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The current state of material compliance management

Materials and substances used in manufacturing plants need to comply with health, safety, and environmental regulations surveilled by authorities such as the EPA, OSHA, and ECHA , to name but a few. Regulations governing materials and substances in articles and complex products include specific restrictions and reporting requirements regarding certain substances in articles; EU, Japan, and China ELV regulations are good examples of this. EU REACH, US TSCA (Toxic Substance Control Act), California SCP (Safer Consumer Products), UNEP (United Nations Environment Programme), and POP (Persistent Organic Pollutants) regulations also govern the use of certain substances in articles. This list goes on, with far too many distinctive regulatory requirements to mention individually in this article. In sum, material compliance management is a complex task, and manufacturing companies are permanently challenged to meet the ever-increasing scope of requirements.

IMDS – the first industry-level tool

In response to this, a small number of companies have developed various IT tools to help organizations manage their materials and substances for different purposes – from data collection, compliance checks, to various reporting capabilities such as generating compliance certifications and reports to ensure products can be sold in all different markets.

Some IT tools have been developed by specific industry sectors. In the automotive industry, for example, there is IMDS (International Material Data System) – a centralized data reporting tool developed more than 20 years ago to meet the EU ELV requirements. It was the first industry-level tool that was adopted by many relevant automotive industry players including OEMs and suppliers around the globe. Over the past two decades, IMDS has incorporated several new regulations such as REACH, SCP, TSCA, and California Prop 65.

More specialized requirements led to IT tools to manage compliance for materials and substances

In response to more specialized requirements, a small number of companies have developed IT tools to manage compliance for materials and substances used in production and processing. These tools aim to enable the collection of chemical composition data, toxicity and hazardous properties, performing risk assessments and generating various reports and documents, such as GHS-compliant SDS (Safety Data Sheets), secondary labels, transportation documents, etc. Some tools are focused on managing workplace health and safety, others on managing hazardous chemical inventories.

There is a continuous influx of regulatory requirements to respond to. In some cases, a new type of requirement emerges, going beyond the coverage of traditional material and substance compliance processes. The existing US Conflict Mineral, and the upcoming EU Conflict Mineral  requirements are clear examples of regulations which do not prohibit substances (3TGs, Tin, Tungsten, Tantalum, and Gold), but require companies to demonstrate due diligence and responsible sourcing by reporting to authorities with the goal of ensuring that the 3TG trade profits are not used to finance armed conflict and atrocious human rights abuses in conflict-affected and high-risk areas (CAHRAs). The requirements of the EU Green Deal and the WFD (Waste Framework Directive), as well as California SCP (Green Chemistry) laws are all new additions which directly or indirectly impact material compliance programs and create more challenges for all companies.

To date, (1) only a handful of IT solution providers are capable of managing the whole material world, (2) few are able to do so in an integrated manner, and (3) even fewer are proactively incorporating new and emerging regulations and initiatives and going beyond compliance to support companies in achieving their corporate responsibility and sustainability goals.

To save on development and maintenance costs, practically all companies prefer to have fewer vendors and IT tools to manage the whole material world and all related requirements. Moreover, utilizing an integrated system makes the tasks of managing the complete material life cycles much easier. For example, one can search and analyze all kinds of data not only for compliance purposes, but also to tackle broader sustainability and corporate responsibility requirements.

Integrated processes and tools makes analysis and reporting more accurate

Another benefit of having integrated processes and tools is that they remove the need to build complex interfaces between different vendors’ tools and databases. This makes analysis and reporting more accurate and it reduces the risk of errors and, more importantly, of non-compliance. In EU REACH, for example, many restrictions do not distinguish between Substances of Very High Concern (SVHC) used in plants and those in finished articles. Hence, companies must be able to sort, aggregate, and report the usage of SVHCs in parallel processes – those related to finished parts and those used in the manufacturing process and maintenance. US EPA also starts collecting data for chemicals contained in both dimensional hard parts and plant used chemicals and mixtures.

Using the automotive industry as an example again, as shown in Fig 1, the same material or substance may need to be reported several times; for example, first in plant reporting systems to fulfill environmental, health, and safety regulatory requirements related to production, and then again into IMDS to ensure that products, parts, and components comply with regulations before they are placed on the market (ELV, REACH, etc.). To report SVHC uses for the whole company without an integrated central database and integrated central processes, one has to expend secondary efforts, often including manual data processing, sorting and matching, to meet the reporting requirements. This can be a lengthy and costly process, and it can increase the risks of reporting errors and ultimately lead to non-compliance.

From an efficiency and effectiveness perspective, both external stakeholders (suppliers and customers) and internal stakeholders (engineers, environmental officers, purchasing managers, plant managers, etc.) would be much happier using a single data entry portal and a single approval review tool instead of multiple tools, and many user interfaces, to do their jobs. For the sake of better managing IT systems, a central and integrated database is often better than several standalone disintegrated databases. In many cases, different vendors may also compete with each other, which makes system and data integration even harder.

Conflict Minerals – combining substance-level data from IMDS with supplier information

When existing requirements change, or new ones emerge, the benefits of an integrated system become even more obvious. One example is Conflict Minerals, whereby combining substance-level data from IMDS with supplier information, one can quickly identify those parts, components and materials that contain 3TGs, and focus only on relevant suppliers. With all the necessary data in one place, reporting is also simplified, even when requirements demand a specific reporting format to be followed, such as the CMRT (Conflict Mineral Reporting Template).


This article is the second in our new series of nine articles dedicated to the topic “From Compliance to Sustainability – Managing Material Lifecycle in the Circular Economy Era”. It is addressed to senior decision makers, managers, compliance officers, engineers, and any corporate citizen interested in the most important steps of your journey from compliance to sustainability. Starting with material compliance, we will explore the entire material life cycle and the connections between corporate sustainability goals, circular economy, and digital technology. Thereby, we will lay the focus on business processes, IT solutions, and the utilization of data as the three key elements which – in combination with sustainability and the circular economy – create greater value for companies and their value chains.
The next article in this series, is ocus on the current state of material compliance management.


About the authors

Maroye Marinkovic is the Product Innovation Manager at iPoint, where he brings in his skills as a solution designer, digital strategist, and a communicator with a passion for improving sustainability, efficiency, and compliance across value chains. Based in Melbourne, Australia, he has more than 10 years of experience in conceptualizing, designing, and implementing enterprise compliance, sustainability, and risk management software solutions. Maroye’s specializations include chemicals management, platform design, blockchain solution design, circular economy, and business strategy.

Dr. Bing Xu joined iPoint in Ann Arbor, Michigan, at the North America main office in 2019 as Director of Business Innovation. In this role, he supports iPoint’s customers in different industries with their material compliance programs as well as their sustainability, circular economy, and digital twin projects, to integrate material compliance programs into their core product development processes and reduce non-compliance risks and improve engineering efficiency.

Before joining iPoint, Dr. Xu was Ford Motor Company’s Global Materials Compliance Program Manager. Spearheading Ford’s Global Materials Management program in early 1997, he was one of the original OEM members who developed and launched the International Data Management System (IMDS) for the automotive industry in 2000. He was Ford’s global attribute leader for material/substance compliance and material life cycle management, and a member of Ford’s Sustainability Council, managing both internal compliance and external suppliers’ compliance. He also led Ford’s cross-functional teams and developed various material compliance-related processes and IT tools for Ford since 1997. Furthermore, Dr. Xu was the owner of Ford’s Restrictive Substances Management Standard (RSMS) and the owner of the Ford’s internal material/substance compliance processes/tools.

He has served as chair and co-chair in several committees of leading industry organizations and work groups, such as the US Automotive Industry Action Group (AIAG)’s Chemical Management Advisory Group, the United States Council for Automotive Research (USCAR)’s Substances of Concern Group, the Global Automotive Declarable Substance List (GADSL)’s Steering Group; and he has supported projects of the US Environmental Protection Agency (EPA) on Alternative Assessments, and TSCA industrial data collection and evaluations.

A recognized and highly respected expert of the automotive industry, he has been invited to speak at many conferences and forums hosted by different industries and governmental agencies, e.g., Electronics, Building Materials, Heavy Machinery, Chemicals, Apparel, Home Appliances, California Safer Consumer Products and Alternative Assessment conferences/workshops, and SAE US Government Industry Meeting.

 

Maroye Marinkovic & Bing Xu

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