By Andrew K. Reese
The growing web of global environmental regulations is forcing the entire supply chain to examine its exposure to potential disruptions caused as a result of regulatory mandates like the EU's RoHS and REACH. While the majority of companies are being reactive when it comes to dealing with these mandates, a few leading enterprises have adopted proactive strategies for mitigating the supply discontinuities caused by these regulations. As a result, these leading-edge innovators are realizing a competitive advantage by better positing their supply chains to ensure uninterrupted supplies for themselves and their customers.
Schneider Electric is one such innovator adopting a proactive strategy for managing the supply risks associated with environmental regulations. The company, based in France, is a global leader in energy management systems, with revenues topping 18 billion euros last year. Schneider Electric operates worldwide, and its engineering and supply chain functions operate globally at more than 200 manufacturing sites that produce for the global market.
The strategy that Schneider Electric has adopted to manage REACH is exemplary of the company's proactive approach to dealing with environmental regulations. REACH — the Registration, Evaluation, Authorization and restriction of Chemical substances — already is having a major impact on global supply chains across industry sectors and geographies. It represents extensive reform of how chemical substances are regulated, and its scope and severity will continue to broaden as unsafe, unknown, or harmful chemicals are monitored, evaluated, and potentially restricted from further use.
Schneider Electric is the global specialist in energy management and has made a public commitment to sustainability, helping its customers make the most of their energy in an effort to achieve more while using less of our common planet. At the company, REACH has executive engagement and is linked to its sustainability mission. For Schneider Electric, compliance is not optional, in part because of its EU operations and the sheer size of its global supply chain. However, it is also because of this commitment to corporate social responsibility, according to Alain Digeon, senior vice president, globalization and industry, Environment Projects, at Schneider Electric. But Digeon says that the company is committed to Schneider's downstream supply chain requirements, too, in formulating its REACH strategy. "We want to facilitate the lives of our customers and of their customers, and in that context complying with laws and standards is a major step in that direction," he says.
The Complexity of REACH
Digeon has first-hand experience with the challenges that environmental regulations pose and the steps that companies can take both to ensure compliance and also to mitigate the risks associated with these mandates. He has been with Schneider Electric for almost 15 years, and he presently is in charge of implementing environmental projects with Schneider Electric, in particular the RoHS and REACH regulations. Digeon has spoken before various industry audiences about the challenges of managing REACH, including earlier this year on a Supply & Demand Chain Executive Web conference (Compliance Conundrum: Schneider Electric Talks REACH) produced in partnership with IHS, a leader in enabling sustainability, environmental compliance, and supply chain management.
One of the challenges associated with REACH, Digeon notes, is its sheer scope. "REACH is very complex, some people say the most complex piece of legislation ever in Europe," he says.
As Supply & Demand Chain Executive reported earlier this year in the whitepaper "Supply Chain Readiness for REACH and Global Material Regulations":
The REACH legislation took effect on June 1, 2007. The regulation provides for phased requirements over an 11-year period, including obligations to register, with the European Chemicals Agency (ECHA) in Helsinki, substances imported into, or used within, the European Union. Nearly 150,000 substances were pre-registered with ECHA by 65,000 companies by a December 1, 2008, deadline. In addition, an expanding list of "Substances of Very High Concern" (SVHCs) will be subject to potential substitution in products. Companies also must be prepared to proactively notify downstream users regarding the presence of SVHCs in their product and respond to consumer requests for information on SVHC presence within 45 days.
Supply & Demand Chain Executive
The impact of REACH will extend beyond companies engaged directly in business within the EU. It will apply to companies with relatively low levels of EU revenue — and even companies that do no business in the EU but that engage with suppliers or customers that are involved in the European market. A customer that sells into the EU may require information on SVHC content to satisfy its own regulatory obligations, while suppliers that service customers in the EU may opt to discontinue production of parts or component that include SVHCs rather than continuing to provide both "compliant" and "non-compliant" product lines.
Schneider Electric's REACH Strategy
Challenges of Compliance
The Data Conundrum
Embracing the Future