Preventing costly stop shipments, fines, and fees is manageable if the supporting documentation, declarations, and due diligence programs are in place. Design for Compliance programs help companies manage product regulatory requirements early on in the design phase, minimizing costly rework and enforcement penalties.
Unni Meecheri is the General Manager for Enventure Technologies, a privately owned company headquartered in Bangalore, India. Enventure provides engineering, procurement and product compliance around the globe. Mr. Meecheri helps companies align product design, engineering, and environmental compliance requirements with data collection and design processes with a focus on complying with global product compliance regulations. His team specializes in compliance to the European Union’s REACH and RoHS regulations, as well as, the United States Dodd-Frank Conflict Minerals Section 1502 regulation.
Why is environmental product compliance so important when designing new products and sourcing for existing products?
Because without meeting the regulatory requirements, companies might not be able to sell their products and are more likely to incur stop shipments, fines, and fees that severely impact their revenues and their capability to sell into various regions.
Most companies don’t have a process for managing compliance during the design phase, even though many agree on the importance of “design for compliance.”
In many cases, designs are often completed without checking for product compliance and it only gets addressed at the end. Non-compliance issues and the need for rework in order to ship the product generally get found when the product can’t leave the dock or pass through customs.
The best time to determine compliance is before the bill of materials is finalized and approved. Traditionally, that has placed a burden on engineering and manufacturing.
Do the companies you work with have systems and processes in place to collect and manage the large volumes of data or is it all buried in spreadsheets and PDFs on someone’s hard drive?
The compliance software industry is well matured with solutions like Extended PLM tools/ ERP tools and pure play compliance tools. Most companies by this point have adopted tools for managing their environmental product compliance.
Having some type of system and process is important. Providing the functionality to send out compliance data requests to suppliers is a basic part of most systems today. It’s common to use an industry data exchange to procure data for common parts. Having a system in place enables better data management and reporting capabilities.
There are companies that use PDFs and spreadsheets but as the regulations continue to expand and the substance lists become more complex with things like exemptions and exclusions, companies need more robust processes and systems. They need help collecting and managing the data.
We also see that in order to get 100% compliance for certain regulations, other data elements like chemical testing, engineering, and documentation need to be completed and in place.
How can companies identify if data is missing? How can they meet compliance to each regulation with only one system?
Many companies take a one size fits all approach to compliance and that just doesn’t work. Each regulation has its own requirements beyond checking for the substance at the article and homogenous level.
Many of the software tools do this with regard to how they collect and manage the materials data. This can result in aiming too high or too low depending on the regulation. A company might meet the material threshold requirement and yet not provide the right exemptions, technical or testing files.
Identifying the missing data is a common practice for today’s compliance tools, most if not all can tell you where the data gaps exist.
The challenge is to identify if any other regulation requirements are missing like documentation.
The best first step is to make sure that your company understands all the requirements in the legislation and then build a process around what is needed and how to get it.
Statistically, many companies are lucky if they reach 60% when collecting compliance data. Sometimes data is just not available. Are there reasonable data collection targets when no data is available?
Compliance means full compliance. 100%. However, there are occasions when data isn’t available for a material, part, or product.
Most companies want to know the acceptable practice for their industry and their peers. Data collection targets are a big discussion with clients. They each have their own measurement of what is appropriate due diligence and how they meet it.
We’ve come up with a method that has helped companies focus on their collection efforts by identifying which suppliers are at risk. We review the suppliers and then divide the base into classes, Class A, Class B, and Class C based on the likelihood of receiving compliance data. We then share with our clients where we can get data quickly and where it will take more effort. By tackling the challenge this way, we’ve been able to get the best possible industry results.
Each class of supplier data has a unique plan associated with it. Using this method, we’ve been able to surpass industry benchmarks for our data collection programs.
We’ve also been able to help companies with the other important parts of compliance that go beyond data collection, like chemical testing and engineering by addressing data collection beyond materials.
As soon as a there is a change to the part or material, the existing declaration becomes outdated. Is there a way for companies to keep the data current?
The data is a living, breathing entity. It needs to stay current and up to date in order to give an accurate assessment whether or not a product is compliant.
Think about it, what happens when new chemicals are added to the product, the part, or even the regulation? What happens when an exemption is valid one day and sunset the next?
Our focus is to make sure companies think about a maintenance program where data is refreshed at regular intervals, often every 6 months to 1 year. Some companies choose longer cycles like 18 months to 3 years but we don’t recommend that as materials, parts, and products can change often depending on who is supplying the part.
With big companies, often multiple divisions are collecting the same data from the same approved suppliers. This causes stress on the supply chain as well as redundancy in the company’s efforts. How can companies save time and money on data collection?
We have seen this with many of the larger companies we’ve worked with over the years. The challenge is mainly in mergers and acquisitions or companies with many large divisions. Often, they each have their own processes and systems.
In several cases we see that multiple internal teams collecting compliance data from the same suppliers. Each supplier is contacted several times in a year asking for compliance data for both unique and the same parts. This causes churn in the supply chain taking up valuable resource time.
Communication amongst the divisions can help greatly. The ability to share the data across enterprise systems can make a significant difference. We often discuss with our customers, how they might leverage the same data not only across multiple divisions but for other regulations and transparency challenges.
What would you recommend to companies who are just entering the product compliance arena?
In years past, many organizations focused on a product’s functionality and not so much the materials and the process used to create the product. With the trend in transparency, the world we live in now no longer let’s companies focus solely on functionality.
Managing product compliance requirements at this level of complexity is new for many companies.
There are two phases companies need to acknowledge. In Phase 1, it is important that personnel have regulatory training, that compliance gets integrated into product design, and that an expedited process helps to get year 1 reporting completed. After that, in Phase 2 it’s all about automation and systems to help collect, analyze, and manage the data.
Having strong processes in place and the systems to collect, analyze, manage, and report the data will ease some of the burden. There will always be a need to reach out for third party data and help because there are so many suppliers that have not been trained on the various regulation requirements or company policies. With strong, long term partnerships in place and solid, repeatable processes, companies can meet their obligations and build better products.
Bio:
Kelly Eisenhardt is Co-Founder and Managing Director at BlueCircle Advisors, an environmental compliance and sustainability consulting and training firm based in Massachusetts (www.bluecircleadvisors.com.) In her role at BlueCircle Advisors, she is responsible for providing business intelligence, strategy and implementation of environmental, social and governance (ESG) risk programs. Her experience aligns well with her client’s needs for technology, compliance, and sustainability expertise by helping companies create and manage their corporate environmental and social responsibility programs.
To contact Kelly Eisenhardt, send emails to kelly.eisenhardt@bluecircleadvisors.com or follow her on Twitter @KelEisenhardt. For more information about BlueCircle Advisors and the company’s products and services, please visit www.bluecircleadvisors.com, on Facebook at BlueCircle Advisors, on Twitter @OurBlueCircle, and on the LinkedIn group at the BlueCircle Advisors group.