Material compliance regulations require companies to delve deep into their supply chains to ensure products are consumer and environmentally safe. Companies also need to ensure their products are socially responsible, avoiding child labor, “sweatshop” labor, and human rights atrocities. An action plan that includes a corroboration strategy between social and environmental responsibilities provides a key element in formulating sustainability solutions containing competitive advantages for products that align with a company's social compliance goals.
Why Should You Care?
A significant number of investors consider a company's environmental and social responsibility when making investment decisions. This is also true of consumers. A 2015 survey of U.S. adult consumers showed that:
- A majority reported that a company’s social or environmental responsibility is usually a consideration when making a major purchase.
- More than half reported rejecting a major product for purchase consideration based upon reports of a company failure in social or environmental responsibility.
- About a third reported discouraging others from purchasing from these companies.
- Only a minority reported selecting a product primarily based upon a company’s reputation for good social or environmental responsibility.
What conclusion can we draw from this? A majority of U.S. adult consumers do not reward companies for responsible conduct, but they will penalize a company for irresponsible conduct.
How does a company avoid environmental and social risks and the likelihood of negative publicity? Remember the acronym I DARE:
- Identification - of the substances in your products provides the opportunity to solve resource scarcity issues, identify potential for optimized design, replace raw materials with recycled ones and avoid costs related to hazardous materials.
- Due Diligence - efforts can protect and mitigate incidents of non-compliance.
- Awareness - of materials composition avoids regional barriers to markets and helps you gain cognizance of substances that raise social responsibility concerns.
- Recognition - of reporting gaps permits pre-emptive corrective action.
- Evaluation - of supply chain permits better risk analysis and contingencies and helps you define alternatives to source from less controversial suppliers.
Sustainability is not a one-time effort, but a continuous improvement process. Rarely will a company begin with all the information it would like to have, so the best strategy is to begin data collection, integrate the information with your experiences and knowledge, and build upon this foundation. Use complexity to your advantage, as interrelations in regulations provide valuable opportunities to leverage existing knowledge, simplify data collection, and crosscheck collected information. Collaborate with your suppliers to understand and address opportunities and challenges, then make sure they know their role in your compliance reporting. Delve into the details (and recognize limitations). Determine how compliance regulations and social expectations affect your products and to what extent suppliers integrate into your processes and product(s). Finally, avoid information isolation: If one tool can do multiple jobs competently, use it! If multiple tools and/or teams are necessary, ensure tools and teams communicate and interact efficiently.
How to be Successful
Your company will gain efficiencies by using a leveraged tool with product focus, common solutions, and industry collaboration. A leveraged tool should collect product information once, and use it to address multiple regulations. Tools with broader scope than a single regulation and integration capabilities provide a more efficient, lower effort, lower cost approach. A cloud-based tool or service protects supplier IP, encourages open and honest communication, and reduces overall IT expenses. Cloud services provide an excellent value for small- to medium-sized companies where a dedicated compliance solution is not feasible, and can integrate with complex in-house solutions to provide additional analysis and product integration services.
As with many business process improvement topics, sustainability requires business information to permit appropriate business decisions. Tools, processes, and procedures with broad industry or cross-industry focus and total supply chain reporting capabilities provide a solid foundation. New regulations require every company to share responsibility for compliance and sustainability, so every part of the entire supply chain must retain focus on their products, and communicate through every level of the product lifecycle.
Chuck LePard is the Americas Representative for IMDS and CDX and a material and conflict mineral regulatory compliance services senior consultant at HPE Eng. & Mfg. Solutions. He is an active member of AIAG's Chemical Management & Reporting and Conflict Minerals Workgroups and sub-committees, and the AIAG Chemical Management & IMDS Summit Planning Committee. Hewlett Packard Enterprise is a proud Platinum Sponsor of the 2016 Corporate Responsibility Summit.