Today, environmental issues across the supply chain are high priorities for operational risk and compliance management. Many companies are scrutinizing products such as chemicals and other hazardous materials and seeking higher standards for environmental health and safety (EH&S) regulatory compliance requirements. Given the heightened emphasis on EH&S across the business community, it’s critical that supply chain professionals evaluate corporate practices to ensure compliance with local, state, federal and international regulations governing the handling of chemicals and other hazardous materials.
As EH&S compliance becomes a major concern, virtually every industry across the supply chain needs to address more stringent EH&S regulations and associated tasks of risk and compliance management. This includes raw material, finished goods manufacturing, transportation, distribution and retail operations. The complexity of managing and conforming to a myriad of local, state, federal and international regulations for total compliance exacerbates these challenges, as does increased enforcement by regulatory bodies.
No industry is immune from the requirements. The increased scrutiny is particularly relevant for retailers who have a brand to protect and may not realize that many of the products they transport and sell are considered hazardous. As retail companies face significant pressure to maintain high-quality service while cutting costs and reducing risk and loss, it’s become increasingly challenging to manage compliance and risk.
At the other end of the supply chain, manufacturers also face numerous regulatory tasks. The research and development (R&D) function must manage new chemical notifications, product registrations, export notifications and inventory reporting. The product testing area needs to carry out risk and safety assessments, safety data sheet authoring and product labeling. Manufacturing operations must manage hazard assessments.
Heightened scrutiny on EH&S compliance
Historically, risks and regulations associated with various activities throughout the product supply chain were widely recognized but typically handled through specific organizational departments that didn’t interact. For instance, chemists involved in product development weren’t necessarily aware of the impact of transportation regulations on the chemical substances employed in new product development. However, the situation has improved and visibility has increased because of the advent and adoption of enterprise resource planning systems (ERP); Internet advancements that allow for efficient information exchange; and technological and process improvements. And those companies that take advantage of these tools often gain a competitive edge in the marketplace.
New variables in the compliance and risk equation have also resulted from the changing dynamic of the global economy as regulations increase in number, scope and complexity. Recent examples include the Restriction of Hazardous Substances (RoHS), Waste Electrical and Electronic Equipment (WeEE) regulations and the Globally Harmonized System of Classification and Labeling of Chemicals (GHS) requirements adopted by the United Nations and soon to be adopted by OSHA in the United States.
The cost of noncompliance or excessive risk is no longer limited to fines and penalties, nor does it affect only certain employees. Increasingly, compliance and risk are closely associated with brand, image and customer loyalty.
Critical best practices
The first step in dealing with heightened EH&S challenges is to understand the issues facing the company. Often times, disparate workflows and inconsistent sources of EH&S data in company operations are the cause of severe and systemic risks. The supply chain professional’s ability to recognize and address such issues can help steer a company toward compliance, simultaneously mitigating corporate risk and protecting the corporate brand.