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Gauging Environmental Preparedness and Recommendations for Best Practices
Key Findings Fragmented Environmental Leadership at OEMs The diversity of titles and functions responsible for environmental compliance and leadership (pictured in Figure 1.2.1) coupled with nearly half the respondents planning to change their organizational design are both evidence of an industry responding reactively more than proactively to the well spring of environmental requirements in the 21st Century. If electronics OEM executives had more concertedly organized around the changing requirements, more uniformity would likely have already occurred in management structure from company to company - much like the near ubiquitous functions for human resources, finance departments, marketing, etc.
Figure 1.2.1 Most Senior Executives Involved in Environmental Compliance Poor Grades Given to Own OEM Companies Only a small number (14%) of respondent OEMs give their companies a grade of "A" for keeping up with new product-focused substance and recycling legislation and regulations worldwide. In fact, as Figure 1.2.2 shows, most companies give themselves grades between "B" and "C". More respondents graded their companies with "Ds" and "Fs" than "As." Overall, the average grade for this study comes out to a "C+."
Figure 1.2.2 Self-Reported Grades for Keeping Up with Environmental Regulations More Substances to Track, But Not Yet Very Efficient For tracking and reporting substances in the OEMs’ products, the trend is away from reporting only specific restricted substances, such as lead (Pb), and toward broader disclosure to enable conformance to the proliferation of environmental regulations. Nearly one-quarter of the respondents plan to track all substances in their products and nearly 20% expect to track all substances required for tracking by current and future regulators. Just a handful of OEMs plan to continue to track only Pb. Yet, despite nearly ubiquitous plans to track more and more substances in their products, nearly half (45%) of respondent OEMs have or will implement substance information collection manually via email or fax exchange. And most OEMs are still using or have used custom mechanisms to obtain the material composition and declaration information they believe they require in order to comply with environmental regulations. Since it was first issued in March 2006, IPC 1752 has quickly risen to capture nearly 20% of the market, and despite significantly less marketing, the ECD spreadsheet is also showing evidence of respectable adoption. It would be far more efficient for the industry to more quickly and widely embrace standardized ways to obtain, track, and declare a wide array of substance information. Auditing Suppliers for Material Content - Chosen by Minority of OEMs As Figure 1.2.3 indicates, more than 60% of OEM respondents do not intend to audit suppliers for compliance and compliance capability (or do not know if they plan to do so). This finding implies that OEM management trusts suppliers to deliver compliant components and other materials (even with prevalent errors in this regard and even counterfeiting), lacks focus on the issue (and on the severity of various penalties for errors - market blockages, fines, and even prison time), and/or has insufficient resources. There have been numerous reports of products (at both the component and system levels) that have been represented as compliant but are, in fact, not so.
Figure 1.2.3 Auditing Suppliers for Compliance and Compliance Capability An Alternative Growing in Recognition Approximately half (52%) of the OEMs in this study are converting the leads of some lead-finished components to lead-free, and/or vice versa, to make use of available components in their products. Fourteen percent did not know that this option is available. Standard, off-the-shelf components are being converted most (70%), followed by end-of-life inventory (35%), and then high end components (28%). For additional information, see the first white paper on TFI’s Website http://www.techforecasters.com/resources/white_papers.php.
Figure 1.2.4 Level of Preparation for Phase 1 Compliance of China RoHS Increase in Use of Recycled Components and Products Many OEM respondents in this study are already using reused materials/subassemblies (25%) or recycled materials (38%) in their companies’ products, and are tracking them with a variety of control methodologies. While a few allow subcontractors to manage the reused materials/subassemblies or recycled materials, others employ a variety of other options, such as:
Most likely, more respondents’ companies are receiving reused/recycled materials from their suppliers than realized. Furthermore, with the growing influx of already-used products based on recycling measures around the world (WEEE, California’s Senate Bills 20 and 50 take-back program, Japan and South Korea’s recycling successes, OEMs’ voluntary take-back programs, etc.) the number of reused materials will flow quickly into the supply chain. .Based on TFI’s participation in the November 29th Counterfeit Components Symposium in Los Angeles, it is clear that standards are needed for properly identifying reused parts for matters of material declaration requirements and anti-counterfeiting measures. Growing Awareness of Need to Design Products for Extended Life More than half (57%) of the OEMs that participated in this study have new product designs that include features for extending the product’s useful life. This percentage is considerably higher than the one-third respondents reporting one year ago (Quarterly Forum WEEE benchmarking study, December 2005) that they are designing new products to be more easily disassembled, upgraded, refurbished, and recycled. Companies Lack Clarity about EuP As Figure 1.2.5 indicates, only 17% of OEMs in this study believe that their company’s products will be covered in the first round of the Energy using Products (EuP) Directive. Nearly half of the respondents are not clear on this matter.
Figure 1.2.5 Company Products Covered in First Round of EuP Directive For business and competitive reasons, some companies reported they are gearing up to meet the lifecycle analysis and design for environment associated by EuP even though their products are not likely to be included in EuP at first. The EuP directive is expected to be law in the European Union as of August 11, 2007 - only 9 months after TFI conducted this research. The large number of respondents unclear on the product scope of the directive could indicate that many managers did not learn the lessons from RoHS and WEEE about staying ahead of the regulatory curve to prevent last-minute and costly catch up. Still, one third of respondents report that they are working cooperatively with the EU (as the EU has invited industry to do) to influence the EuP directive in ways that will be most effective and efficient. Even More Uncertainty about REACH Only 13% of OEMs in this study believe that their company’s products will be impacted by the Registration, Evaluation, and Acceptance of Chemicals (REACH) Regulation. However, it is important to note that Figure 6.1.4 shows more than half (52%) as uncertain about the ramifications of REACH on their products. Beyond Regulations for Business Benefit Nearly one-quarter of OEMs in this study reported that their companies’ have made measurable environmental improvements to products that are beyond regulators’ requirements. Reducing Environmental Footprint A company’s environmental footprint in this study is defined at "the impact of an organization in environmental terms: resource use, waste generation, physical environmental changes etc." TFI asked the 16 OEMs that participated in our telephone survey to describe any steps they have taken recently to reduce the environmental footprint of their facilities and general operations. Table 1.2.1 summarizes respondent feedback. Table 1.2.1 Steps for Reducing Environmental Footprints
Synopsis of Recommendations Chapter Eight comprises dozens of recommendations for efficient and profitable environmental steps to be taken by OEMs, contract manufacturers, material suppliers, and software companies. The Executive Summary included the top-level recommendations for environmental leadership:
To obtain the full report contact Jennifer Read at jread@techforecasters.com or +1.623-293-6985
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