In the electronics industry, an OEMs ability to master the challenge of environmental compliance can affect how competitive the company is. Compliance can also have a direct impact on the company’s bottom line. Because of this, environmental compliance has become a risk factor in the OEM’s overall performance. This is part two in a two-part article that looks at the challenge of compliance in a industry that is facing an onslaught of new environmental regulations.
According to Colin Masson, an analyst at Boston-based AMR Research Inc., meeting the demands of environmental regulations has become more of a risk factor for manufacturers than abiding by the Sarbanes Oxley law. Compliance has become a factor in how companies differentiate themselves in their markets. “Compliance has become a competitive factor,” says Masson. “Compliance has become a risk factor that has to be considered by any manufacturing company.”
He notes that part of the pressure to become good corporate citizens with responsible environmental policies is coming up from consumers. “There is increased awareness among consumers as to the corporate discipline on the environment,” says Masson. “Consumers are now aware of companies that use inefficient manufacturing processes or push the regulations on emissions to the limit. They care about how companies move hazardous materials around the country.”
He notes that the potential fines for failing to meet environmental regulations may have less of an impact on the manufacturer than the image that gets tarnished when it becomes apparent that the company has failed as a good corporate citizen. “In some respects, the fine that comes from being out of compliance is the least of a company’s worries,” says Masson. “If the story goes out in the news and on TV, it can have a big impact. The manufacturer may find it can’t sell its product in the market.”
Masson notes that a negative perception from consumers has a direct affect on the company’s bottom line and thus environmental compliance should be viewed as a risk factor in the company’s operation. He points to Dow Chemical Co. in Midland, Mich. as an example of a company that has gone out of its way in order to avoid a negative perception by consumers. “Dow goes way beyond regulatory requirements in everything they do with environmental compliance,” says Masson. “Look at how they transport chemicals. They minimize the movement of hazardous materials by locating their manufacturing facilities close to the hazardous materials they use.”
Masson notes that environmental compliance is moving up the corporate ladder as a risk management concern. Many leading manufacturers are now assigning responsibility for compliance to the officer-level in the corporation’s leadership. “It good for the brand when the manufacturer sees compliance from a competitive viewpoint,” says Masson. “That also forces other companies to respond, so it makes compliance doubly important. When other companies see what Dow is doing, it definitely translates into a competitive factor.”