With the continual parade of new environmental laws stretching from California to Asia, analysts say companies need a high-level leader to manage compliance –
the environmental compliance officer. As an alternative, companies can outsource this task to a consulting firm, sometime a product lifecycle management company – but analysts warn that while tasks can be outsourced, accountability cannot. Environmental compliance is likely to require high-level corporate management for decades to come.
The march of new environmental laws shows no end in sight. From RoHS, we go to REACH, then to EuP and on to versions of RoHS coming down from China, Korea, California and other U.S. state legislatures. All of these laws require a hard look at how products are manufactured and what they contain. These are not simple regulations. They require detailed study in order for a manufacturer to determine how a product must be changed in order to comply.
Some large companies such as Texas Instruments Inc. in Dallas, Texas and Dow Chemical Co. in Midland, Mich. have entire compliance teams devoted to making sure the company complies with environmental legislation globally. “In recent years we’ve seen a trend toward using an environmental compliance officer,” explains Colin Masson, analyst at AMR Research Inc. in Boston, Mass. “With environmental compliance, there is a whole series of activities that have to be taken into account whether you’re building a new plant or a new product.”
Masson notes the details related to environmental compliance are similar in scope whether the company is complying with waste disposal, component selection for design and manufacturing or accounting practices. “They elements of compliance are common whether you’re talking about SOX (Sarbanes Oxley) or environmental compliance,” says Masson. “Somebody in the organization needs to look at all of the compliance elements, including record keeping.”
Some companies are turning to consultants or product lifecycle management (PLM) companies for expertise in compliance. For one thing, manufacturers find it may be easier to place the required expertise outside the company rather than trying to grow it and keep it up to date internally. “The factor of whether to use a consultant has to do with the complexity of the regulation,” says Masson. “Up until now, you have employees who grew up with compliance and each new regulation expanded their knowledge. But many of those people are coming up for retirement. So you have the problem of brain drain.”
When going outside the enterprise, many companies turn to PLM companies, but Masson warns that many elements of compliance fall outside the natural boundaries of PLM. “PLM and environmental compliance are different. Environmental compliance factors into your physical plant, and PLM doesn’t,” says Masson. “Compliance involves how you actually manufacture the product and whether the product is safe. Those issues may come up in a PLM discussion, but it’s not part of PLM.”
Masson notes that some companies are building an internal compliance team that still relies on outside support in the form of software as a service. “There are a number of newer offerings in the software space for environmental compliance,” says Masson. “There is a business process outsourcing model where you buy access to a software system that provides a team of experts who can shoulder a lot of responsibility for generating reports or complying with regulations.”
He notes however, that companies can outsource some of the compliance tasks, but they cannot outsource accountability, so there still have to be some internal officer and team to monitor corporate accountability. Part two of this article looks at the bottom line and competitive impact of environmental compliance.