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In Supply Chain, Environmental, Social Responsibility Heats Up

As we settle into 2013, the environmental — and social — regulatory landscape for the electronics industry is becoming, predictably, broader and more complex. To start off, here are some of the hurdles ahead for manufacturers and suppliers:

    • The new EU RoHS directive (2011/65/EU), while not yet expanding the set of six restricted substances (though a consultation was briefly open — Jan. 20 through Feb. 10, 2013 — to initiate that process), is becoming more inclusive, bringing in categories 8 (medical devices) and 9 (monitoring and control instruments) over the next few years, and upping the ante for corporate management and validation of compliance.
    • The expanding candidate list of “substances of very high concern” (SVHC) from the REACH regulation hit 138 substances in December, and by the time you read this, there will be at least 13 more substances proposed. The European Commission expressed a goal of 2020 for including all SVHCs on the candidate list; this could number more than 1,000 substances.
    • Vietnam's RoHS regulation came into effect in December 2012; the RoHS-like provisions of India's “e-waste (Management and Handling) Rules, 2011” will come into effect on May 1, 2014.
    • “Large network equipment” (such as rack-mounted network switches) is in the cross-hairs of the US Energy Star development process, while enterprise “servers, data storage and ancillary equipment” are in scope of the European Commission's Energy-Related Products 2012-2014 Working Plan.
    • Producer responsibility regulations in the Americas continue to expand: Quebec is expanding the scope of its recycling regulation this year across more categories of electronics; and a variety of activities at the municipal, state, and country level throughout Latin America can be expected in 2013.
  • In addition, social regulatory compliance requirements come into full swing this year. While manufacturers already have to comply with the California Transparency in Supply Chains Act (which went into effect last year), meeting the challenges of the US Security and Exchange Commission's Conflict Minerals Rule may require manufacturers to make multiple passes through their supply chains and work closely with their suppliers to meet the intent of the “reasonable country of origin inquiry” (RCOI) process. In addition, the EU is considering whether to implement a similar type of requirement.

Stacked Deck

REACH, RoHS, and US states' requirements  make 2013 an interesting year for new regulations.

REACH, RoHS, and US states' requirements
make 2013 an interesting year for new regulations.

Other regulations and demands are on the horizon as well, including the following:

    • California's Safer Consumer Products Regulation is expected to be finalized and come into force in the first half of this year. This may or may not have an immediate impact on the electronics industry, but it will set a standard and conceptual framework for manufacturers to identify and assess substances in products.
    • The product registries for IEEE- 1680.2 and IEEE-1680.3, Electronic Product Environmental Assessment Tools for Imaging Equipment and Televisions, respectively, will open this year, enabling manufacturers of these products to identify their products as complying with Bronze, Silver, or Gold levels of these sustainability leadership standards. In addition, 2013 is expected to see the start of EPEAT (electronic product environmental assessment tool) standard development processes for server-class products and a revision of IEEE-1680.1, the venerable computer/notebook/monitor standard.
  • UL, in conjunction with AHAM (Association of Home Appliance Manufacturers), issued UL 7001 last year, the first sustainability standard for refrigeration appliances. Look for increased environmental performance competition in this space and others as well.

In light of the expanding demands for improved environmental and social performance across a wide variety of segments of the industry, to keep up, manufacturers must take a far more active, and proactive, approach to both compliance and rule setting.

What areas should manufacturers focus on for 2013? Consider these:

    • Supplier requirements: Work with your supply base to define formal requirements for environmental and social responsibility criteria. While, for instance, it is still nearly impossible to create and promulgate a “preferred substances” list (although the BizNGO Working Group has produced its first guideline on the subject), manufacturers must at least compile a list of substances they do not want to see in their products (i.e., restricted), as well as those that must be disclosed. On the social side, SEC issuers and their suppliers will need to collect sourcing information on 3TG (tin, tantalum, tungsten, and gold) substances used in the products. In addition to this, define how you want your suppliers to provide you with this information. Understand that you are asking for a lot of details — a standardized electronic format that can handle this detail such as IPC-1752A is your best bet for substance information, while the EICC/GeSI Conflict Minerals template is the standard for RCOI information.
  • Supplier measurement: As you define and implement requirements, incorporate measuring supplier response into your score-carding process. Manage and maintain that. If suppliers have difficulty meeting your requirements, work with them as you would on other measured criteria. Your supply base's ability to support your requirements for environmental criteria is as important as its ability to support technical and business criteria, not in the least because they reflect regulatory requirements, at a minimum.

As you define and set up these systems, take care to not box yourself into a corner. While, for instance, Conflict Minerals today is focused on the Democratic Republic of the Congo and four substances, consider that a similar situation could arise in many other locales around the world. And consider as well that RoHS will not always be limited to the same six substances we've all come to know and love (OK, we don't love them), and the REACH SVHC list will indeed continue to expand.

Always generalize your approach so that the systems and processes you implement will be capable of incorporating another wrinkle from a previously unheard-from market. Working outwardly with suppliers and customers is important, but so is internal coordination and process standardization. Many medical device and monitoring/control companies are now entering the world of supply chain regulation that the rest of the electronics industry has dealt with for the past six-and-a-half years, if not longer. My advice to them: Incorporate environmental requirements for products from the concept stage throughout your product lifecycle.

For instance:

    • Market-requirement documents must have a section that encompasses and explains environmental regulations in the markets in which you expect to do business.
    • Product development needs guidance, rules, and checkpoints for environmental properties of components, materials, and subassemblies.
    • CE marking means that existing regulatory affairs experts will be pulled in as well; they have a degree of expertise and knowledge about CE requirements that your RoHS experts don't have, and vice versa. They will need to work more closely together than they have in the past.
    • Facilities that have never had to segregate compliant from noncompliant inventories and production lines will need to develop methods to minimize cross-contamination.
  • Management of spare inventory takes on another level of complexity; make sure you understand the rules and impact of, for instance, EU RoHS exemption expiration on what spares can and cannot be used to service units in the EU.

In other words, 2013 will give you an increasingly complex world in which to do business, just as in previous years. Your approaches to these issues and your markets must comprehend this. Take a broad overview of internal and external aspects of your product lifecycle process, and make sure it's up to the task of complying with the breadth of today's and tomorrow's regulatory and customer requirements.

(This article originally appeared in the March 2013 Avnet EBN Velocity digital edition. Download the complete issue here. )

2 comments on “In Supply Chain, Environmental, Social Responsibility Heats Up

  1. t.alex
    March 14, 2013

    Inteventory of old stocks have to be carefully audited for parts that do not meet the requirements anymore. This is cost and time consuming for companies to go through their inventories while at the same time going through the huge stack of papers!

  2. mike_at_DCA
    March 15, 2013

    Right you are, t.alex! Category 8 & 9 (RoHS) companies are finding out now just how difficult that is on a large scale, much less the detailed and more frequent scale required as exemptions, such as 7(c)III, expire. It will get even more challenging as restrictions brought to us by RoHS and other regulatory regimens around the world expand.

     

    The more manufacturers know about the composition (and ultimate source!) components and materials they use in their products, the better prepared they will be for the future regulatory reality. Taking a proactive, pre-emptive approach can be a good investment.

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