EEE Stewardship

Yesterday it was Sarbanes-Oxley. Today it is eco-compliance. There has been a global proliferation of electrical and electronic equipment (EEE) legislation in the European Union and other major electronics markets, such as China. These laws focus on restricting the chemicals and materials manufacturers can use in and for the production of their products. Simplified, the environmental regulation is commonly referred to as the Restriction of Hazardous Substance Directive (RoHS). Additional legislation focuses on how these products are discarded at the end of their useful life, commonly referred to as Waste Electrical and Electronic Equipment (WEEE). However, with any new legislation on a highly publicized topic such as eco-compliance, comes the inevitable risk exposure for those companies that cannot prove compliance.

Failure of a RoHS audit can result in a company’s product removal from marketplace. Such bans on product will likely lead to interference with third party contracts resulting in further liability exposure – perhaps errors and omissions, or directors and officers exposures? Compounding the challenge of compliance is the reality that an “Underwriter Laboratories” (UL) product certification program (or equivalent) does not exist for exporting electronic product based on its ability to meet eco-compliance requirements. How do a company and its trusted advisors maintain compliance and therefore a competitive advantage in our global economy? By attacking the problem proactively!

The UK RoHS Conformity Assessment Group (URCAG) clearly defines the components required to defend a corporation and its products during an audit. Auditors continually work with the URCAG to refine this definition so that it tracks with these changing directives. The spirit of the URCAG initiative is to show to the auditors that the corporation is committed to meeting the intent of the legal environmental directives. This is done through a set of corporate policies and procedures that govern the operations of day to day business. Auditors look for a clear display of supplier data identifying the chemical makeup of each component in the product. They look for identification labels on both products and packaging and data supporting this documentation. Finally they look for proof that shipments into and out of their country are tracked, reported and recycled. However, while auditors look to companies for compliance, companies are unable look to a certification house for a seal of compliance.

The impact of these regulations on the corporate entity range from executive staff liabilities to the generation of new corporate policies and procedures. In the end, the original equipment manufacturer (OEM) is responsible for certifying the chemical makeup of their products and for ensuring a vehicle is setup for waste reclamation. The aggressiveness with which this challenge is met directly correlates to inferred risk by the stake holders. Auditors from countries who are actively reviewing product compliance documentation (also called technical compliance files) will tell you that the more formal the program the less inferred risk. More clearly stated, you reap what you sow.

Meeting this definition of conformity is the bar by which liability is calculated. Do nothing and current actions in the auditing community trend towards legal actions and pulling of your products from shelves. By directing your organization to internalize the spirit of these global legal directives, you eliminate corporate and personal risks. The corporate challenge is to achieve compliance with minimal impact to your bottom line. Hiring full time or contract personnel to help will solve the problem but will command a steep price. Furthermore, given the evolving nature of environmental legislation, this position must be perpetually staffed and educated.

Alternative solutions include out-sourced, turnkey and/or web enabled services. These portend a solution that puts your company in the best possible light to an auditor. These include component data mining for chemical compositions, proven corporate policies and procedures, and automated agency reporting. They use the web to manage costs and leverage a global workforce to scale to meet changing demand and track expanding legislative environmental initiatives. This breed of EEE environmental solutions offers corporations a complete solution to environmental liability. It offers directors and officers protection from shareholder retribution. It eliminates risks associated with sales channel closures or unplanned legal fees and fines. In short, these maximize corporate protection with minimal fiscal impact.

We have covered two of environmental issues impacting today’s EEE producers. The proliferation of environmental legislation around the world makes tracking this dynamic business risk challenging. Educated environmental stewards will look for solutions that cover all aspects of the solution set and package this data in a unified, coherent manner for auditors and investors. Corporations should be working with their existing business partners (lawyers, CPAs, bankers, insurance agencies) to identify these risks and solutions. Working together we all can meet these new business challenges in an effort to build innovative ‘green’ products that meet the legal requirement of environmental law without breaking the bank or exposing ourselves to unnecessary litigation.

About the authors
Krista Botsford is the Founder and Chief Executive Officer of Botsford EcoTech Partners. She can be reached at kbots@BotsfordEco.com.

Edmund A Greene holds a LLM in Banking & Financial law and is the founder of the Law Office of Edmund A Greene (www.edgreenelaw.com).