Cutting Documentation Costs with the Standard Cost Model

In compliance-heavy industries, documentation is often described as the “hidden tax” on business. While essential for safety, traceability, and regulatory adherence, the manual processing of declarations, audit files, and lifecycle reports consumes vast amounts of time and resources. The Standard Cost Model (SCM) provides a structured and internationally recognised way to put a price tag on this hidden burden.

How the Standard Cost Model Works

The SCM was developed through collaboration between several European countries, including Norway, as a tool for quantifying the administrative costs of regulation (European Commission, 2004). The model simplifies overhead measurement into three key factors:

Population (P): The number of staff or businesses affected.
Frequency (F): How often the task must be carried out (weekly, monthly, annually).
Time (T): Average time required per task, usually measured in staff hours.

The calculation formula is straightforward:

Administrative Cost = P × F × T × Hourly Wage

This approach transforms “invisible” documentation work into hard numbers that executives and policymakers can evaluate.

Example: Manual Documentation in Compliance Teams

Consider a compliance department with 20 staff. Each employee spends 6 hours per week on manual documentation tasks such as supplier declarations or preparing for audits. At an average wage of NOK 600 per hour, the annual cost is:

20 × 52 × 6 × 600 = NOK 3,744,000 per year

This illustrates how compliance overhead can escalate into millions of kroner in hidden costs, without necessarily adding direct business value.

Where SCM Has Been Applied

The SCM has not only been used at the national policy level but also at the private sector level. For example:

Italy: Sector-level SCM studies demonstrated the disproportionate burden of reporting requirements in energy and manufacturing (Torriti, 2013).
Kosovo: The SCM framework was used in private business reform programs to identify and reduce administrative burdens (Regulatory Reform, 2015).

These case studies underline that SCM is equally effective at diagnosing inefficiencies inside companies as it is at the governmental level.

From Measurement to Reduction: Why Automation Matters

The value of SCM lies in making hidden costs visible. Once quantified, the natural next step is reduction. This is where automation comes in. Platforms such as Protag’s AI- and blockchain-enabled Digital Product Passport solution target the very “information obligations” the SCM identifies as most costly. By reducing the frequency and time components of the formula—often by more than 80%—businesses can move from multimillion-kroner overheads to lean, automated compliance operations.

For industries facing upcoming EU regulation, such as the Ecodesign for Sustainable Products Regulation (ESPR), automating documentation isn’t just cost-cutting—it’s survival.

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.
Regulatory Reform (2015). Reducing Administrative Burdens: Lessons from the Kosovo SCM Programme. OECD Regulatory Reform Series.
Torriti, J. (2013). The standard cost model: A critical appraisal. European Journal of Risk Regulation, 4(3), 337–348.