Today, environmental issues across the supply chain are high priorities for operational risk and compliance management. Many companies are scrutinizing products such as chemicals and other hazardous materials and seeking higher standards for environmental health and safety (EH&S) regulatory compliance requirements. Given the heightened emphasis on EH&S across the business community, it’s critical that supply chain professionals evaluate corporate practices to ensure compliance with local, state, federal and international regulations governing the handling of chemicals and other hazardous materials.
As EH&S compliance becomes a major concern, virtually every industry across the supply chain needs to address more stringent EH&S regulations and associated tasks of risk and compliance management. This includes raw material, finished goods manufacturing, transportation, distribution and retail operations. The complexity of managing and conforming to a myriad of local, state, federal and international regulations for total compliance exacerbates these challenges, as does increased enforcement by regulatory bodies.
No industry is immune from the requirements. The increased scrutiny is particularly relevant for retailers who have a brand to protect and may not realize that many of the products they transport and sell are considered hazardous. As retail companies face significant pressure to maintain high-quality service while cutting costs and reducing risk and loss, it’s become increasingly challenging to manage compliance and risk.
At the other end of the supply chain, manufacturers also face numerous regulatory tasks. The research and development (R&D) function must manage new chemical notifications, product registrations, export notifications and inventory reporting. The product testing area needs to carry out risk and safety assessments, safety data sheet authoring and product labeling. Manufacturing operations must manage hazard assessments.
Heightened scrutiny on EH&S compliance
Historically, risks and regulations associated with various activities throughout the product supply chain were widely recognized but typically handled through specific organizational departments that didn’t interact. For instance, chemists involved in product development weren’t necessarily aware of the impact of transportation regulations on the chemical substances employed in new product development. However, the situation has improved and visibility has increased because of the advent and adoption of enterprise resource planning systems (ERP); Internet advancements that allow for efficient information exchange; and technological and process improvements. And those companies that take advantage of these tools often gain a competitive edge in the marketplace.
New variables in the compliance and risk equation have also resulted from the changing dynamic of the global economy as regulations increase in number, scope and complexity. Recent examples include the Restriction of Hazardous Substances (RoHS), Waste Electrical and Electronic Equipment (WeEE) regulations and the Globally Harmonized System of Classification and Labeling of Chemicals (GHS) requirements adopted by the United Nations and soon to be adopted by OSHA in the United States.
The cost of noncompliance or excessive risk is no longer limited to fines and penalties, nor does it affect only certain employees. Increasingly, compliance and risk are closely associated with brand, image and customer loyalty.
Critical best practices
The first step in dealing with heightened EH&S challenges is to understand the issues facing the company. Often times, disparate workflows and inconsistent sources of EH&S data in company operations are the cause of severe and systemic risks. The supply chain professional’s ability to recognize and address such issues can help steer a company toward compliance, simultaneously mitigating corporate risk and protecting the corporate brand.
Once roles and responsibilities for handling EH&S data are defined, it’s important to assess how to promote compliance across the board. A shift of perspective can lead supply chain staff in the right direction for determining best practices. Typically, a product supply chain perspective is the most effective.
Simplify the review process
With a fresh outlook, supply chain professionals can start to assess the company’s total product risk profile against the framework of the company’s product lifecycle and supply chain. Steps in the review process may include:
1). Review product compliance, safety and stewardship functions
- Thoroughly analyze three distinct levers that govern EH&S regulatory compliance: Regulatory content and information management; compliance tasks and activities; and technology applications and platforms.
- Determine how the company manages regulatory content and information across the product supply chain, both upstream and downstream. Ask the critical question: What are the activities, tasks and controls a company has in place to manage compliance and risks associated with the products that are purchased, produced, stored, sold, distributed, transported or disposed? The company should strategically implement the right mix of platforms, applications and automation tools, optimized for both compliance-related tasks and for keeping management informed on how the company is tracking against its overall EH&S compliance plan.
2). Continue to develop, implement and optimize key strategies
- Ideally, a company should review its business from a product life cycle vantage point—from research and development all the way through to disposal—to gain a better understanding of the critical activities associated with each stage of the product life cycle.
3). Educate executives, directors and managers across the enterprise
- Show them where and how they can research and apply best-in-class global regulatory content and information, technology platforms and applications and activities and tasks associated with delivering compliance.
- Obtain current and accurate global regulatory data from reputable sources.
- Test a variety of solutions available in the marketplace for technology platforms and applications.
- Identify one comprehensive, integrated and qualified provider to supply the content and associated support services.
To achieve and sustain compliance improvements, supply chain executives should take a comprehensive view of compliance performance and risk management throughout the entire supply chain and product lifecycle. Compliance tasks and activities must be evaluated closely to discern which activities are best managed in-house and which can be outsourced most effectively.
Choose the right service provider
When outsourcing certain aspects of the EH&S compliance or risk management program, it’s important to engage with a service provider that supports a comprehensive approach to corporate product stewardship and compliance efforts—beginning upstream with research, development and manufacturing; continuing midstream with transportation, distribution and sales; and concluding downstream with use in the workplace or by consumers and on to the product’s final disposal, recycling or reuse. The benefits of this integrated approach will then reach throughout the extended supply chain.
The most helpful service providers bring scalability, breadth and accurate data within comprehensive and timely solutions to the enterprise—all in the framework of a global platform. Data quality is often a key driver of success and the most valuable service providers are those that offer it in the most robust way available—broad, updated, high-quality and accurate data. This information must be developed, managed and maintained by highly-qualified regulatory and geographic-specific experts. These solutions can then be leveraged to support comprehensive and mission-critical applications across the supply chain and product lifecycle.
Managing information associated with EH&S compliance is a time-consuming, resource-draining and often expensive task. Environmental compliance can be more daunting and onerous than many financial regulations due to the intricacies of the requirements and the financial and human cost of noncompliance. To combat the challenges, companies must shift their attention and resources to focus on EH&S compliance at a higher level.
Robert S. Christie is President and Chief Executive Officer of 3E Company, a provider of data products and information services to help customers comply with environmental health and safety requirements.