The major OEMs are taking leadership positions in the electronics industry as they form compliance teams to deal with environmental legislation such as RoHS, EuP and REACH. At some OEMs, these groups are forming in the product engineering area, while other large manufacturers are creating corporate sustainability teams that reside closer to the company’s business functions. In some instances, these groups are close to the CFO. Wherever the group lives in the corporation, it’s becoming clear that compliance has evolved from a design concern to a strategic business issue.
While the concern for environmental compliance started with the European Union’s RoHS legislation, the largest OEMs in the electronics industry understand that compliance will be a multi-year, perhaps multi-decade concern. “While RoHS certainly created the understanding that the company needed to jump on compliance, companies now realize that compliance needs to reach the right levels in the company,” says Eric Karofsky, senior analyst at ARM Research Inc. in Boston, Mass. “OEMs now understand that environmental compliance is a supply chain, design and portfolio issue. And they see that it’s a major business issue.”
With the continuing march of new environmental laws hitting the electronics industry from all over the globe, companies are seeking ways to make products that comply with multiple regulations. In many cases, component suppliers look to the standard of their major OEM customer and comply to that standard. “Companies like Sony are looking for the most stringent law and complying,” says Karofsky. “And then all of the suppliers are saying, ‘Let’s manufacture a product to the Sony standard.’”
He also points to Hewlett Packard as a company that is leading its suppliers into standardized compliance. “HP comes to mind as a company that has created an industry standard,” says Karofsky. “These industry leaders have created a tremendous amount of corporate collaboration as they say to their suppliers, ‘We’re in the best position to comply with these government regulations, so comply to our standard’”
The large companies have created compliance teams that live in different territories within the corporate structure. Over the coming years, standard ways to structure compliance groups will likely emerge. “In the next couple years, there will be a commonality in the way companies create compliance teams,” says Karofsky. “Right now it can be in the engineering group or in program management or in the business function.”
He sees compliance evolving into the area of corporate sustainability, which also includes the company’s compliance with financial standards such as Sarbanes Oxley (SOX). “Large OEMs are seeing that they have responsibility to their constituents that includes financial sustainability as in SOX, as well as environmental accountability and social accountability,” says Karofsky. “Environmental compliance has jumped into a higher category that answers the larger question, ‘How are we doing as a corporate citizen?’”
Karofsky notes that the pressure to create environmental laws has come up from consumers who push their governments to draft legislation. “The world consumers have created this movement, and they want their governments to become more environmental friendly,” says Karofsky. “The governments then say, ‘Here are the laws.’”