Originally Published - March 5, 2007
"Green" Directives for High-tech and Electronics Manufacturers
Manufacturers in the electrical and electronics equipment industry are not spared the growing array of regulations requiring compliance. In recent years, strict environmental regulations have been implemented in the US and European Union (EU), with more soon to come from other countries such as Japan and China. The cost of compliance to manufacturers in any industry is high, but noncompliance with national and international regulations can cost enterprises a great deal more. Therefore, industry leaders must ensure they have the means to adapt their businesses to meeting these regulatory requirements, and thus avoid costly penalties and product recalls. What's more, companies can further benefit from enterprise application systems that will ensure their business processes meet with ever-changing regulatory requirements, in addition to creating trusted brands and maintaining shareholder value.
Key regulations in the high-tech industry include the following:
- Restriction of Hazardous Substances (RoHS) Directive, which applies to manufacturers of electrical and electronics equipment that do business in the EU. The regulation prohibits the sale of electronics products that contain more than 0.01 percent of cadmium, mercury, lead, hexavalent chromium, polybrominated biphenyls (PBBs), and polybrominated diphenyl ether (PBDE). Violations can result in stiff penalties, significant loss of sales, and a negative impact on brand perception in the environmentally conscious European market.
- The Waste Electrical and Electronic Equipment (WEEE) Directive, which establishes rules for the collection, treatment, recycling, and recovery of electronic waste in the EU. The directive states that electronics manufacturers and importers must manage and pay for the recycling of electrical and electronics waste. EU member countries have been required to meet WEEE recycling targets since the end of 2006. For more detailed information on WEEE, see Off-loading Some Green Compliance Burdens: Can Enterprise Applications Meet the Challenge?
RoHS and WEEE are the most pressing environmental regulations that electronics manufacturers face today. But other recently announced regulations, including Energy Using Products (EUP), Integrated Product Policy (IPP), Environmental Permitting Program (EPP), and Registration, Evaluation, and Authorization of Chemicals (REACH), might have even greater impacts on core business processes. An astute solution for high-tech environmental product compliance has to deliver the tight integration with core logistics and other processes that will be necessary to comply with these emerging regulations.
For more information on compliance issues in other industries, please see previous parts of this series: Thou Shalt Comply (and More, or Else): Looking at Sarbanes-Oxley, Important Sarbanes-Oxley Act Mandates and What They Mean for Supply Chain Management, Sarbanes-Oxley Act May Be Just the Tip of a Compliance Iceberg, and Automotive Industry and Food, Safety, and Drug Regulations.
Environment-friendly Chemicals?
The issues of environment, health and safety (EH&S) are what make the chemical industry one of the most liable of all industries. Chemical companies, therefore, have a pressing need for solutions that will streamline and automate compliance processes, as well as enable them to manage their operations more safely, effectively, and in accordance with both national and international regulations and recommendations.
The chemical industry faces particular scrutiny from a regulatory perspective, and companies are all too aware of the impacts of the European Classification and Labelling Inspections of Preparations, including Safety Data Sheets (ECLIPS); REACH; Science, Children, Awareness, Legislation and Evaluation (SCALE); and Global Harmonized System of Classification and Labelling of Chemicals (GHS). For instance, REACH is the new system for regulating chemical use in the EU, and it mandates organizations to track inventory and usage of over 12,000 chemical substances. For more information, see So What's the Big Deal with Chemicals?
The recently passed REACH legislation requires the registration or screening of the majority of substances that are already in the EU marketplace. Of key importance are substances of very high concern (SVHC): substances considered persistent, bioaccumulative, and toxic (PBT); substances considered very persistent and very bioaccumulative (vPvBs); and carcinogenic, mutagenic, and reprotoxic (CMR) substances, in addition to those of similar concern, such as endocrine disrupters.
Authorization for the use of such high concern substances will only be given when good socioeconomic reasons and risk minimization measures are in place. The European Commission estimates that these measures will cost industry between €2.8 and 5.2 billion over the next eleven years. For additional information on REACH, visit http://www.reachlegislation.com; a glossary reference site from the European Environment Agency (EEA) can be found at http://glossary.eea.europa.eu/EEAGlossary.
Hence, astute solutions have to espouse the capabilities that chemical manufacturers need to handle a broad range of compliance issues, as listed in SAP for Chemicals: Regulatory Compliance:
- Product safety, so as to ensure that substance data is up-to-date and available to appropriate users by integrating product safety capabilities into supply chain processes. This enables compliance with such regulations as the Food Quality Protection Act, Title 21 CFR Part 11; Title 29 CFR 1910.1200 and EU Directive 91/155/EEC for Material Safety Data Sheets (MSDS); the Toxic Substances Control Act (TSCA); the Clean Water Act; the Superfund Amendments and Reauthorization Act (SARA); and the Federal Food, Drug, and Cosmetic Act (FFDCA).
- Dangerous goods management, so as to support all processes connected with the manufacture and distribution of dangerous goods. Companies must comply with such regulations as the International Air Transport Association's (IATA's) and International Civil Aviation Organization's (ICAO's) Dangerous Goods Regulation, Title 49 CFR Parts 100-185; the International Maritime Dangerous Goods Code (IMDG); the Intergovernmental Organization for International Carriage by Rail's (OTIF's) Carriage of Dangerous Goods (RID); the European Agreement Concerning International Carriage of Dangerous Goods by Road (ADR); the Agreement on the Transport of Dangerous Goods on the Rhine (ADNR); the Canadian Transportation of Dangerous Goods Act; and the International Atomic Energy Agency's (IAEA's) Code of Conduct on the Safety and Security of Radioactive Sources.
- Industrial hygiene and safety management, so as to support a safe work environment, whereby companies can identify, control, and eliminate work hazards. Such solutions must enable compliance with regulations such as the International Labor Organization (ILO) Safe Work Agenda 21, Chapter 19, Programme B.
- Occupational health, so as to ensure the health of workers, protect personal data, and meet legal requirements, whereby enterprises can effectively comply with regulations such as the Occupational Safety and Health Act's (OSHA's) right-to-know (RTK) directives and the ILO Safe Work Agenda 21, Chapter 19, Programme B.
- Waste management, so as to streamline, automate, and monitor waste disposal processes across the enterprise. To that end, integration with multiple systems should enable user enterprises to allocate costs by the appropriate cost centers, while also enabling compliance with such regulations as the Title 40 CFR; Germany 's KrW /AbfG; the United Kingdom's (UK's) Environmental Protection Act and Codes of Practice; and the Basel Convention on the Reduction of Hazardous Waste.
The MSDS record is the second most generated documented (next to an invoice, logically) at chemical manufacturing facilities. The difficulty and cost of generating this document on a global scale is significant, since local legislation related to MSDS exists for approximately sixty countries. In addition, the document needs to be in at least forty key languages, translations of which must be validated by local experts to ensure that the brand excellence of the company is being maintained. An example of a vendor that provides a system to generate global regulatory documents is Atrion International.
Utilities and Oil and Gas Corporations Share Environmental Regulatory Compliance Mandates
Chemicals, together with their utilities and oil and gas brethren, must comply with the Kyoto Protocol, the Clean Air Act, the EU Integrated Pollution Prevention and Control (IPPC) Directive, and other regulations related to greenhouse gases and other emissions. Moreover, the process of applying and monitoring permits can be labor-intensive. This is because enterprises need to monitor and manage operations and emissions permits to comply with regulations, reduce greenhouse gases and other emissions, and ensure the ability to audit.
On the positive side, efficient compliance management can result in competitive advantage. The revenue-generating potential of the emerging emissions trading markets means companies can turn regulatory compliance into new revenue streams. But they first have to garner a number of tools to mitigate risks, build trust with regulatory authorities, significantly reduce the cost of compliance over the long term, and pursue new business opportunities. Well-devised software tools could allow companies to reap the financial benefits of the emissions trading markets because the software can determine and document emission credits, and can communicate emissions credits with emission trading platforms.
This brings us to the enterprise software category for handling EH&S. EH&S entails many disparate, environmental compliance solutions to address regulations dealing with health and environmental protection, restriction of hazardous substances, occupational health and safety, and greenhouse gas trading schemes. Amid a growing number of environmental compliance challenges, manufacturers and suppliers today are looking to proactively monitor and improve product and EH&S compliance processes. Companies have to efficiently manage their businesses while ensuring compliance with complex EH&S processes and mandates, such as RoHS, WEEE, the International Material Data System (IMDS), the End-of-Life Vehicles (ELV) Directive, the Health and Safety at Work Act, OSHA, emissions-trading permits, and regulations around emissions trading schemes.
Potential benefits from leveraging EH&S software tools include the ability to deploy global EH&S processes while adapting them to practices in individual circumstances and geographies. Leveraging such software tools can also ensure much safer handling and tracking of hazardous substances, dangerous goods, and waste products. Also important, a company can deliver full-scale health management to provide for employee health and well-being, ensure the compliance of individual products with various regulations, and improve manufacturing productivity by aligning business processes with the fulfillment of environmental regulations for emissions management.
In part six of this series on how different industries address compliance issues, global trading will be looked at in light of the increasing amount of legal and regulatory requirements. With enterprises realizing the importance of having a holistic approach from top down, governance, risk management, and compliance (GRC) software is emerging as an essential enterprise solution.
Part Five of the series Thou Shalt Comply (and More), or Else