For some industries with more complex supply chains, like the automotive or aerospace industries, the European Union’s REACH regulation is creating challenges that extend far beyond the matter of compliance reporting. The sheer scale of implementing a single change through their entire supply chain can cause damaging production delays and supply chain disruptions that put everyone involved at risk.
REACH, the Registration, Evaluation, Authorization and restriction of Chemicals regulation, exerts control over the chemicals and substances contained in articles made in or exported to the European Union. Essentially, the EU’s European Chemical Agency (ECHA) has created an ongoing list of chemicals that must be reported for and/or banned from any good that enters its borders.
Making REACH a bit more difficult to comply with for North American manufacturers is the fact that a banned substance can’t be present in any of the parts that get assembled into the final product, which means REACH compliance is a matter for a manufacturer’s entire supply chain – even though the end importer is held solely responsible for compliance under the EU’s laws.;
A lot of attention of late has been paid to the difficulties Original Equipment Manufacturers (OEMs) are having when it comes to tracking down chemicals in their supply chains and demonstrating their compliance. However, manufacturers are finding that there’s an even more pressing issue and are starting to come together to raise their concerns about the other ways that REACH is creating barriers to their success: namely, supply chain disruptions and production delays due to insufficient regulatory timelines and a general misunderstanding of supply chain complexity on the part of the regulators.
Not All Supply Chains are the Same
Whenever ECHA updates REACH’s list of banned and reportable chemicals, manufacturers within the EU or who ship to the EU consult their chemical inventory records and the data sheets from their suppliers to investigate whether or not the latest REACH additions will have an impact on them. It makes sense then that manufacturers with fewer links in their supply chain will have fewer data sheets to review and there will be less data lost in translation – resulting in it being easier for those manufacturers to comply with and adapt to REACH changes.
And because REACH has been developed and improved according to industry case studies since 2006, these smaller businesses that are more readily able to implement REACH throughout their supply chains has demonstrated that REACH is indeed a viable regulatory system… but not necessarily a “one size fits all” solution. Unlike those previously-mentioned smaller supply chains, major international industries like aerospace and automotive manufacturing that have tier upon tier of suppliers (sometimes up to a dozen tiers per product) often simply cannot achieve the same REACH implementation results given the same time frames – despite being equally willing and receptive.
Under ideal circumstances, in which a vehicle or airbus manufacturer has a complete library of Safety Data Sheets (SDSs), strong relations with its suppliers, and is on top of its environmental data management in general, the scale of the average automotive/aerospace supply chain means that a reliable investigation for a REACH substance can take anywhere from two to six months. If the substance is hidden in the deeper tiers of the supply chain, it can take 180 days just to find out if the chemical is present and how it is entering the product stream.
Furthermore, that time frame is currently only really possible if the material has been identified as a prospective REACH material one year in advance of its official REACH status. If not, it can take nearly an entire year for the automotive industry to get its supply chain management prepared to perform the investigation and get the proper internal documentation ready – ultimately resulting in a 14-20 month period (540+ days) from beginning to end to comply with REACH for a single chemical.
…And all that is only the best-case scenario. The timelines get even longer when a manufacturing facility doesn’t have a firm grasp on its environmental data or supply chain.
Unfortunately for automotive and aerospace manufacturers, REACH does not allow twenty month or longer compliance timeframes, meaning that is some cases a well-intentioned and hardworking manufacturer that completed all the work of REACH compliance cannot meet REACH’s goals. It’s a classic square peg in round hole dilemma. The results of this issue? Production delays, perfectly compliant goods not making it into the European market on schedule, and supply chain disruptions as manufacturers are forced to stop buying parts and coatings until investigations are done. Entire supply chains shut down and stop being profitable, not because the manufacture was unwilling or unable, but because their reality was at odds with REACH’s perceptions of what was realistically achievable.
While a supply chain disruption can end up being a costly affair for an OEM, it’s really the smaller entities along the supply chain that suffer most. If your entire business is making and selling one specific part to an OEM, how can your business survive long draughts in which no one is buying your product simply because an investigation into some other supplier good’s chemical makeup is causing unpredictable delays?
How ECHA can Improve REACH
There’s no question that the automotive and aerospace manufacturing industries are doing their best when it comes to REACH compliance. In fact, both sectors are known for being early adopters of voluntary sustainability and chemical safety initiatives. For example, the voluntary Global Automotive Declarable Substance List (GADSL) already asks vehicle manufacturers to create detail chemical accounts of their goods and ensure nothing toxic or banned internationally makes into their finished goods. So the objections being raised by auto and aerospace manufacturers shouldn’t be taken lightly or be misinterpreted as trying to avoid responsibility under REACH.
These two industries aren’t trying to get out of complying with REACH, but what they are asking for is increased regulatory flexibility that accounts for the uniquely complex supply chains of industries like theirs so that the time frames are realistic and achievable.
So what needs to change?
ECHA needs to ensure that it is transparent and more proactive about communicating which chemicals are slated for REACH classification so that larger supply chains have the advance notice they need to perform a thorough investigation of their materials without facing a time crunch. The solution being proposed is a commitment from ECHA to provide at least 540 days’ notice before the public consultation phase of a material being listed under REACH.
Today, it is difficult to know exactly which substances will be added to REACH, as ECHA publishes large lists of chemicals that are under review in advance, but ultimately gives insufficient lead time for notifications about those chemicals that actually end up on the list. In addition, that initial list of potentials is too large for manufacturers to viably perform a thorough analysis of each one, as there is little immediate ROI to investigating a substance that won’t be slated for REACH control, especially considering the amount of time that will need to be dedicated to those materials that do end up on the list.
The automotive industry also wants ECHA to address concerns about regulatory overlap which are causing further time delays and complications, as well as issues regarding how REACH is affecting the production of spare parts. Already a heavily regulated industry, automotive manufacturing has several regulations regarding chemical authorizations, heavy metals, and end of life management.
ECHA itself has stated that REACH is still evolving as more and more types of industry get absorbed under its umbrella, and is planning some modifications to help make REACH more achievable. These include working to ensure REACH has no “major overlaps” with other EU regulations and to place a greater emphasis on helping SMEs achieve REACH compliance with fee reductions and other support. This could relieve some of the burden on some automotive and aerospace supply chains, though not to an extent that would eradicate the potential for supply chain disruptions.
How Automotive and Aerospace OEMs can Prepare Today
ECHA also recommends that SDSs need to be more comprehensive and more central to the way manufacturers assess potential parts and suppliers. This could help reduce the amount of lead time needed by manufacturers to perform their analyses, as one of the major stumbling blocks most manufacturers with complex supply chains face is data leakage across their supply chain: as a piece of product data moves upwards from tier to tier it gets less reliable and accessible the further it has to travel. Most manufacturers at the top of 10+ tier supply chains will never receive chemical data about a material developed a few tiers down and have to ask their tier I and II suppliers to find that information for them.
The solution that these types of industries can adopt now as a part of their REACH compliance strategy is to implement a stronger environmental and chemical inventory data management system that track chemical data more closely across their supply chains. It’s also important that this system be able to keep the enormous influx of chemical data organized and standardized so that investigations are a more simple matter of checking through an archive of product data instead of needing to collaborate with dozens of separate SMEs to locate a single chemical.
The secret is to have the ability to communicate environmental metrics through an entire supply chain, which for most big manufacturers is a complicated and resource-intensive task requiring an ever diversifying range of skill and competencies. Having a system in place to facilitate that communication is becoming more and more essential to support existing staff and these new actions.
REACH is here to stay, there’s no doubt about that. Hopefully, as the aerospace and automotive industries continue to voice their concerns, create support networks, and develop lasting solutions to aid in chemical data management, ECHA will come to understand that these manufacturers are ready and willing to comply with REACH if given a fair chance.
Research and Content Support: Greg Brown
Image by Stuart Pilbow
January 15, 2014