Strategies for enhancing EH&S Regulatory Compliance and Reducing Risk

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Courtesy of 3E Company

With the advent of new federal and international environmental regulations and safety rules, perhaps more than ever before, risk professionals and insurance customers need visibility into the chemicals used at their sites. The environmental regulatory landscape has become increasingly complex in recent years, and companies that manufacture, transport, use, or sell potentially hazardous materials must closely monitor chemical inventories as well as international developments on classification of chemicals to ensure compliance and reduce risk.

Key regulatory initiatives for companies throughout the supply chain include the United Nations’ Globally Harmonized System for the Classification and Labelling of Chemicals (GHS) and Europe’s Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation. The U.S. Environmental Protection Agency (EPA) is also planning a complete overhaul of the Toxic Substance Control Act (TSCA). Given the complexity and breadth of these vast new initiatives, compliance with international, federal, and regional regulatory obligations has never been more daunting, and those affected should not underestimate the depth and breadth of the knowledge required to achieve compliance.

A New Era
In April, the Occupational Safety and Health Administration (OSHA) published its Hazard Communication Standard (HCS) 2012 in the Federal Register, aligning the old HCS with GHS and ushering in a new era. The rule affects millions of workplaces and has a profound impact on the supply chain.

HCS 2012 introduces a set of criteria for classifying human health and physical hazards as well as OSHA-defined hazards and hazards not otherwise classified (HNOC). The new criteria have far-reaching implications for the data contained within Safety Data Sheets (SDSs) and product labels. Many companies will need to reclassify their hazardous materials and capture additional data for publication on labels and SDSs. In many instances, they will also have to reauthor SDSs and labels to conform to the guidelines set forth in HCS 2012.

Achieving conformance will be challenging for many businesses, and risk and insurance professionals should advise affected companies to begin executing their compliance initiatives if they have not already done so. The risk of errors or misinterpretations can persist, and affected companies should seek access to regulatory expertise. Client staff may also consider outsourcing compliance activities to a trusted solutions provider with specialized knowledge of the standard.

GHS around the World
Many Asia-Pacific countries — including Japan, Taiwan, China, Korea, New Zealand, Indonesia, Thailand, and Australia — as well as Europe have implemented GHS but not always in its entirety. This causes differences in how the classification results appear on both SDSs and labels. In Europe, the standard requires companies to follow a harmonized (mandatory) classification of certain substances for various end points. Korea and Japan also have official lists of recommended GHS classifications for substances.

GHS is especially difficult to implement in countries such as the United States, where multiple regulatory authorities govern different aspects of hazard communication requirements. In the United States, OSHA, the EPA, the Consumer Product Safety Commission (CPSC), and the Department of Transportation (DOT) are working to implement GHS. Each agency has the right to adopt GHS in a way that best suits its purpose, with no consideration given to a unified approach or timeline.

Know Your Environmental Health and Safety (EH&S) Acronyms

Chemical Abstracts Service (CAS)
Consumer Product Safety Commission (CPSC) Department of Transportation (DOT)
Environmental Protection Agency (EPA)
Enzyme Commission (EC)
European Chemicals Agency (ECHA)
Globally Harmonized System for the Classification and Labelling of Chemicals (GHS)
Hazard Communication Standard (HCS)
Hazards Not Otherwise Classified (HNOC)
Occupational Safety and Health Administration (OSHA)
Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH)
Safety Data Sheet (SDS)
Substance Information Exchange Forum (SIEF)
Toxic Substance Control Act (TSCA)

As much as GHS is meant to drive global harmonization, individual countries may select the physical hazards and the health and environment classes they wish to adopt. Most countries that have implemented GHS have kept some of their existing hazard classification and communication that is not yet part of the GHS. As a result, far less harmonization exists between countries and regulatory authorities within each country than originally anticipated.

REACHing for Success
The intent of Europe’s REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), managed by the European Chemicals Agency (ECHA), is to enhance chemical safety; however, the regulation has significantly complicated the compliance work for companies manufacturing, importing, or exporting in Europe. As a result of the legislation, all companies manufacturing, importing, distributing, or using chemical substances (on their own, in mixtures, or in articles) in Europe are required to examine their chemical inventory closely for substances within the scope of the regulation to ensure compliance.

Risk and insurance professionals working with non-EU companies should encourage them to establish and maintain an accurate and reliable inventory of substances for all chemicals (substances, mixtures, and chemicals in articles) exported to the EU. Companies must identify each substance by Chemical Abstracts Service (CAS) number, Enzyme Commission (EC) number, and so forth and maintain records of the amounts exported to the EU. All company-owned test data should be labeled as such because it will most likely be shared with other companies in the Substance Information Exchange Forum (SIEF).

If a non-EU company uses mixtures for producing products exported to the EU, the company must know the chemical composition of the mixtures as well as the producer of the substances. If the products have not been preregistered, the non-EU user exporting the product and the producers of the constituent substances have to agree which company will be responsible for late preregistration and for actual registration under REACH.

Another factor for consideration is whether the company can handle the registration and other requirements under REACH by itself. To do so, the company must have an EU subsidiary that can manage the work. Alternatively, the company’s EU customer could register the substance or appoint an “only representative,” a person or company legally established in Europe to assume responsibility for the substance under REACH. Outsourcing is also an option. In any case, the non-EU company must play an active role during the registration of substances.

A number of useful guidance documents are available for downloading from the ECHA website (http://echa.europa.eu).

TSCA Reform on the Horizon
Momentum is also building for significant reform of the Toxic Substance Control Act (TSCA). On December 30, 2009, EPA administrator Lisa P. Jackson announced a new initiative with a comprehensive approach to enhance the agency’s current chemical management program within the limits of existing authorities.

The changes will affect many companies because TSCA influences almost every business involved in the chemical industry in some way (with some exceptions among food, drug, cosmetic, nuclear, and pesticides companies). In addition, TSCA regulates raw materials, intermediates, and finished goods. Full life-cycle compliance is an essential component of TSCA; and most manufacturing, importing, processing, and disposal activities are TSCA-regulated.

If companies do not comply with TSCA, they could experience severe legal repercussions, including criminal and civil penalties, damage to a company’s brand or reputation, and negative impact on a company’s ability to do business. Personnel who demonstrate willful and knowing noncompliance may also face imprisonment.

The risk of financial damage is also high if a company is noncompliant. Such companies may receive severe fines and experience a loss of business revenue if they must stop production. Noncompliant companies can face penalties up to $37,500 per day and/or prison sentences of up to one year. A five-year statute of limitations and criminal penalties for “knowing” or “willful” violations also apply, which can be in lieu of or in addition to civil penalties.

To ensure compliance with TSCA, businesses should develop and maintain comprehensive and detailed plans that address TSCA inventory, TSCA R&D exemption, import certification, export notification, adverse effects, regulatory tracking, and recordkeeping.

Facilitating Compliance
Achieving environmental regulatory compliance can be a daunting task, especially with the regulatory landscape constantly shifting and changing. Businesses need strong processes, applications, and systems to support the various aspects of compliance management for GHS, REACH, and TSCA.

Risk and insurance professionals with client companies affected by GHS, REACH, or TSCA should counsel them to seek assistance from service providers that thoroughly understand the global regulatory environment and are well versed in data and other content and information as it relates to global EH&S regulations. Those providers can assist in implementing compliance activities within the organization and help facilitate adherence to increasingly complex and changing global chemical regulatory obligations.

A proactive EH&S regulatory compliance program promotes many benefits, including reduced risk, a stronger brand, and increased customer loyalty. In addition, by focusing efforts on gathering and analyzing the right data, companies can significantly streamline the cost of managing regulatory compliance requirements, as well as the costs associated with acquiring, tracking, storing, shipping, and disposing of hazardous materials.

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