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The maturing of our supply chain...Supply chain management and brand protection domestically and world-wide is a priority for most companies. Climbing aboard the green bandwagon of environmentalism is nothing new, but being the leader in supply chain transparency is.
The passage of REACH in 2007 was an impetus to supply chain transparency, requiring companies manufacturing and selling into the European Union to bear legal obligations for certain aspects of supply chain transparency. While REACH is required for business in the EU, establishing and maintaining this supply chain transparency domestically is the new “socially responsible” supply chain paradigm. Such chain transparency is supported by the Dodd-Frank Wall Street Reform and Consumer Protection Act of July, 2010 (the “Conflict Minerals Law”) and California’s Supply Chain Transparency Act (SB 657) passed in September 2010. With SB 657 we are not just addressing transparency of substances in products, we are addressing public disclosure efforts to eradicate slavery and human trafficking from supply chains. SB 657 will affect over 3,000 companies including major brands, retailers, vendors, and suppliers with headquarters outside of California and the United States. On a larger scale, Representative Carolyn Maloney (D-New York) has announced that she will introduce a federal bill modeled after SB 657.
Some companies are responding to this type of legislation, anticipating emerging similar legislation, and are already setting a new standard for supply chain transparency. Efforts made by these leaders in supply chain transparency will continue to set the bar higher with voluntary disclosure, and will and push us to new levels of disclosure until full disclosure in every product is made available - either by law or by a pursuit of competitive advantage. Examples of this legislation include New York’s Household Cleansing Product Disclosure that requires manufacturers of household cleaners to disclose to consumers what chemicals are in their products. Specific language may require companies to disclose any chemicals in their products that cause nerve damage or hormone disruption, even if industry asks to keep this information secret from consumers. Similar disclosures efforts, such as the Accord Initiative in Australia, are already in place. The Accord Initiative is a voluntary approach to providing consumers with information on the ingredients in household products. Already seven major chemical companies, covering almost 80% of their industry market share, have signed up to "What's in it?", committing to disclose all ingredients in certain products by July 2011. Advocates for these laws insist that consumers have the right to know, which mirrors REACH’s Article 33 requirement that suppliers of products that contain certain substances must furnish information regarding those products within 45 days of a consumer request.
Leaders in domestic supply chain transparency have already emerged and include household cleaner manufacturing giant SC Johnson, who intends to disclose chemical ingredients in its products through product labels and a website. Seventh Generation has been publicly disclosing ingredients in their products since 1990, and Clorox recentlyannounced that it will disclose the specific preservatives, dyes and fragrances it uses in its cleaning, disinfecting and laundry products sold in the U.S. and Canada. Also recently, Clorox has developed a mobile application to make it even easier for consumers to see the chemical composition of its products and what those chemicals do.
These new disclosures mark the first time that mainstream cleaning product manufacturers have disclosed all the ingredients used in some or all of their products. Supporters of the cleansing product disclosure maintain that, because household cleansers are products so widely used, requiring full disclosure of their ingredients would be a good start toward requiring full disclosure of all ingredients in all products. Mirroring the food and nutritional labeling disclosures established by the FDA that apply to ingredients in food, full disclosure on all product ingredients is clearly in our future and the leaders of ingredient full disclosure and supply chain transparency are already setting the standard for ease of use via their website and, in return, will reap the rewards for leading the pack. Domestic full ingredient disclosure laws have had starts and stops in the past. Hopefully these false starts will be a thing of the past given increased environmental and governmental demands, coupled with consumer and corporate response to such disclosure laws. In the mean time, information on what may be in other consumer products can be found in The Good Guide, a resource that provides health, environment, and social performance of products and companies.
The traditional definition of Corporate Social Responsibility (CSR) includes a voluntary approach to meet or exceed stakeholder expectations by integrating social, ethical, and environmental concerns together with the usual measures of revenue, profit, and legal obligation. Since first entering into force in 2003, RoHS and WEEE have catapulted both awareness and action of the environmental concerns portion of traditional CSR.
Seven years later, the social and ethical portions of traditional CSR have finally received their push with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of July, 2010 (the “Conflict Minerals Law”). This federal law is being formally supported at the state level with California’s recent proposed legislation, SB861. If adopted, California SB861 would deny companies procurement contracts with the State of California for failing to meet the requirements of the rules promulgated by the SEC. California’s ground breaking legislation is taking this a step further by actually prohibiting contracts, whereas the federal approach doesn’t prohibit using these conflict minerals, it just exposes companies that source them.
This progression and shift from the emphasis on revenue, profit and legal obligation, to an emphasis on environmental concern, and most recently on social and ethical concerns and responsibilities, reflects the maturing of our supply chains. Following suit, the maturing of extended producer responsibility paradigm from where products are made, to where products are sold and disposed of is now making a natural progression to where substances in products are sourced from and the impact of that sourcing. Shaming companies into doing the right thing by exposing sourcing efforts that are contradictory to social and ethical expectations will increase the demand for socially responsible sourcing methods that we will likely see further instilled with future legislation at both the federal and state level in addition to voluntary actions by leaders in Corporate Social Responsibility who will set this new standard.
REACH: “No data, no market.”
Enforcement: Country Specific; Forum coordinated.
Enforcement coordinated at the EU level through the Forum for Exchange of Information on Enforcement (Forum), ensuring that all member states are actively checking REACH compliance
Penalties: Determined by member states; includes fines and imprisonment
Examples of penalties:
Belgium: Fines for failing to comply with the “no data, no market” principle can be as much as €4 million and/or imprisonment of up to three years
UK: Penalties include an unlimited fine and/or up to two years of imprisonment
Netherlands: The most severe imprisonment penalty for REACH violations: up to six years
In the news:
HSE, the UK’s Competent Authority for REACH, has issued a series of REACH Notices in relation to alleged failures to pre-register or register the manufacture or import of substances. Reports describing REACH enforcement actions in Sweden against two companies that place consumer products on the market in Europe. One of the companies allegedly being investigated failed to respond to requests to provide information about SVHCs in their products. Article 33 of REACH requires that any EU supplier of an article containing an SVHC in a concentration above 0.1 per cent by weight shall provide information, free of charge, to a consumer within 45 days of receipt of a request. An environmental NGO in Sweden made the requests and informed Swedish enforcement authorities when no responses had been received from the companies. The penalties in Sweden for violation of Article 33 range from monetary fines to two years' imprisonment. December 2009.
In God we trust. All others bring data. -- Amory Lovins
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed in to law on July 21, 2010, contains Section 1502 which refers to the use of Conflict Minerals in the Democratic Republic of the Congo (DRC). In short, this section is being referred to as the Conflict Minerals Law.
While the U.S. government estimates that the cost to industry to implement the Conflict Minerals Law is approximately $16.5 million, a recent study by the IPC puts this cost at a staggering $279 million for the first year of implementation. IPC’s calculated cost per company includes a due-diligence cost of $65,000 plus costs for tracking software, additional staff, training, and expenses for legal services and third-party audits. This brings the median total per company to $170,000 in the first year, and IPC estimates that ongoing industry costs to be $165 million per year.
For more information about section 1502 of The Dodd-Frank Wall Street Reform and Consumer Protection Act, click here, and to read more about the IPC study visit their news section here.
ECHA exceeded its goal of 136 SVHCs by December 2012 with the new total of 138. This number is anticipated to increase to over 400 by 2020. It is anticipated that ECHA continue to update the SVHC list twice a year, once in December and once in June.
Stay current with the latest REACH updates to the Candidate List, Authorisation List, News Articles, and Press Releases on GCG‘s “REACH: Running Totals and News Alerts” page located here.