Cutting the Hidden Costs of Compliance with ProTag: How the Standard Cost Model Exposes Opportunities for Automation

Documentation and compliance can be exhausting without automation.

Regulatory compliance is often seen as a cost of doing business—but few companies realise just how large that cost really is. For manufacturing firms in particular, the burden of documentation, reporting, and audit preparation eats into both margins and innovation capacity.

The Standard Cost Model (SCM) provides a powerful way to make these hidden costs visible. Developed across Europe, including in Norway, the SCM is now widely recognised as the benchmark methodology for quantifying administrative burdens (European Commission, 2004; Torriti, 2013).

And once the costs are visible, the question becomes: how do we reduce them?

The Standard Cost Model in Practice

The SCM breaks down administrative costs into three factors:

Population (P): Number of staff affected.
Frequency (F): How often the task must be carried out.
Time (T): Average time per task, measured in staff hours.

The formula is straightforward:

Administrative Cost = P × F × T × Hourly Wage

This simple equation allows companies to put a hard number on activities that would otherwise stay invisible.

The Real Cost of Compliance

In manufacturing, the numbers are stark. According to a National Association of Manufacturers (NAM) study, regulatory compliance costs average USD 29,100 per employee annually. For small manufacturers—those with fewer than 50 employees—the cost balloons to USD 50,100 per employee per year (NAM, 2014; NJBIA, 2014; FasterCapital, 2023).

That means smaller firms pay nearly double the per-employee cost of their larger counterparts, creating a structural imbalance in competitiveness.

Example 1: Small vs. Large Manufacturer

Using the SCM, the imbalance becomes clear.

Task: Preparing supplier compliance declarations.
Frequency (F): 12 times per year.
Hourly wage: USD 50.

Small manufacturer (40 employees):

Population: 1 staff member.
Time: 10 hours per month.
Cost = 1 × 12 × 10 × 50 = USD 6,000 annually.
Per employee = USD 150.

Large manufacturer (400 employees):

Population: 5 staff members.
Time: 5 hours per month.
Cost = 5 × 12 × 5 × 50 = USD 15,000 annually.
Per employee = USD 37.50.

👉 Result: The small firm pays 4x more per employee for the same regulatory activity.

Example 2: What Happens After Automation

Now imagine the same small manufacturer adopts Protag’s Digital Product Passport automation platform. With AI-driven extraction and blockchain-secured traceability, documentation time drops from 10 hours per month to just 2 hours per month—an 80% reduction.

Population: 1 staff member.
Frequency: 12 times per year.
Time: 2 hours per month.
Cost = 1 × 12 × 2 × 50 = USD 1,200 annually.
Per employee = USD 30.

👉 Savings: USD 4,800 annually on this one task. Applied across dozens of reporting requirements, savings can easily climb into hundreds of thousands per year.

And critically, automation doesn’t just reduce costs—it flips the imbalance. The small manufacturer now pays less per employee than the large firm, levelling the playing field.

Why This Matters for European Industry

With the Ecodesign for Sustainable Products Regulation (ESPR) on the horizon, the volume of documentation required will only increase. Firms will need to supply structured, verifiable product data at scale through Digital Product Passports (DPPs).

For companies relying on manual processes, this will mean spiraling costs. For those adopting automation, it’s an opportunity to cut overhead, free up staff for high-value work, and position themselves ahead of the regulatory curve.

Protag’s Role

At Protag, we have built our platform specifically to address these pain points. By combining AI automation with blockchain-secured data infrastructure, we help manufacturers:

Cut documentation time by up to 80–90%.
Ensure compliance with ESPR and other EU frameworks.
Free compliance teams from repetitive reporting to focus on innovation and growth.
Level the playing field for smaller manufacturers facing disproportionate burdens.

The Standard Cost Model shows just how expensive manual documentation really is. Protag shows how much of those costs can be eliminated.

References

European Commission (2004). A handbook for the EU Standard Cost Model: How to measure the administrative costs and reduce them at national and EU level. Brussels: European Commission.
FasterCapital (2023). Regulatory compliance costs for SMEs. Available at: https://fastercapital.com [Accessed 18 August 2025].
National Association of Manufacturers (2014). The Cost of Federal Regulation to the U.S. Economy, Manufacturing and Small Business. Washington, DC: NAM.
New Jersey Business & Industry Association (2014). Regulatory burdens on small manufacturers. Trenton: NJBIA.
Torriti, J. (2013). The standard cost model: A critical appraisal. European Journal of Risk Regulation, 4(3), 337–348.