New Product Stewardship and Globalization Trends Impacting Businesses

New international product laws and regulations are impacting nearly all industry sectors. According to a report recently published by Ernst & Young, regulatory compliance risk is the greatest strategic challenge facing global businesses in 2008. “The continually escalating burden, as well as ever more complex compliance challenges, means this is still the biggest business risk to be addressed.” The report went on to say that “as companies become more and more global, compliance becomes an even greater challenge, forcing them to manage diverse regulations in different markets. Industrial groups have speculated that by 2010, more than 75% of all electronic products will be sold in countries with legislation similar to the European Union (EU) Directives.”

Recent international environmental laws and regulations require comprehensive product requirements and chemical substance registrations designed to restrict the toxic effects of chemicals in products during one or more phases of the products’ life cycle. The most comprehensive regulations are referred to as “directives,” and have been adopted by the EU. It’s not just EU driving this trend. Similar environmental regulations are being adopted around the world, including China, Taiwan, Korea, Japan, Central and South America, as well as several Canadian provinces, and U.S. states.

Noncompliance is really not an option for companies selling their products internationally. Companies that fail to comply with such directives may not be able to sell their products in the EU and other countries. Market pressures like this now require companies to manage the health and environmental impacts across their products’ life cycles.

Three of the most important new EU regulations are the Waste Electrical and Electronic Equipment Directive (WEEE), the restriction of the use of certain hazardous substances in electrical and electronic equipment, or RoHS and the Registration, Evaluation, Authorisation and Restriction of Chemical substances (REACH).

WEEE requires producers of electrical and electronic equipment to register, arrange and pay for a product’s end-of-life collection and recycling. WEEE shifts responsibility from governments and the key enforcing authority to the manufacturers themselves.

RoHS requires manufacturers to restrict the use of certain metals and chemicals beyond a specified concentration value in electrical equipment. These substances have historically been critical components in the production of electronic products.

As I’ve mentioned in earlier posts, REACH impacts nearly all chemical manufacturers. The directive requires companies to identify and manage risks from chemical substances and provide safety information to all downstream users. Specifically, REACH requires every importer or producer of more than 1 metric ton of a chemical substance to register the substance and provide detailed information on the risks, hazards, uses and end-of-life characteristics.

As supply chains continue to become more global, these directives will have a significant impact on companies, their production processes and their ability to compete globally. For example, the U.S. electronics and automotive industries have spent millions of dollars complying with the WEEE and RoHS requirements since 2002, and more recently, U.S. chemical manufacturers, pharmaceutical companies and other manufacturers are working toward achieving compliance with other directives such as REACH.

To insure successful compliance with these directives, organizations need to take a proactive approach. This starts with developing a sound strategy, a regulatory road map and incorporation of information management systems to collect the required data, organize it and enable reporting both internally and externally. We are working hard at ESS to insure our software makes this effort easier, faster, more reliable and reduces the costs of compliance.

Add comment June 25th, 2008