GHS and its impact on supply chain risk management and compliance

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Courtesy of Verisk 3E

The Globally Harmonized System of Classification and Labeling of Chemicals, or GHS — developed by a United Nations committee of experts — seeks to facilitate international trade through standardized classification and labeling of chemicals and to improve the overall clarity of available hazard information. Because of the Occupational Safety and Health Administration's (OSHA) impending adoption of the system, risk professionals should take note when monitoring supply chain operations, both at product manufacturer and industrial end-user facilities.

GHS itself is not a regulation. Instead, it is an internationally recognized harmonized method to classify hazards and communicate those hazards throughout the supply chain. Regulatory authorities, such as OSHA in the United States and Health Canada, adopt the UN standard through their national regulatory processes. For this reason, variations still remain among countries, but 'harmonization' is closer than ever before.

The United States moved significantly closer to adopting the standard when, on October 25, 2011, OSHA sent the Office of Management and Budget (OMB) its final rule to adopt the GHS as its hazard communication standard (HCS). On February 21, 2012, the OMB completed its review of the revised HCS, concluding that the revised standard is 'consistent with change,' which indicates that while the OMB agrees with the intent of the rule, it may require 'substantive' revision by OSHA before promulgation.

The OSHA GHS introduces a set of criteria for categorizing the human health, physical, and environmental dangers of hazardous substances. Before GHS, a substance was classified as nonhazardous, toxic, or harmful to health depending on the country or tracking block in which the classification was made (Canadian WHMIS, EU DPD, and so forth). GHS harmonizes the various systems, and new classification criteria could create a higher, lower, identical, or new classification for a product compared with the previous system. The new standard also has far-reaching implications for data contained within material safety data sheets (MSDS) and product labels and the way the data is formatted.

The promulgation of the final rule will affect millions of workplaces and have a profound effect on the supply chain. Upstream, manufacturers and distributors will be required to conform to new safety data sheet (SDS) format and content requirements. Down­stream, producers, importers, and distributors will have a three-year transition period to be in full compliance (see Figure 1). The proposed rule also includes a provision that requires employers to train all employees on the new label elements and the standardized SDS sheet format within two years after the publication of the HCS final rule.

For some, transitioning to GHS has been coined an 'avalanche' or 'tidal wave,' with nonconformance having adverse implications on compliance and risk management initiatives alike.

Key risk evaluators in property/casualty insurance organizations can facilitate conformance and mitigate risk by encouraging client executives and directors to research and apply best-in-class tools before the deadlines set forth in the final rule. If the appropriate tools are in place to handle the transition, the volume and scope of change ahead will not be as daunting.

For example, housing substance-level data in a centralized electronic system is becoming a best practice for integrated, modern environmental health and safety (EH&S) management. Streamlining operations by automating and centralizing paper-based systems results in immediate return on investment. Such a tool, especially when fueled by accurate and up-to-date regulatory data and content, can be invaluable in implementing GHS initiatives across the enterprise. Risk evaluators should also counsel affected companies to begin sourcing relevant SDSs for all hazardous products on-site. Once this step is complete, revised GHS SDSs can be distributed throughout the company. Many companies have found that using an online management system has many benefits, including the ability to develop an accurate product inventory for each company location and to manage and distribute GHS-compliant SDSs.

Following the receipt of an SDS with GHS information, companies should review the new SDS and compare it with the previous version to evaluate changes. New information should be reviewed carefully to ensure that it is properly used. GHS information was created to improve hazard information available to employees, thereby reducing risk and circumventing accidents through proper understanding of the hazards and the required precautionary measures.

Conformance also mandates education and training. Insurance professionals should counsel clients to educate their employees thoroughly for maximum risk reduction. Employees should know where to find information on new GHS-formatted safety data sheets and labels and how to interpret GHS information.

Consumer education is critical as well. Manufacturers, wholesalers, and retailers can play a voluntary role in educating customers as they navigate new information coming through the supply chain. Classification clarification may be required for the products they are buying.

As with any complex new regulatory initiative, confusion is expected. However, a variety of tools and solutions are available on the market today to facilitate conformance and to ease the burden of new requirements for companies throughout the supply chain. In addition, engaging with a reputable and experienced service provider to deploy essential GHS initiatives can certainly reduce the risks surrounding noncompliance.

3E Company's full-service approach to SDS management provides critical SDS revision maintenance that will save you time and effort, especially during this transition.

Robert S. Christie is president and CEO of 3E Company, a provider of data products and information services to help customers comply with environmental health and safety requirements.

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