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REACH Guide, Part 3: A quick way to understand your risks and obligations

If you’re a discrete manufacturer you may find it difficult to understand how Europe’s REACH chemical regulation impacts your products. No time to decipher the 849 page regulation? You’re in luck. Here’s a quick list to help you understand your product-related risks and obligations stemming from REACH.

Product manufacturers or suppliers, have four key risk areas – and numerous potential obligations and impacts – to consider:

RISK #1: If your product releases a substance and is made, imported or supplied in Europe

If you make, import, or supply (as a retailer) a product in the European Economic Area (EEA) – currently composed of Iceland, Liechtenstein, Norway and the 27 EU member states – and that product releases a substance, then you may have to register that substance for that use. You should first determine if the following four conditions are true:

1.) The substance is intended to be released from the product under normal and foreseeable conditions of use. One example of an intentional release of a substance is the scent emitted by a scented eraser or children’s toy. Notable exceptions include toner cartridges. According to ECHA guidance, a toner cartridge is not an article releasing a substance, but an article containing a substance. This is an important distinction since it follows that the manufacturer, importer, or retailer may face obligations of a substance maker in addition to those of an article maker.

2.) The substance is not excluded from REACH or exempt from registration

3.) The substance will be imported into the EEA in quantities over 1 metric ton per year per producer, or importer, per legal entity (this includes the total amount of the substance in the product, not just the released portion. It also includes amounts aggregated across all articles of this type per legal entity)

4.) The substance has not already been registered for that use in articles by another company.

Potential Obligation: Registration (REACH, Article 7(1))
If all of the above are true then you may be required to register the substance – in other words, submit a technical dossier to ECHA with information on the properties of a substance and, if required, a chemical safety report documenting the chemical safety assessment for this substance.

RISK #2: If your product contains an SVHC and is made, imported, or supplied in Europe

If you make, import, or supply (as a retailer) a product into the EEA, and it contains an SVHC, you may have an additional set of risks and obligations under REACH. (See the appendix at the end of this paper for the current list of SVHC.)

Potential Obligation: Communication (REACH, Article 33)
If your product contains an SVHC then you must provide sufficient information to allow safe use and end of life disposal of the article, and including – at minimum – the name of the SVHC in question. This information must be provided to industrial or professional users and distributers “automatically.” If requests come from consumers, then information must be provided within 45 days of the request, free of charge.

Chemical Watch has reported at least one instance of a company failing to fulfill REACH Article 33 obligations. In December 2009, they reported: “The Swedish Society for Nature Conservation (SSNC)…has urged the State Prosecution Service to prosecute two companies for allegedly failing to respond to information requests in relation to Article 33. In September the SSNC tested plastic shoes bought in a number of countries and found that two shoes bought in Sweden contained the phthalates DEHP and DBP, which are on the REACH Candidate List and thus SVHCs.”

The obligation to communicate applies regardless of the tonnage shipped (i.e. even if quantities are less than 1 metric ton per year) and begins for supplied articles as soon as the SVHC appears on the candidate list for authorization. The date the article is supplied, or placed on the market is key, not the date it was produced or imported.

Potential Obligation: Notification (REACH, Article 7(2…))
If your product contains an SVHC then you may have to notify ECHA – i.e. provide contact information, the registration number of the substance if previously registered, the identity and classification of the substance, a brief description of the uses of the substance in the article, and the tonnage band of the substance.

Notification is required if:

1.) The SVHC will be imported into the EU market in quantities over 1 metric ton per year per producer or importer/legal entity

2.) Exposure to humans or the environment can’t be excluded during normal use throughout the life of the product, including disposal. Normal use could include “anticipated” use even if not “intended” unless explicitly advised against by the manufacturer.

3.) The substance has not already been registered for that use in articles by another company.

4.) The articles have been produced or imported after the SVHC was included in the candidate list (i.e. were not exclusively produced before it appeared on the list).

Note that none of the conditions above apply to the obligation to communicate – they’re only related to notification. Also, whereas the obligation to communicate begins as soon as an SVHC appears on the candidate list, article makers have an additional 6 months to notify, if notification applies. Notification starts from June 1, 2011.

Potential Obligation: Authorization and restriction
Authorization is the mechanism within REACH for identifying and restricting the use of SVHC. Over time, SVHC on the candidate list will become “subject to authorization” and listed in Annex XIV along with sunset dates. Manufacturers may seek authorizations, but any authorization will be company-specific, use-specific and time-limited. By design, authorization will be expensive for manufacturers and only a temporary fix. One of the ultimate goals of REACH is to remove SVHC from the market.

Even if the articles you produce aren’t directly imported into Europe, you may face additional, indirect obligations arising from supply chain ripple effects – from both your customers and your suppliers.

RISK #3: If your customers import, or make products in Europe
Just because you don’t import your product into EU does not mean that REACH will not impact you. Do you sell to a distributor that imports to Europe? Does your product end up in another product that is imported into the EU? If yes, then the burden of registration and SVHC management and reporting will likely get pushed up the supply chain to you.

Potential obligation: Satisfying the REACH-related requirements of your customer
This can be a confusing area, especially for suppliers who don’t sell directly to Europe and are new to REACH. REACH may place direct legal obligations on your customer, but not on you. The demands that your customer places on you may be related to REACH. But they ultimately have more to do with the strategy of your customer and the business relationship between you and your customer, rather than with any specific obligations spelled out by the REACH regulation. For example, your customer may decide to impose requirements that are stricter than REACH – say request information on a forward-looking list of SVHC that is longer than the official list of SVHC.

Alain Digeon, Senior Vice President of Environmental Projects at Schneider Electric described the supply chain challenge in Supply and Demand Chain Executive, “REACH requires a lot of data, new data, and changing data.  It needs to be exchanged between customers and suppliers, and some of these suppliers have never heard about REACH and could care less about it.”

RISK #4: If your suppliers (or their customers) import or make products in Europe

Because of REACH and the sheer size and influence of the EU market, certain chemicals, parts, and materials will become costlier and harder to procure. They may even disappear from the market as suppliers faced with additional costs and restrictions decide to shift their business elsewhere. The European Commission has estimated that 1-2% of the roughly 30,000 substances in production will be withdrawn from the market due to REACH.

Potential impact: Supply chain disruptions and higher costs
Now more than ever, manufacturers must identify and manage the supply chain risks arising from the substances in the articles they produce. Targeted substances like the REACH SVHC, those on ChemSec’s “Substitute It Now!” (SIN) list and others expose you to risks of increasing costs, obsolescence issues and supply chain disruptions.

For discrete manufacturers, REACH is about more than saving the environment.  It’s about avoiding business disruptions caused by high-risk substances in your products and supply chain.  As Andy Page, Engineering and Technology executive at Rolls-Royce puts it, “This is predominately a business risk issue.”

Other considerations and risks

In addition to the above, you may face more requirements under REACH that are not related to “the requirements for substances in articles” – as ECHA describes them. For example, manufacturers who are located in the EU must ensure the processes and chemicals used in their European facilities comply with REACH. Finally, if you manufacture substances or preparations in addition to manufacturing articles, you will face an additional set of obligations. These topics are outside the scope of this guide.

The rest of this series will provide practical steps that your organization should take to meet the challenges of REACH, along with other useful information.

Note: This guide (and this blog) is informative only and has no legal authority. You should refer to the REACH regulation itself for a full statement of the legal requirements, and in the case of any doubt seek legal advice.

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What every manufacturer needs to know about ChemSec

When it comes to restricted substances in products, many companies focus exclusively on government regulations and customer requirements. They should also take a closer look at the factors that drive these mandates — such as the activities of influential non-governmental organizations like ChemSec.

Who is ChemSec?

ChemSec (The International Chemical Secretariat) is a non-profit organization operating out of Göteborg, Sweden. Their goal is to spur action toward what they call “a toxic free world.”

ChemSec’s stated mission is to “highlight the risks of hazardous substances and influence and speed up legislative processes.”  Two legislative initiatives getting their attention these days are the RoHS directive recast and the REACH regulation.  Here’s where it gets interesting.

ChemSec and the RoHS Recast

In the following three short videos, ChemSec builds the case for why brominated flame retardants (BFR) and PVC should be restricted as part of the recast of the RoHS directive:

Part 1: Why RoHS should restrict BFR and PVC

Part 2: Problems with BFR and PVC

Part 3: Electronics industry already moving away from BFR and PVC

In the video, ChemSec Project Coordinator, Frida Hök, says that the scientific evidence shows that brominated flame retardants (BFR) and PVC are a concern for humans and the environment.

ChemSec contends that it’s technically feasible to find safe alternatives (many produced in the EU by European companies, a potential boon for European business) and that safe products in several RoHS categories already exist.

Several noteworthy companies have started to phase out these substances in their products: Acer, Apple, ASUS, Cisco, Dell, Electrolux, Fujitsu, HCL Infosystems Ltd, Hitachi, HP, JVC, Lenovo, LG Electronics, Microsoft, Motorola, NEC, Nintendo, Nokia, Panasonic, Philips, Ricoh, Samsung, Sharp, Sony, Sony Ericsson, Toshiba, Very PC, and Wipro.

ChemSec makes the point that all BFR and PVC should be restricted to prevent companies from substituting similar substances that present the same hazard.  Apparently some manufacturers stopped using RoHS-restricted PBB and PBDE, only to replace them with substances with equivalent hazardous properties: PVC, TBBPA, HBCDD, and DBDPE.

On June 2nd, 2010 the European Parliament voted to widen the scope of RoHS to include additional product categories and to introduce a methodology for the consideration of new substance restrictions. However, it did not vote to include BFR and PVC as part of the recast. ChemSec called this a disappointment and a missed opportunity.

ChemSec and REACH

On the REACH front, ChemSec developed the SIN (Substitute It Now!) List, a database of hundreds of substances that meet the criteria for REACH Substances of Very High Concern (SVHC).  This forward-looking list was compiled with the help of toxicologists, an NGO advisory committee, and the ChemSec Business Group, which includes companies such as Sony Ericsson, Dell, Sara Lee, Boots, and L’Oreal.

The SIN List is intended to offer guidance to companies, consumers and regulators. ChemSec hopes it will also help fast-track the most urgent SVHC for substitution.  The SIN List 1.1 contains 356 substances and can be accessed here.

Jerker Lighthart, Project Coordinator at ChemSec, reported that the European member state substance list has a 90% overlap with the SIN List, making it an effective model for identifying SVHC.  As such, it can help businesses “look into the future” and mitigate risks.  And at least one financial research firm has used the SIN List to estimate the risks and potential costs that REACH will have on industry.

The SIN List is a potentially powerful tool for businesses who want to stay ahead of the REACH regulation as a means of managing risks and reducing the operational costs of compliance – for example, reducing the need to re-survey suppliers every time a new set of SVHC is made official by ECHA.  However, ECHA cautions that businesses should not use the SIN List in this way.  Efforts are underway to speed up the official SVHC process — one of the intended effects of the SIN List. Coincidence?

In the future ChemSec wants to include more information on where SIN List substances can be found.  This will help manufacturers more rapidly pinpoint where targeted substances may be present in their products.

ChemSec Reading List

ChemSec has published some highly readable and informative reports, designed to help further their agenda.  I included links to some of their best publications, below.

ChemSec collaborates with manufacturers who are committed to removing hazardous substances from their products and are eager to promote their achievements. The result is a set of excellent case studies — featured in some of the reports, below. The case study focused on Seagate in the “Greening Consumer Electronics” report is worth reading as a companion to my earlier post on Seagate.

I recommend reading the following ChemSec publications:

“ChemSec joins Twitter!”

This tweet, posted by @chemsec, appeared on June 1st 2010. Regular posts have been appearing ever since, with news and relevant links. If you’re a twitter user, consider following @chemsec.  And if you enjoyed this post, please consider to subscribing to this blog. Thanks!

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REACH Guide, Part 2: What is REACH?

In my previous post I introduced REACH and gave some examples of how some companies are responding to the challenges of this new chemical regulation – some successfully, some not. Today I’ll provide a more complete definition of REACH, its history, and how it’s influencing chemical regulations around the world.

What is REACH?

Laws banning toxic substances in products have been around for years, but historically focused on individual substances, products, industries, and uses. The groundbreaking ideas behind the REACH regulation – also known as Regulation (EC) No 1907/2006 – originated out of Europe’s desire to replace its patchwork of existing regulations with a more comprehensive law – one that encompasses all chemicals, including those placed on the market before 1981, when the industry did not systematically provide documented health and safety information.

REACH, which stands for “Registration, Evaluation, Authorization and Restriction of Chemicals,” went into effect on June 1, 2007. It takes a precautious stance, meaning the burden is placed on industry to prove that the chemicals it produces, uses, and places on the market in significant quantities are safe for humans and the environment.

An estimated 30,000 chemicals will be regulated by REACH. It’s expected that up to 3,000 substances will ultimately be banned, or “restricted,” under REACH. These so-called Substances of Very High Concern (SVHC) will include CMRs – substances that are carcinogenic, mutagenic, and toxic for reproduction – and other substances. (See the appendix at the end of this paper for the current list of SVHC.)

With such an ambitious agenda it’s not surprising that the REACH document itself is lengthy. It consists of hundreds of pages of legal text and technical annexes, and more than twenty individual technical guidance documents, each addressing the requirements of various stakeholders and elements of the law. In all, there are thousands of pages of supporting documents for REACH. It’s been called one of the most complex texts in the history of the European Union.

The 4 Elements of REACH

REACH sets up an agency – the European Chemicals Agency (ECHA) – to oversee the four key procedures of the law:

1.) Registration: Registration is an information gathering and risk management exercise. Manufacturers of substances that are imported into the EU in quantities over 1 metric ton per year must register these substances by submitting a dossier which includes data on a chemical’s properties, uses, and safe management. The goal is to have one registration per substance, so companies may have to register jointly.

2.) Evaluation: The Agency evaluates the registration information to determine the chemical’s hazards and risks.

3.) Authorization: Authorization applies to SVHC and will be company-specific, use-specific, and time-limited. Lists of candidate and official SVHC will be issued on a rolling basis. The 1 metric ton threshold doesn’t apply to authorization.

4.) Restriction: The goal of authorization is to encourage manufacturers to find and use safe alternatives to SVHC and to ultimately restrict the use of SVHC explicitly.

REACH-like Regulations around the World

REACH is a European Union (EU) regulation, but its influence extends far beyond Europe. The size of the EU market and the supply chain ripple effects of the regulation mean that manufacturers in nations around the world are essentially playing by European rules. Other countries – including the U.S. – are making moves to update their chemical regulatory regimes so they are more like REACH. The reasons have as much to do with national competitiveness as they do with protecting human health and the environment.

This CNN video explains how the U.S. may move from an “innocent until proven guilty” approach to a REACH-like “guilty until proven innocent” stance – which places a far greater burden on industry.

The “Kid Safe Chemicals Act” referred to in the video is now called the Safe Chemicals Act of 2010 and was introduced by Senator Frank Lautenberg (D-NJ) on April 15th.

Japan, Switzerland, Turkey, Canada, Taiwan, and China are also in the process of making their existing chemical laws more REACH-like.

Clearly, REACH is triggering a global regulatory trend. Manufacturers will face more restrictions on the use of substances in their products, more risks of compliance failures and supply chain disruptions, higher costs, and new legal and customer-related obligations regarding the substances in their products.

The rest of this series will describe these risks and obligations along with practical steps that your organization should take to meet the challenges of REACH. Please consider subscribing to this blog.

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REACH Guide, Part 1: Introduction and Overview

REACH is Europe’s groundbreaking new chemical regulation. It’s a chemical regulation, but REACH impacts all products, not just chemicals. It’s a European regulation, but REACH is influencing all regions of the world. If you manufacturer or distribute products, REACH can block your sales or disrupt your supply chain. I’ll explain how and what you can do about it in a series of posts, starting with this one.

In an earlier post I described the dramatic increase in the number of regulations targeting hazardous substances in products. REACH is at the forefront of this trend, a framework developed to ensure the safe use of all chemicals, including those used in products. A key goal of REACH is to encourage manufacturers to remove dangerous chemicals from their products. These so-called Substances of Very High Concern (SVHC) include CMRs (substances that are carcinogenic, mutagenic, and toxic for reproduction) and other hazardous substances.

This 8-minute video does a good job of describing some of the goals of REACH, its scope, and its implications for manufacturers:

There are thousands of substances in everyday products that meet the criteria of REACH SVHC. So far Europe has identified thirty. Over the next several years, many more SVHC will be identified. Manufacturers and suppliers of products that contain SVHC will need to take some difficult steps, ultimately replacing any SVHC with safer alternatives. The first step is simply communicating their presence to customers, as described in Article 33 of the REACH regulation.

We’ve already seen companies successfully fulfilling the early requirements of REACH. Others?…not so much.

First, the successes:

1.) Hewlett-Packard provides detailed information on their website for consumers, identifying SVHC that may be present in some of their products. For example, HP states that the power cord, mouse, and external power supply for certain desktop personal computers may contain the substance DEHP, (Bis (2-ethyl(hexyl)phthalate), CAS Number 117-81-7) in levels above the REACH threshold.

2.) Apple provides less extensive information regarding their products on a general FAQ page titled “Apple and the Environment.” But as of this writing the statement references the 15 SVHC identified on October 28, 2008. It does not mention the additional 15 SVHC identified in January 2010, five months ago.

3.) Other manufacturers – HP provides a handy list of links to other, “non-HP” manufacturers. Some companies on the list appear to be fulfilling portions of their REACH Article 33 obligations via their web sites. Others are apparently not.

Now, some failures:

1.) Björn Borg Footwear sandals were found to contain high content of the repro-toxic phthalate DBP, which is on the SVHC candidate list. The company had earlier failed to respond to a consumer request regarding SVHC.

2.) John Lewis, B&Q, Focus, and other retailers failed to respond to similar SVHC information requests – reported in a study conducted by Environmental data service, ENDS.

3.) Other failures. Every Friday, the European Commission publishes a weekly overview of the dangerous products reported by the national authorities – as part of the RAPEX alert system. Many of these RAPEX alerts include reports of blocked shipments and product recalls due to REACH SVHC – like this one.

These examples show that REACH is already impacting product manufacturers in a big way. These impacts will become greater in the years ahead, as will the costs and risks for manufacturers. In later posts, I’ll do a deeper dive on the regulation itself, the exact risks and obligations it imposes, and the steps you need to take to ensure that your business and your products are ready for REACH. Please consider subscribing to this blog.

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3 ways to get better insight on product performance

It was good to meet so many PTC/USER 2010 attendees this week at our PTC InSight booth and in our special topic and product update sessions held yesterday afternoon. For those of you who missed the sessions, I’d like to give you a snapshot of some of the important ideas behind our InSight strategy and what we mean by “product analytics.” Here are three ways that PTC InSight provides insight and helps manufacturers develop better products.

1.) Central management of data from disparate sources
An earlier post summarized the exponential growth in product-targeted environmental regulations in recent years. These regulations are broadening in scope. Now “green” encompasses restricted substances, embodied greenhouse gas emissions, energy efficiency, and much more. With each new constraint, the amount of data required to track the environmental performance of your product increases. Data may come from your suppliers in the form of declarations, test reports from third party labs, or models from reference libraries. InSight helps you reconcile all this data and analyze it in the context of the product’s bill of material (BOM). It’s a scalable approach that helps you quickly measure performance and target areas for improvement. Ford used PTC InSight to help pinpoint ways to reduce their product’s carbon footprint.

2.) Dashboards that enable data-driven decision making
InSight can crunch a lot of data, but one of the biggest benefits of the software is its ability to distill all that data it and present it in intuitive dashboards.

With dashboards, engineers and managers can quickly identify any red flag components or “hot spots” that need to be addressed. They can spend their time acting on the data, not sifting through spreadsheets and performing manual analysis. They can analyze a product at the earliest stages of development (the as-designed BOM) and at any point over the product’s lifetime (the as-manufactured BOM).

3.) Integration with standard tools
People across the enterprise need access to this dashboard-type data too, at their fingertips, in the tools they use every day. InSight connects to PLM, ERP and other systems and provides important data to the users of these systems – in the right context. Take a look at this 3D image in ProductView:

In 3D it’s easy to visualize which components meet your targets and which do not, with status levels provided by InSight. Context is everything. Some restricted substances are only restricted if they come into contact with the user. Others are restricted everywhere, and will have redesign and rework implications depending on where they appear in the physical product. In both cases 3D helps identify issues and uncover paths to resolve them.

You can get more information on InSight, including whitepapers, case studies and data sheets at the InSight web page.

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The high cost of noncompliance – what we can learn from Shrek

Last year at PTC/USER 2009 I wrote about the Mattel toy recall and the record-setting civil penalty imposed because their products contained excessive levels of lead. This year McDonald’s is in the headlines for similar reasons. A recall is underway of 12 million cadmium-tainted “Shrek” drinking glasses sold by McDonald’s. For every headline like this one, there are hundreds of other incidents we never hear about. Restricted substances and other regulations are having a big impact on all manufacturers. Our recent industry survey illustrates how.

It’s not just toys and fast-food promotional items. All products are affected. The survey results showed that manufacturers in various industries and doing business in regions around the world are feeling the impact of product compliance failures. Fifty-five percent of our more than 300 respondents had experienced some impact. For companies with greater than $5 billion in revenue it was significantly higher – 70% reported some impact.

As you can see in the chart above, fines and penalties – perhaps the most obvious potential impact – ranked a distant third among all the impacts. Impacts related to blocked or delayed shipments ranked much higher. Losing revenue, whether it’s due to a compliance failure or a supply chain disruption, is the most commonly reported impact.

We’ve seen small amounts of restricted substances in inexpensive components jeopardize tens even hundreds of millions of dollars in product sales (See The $50 million dollar cage nut). The stakes are high – a hard lesson we can learn from Shrek.

For more survey results, company interviews, and additional analysis, download the Tech-Clarity whitepaper, Product Environmental Compliance.

For additional survey results, attend my presentation at PTC/USER 2010, Developing Greener Products, at 2 PM tomorrow in Suwannee 12. Hope to see you there!

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Seagate’s Green Product Strategy – 5 Secrets of Success

My previous post covered highlights of Mike Kirschner’s presentation at “The Green Product Challenge” seminar we hosted in Santa Clara last week. Mike gave an overview and update on many of the major product-targeted environmental regulations. Brian Martin of Seagate was our next speaker. Brian explained how Seagate is successfully meeting and in many cases exceeding the requirements of these regulations.

Seagate is the world’s largest provider of digital information storage devices, shipping about 50 million disk drives this year. With a global presence, Seagate products must meet the regulatory standards of countries around the world. Brian explained that since Seagate’s customers include global OEMs — many who market themselves as “the greenest on the planet” — Seagate must meet an array of unique corporate standards. In the area of restricted substances and reporting, every customer may have a slightly different list of substances of concern. And about every six weeks one customer adds a new substance to their list. Brian calls this “the flavor of the month.”

Many companies waste resources constantly reacting to these ever-changing requirements as the bar is raised higher and higher. Brian described the Seagate approach, and how they avoid these costs. Here are some of the secrets of their success:

1. Move away from list-based supplier declarations toward greater levels of disclosure. Restricted substance lists change constantly, requiring repeated data request to suppliers, increasing costs and errors. Brian noted that products typically contain less than 1% restricted substances, so list-based approaches leave 99% or more of the product unreported. Seagate’s supplier policy mandating full material declaration positioned them well when the first REACH Substances of Very High Concern (SVHC) appeared. Seagate already had the data to see what, if any, SVHC were present in their products. As a result they were able to generate their first REACH response within 15 minutes (see video, below).

2. Use industry standard data collection formats, not proprietary, in-house spreadsheets. Seagate uses the IPC-1752 form. Brian calls it “the standard everyone loves to hate” but explained how it was a key success factor for their program. It enables Seagate to collect greater levels of disclosure from suppliers and systematically capture and validate the data with software. Over time suppliers appreciate the consistent format — it means they don’t have to figure out and complete another customer-specific form. Now, some of Seagate’s suppliers are even more receptive to the idea of full material content. Their other customers send them new data request every time the REACH SVHC list grows – not Seagate.

3. Focus on supplier communication and training. According to Brian, “supplier training is absolutely key.” Seagate provides live web-based training sessions to their suppliers every 3 weeks and uses WSP to assist in supplier communication, support, and data collection.

4. Avoid over-reliance on test data. Brian reported, “We use lab tests as an audit, and only as an audit — not as the basis for compliance.” Getting comprehensive, reusable data up front means you’re more in control of the process, not reacting after the fact, based on test results.

5. Use off-the-shelf software for data management analysis and reporting. Seagate uses PTC InSight software technology (marketed via a Siemens PLM Software partnership as “Teamcenter for environmental compliance”) to automate the collection and validation supplier data and to quickly grade products against multiple standards, including those “flavor of the month” requirements. Another key benefit of the software is that it integrates well with their existing product data management systems — for example, when a new item is introduced it triggers a supplier data request.

Take a look at this video in which Brian and Cheryll McDougall (Seagate’s Executive Director – Environmental Health & Safety, Global Citizenship) talk more about the Seagate strategy and the benefits of their systematic approach. It’s easy to see why Seagate has been recognized as a green leader in Bloomberg Businessweek, the Newsweek green rankings, and the ChemSec & CPA report – Greening Consumer Electronics.

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“We are going to be held responsible for every molecule in our product”

We hosted “The Green Product Challenge” in Santa Clara last Thursday, a PTC InSight seminar featuring presentations from Design Chain Associates and Seagate. The goal of the seminar was to explore how leading companies are addressing the challenges of REACH, RoHS, and other product-focused environmental mandates.  I’m going to present the highlights of the event here, for those who couldn’t attend in person.

Mike Kirschner, president, Design Chain Associates kicked things off with his presentation, “Product-Targeted Environmental Regulations (PTERs):  Directions and Implications.” Mike provided updates on all the major regulations and talked about the trends.

    Mike’s chart above illustrates the exponential growth in regulations over the past decade. The chart is “indicative of but not 100% equal to the growth of all regulations in the field.” Six major categories of regulations are represented:  batteries, packaging, waste, energy, climate change, and substances.

    In the biggest category, substances, Europe’s REACH regulation is “a very big influencer.” Countries around the world are expanding their chemical regulatory regimes along the lines of REACH.  Some examples:  China REACH, Japan REACH, Korea REACH, Canada’s Chemical Management Plan, California’s Safer Alternatives Regulation, and TSCA reform in the U.S.  (Senator Frank Lautenberg introduced the Safe Chemicals Act of 2010 on April 15th).

    Earlier regulations focused on just a handful of substances.  REACH is changing the framework, essentially regulating all chemicals — not just a few bad actors, or even a list of Substances of Very High Concern (SVHC) — but all chemicals.  Mike paraphrased something he heard from one of his clients, a big electronics firm: “We’re heading into an environment where we believe we are going to be held responsible for every molecule in our product.”

    This has major implications for all product manufacturers, who will need to beef-up their business processes and their data management systems – some regulations require data to be stored for 10 years after the last product was sold.  Among Mike’s recommendations for the manufacturers in the room, “Take this seriously.”

    Seagate presented next.  Seagate is an excellent example of how one company is succeeding by not only meeting but exceeding the requirements of many of these regulations.  I’ll explain why and how in my next post.

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    What’s in your product? Why you should care…

    Sarge ToyLast week Mattel agreed to pay a $2.3 million civil penalty – the highest toy-related penalty ever imposed by the U.S. Consumer Product Safety Commission.  This is just the latest cost incurred by the toy industry, where excessive levels of lead were found in some products (one example shown at right).  This week at PTC/USER 2009, more than a few attendees were looking at the Mattel case and drawing parallels to their own industries and products.  These days, for a variety of reasons, more companies need to answer the question: “What’s in your product?”

    Jim Sweeney, Andrew, and I had some great conversations with PTC/USER attendees around the InSight Environmental Compliance demo exhibit over the past three days.  Many of the people we spoke with had a critical need to track the substances in their products – but not always for the same reasons.

    Here’s a partial list of some of the reasons why companies need to track the materials and substances in their products.  Some of these may surprise you:

    • Restricted substance regulations. Manufacturers are concerned about regulations that restrict the use of hazardous substances in products.  European regulations like ELV, RoHS, and REACH are proliferating and targeting more toxic substances every day – with the aim of protecting human health and the environment.  Countries like China and the US are adopting similar laws. These laws can block sales of non-compliant products and lead to fines and other costs.
    • Customer requirements. Companies faced with many different regional product regulations, like those above, are creating their own superset standards.  They in turn enforce these standards on their suppliers.  As a result many manufacturers must comply with the unique “regulations” of their customers.
    • Risk of supply chain disruptions. The two forces above are rippling through the world’s supply chains, purging them of targeted substances.  Companies who aren’t aware that targeted substances are in their products or are used in the making of their products run the risk of higher prices or the inability to procure key components.
    • Risk of product failure. Aerospace suppliers need to track materials that may produce out gassing, a phenomenon that can jeopardize the success of a mission.
    • Sanitary standards. Equipment makers in the food and beverage industry need to know what materials are in their machines and to what extent they come in contact with food to meet regulatory standards.
    • Cost reduction. Accurately accounting for materials in products enables manufacturers to chart their aggregate demand for key commodities enabling them to make better purchasing decisions.  It also enables them to target high cost materials and seek lower cost alternatives.

    Thanks to everyone who stopped by the exhibit to chat.

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    John’s posts can be reused or republished solely in accordance with the BY-NC-ND Creative Commons License.

    The $50 million cage nut

    DSCF0054WCan a 12 cent cage nut cost you $50 million? It can if it happens to be in your product, and it happens to contain a substance prohibited by your customer. Ray Lizotte, Director of the Environmental Stewardship Office at APC by Schneider Electric, has an interesting story to tell that was featured at PTC/USER 2009 this week.

    Ray Lizotte led the charge to resolve the case of the non-compliant cage nut — an issue which placed over $50 million of revenue in jeopardy with a demanding Japanese customer. As Ray explains, the solution to this and a myriad of similar regulatory and customer requirements involved mobilizing the entire organization, setting up new business processes and implementing new systems to handle the barrage of data required to manage suppliers and track the compliance status of the parts and materials in APC products. At APC, the centerpiece of that system is PTC software: InSight Environmental Compliance.

    Thanks to Ray and his team, APC remains an industry leader, bringing products to market that are innovative, efficient, AND environmentally compliant.  I’ll  let Ray speak for himself. Take a look at this 10 minute video (the cage nut story starts at 2:35)…

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    John’s posts can be reused or republished solely in accordance with the BY-NC-ND Creative Commons License.

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