5 ways closed company data undermines the EU

Just how damaging is closed company data?

The European Union is a great example of how it really undermines public policy, disadvantages business and widens inequalities. Our recent report on access to company data in the EU, ‘EU Company Data: State of the Union 2020’, identified 15 areas where the lack of company register data as open data frustrates, impedes or otherwise has a negative impact on EU policy.

Below are the first five.

The cost of these issues runs to many billions of Euros for the member states and their citizens, and more than that, they stifle the innovations of its companies and undermine confidence in the single market, as well as national and EU institutions.

1. Supply chain integrity and fairness
   There have been many scandals uncovering bad practices in supply chains that it is difficult to know where to start — food scandals, human rights abuses, corruption and bribery, environmental damage, counterfeiting, and unfair practices, especially larger companies. Underpinning these issues are two fundamental problems. One is a lack of clarity companies have on their own supply chains (these are, by definition, a chain of contractual relationships between legal entities), including a lack of visibility on exactly what the companies are, and who is behind them (and hence their past record). The second is the opacity of such chains, and the lack of leverage that consumers have to effect change on them. For both of these, open company data, particularly ownership and directors, and corporate structures is crucial.
2. Corporate accountability
   There are no specific directives or initiatives that we know of by the EU on corporate accountability. However, there are numerous statements made by the European Commission and EU member states on this subject. For example, the European Commission statement on the Single Market Act said, “It is of paramount importance that European businesses demonstrate the utmost responsibility not only towards their employees and shareholders but also towards society at large.” But accountability is not possible without access to information, and, in this world where, increasingly, power comes from the ability to analyze, reuse and combine large datasets with other large datasets, that means access to the information as data in a machine-readable form under an open licence that allows reuse.
3. Reducing unnecessary burdens on business through regtech and fintech
   The fintech and regtech markets are growing apace, and have the potential to significantly reduce the burden on businesses, while improving compliance and standards. However, like most B2B markets, core company data is a key foundational dataset in fintech and regtech, and by restricting access not only is this growing sector inhibited, but the costs and burdens to business are kept unnecessarily high.
4. Support for small & medium enterprises (SMEs)
   According to the EU, “SMEs represent 99% of all businesses in the EU. In the past five years, they have created around 85% of new jobs and provided two-thirds of the total private sector employment in the EU.” Yet, their access to data about the companies they supply, buy from, or compete with is very poor compared with their larger counterparts, who have access to expensive traditional proprietary services. As a result, they lack good due diligence processes, increase their risk and miss out on commercial opportunities. Making company registration data freely available as open data not only reduces the financial costs for such companies, but also, gives them greater ability to scale and compete with larger competitors.
5. Tax
   Tax is an emotive subject in almost every EU member state, and perceived injustices in the tax system, and a number of papers have linked corporate tax injustices to populism. Yet at the heart of corporate taxation is the concept of distinct legal entities and the relationships between them — in the EU this information is actually already public, albeit siloed at national level in official public records at company registers, as was highlighted by a report by the Tax Justice Network last year: “Corporate registries play an important role in preventing corporations from being misused to conceal money laundering, tax evasion and corruption”. A measure of how much EU company registers consider the role their data can play in this area is perhaps indicated by the fact that according to the report only seven responded to the survey, despite repeated requests.

We’ll analyse some of the many other reasons how a lack of access to company register data as open data harms policymaking, society and business in the EU in future posts.

Want to learn more? Read the full report:
‘EU Company Data: State of the Union 2020’

Interested in the US perspective? Read our recent report:
‘US Company Data: State of the Nation 2020’