Environmental compliance directives from the European Union (EU) will require electronics device companies to change the way they develop and bring their products to market. The environmental regulations are not up for debate, and their reach is widespread.
While the legislation has moved quickly, most companies have not responded with the same speed. According to a study conducted by AMR Research last year, an overwhelming majority of multinational companies had underestimated the scope and extent of the impact of environmental regulation on major business processes.
What follows is an explanation of these requirements, how they will affect electronic device manufacturers, and what can be done to cost-effectively manage their compliance.
The regulations
Two environmental policies will have a significant impact on the electronics industry. Both became law in February of 2003 in the European Union.
The first law is the Restrictions on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS). As of July 1, 2006, it has prohibited the sale of electronics-based products that contain more than 0.01% of specific hazardous materials including cadmium, mercury, lead, hexavalent chromium, polybrominated biphenyls (PBB), and polybrominated diphenyl ether (PBDE).
The second regulation is the Waste Electrical and Electronic Equipment (WEEE) that ensures products are recycled or disposed of properly. Starting last August, 2005, manufacturers are required to finance the collection, treatment, recycling and recovery of all electronics waste.
Although required compliance is one to two years away, the impact already is being felt in countries that have chosen to adopt all or some of the environmental policies earlier.
Companies can take a lesson from the experience of Sony. In late 2002, Dutch authorities temporarily halted more than 1.3 million Sony PlayStation consoles because the devices' cables had too much cadmium. Replacing the cables and validating their safety cost Sony $110 million in revenue.
What this regulation means
The four key areas that will be affected by these regulations are reporting, product design, service and repair, and sourcing and procurement:
Reporting: WEEE requires new compliance reporting that will track certifications at every step of the product's lifecycle, including trade documents; labeling; disassembly and recovery processing instructions; and the tracking of disposal, reclamation, and reuse compliance. Additionally, RoHS regulations will require documented proof that electronic devices do not exceed the maximum allowable amount of hazardous substances.
Compliance will demand huge stores of data for audit purposes and will require the ability to summarize this information into higher-level reports.
Product design: Design guidelines will be required to ensure that products do not contain hazardous substances and are also prepared for disassembly, reuse and recycling.
This will also require system-level test data that will support the manufacturer's claim of product/device conformance.
At a design level, this means that by applying compliance efforts to the device design when it is still in the concept stage, companies can minimize the costs of development up front as opposed to further along in the process. At an engineering level, this means that as proof of compliance in the design cycle must be created, less time will be spent on the creative development of the device and more on administrative tasks.
Service and repair: For devices with long lifecycles, companies will need to track, repair, and upgrade histories in order to meet regulatory guidelines for End of Life (EOL) processing. This means that, if changes are made during the life of the product - such as swapping outthe current battery shipped with the product to a new battery - this too will need to be tracked to ensure that any substitutions meet RoHS requirements, at the end of the life of the product, it will be accepted by recyclers.
Sourcing and procurement: This can be the most complicated part of the process requiring change. Companies will need to incorporate additional qualification criteria for supplier selection and parts qualification and track the information through the lifecycle of the product. What this means is that not only will the parts of a device need to meet the requirements, so too will the supplier.
Costs
Some analysts estimate that IT costs for supporting compliance will be up to 10 percent of a company's IT budget over the next two to three years. Although these costs are high, the business risk of noncompliance is seven higher. Failure to comply could result in the removal of the manufacturers' products from the marketplace.
How to get started
Following are recommendations for how medical device manufactures can prepare their companies for the pending regulation:
Step One: Manufacturers need to change their current perception of a product's lifecycle. Product development is now longer than before and includes regulation adherence at the beginning and end of the process.Addressing the need to change requires a commitment across a company's various organisations.
Step Two: Consider new technologies that are addressing the need to manage the entire process from Product Lifecycle Management solution providers. When reviewing these solutions, look for the ability to:
- Collaborate with suppliers to collect material data for supplier material declarations.
- Generate an environmental view of the product to analyze it for environmental risk - and make "what if" changes to bring the product into compliance.
- Manage regulatory documentation and specifications.
- Track recovery manifests and disposal certificates of destruction.
- Manage compliance of outsourced recovery partners through proactive audits and closed-loop corrective actions.
Step Three: Get involved. With few established guidelines, there is still an opportunity for companies to have a voice in definitions and accepted practices for complying with WEEE and RoHS. Three organisations involved in these processes include:
- National Electronics Manufacturing Initiative (NEMI) is an industry-led consortium whose mission is to assure leadership of the global electronics manufacturing supply chain. http://www.nemi.org.
- AeA is the nation's largest high-tech trade association. This lobbying group is currently working to ensure that environmental compliance regulations in the U.S are sanctioned at a federal level, for fear that each state will have its own (and differing) legislation. http://www.aeanet.org
- The Electronic Industries Alliance (EIA) is a national trade organization that includes U.S. manufacturers, representing more than 80% of the electronics industry. This organization is working on creating guidelines for environmental compliance. http://www.eia.org
Conclusion
These regulations are coming fast, but there is time to put into place both the best practices and technology to manage them. Companies should get involved with organisations now, both to learn and to influence the guidelines for meeting these directives, as well as taking a tip from other industries.
By making these initial inroads, companies can continue to drive the product innovation and time to market to remain competitive, while complying with global guidelines for ensuring the health of individuals and the environment alike.
