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Material Composition and Supply Considerations for Component Manufacturers

04.17.2013 // Mike Kirschner // Supply Chain

While no additional substances were restricted when the European Union’s Recast RoHS directive (2011/65/EU) took effect earlier this year, the number of substances on the radar of the world’s regulators continues to increase.

Consider:

  • Today the European Commission is in the midst of developing a methodology to review Hexabromocyclododecane (HBCDD), Bis (2- ethylhexyl) phthalate (DEHP), Butyl benzyl phthalate (BBP) and Dibutyl phthalate (DBP) and determine whether and how to include them within the scope of RoHS restricted substances.
  • The European Chemicals Agency, under direction from the European Commission and along with EU Member States, is to review no less than 440 substances (and likely many more) by 2020 for possible inclusion in the REACH candidate list of Substances of Very High Concern (SVHCs). The next step for many could be authorization. But as we have seen, inclusion in the candidate list of SVHCs alone can be a death knell for a substance.
  • In a related move, Chemsec added 249 more substances to the SIN (“Substitute it Now”) list, bringing it to over 600 substances, after reviewing the recent crop of registration dossiers. These are substances that the EU’s environmental NGOs believe should be added to the REACH candidate list of SVHCs.
  • On this side of the pond, California is edging closer to producing the Safer Consumer Products regulation, which will include a list of over 200 “Chemicals of Concern” that could be targeted for replacement over time in specific applications.
  • Meanwhile publicly held manufacturers are reaching back through their supply chains to identify smelters and, ultimately, the source mines of minerals used for the tin, tungsten, tantalum, and gold in their products in order to comply with the Security and Exchange Commission’s rule implementing Section 1502 of the Dodd-Frank act on Conflict Minerals.

What does all this mean for component manufacturers? It means that your customers are being driven to understand more and more about the substances, and sources of supply of those substances, that comprise the products you sell to them. Not so they can compete with you, or sell it to the highest bidder (that’s what Non-Disclosure Agreements are for!), but so they can comply with regulatory – and, increasingly, customer – requirements.

There are problems and opportunities for you because of this. The problems are:

  • We don’t really know what is going to come next in terms of substances of concern. Above I have identified the potential for almost 700 more substances to be “of concern” to your customers over the next few years. While there are tens of thousands of substances in use, numbers like this start to become significant, raising the possibility that you will be impacted at least once, if not more.
  • The Conflict Minerals issue reflects a social responsibility problem, not an environmental problem. But it ultimately exercises the same channels from the OEM back up through the supply chain, and it raises another avenue of business risk.

These are “problems” because historically this sort of information was not considered relevant to your customers. Now that it is, the onus is on you to learn about these issues and incorporate solutions into how you do business.

The initial steps to address these long-term and systemic challenges include the following:

  • Make sure you know what substances are in your product and be able to report that to your customers. While you may consider some information proprietary, understand that the rationale for needing it is not to compete; it’s to enable compliance. Protect yourself, but don’t make your life more difficult than you need to (for instance, by not disclosing full composition you force your customers to demand sometimes immediate responses and updated information every time a regulatory requirement changes).
  • Report the substances and materials that actually comprise your product, not the ingredients. I often see ingredient lists being supplied as material disclosures for components. This is not only inaccurate information, but it can frustrate your customers. Telling your customers that your product contains substances that are not, in fact, there in the same form as they went in to produce it (consider volatile substances like solvents, or substances that are reactive or become part of a glass or ceramic matrix) can cause both you and they headaches as they show up on more and more lists.
  • Dig deep into your supply chain. The problem of political instability that resulted in the Conflict Minerals legislation in the U.S. (and is also being considered in the EU and Canada) is not limited or isolated to the Democratic Republic of the Congo; it can happen anywhere. Understand where your supply chain starts and how it gets materials to you, then review it for a broad variety of sourcing risks: geopolitical, weather, earthquakes, counterfeit ingress, bribery, corruption, and so on. You may find that you can improve not only the robustness of your supply chain, but its security as well.

You can, and should, go even further. Here are two areas to consider as “opportunities”:

  • Review the substances that actually comprise your products for environmental and human health hazards. This will give you a list of substances that could potentially be included in RoHS (which is hazard-based). Then review this list for exposure potential throughout its lifecycle, from extraction from the planet through its use in your customers’ applications. This will give you a list that could potentially be included in the REACH SVHC list, or be restricted by REACH, which is risk-based (risk is a function of hazard and exposure potential). Prioritize these lists then identify potential alternatives (consider using the Alternatives Assessment process defined in the California SCP draft regulation, or in the Interstate Chemical Clearinghouse’s draft Alternatives Assessment guidance. The more of these substances you replace (and replacement is, of course, not always one-to-one, and often entails the need to do extensive functional, cost, source-of-supply robustness, and reliability studies prior to release to manufacturing) with substances that are not likely to need replacement themselves, the better situated you will be to deal with future customer demands and regulations. You may even find yourself ahead of your competitors and able to compete successfully with them on your product’s environmental performance.
  • As described above, you don’t have to tell your customers what your process substances and ingredients are, but you should know them (and your suppliers should know what they use as well). This is another level of risk for you. These substances are under increasing scrutiny as well. Review processes and technologies in the same manner described above, and identify potential alternative processes to replace them that are less toxic, less energy-intensive, and/or less wasteful. You could save money as well as headaches.

What we are learning from this is that very often the way we are doing something today is not the only way to do it. We’re simply doing it that way because that’s the way it’s always been done, it works, and manufacturing businesses often go by the maxim “if it ain’t broke, don’t fix it!”, and rightly so! However, in many cases it is broken; we haven’t been looking at our products and processes through an “environmental lens” so we haven’t seen it. But if you take the time to look, you may find problems just waiting to be found. Better you should find them and fix them before governments or your customers insist on it.

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Statements of fact and or opinions expressed in MarketEYE by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

Featured Contributor:
Mike Kirschner

Mike Kirschner

Mike Kirschner is a product environmental compliance and performance expert who provides advice and expertise to manufacturers in a variety of industries. His primary areas of focus include EU RoHS, the impact of EU's REACH regulation on article manufacturers, California’s Safer Consumer Products regulation, and performance standards like IEEE-1680.x for electronics. Mike helps manufacturers define, implement and troubleshoot internal management systems that result in compliant products, and assesses and monitors environmental regulations around the world on their behalf. ( More... )

He contributed two chapters to the Governance, Risk, and Compliance Handbook, published by Wiley in 2008, and is featured in the critically acclaimed book, Exposed: The Toxic Chemistry of Everyday Products and What's at Stake for American Power. In 2009 he was appointed to the California EPA Department of Toxic Substance Control's Green Ribbon Science Panel. Prior to joining ENVIRON, Mike founded product lifecycle and environmental consultancy Design Chain Associates, LLC (DCA), where he served as president and managing partner. Before founding DCA in 2001, Mike spent 20 years in engineering and engineering management roles within the electronics industry with manufacturers including Intel and Compaq. He holds a BS in electrical engineering from Worcester Polytechnic Institute.

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