Environmental compliance regs are here to stay. Learn all about them so you can use them to differentiate your company.
If you are in the printed circuit board business and you are not familiar with the current environmental laws that are dramatically affecting the electronics industry, you would be wise to start researching the existing and pending regulations, and determining your products' compliance with each one.
New environmental regulations coming online are expected to have significant impacts on businesses of all sizes and serious implications for those who do not comply. Governmental regulations that restrict the use of materials - such as lead and mercury - in the manufacture of electronic products can bring a high cost of non-compliance.
Non-compliance to these hazardous substances and recycling directives pose potential financial risk to manufacturers as well as other members of the supply chain. These risks include banned or delayed shipments, product recalls, regulatory fines, exclusion from important markets and potential damage to a corporation's or its brand's reputation.
The strong focus on environmental regulations for electronic products is a result of the large amount of potentially hazardous substances polluting the environment and leading to major health concerns affecting the kidneys and reproductive and central nervous systems.
The two environmental regulations in the news today that are impacting the printed circuit industry are the European Union's Restrictions on Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) directives. Scheduled to go into effect on July 1, 2006, RoHS limits the use of six substances in electrical and electronic products. WEEE, which went into effect August 2005, requires producers to provide recovery and recycling programs for the processing of electronic waste.
Some companies have been managing their compliance for years, but others are just getting started. Still, there are others that don't really understand the regulations and what they need to do, and then there are those that are in denial.
Here is a look at some of the issues surrounding compliance, and the ramifications of non-compliance.
EARLY BIRD GETS THE WORM Make sure your PCB is RoHS-compliant as early in the design process as possible.
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Worldwide Impact
No matter where you are in the supply chain, these environmental regulations will affect you. Even if you don't sell directly to the EU, if your product is a component of a product being sold to the EU, it is your company's responsibility to ensure the compliance of your specific part(s).
Understanding the regulations is not easy, as the requirements and enforcement policies have yet to be completely spelled out. Making it more complicated, regions in the EU have their own government bodies interpreting the regulations and determining the enforcement policies and procedures.
Furthermore, countries such as China, Japan, South Korea and select states in the U.S. are developing their own hazardous substances and recycling directives, similar to RoHS and WEEE, that will also require compliance - and therefore present further challenges to electronics companies who are selling their products in multiple countries.
Compliance with these types of directives requires the identification and documentation of the contents of each component in a product. Therefore, many may think that this is a tactical issue that does not need to be dealt with at the executive level of an organization. But companies concerned about minimizing the risk and cost of compliance cannot deal with compliance as a tactical problem.
Complying with these hazardous substances and recycling directives requires streamlining internal design and supply chain processes and systems. And any time a project creates changes in an organization's operations, it needs to have the blessing of the executive management team.
Many organizations still see environmental regulation compliance as an obligation to fulfill and a burden on their business, when in reality compliance with regulations such as RoHS and WEEE should be seen as much more. Compliance offers a competitive advantage for manufacturers and should be treated as one. It should be thought of as a strategic goal, not as a tactical process that must be managed.
Each company needs to assemble a leadership team to be responsible for environmental management within that organization. This team will need to develop a strategic plan to not only address current requirements, but potential future regulations as well. The plan should focus on first identifying compliant and non-compliant components, then determining alternatives for non-compliant parts, followed by documenting compliance processes and labeling compliant components, and finally, developing a strategy for addressing future regulations.
Managing Complexity
Complexity is a term commonly associated with managing environmental regulations, and the level of complexity depends upon the organization. Each product may be made up of numerous subassemblies and components that they manufacture or they purchase from another manufacturer that need to be accounted for in the process. Some organizations may only have one or two products; others may have hundreds or thousands. Add to this the number of states, regions or countries that they sell into and the level of complexity is significantly magnified.
As printed circuit boards become more advanced, the complexity of managing their compliance also increases. It is critical that at each stage of the supply chain there is a complete and accurate list of the part numbers that make up each component. One of the main problems these days is that a significant percentage of the suppliers are not changing the part numbers for RoHS-compliant parts. Consistent numbering for compliant parts would reduce the complexity of the process significantly.
Having a non-compliant product banned from a market or removed from the shelves could be a minor setback for a company with a multitude of products and a large customer base. However, for those smaller organizations that sell one or two products to a more targeted market, non-compliance can be far more detrimental, potentially shutting their doors for good.
Most larger companies have been aware of the regulations and their potential impact for some time and have taken early action, whereas most small companies have not realized where they fit in and the impact these regulations can have on their businesses. With deadlines rapidly approaching, small firms have a major task in front of them and must get up to speed quickly.
The earlier compliance is addressed in the product development lifecycle, the better. The optimal time to ensure compliance with these environmental regulations is during the initial product design stages. When non-compliant components and assemblies are identified in the design process, changes can be made quickly and easily in an automated design package and the costs to make changes at this juncture are relatively low. On the other hand, the costs of compliance increase exponentially once the product advances beyond the prototype phase and moves into full production. Therefore, environmental regulations must drive the way the electrical and electronic equipment companies design their products.
Enforcing Regulations
Now, the looming question is: Who is enforcing these laws and how are they doing so?
Europe. In the UK, the National Weights and Measure Laboratory (NWML) is ultimately responsible for ensuring RoHS compliance. The organization is partnering with industry stakeholders to ensure compliance, and is also serving as a resource of information and working to reduce the administrative burdens of this regulation on businesses. NWML's RoHS enforcement policy states that:
- Enforcement should be intelligence-led and based on an assessment of risk.
- Form-filling and data requirements will be kept to a minimum.
- Information and data can be sent to NWML electronically or in any format that is convenient to the supplier.
- Enforcement actions will not be disproportionate.
A company is considered at fault, in violation of RoHS, if it enters a non-compliant product onto the market. However, the regulation allows companies to avoid penalties if they can prove that they took "all reasonable steps" and "exercised all due diligence" to comply with the law.
In the case of RoHS, companies are considered to have taken "all reasonable steps" if they have reviewed the methods in which they control their production and material supply and implement appropriate audits to ensure problems do not occur. But having a procedure in place does not ensure compliance. Companies must also prove to the governing bodies that they have a system in place to ensure the procedures are actually followed. Still, under RoHS there are no specific details about what systems need to be used in order to meet this requirement.
Companies must also have in place an effective due diligence system that is monitored on a constant or periodic basis, depending on the company's particular situation.
NWML recommends following the steps listed below to ensure the proper system is being used:
1. Assess the risk factor by determining what could go wrong in your business.
2. Establish reasonable safeguards to prevent such events.
3. Document your system and inform/train your employees of the processes.
4. Actually operate your system to ensure its effectiveness.
5. Regularly review your system to ensure it remains effective.
Once your due diligence system has been implemented, you must be able to demonstrate your compliance if requested by the authorities. As stated previously, with RoHS this is difficult as the directive does not define the necessary compliance processes and list the needed documentation in order to meet compliance.
However, as of July 1, 2006, any product exceeding the levels of restricted substances as stated in the directive will be subject to prosecution. So, how do you demonstrate compliance? Essentially, companies need to provide the technical documentation (i.e., material content declarations from suppliers) to the enforcing authorities and have the proper management systems in place to ensure they are compliant.
Now, because of the lack of clarity in these regulations, it is critical that companies not just accept a certificate of compliance from their suppliers. How do you know that suppliers understand the law completely and have provided you with accurate, honest information? It is important to also obtain material content information from suppliers to allow you to compare the regulatory requirements with the levels stated in the directives on your own.
Who is actually liable for a non-compliant product? This, as well, is very unclear. Most likely, it will be dependent on the due diligence processes of a company, who has the most accurate information and who is effectively sharing that information with appropriate parties up and down the supply chain. The businesses that will benefit from this liability issues are the law firms, with more companies coming to them searching for legal assistance with these regulations.
China. The EU is leading the way in the creation and enforcement of environmental regulations, but China, a leader in the electronics industry, is quickly following.
In the past, China has had a reputation for less strict regulations concerning environmental compliance than the EU. However, more recently they have been demonstrating that they are no longer taking this issue lightly.
The Chinese Ministry of Information Industry is most likely postponing its version of RoHS, known as Management Methods for Controlling Pollution by Electronic Information Products (China RoHS), until January 1, 2007. Its version of the EU's RoHS directive has been said to be much more severe and will be reviewed annually, unlike the EU's RoHS, which is reviewed every four years.
In the EU, the enforcement of the regulations is focused on the end-producers of the product - where they are held responsible for the product's entire compliance. In China, the RoHS-like directive is said to also issue penalties to members of the complete supply chain if a product is found not in compliance with the regulation. Additionally, the products must be tested in China's certified laboratories.
IT Infrastructure
So, although many of the regulations are still a bit unclear, what is evident is that companies of all sizes need to get their acts together to ensure they have the right internal and external processes in place by the expected deadlines.
In a recent study conducted by The Aberdeen Group, it was revealed that nearly 80% of companies lack a cohesive systems infrastructure to track, audit or manage product compliance. Most companies are relying on a variety of solutions that are not properly integrated and do not provide the necessary information needed to meet the current and future environmental regulations.
As mentioned earlier, to effectively determine if a product is compliant, various factors must be analyzed and tracked, such as material content, substance concentrations and product exemptions.
To manage this information, an IT solution needs to be implemented that not only offers material compliance analysis capabilities, but can also account for rapidly changing environmental regulations across multiple markets and geographies. The IT infrastructure should expedite the flow of material content information and supplier compliance certificates across the supply chain and provide design engineers with the necessary visibility to use this information during all stages of the product development lifecycle.
Information systems are important enablers to implementing process changes and reducing the cost of compliance. Companies will need to make investments in IT systems which can integrate with current systems and provide a closed-loop compliance framework to manage and analyze the vast amounts of information that will be required to implement cost-effective compliance programs. These systems must also be flexible and have the ability to accommodate changing and new regulations.
Yes, these hazardous substances and recycling directives are turning out to be a logistical nightmare. But there is no ignoring them. These laws are coming fast and furiously and there are bound to be many more. The immense amount of information that original equipment manufacturers must collect and analyze for each of their products can be paralyzing, but when addressed properly, it doesn't have to be.
Instead of looking at compliance as a tactical hurdle a company must overcome, it must be thought of as a road to competitive intelligence and treated as a strategic objective for the organization. PCD&M
German Avila is product manager, environmental products, at Synapsis. He has a background in providing direction for the emerging environmental compliance market globally, especially in the electronics and the automotive industries at companies such as Motorola. Avila has a master's degree in environmental engineering and a bachelor's degree in civil engineering from the Illinois Institute of Technology. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
