Are EPA Regulations Making Manufacturing Unsustainable for Small Firms?

Key Takeaways

• Updated EPA air toxics rules (e.g., 2024 NESHAP) impose costly compliance burdens on small manufacturers.

• Small firms may spend over $50,000 per employee annually to meet federal environmental standards.

• Mandated upgrades to old equipment often exceed the cost of replacement, overwhelming smaller operations.

• Programs like SBEAPs and EPA P2 Grants help firms cut emissions and save money through technical and financial assistance.

• With the right tools, small manufacturers can turn compliance into an opportunity for innovation and sustainability.

In Garfield, New Jersey, a small, family-operated electroplating company became a cautionary tale about the consequences of lax environmental oversight. An underground storage tank at the facility leaked approximately 3,640 gallons of chromic acid, a substance containing hexavalent chromium (Cr(VI)), into the groundwater.

The spill released an estimated 5,400 pounds of toxic chemicals into the aquifer, contaminating local drinking water wells. Though the EPA later designated the site as a Superfund priority and undertook a cleanup costing nearly $37 million, the company went out of business in 2009, unable to withstand the mounting legal, health, and environmental pressures.

Against this backdrop, the tightening of air toxics regulations by the EPA in 2024 highlights the escalating challenges small manufacturers face. Under the revised National Emission Standards for Hazardous Air Pollutants (NESHAP), facilities that use hexavalent chromium are now required to implement advanced air filtration systems and continuous emissions monitoring. For small firms, non-compliance doesn't just risk significant fines—it can also result in lasting environmental damage and financial instability.

According to a 2023 report by the National Association of Manufacturers (NAM), compliance costs for small businesses could reach as high as $50,100 per employee per year, more than double the $24,800 per employee cost incurred by manufacturers with over 100 employees, raising concerns about the very sustainability of many operations.

Small Manufacturer Compliance Cost Impact

The EPA's 2024 updates to the NESHAP for chromium electroplating facilities are based on new scientific assessments. The EPA’s Integrated Risk Information System (IRIS) now classifies Cr(VI) as a known human carcinogen via inhalation, prompting the agency to lower acceptable emissions thresholds drastically. These updates aim to reduce industrial toxic air emissions by approximately 64 tons per year, significantly improving air quality, especially in fenceline communities near manufacturing hubs.

While good for the environment, small manufacturers such as those with fewer than 100 employees bear a disproportionately high share of compliance costs under federal regulations, including EPA rules. According to the U.S. Chamber of Commerce’s statement to Congress, 96% of its small-business members fall into this category. As Natalie Kaddas, CEO of Kaddas Enterprises and Chair of the Chamber’s Small Business Council, warned:

“Unfortunately, the crushing burden of federal regulation threatens this small business growth.”

A National Association of Manufacturers (NAM) study referenced in the testimony estimated these manufacturers spend around $28,000 per employee annually on federal regulatory compliance, more than double the average for similarly sized firms in other sectors.

Meanwhile, federal regulatory compliance costs nationwide are estimated at over $3 trillion per year, exceeding the total annual output of the U.S. manufacturing sector.

This substantial financial burden limits small manufacturers’ ability to:

• Invest in workforce development: High regulatory compliance costs often force small businesses to postpone or reduce hiring plans. This makes it difficult to attract skilled labor, provide ongoing training, or retain talent in competitive markets.

• Upgrade equipment and technology: Instead of modernizing operations with more efficient or safer technologies, resources are diverted to compliance measures. This can slow innovation and hinder competitiveness in both domestic and international markets.

• Expand production capacity or facilities: Regulatory expenses may deter capital investment in facility expansion, preventing businesses from scaling operations to meet demand or enter new markets. This stunts long-term growth and reduces resilience in the face of economic shifts.

Regulatory Policy and Economic Tensions

In February 2024, the U.S. House Small Business Committee raised concerns in a letter to EPA Administrator Michael Regan, arguing that new rules on hazardous air pollutants could substantially harm small manufacturers. The letter cited industry-wide frustration over complex requirements and disproportionate costs, especially from smaller firms with limited resources.

One small manufacturer in Ohio with 45 employees quickly faced the toll as new EPA rules came into effect. The company had previously met standards using basic filtration and occasional emissions tests. But the new regulations demanded far more: round-the-clock emissions tracking, instant digital reporting, and an overhaul to low-emission solvents, all within just a short amount of time for compliance.

The upgrades weren’t just expensive, as they’ve significantly strained nearly every part of the operation. Monitoring systems ate into the operating budget, while the solvent switch threw off production, requiring new machinery and staff retraining. With limited options, the company applied for an exemption and a phased rollout.

But confusing rules and slow responses made it hard to move forward. In the end, the company executives had to consider hard choices: send some work elsewhere or move to a state with fewer rules, showing how complicated and costly regulations can push small businesses to the edge.

Technical Support for Compliance Transition

Some businesses are finding lifelines through collaboration. With access to shared resources, grant programs, and technical assistance, small firms can stay compliant without sacrificing their operations.

To help ease the burden of compliance, small manufacturers can now access a range of support tools:

• EPA Small Entity Compliance Guides: These guides provide clear, plain-language explanations of complex rules, including step-by-step checklists, FAQs, and example scenarios. They are supplemented with live and recorded webinars, and some include contact info for free technical advisors who specialize in small business concerns.

• California Manufacturing Technology Consulting (CMTC): This nonprofit organization within the NIST Manufacturing Extension Partnership (MEP) provides technical assistance to help small manufacturers implement cleaner production through programs like Lean & Environment. These services, such as value-stream mapping focused on energy and emissions reduction, are often provided at low or no cost.

• EPA Pollution Prevention (P2) Grants: Aimed at reducing the use of hazardous substances and energy, P2 grants fund innovations that both cut emissions and lower operating costs. Eligible small businesses can apply through regional EPA offices or partner universities and often receive technical guidance alongside financial support.

• SBA’s Empower to Grow (E2G) Manufacturing Grant: This Small Business Administration program supports small manufacturers in upgrading to cleaner technologies and training workers in green manufacturing. It also offers mentorship and networking opportunities with experts in sustainability.

• State SBEAP Offices: Most states operate Small Business Environmental Assistance Programs (SBEAPs), which offer free, confidential support with air permitting, compliance planning, and environmental best practices. In Kansas, the program documented measurable results from its work with local manufacturers. Companies that participated in hotline calls and on-site visits reduced volatile organic compounds (VOC) and hazardous air pollutant (HAP) emissions, eliminated over 25,000 pounds of hazardous waste, and saved more than $130,000, demonstrating how targeted support can reduce environmental impact while preserving economic viability.

Strategies for Sustainable Regulatory Compliance

While regulatory compliance can feel burdensome for small manufacturers, especially under evolving EPA standards, there are practical, strategic approaches that go beyond basic rule-following. Many of these methods not only align with EPA priorities but also support long-term operational efficiency, risk reduction, and environmental stewardship. From implementing structured management systems to rethinking production workflows, the following strategies offer sustainable pathways to compliance without compromising business viability.

Implement an EMS

Implementing an Environmental Management System (EMS) like ISO 14001 helps small manufacturers systematically monitor emissions, manage hazardous materials, and document compliance with EPA regulations. According to the EPA, benefits include improved environmental performance, enhanced compliance, pollution prevention, and resource efficiency. For example, a small electroplating facility could use an EMS to keep detailed logs of air emissions and chemical usage, ensuring they meet NESHAP requirements.

Pursue Third-Party Environmental Certifications

Pursuing third-party environmental certifications, such as EMAS or similar ecolabels, often includes rigorous pollution controls, waste minimization, and use of safer chemistries, aligning directly with EPA programs like Safer Choice and Pollution Prevention. EMAS, for instance, integrates ISO 14001 standards and adds verified performance reporting, offering credibility and compliance assurance. A small metal finishing company might earn such a certification by switching to lower-toxicity solvents, simultaneously satisfying EPA goals and TSCA risk reduction.

Install Cloud-Based Monitoring Platform

Adoption of digital compliance systems is essential, especially under EPA rules requiring continuous emissions monitoring and digital reporting, such as those in the revised chromium electroplating NESHAP. Installing a cloud-based monitoring platform that continuously tracks Cr(VI) emissions and uploads data directly to EPA or state systems helps smaller manufacturers avoid manual reporting errors and regulatory penalties.

Use Risk-Based Prioritization Tools

Employing risk-based prioritization tools like environmental risk matrices or Six Sigma frameworks enables efficient allocation of limited resources toward the most compliance-critical areas. Though scholarly sources are limited on small manufacturers specifically, such approaches are proven across industries to enhance regulatory readiness and mitigate environmental risk. For instance, a plating facility might focus on upgrading fume control for the highest-emitting tanks first, addressing EPA-targeted hazards most effectively.

Engage in EPA Rulemaking

Engaging in EPA rulemaking through the Regulatory Flexibility Act (RFA) gives small businesses opportunities to request adjustments such as phased implementation timelines, scaled standards, or extended deadlines. Historical evidence shows EPA rulemakers consider small-entity comments for accommodations under statutes like RFA. A small anodizing shop, for example, might successfully petition for a longer compliance timeline on hard-to-implement emissions controls.

Participate in MSIs

Participating in multi-stakeholder initiatives (MSIs), especially those partnered with EPA, such as Green Suppliers Network or Design for the Environment, provides access to vetted best practices, cleaner technologies, and group compliance strategies. While EPA materials highlight such collaborations, the broader trend of MSIs supporting regulatory alignment is well-documented. For instance, a niche parts manufacturer could adopt low-VOC coatings recommended through these networks to maintain compliance with EPA thresholds.

Combine Lean Manufacturing with Circular Economy Principles

Combining lean manufacturing with circular economy principles aligns perfectly with the EPA’s Pollution Prevention priorities. The EPA endorses waste minimization at the source, and lean techniques support this by reducing resource use and hazardous byproducts. By redesigning rinse processes to cut chromic acid usage by 30%, a plating shop can reduce both hazardous waste generation and air emissions, achieving regulatory compliance while improving efficiency.

Turning Regulatory Pressure into Sustainable Progress

EPA regulations like the 2024 air toxics updates represent significant steps forward for public health, especially in fenceline communities that have long borne the brunt of industrial pollution, such as the image below. 

These rules aim to reduce hazardous emissions, protect vulnerable populations, and push industry toward cleaner operations. But they also pose serious challenges for small businesses, which often lack the capital, staffing, or technical infrastructure to swiftly adapt to complex compliance demands.

Still, what’s clear is that regulation and sustainability do not have to be mutually exclusive. Small manufacturers that approach compliance proactively—through smarter systems, targeted upgrades, and collaborative support—can meet environmental standards without sacrificing their competitiveness.

With strategic planning and access to the right resources, small manufacturers can remain viable while contributing to cleaner air and healthier communities. In this evolving regulatory landscape, resilience will come not just from reacting to change, but from building sustainability into the core of how small businesses operate.

FAQs about EPA Regulations and Small Manufacturing Sustainability

Why are EPA air toxics regulations becoming more rigorous?

EPA regulations are evolving in response to updated scientific research identifying greater health risks from pollutants like hexavalent chromium. These changes aim to reduce emissions and protect public health, particularly in fenceline and overburdened communities.

How do these regulations affect small manufacturers differently from large ones?

Small manufacturers typically lack the economies of scale and dedicated compliance teams that larger firms have. As a result, they face disproportionately higher per-employee costs and operational strain when complying with new EPA requirements. This often forces them to divert resources from innovation and growth initiatives just to meet baseline environmental standards.

What is the cost burden of compliance for small manufacturers?

According to the National Association of Manufacturers (NAM), compliance costs can reach up to $50,100 per employee per year for small manufacturers, over double what large manufacturers typically incur. This financial strain often limits small firms' ability to invest in workforce development, equipment upgrades, and business expansion.

Are there penalties for non-compliance with the new chromium emission standards?

Yes. Non-compliance can result in significant EPA fines, legal action, reputational damage, and, in severe cases, business closure, particularly for companies handling hazardous air pollutants such as Cr(VI). In addition to financial penalties, prolonged non-compliance can trigger EPA investigations and lead to mandatory shutdowns or costly remediation efforts.

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