Starting June 2007, in the
European Union Registration, Evaluation and Authorization of Chemicals
legislation (REACH) went into effect. Like the
“End-of-Life Vehicles Directive (2000), “Restriction on the use of certain
hazardous substances in electrical and electronic products” directive (2002)
and the “Waste electrical and electronic equipment” directive (2002), REACH
legislation pushes manufacturing companies doing business in the European Union
to think differently about the products they produce and the chemicals they
emit.
Each of these
directives serves to address the substances used to manufacture these products,
and in some instances how to recycle the materials contained within these
products, expand the scope of product to technology and monitor the potential
risk of chemicals contained in products and considers how to dispose the waste
of these chemicals or to replace them with less hazardous ones.
The aim of all
these directives is to improve the protection of the environment and human
health by putting greater responsibility on the manufacturers to monitor
potential high risk and to report on new chemicals and other exposures that can
replace more hazardous ones, consider how to dispose the waste of products at
the end of their life cycle.
In June 2008, a
new initiative described as REACH-IT was established as a central registration
organization based in Finland. Any manufacturer doing business in the European
Union is required to register chemical substances they manufacture or use in
the amount of one ton or more.
All this
legislation, in short, places the “burden of proof” on manufacturers – to be
certain of dangerous effects before the fact; while the products are in
development and in the case of vehicle manufacturing consider the impact of the
materials contained within the product in preparation for how they are
recycled.
News outlets within
manufacturing, e.g. ANSI have been reporting that REACH in China is now on the drawing table,
making REACH a global manufacturing mandate. China and Korea have already adopted RoHS and WEEE.
Overview
“REACH forces a new
approach,” says Gil Friend, 
a longstanding environmental writer and CEO of
Natlogic, a California-based consulting firm. Through Friend’s leadership, the
consultants of Natlogic deliver strategic
sustainability consulting to companies and communities, with integrated,
results-focused programs that build profit and competitive advantage while
reducing your organization's environmental footprint, waste and risk
According to Friend, “REACH suggests that manufacturing
executives must rethink how they approach strategy and hence research and
development.” In other words, REACH follows a countervailing premise to
the typical approach – that polluters are “innocent until proven guilty.”
Instead, REACH is an example of an idea that will increasingly influence the
corporate world – and that corporate leaders don’t yet know how to respond to
strategically. This idea is known, in environmental circles, as “The
Precautionary Principle.”
This type of thinking
raises these questions:
1. What is implied by REACH?
2. What does this imply with respect to “exercising
precaution.”
3. Sustainable Value Creation can create a Strategic
Manufacturing Response?
Implications of REACH
and REACH-IT?
Michael Kirschner, 
President of Design Chain Associates, LLC, notes that REACH came about
because of the frustration that is more common today with the increasing number
of studies on toxicity and environmental impact creating confusion rather than
clear scientific direction. Lots
of studies either explicitly or more often, show a possible connection between
a specific chemical substance and a problem for humans, animals or the
environment.
Design Chain Associates provides services that help Electronics OEMs and other
product manufacturers increase engineering, procurement, and production
efficiency, product and operational environmental performance, and corporate
profitability by ensuring that the right decisions about supply base and the
environment are made during the earliest stages of the product lifecycle, and
are built-in to corporate strategies and tactics.
Kirschner has been one of
the leading practice leaders, preparing the Supply Chain to understand REACH by
monitoring current and global events related to REACH and participating in a
global forum funded by the European Commision at UC Berkeley’s Center for
Institutions and Governance , directed by Heddy Riss. Ms.
Riss has at UC Berkeley has convened a group of where academic leaders across the expertise of government,
policy, law and environmental science to understand the implications of REACH
and the role Academics can serve to educate and/or respond to manufacturing
education and professional development.
Kirschner's action research
on the history of environmental law and manufacturing's response to those laws
in California, Korea, China and the EU has been a key contribution to the
community convened by Ms. Riss through Berkeley and Standford University. Kirschner believes that downstream more
conversations are going to have to occur in the context of when and how to
exercise precaution. He has ascertained that percentage of manufacturers,
particularly SME’s in the EU and US (doing business with the EU) who are aware
of REACH and have some understanding may be as low as 30%.
According to Kirschner,
with WEEE and RoHS the 30% of manufacturers who sought education on this
legislation initiated a response by building systems of compliance. The cost of
compliance to the EU’s RoHS directive was $32.7B across the entire electronics
supply chain, or about 1.1% of total annual industry revenue.
Unlike RoHS and WEEE,
REACH asks for the introduction of an ongoing process of review, which is
guiding manufacturers to integrate a more strategic system of learning,
evaluation, review and discovery which measures a thought leadership practice
described as “Sustainable Value,” whereby manufacturing owns responsibility by
- monitoring the potential high risk of
chemicals and reporting on new chemicals that replace hazardous ones;
- engaging in a process of evaluation which asks for ongoing research
and data analysis;
- participating in continuously learning with
other manufacturers who register substances of very high concern, “SVHCs”
which can be restricted from use;
- integrating a horizontal perspective into
decision making processes which measure metrics from a more horizontal
perspective of their impact on society and environment, in addition to
impact on the bottom line.
The supply chain is not
designed to make compliance with these sorts of regulations easy, since it was
not designed with REACH in mind. Companies and educational institutions are not
configured to instruct about REACH or facilitate its implementation. This presents serious infrastructure
problems and a call for developing educational programs for manufacturers cross
numerous industries that include chemicals, automotive, electronics, medical
devices and bio-pharmaceuticals to name a few.
Kirshner believes that
there is an opportunity for large manufacturers, e.g. Dupont to organize to
educate the supply chain and enable change across the entire sector, so that
small manufacturers within the sector can be responsive and not get lost in the
chaos of change due to the cost of reorganization and access to educational
forums.
1. Reach is more than a law about chemical substances?
2. It implies that a manufacturer of any tangible
article/product, e.g. toys, vehicles, clothing, furniture, electronics can have many parts which have many
chemical substances.
3. Example: A desk-top computer has upwards of 2000
chemical substances.
4. REACH is only concerned with what may be less than
2000 substances of very high concern (SVHC’s), which include but are not
limited to
a. Carcinogenices, mutagenics and toxic for
reproduction CMR, and it is these substances that are registered.
b. PBT’s 9 persistent, bioaccumulative and toxic or
very toxic PBT’s
c. Endocrine disruptors or any substance equivalent in
concern and impact on health.
5. The initial list of SVHC’s will be
published in October. Thus
far, non-profit environmental groups have identified 300 substances as SVHC’s
versus 16 identified by the European Commission to date. Part of the process of
registration will be to replace use of substances that prove harmful with new
ones.
Implications of REACH
IT and its data base?
Kirshcner has outlined
from his view that the best response for most manufacturers registering SVHC’s
with REACH IT is to
1. Be proactive and register. If you don’t register
you could find that you have fulfilled an order of a product that will be
banned from shipment.
2. Work with the experts in your network – research
based scientists in the non profit and academic sector, manufacturers who
supply you components used within your products that contain SVHC’s, your
r&d staff and government agencies that track and monitor issues related to
these SVHC’s, e.g. the EPA.
3. This permits people to realize where the risk lies
within your network beyond your own company and who you will have to work with
to respond if a substance proves harmful and what the recommendations are
4. This may result in through a passive process of you
learning about contaminants through Product Change Notices that are removed
from use and insure you have suppliers who provide you replacement components adopting
new substances.
5. Organize your leadership group to join in an
education forum out of which they can learn to see opportunities and formulate
strategies with a long view.
6. Parallel to preparing your organization to build
and act on a more strategic view, build a new communication chain to learn
about the status of SVHC research that is proactive with your supply network,
scientists who perform research on substances independent of your company and
government agencies, who will be responding to defining levels of toxicity
through medical and environmental research.
7. Through your larger social network outlined in
recommendations 3 and 6 begin to examine opportunities for how your company and
products can exercise precaution so that people you sell your products to or
people who live by manufacturing plants owned by you or your suppliers are not
harmed.
What does this mean
with respect to Exercising Precaution?
REACH follows a
countervailing premise to the typical approach – that polluters are “innocent until
proven guilty.” Instead, REACH is an example of an idea that will increasingly
influence the corporate world – and that corporate leaders don’t yet know how
to respond to strategically. This idea is known, in environmental circles, as
“The Precautionary Principle.”
This all serves to
underscore the opportunity for exercising the Precautionary Principle with a
more concrete approach that pushes companies to register and examine the global
data base organized by European Chemical Agency (ECHA) and examine how this data can
translate to the flow of conversations within a company and with its value
chain of suppliers, distributors and consumers.
At present, The REACH-IT
format and design is an opportunity to redesign data management with a focus on
compliance and building information to identify patterns and historical trends
from which to define response to a more strategic knowledge management
practices satisfies inquiring minds and wise practices for manufacturers who
accept the responsibility of REACH.
The question becomes what
is critical to IT design to organize from a data management view into a more
strategic view where by data can become part of a practice of wisdom and
managed as knowledge that monitors return on investment.
Chauncey Bell, 
expert IT designer and organizational strategist, has asserted that the
application of technology and the design of data bases that serve organizations
to work wisely and will empower the people within these organizations to
develop a flow of conversations as modeled successfully by Toyota that permits
them to learn from mistakes and even invent mistakes to learn from and build on
new social realities that shape intention and purpose.
Collecting information
(data) and analyzing it and therefore ascertaining how to develop, invest and
sustain maintenance of technology and systems is increasingly become a
significant focus on monitoring the bottom line and organizational roi, hence
how to define the purpose and intent of knowledge management is the focus of
this chapter by Chauncey Bell in Moving from Knowledge Management to Wisdom. From his review of C. West
Churchman’s inquiry into designing systems, from his analysis of
responsibilities, roles in organization and how information is related to by all
people in an organization in order to assure a viable future, Chauncey Bell
succeeds in capturing the reader’s attention to recognize that a limited view
of design, task and technology is now what adds up to an ethical high
performance that engages people in inquiry that assures a companies future and
hence, continuous improvement of a organizations performance.
The traditional forms of
preparation that managers conduct to assure a future that include strategic
planning, forecasting demand, proposal and review of capital budgets. Decisions
re: capital expenditures, management of cash flow relative to capital
investment, execution of capital projects, accounting and measuring rate of
return on investment can be expensive, bureaucratic and generate a lot of
paper.
The question becomes what
is the role of people (and who) in relating to these tasks and how does
leadership organize itself unifying the organization to make future investments
quickly, potentially stretched over a long period of time that may be
unconventional and further progress of goofy ideas that engage the type of
learning that assures a future.
In this chapter, Bell
outlines a thought leadership and analysis of the complex interplay of what
builds a “wise” practice in organizations between people and how innovation can
emerge as a result. Bell’s maps out an understanding of what comprises
organizational performance and why some organizations are market responsive and
innovative while others simply sit dormant with mechanical responses that
compromise the future of the companies value to its stakeholders. As a person
specializing in IT design for organizations, Bell maps out a thinking that
injects life into the an organization where the cost of collecting data and
learning from that data can be excessive if a purpose and intent for learning
is not mapped out to assure an organization future.
This perspective is key to
establishing investment relationships of any kind whether based on venture,
philanthropy or cooperative work (elbow grease). Bell is one of the few thought leaders who bases his thought
leadership on philosophy on language and philosophy, who takes into account how
people learn. Hence growing from
observations new possibilities from which a group of people can act to construct
a new viable future.
REACH has the potential to
be an example of how manufacturing can build a new social reality that is
concrete and respects the Precautionary Principle With purpose and intention,
manufacturers and their supply chain can author conversations based on
possibilities and zero in on the requests and promises it takes to act and
respond to insure they do no harm.
More important the registration system with REACH IT creates
accountability. Hence, it puts the onus on manufacturers to work with their
supply chains for the benefit of their consumers to learn from recommendations
authored by the independent scientific community on how to apply these
recommendations to exercise precaution and ongoing review the substances,
components an products to “do no harm.”
One attempt to provide
such education was by The European Union Environmental Protection Agency, when
it released a report in January
2002 titled, Late Lessons from Early Warnings: the Precautionary Principle
1896-2000. The report is written from the perspective that scientific research as
innovative as it is can no longer predict the consequences of hazardous
substances on health and the environment. This report summarized the results of
an investigation regarding 14 costly hazards e.g. radiation, benzene, asbestos
and polycholorinated biphenyls (PCBs).
Within each report authored by a subject matter scientific expert is a
description of the history of harm, the early lessons and how and how exercised
or misused the concept of precaution and where the findings influenced the
adoption of government regulations that mandated manufacturing compliance.
The report also summarized
the difficulty and challenges ahead based on this history with exercising
precaution because of the confusion on how to deal with scientific
uncertainties and potential hazards, where conflicting research makes it
impossible to draw quality scientific confusions.
Historically, where there
is a threat or appears to be a threat, environmentalists organized through non
profit organizations and government agencies oversaw the definition of
standards and requirements for legislation and policy. Through either reports of hazardous
events or the dissemination of research that is often conflicting, corporations
traditionally responded to the information overload challenging the research
results validity or initiating activities to suppress the information
circulated. With the introduction
of new environmental legislation and policies, fewer than 30% of manufacturers
were in a communication channel or association that assured education on which
they can act.
An example of a current
topical issue that has been given great press attention as of late relates to
the potential threat of non-ionizing electromagnetic radiation produced by cell
phones often described as EMF exposure. EMF, while not defined as a chemical
substances is surrounded by the type of confusion that often prevents any
conclusions to be drawn that can advise consumers and manufacturers. Larry King, who has produced 2-3 shows on Cell Phones and Cancer , interviewed
Dr. Devra Davis, director of the Center for Environmental Oncology at the
University of Pittsburgh's Cancer Institute. Dr. Davis illustrated this point well when
she stated, “The reality is we do not have studies yet and, with all due
respect, we can't vote on whether or not cell phones cause cancer with polls.
What we need is independent research. In fact, Dr. Herberman , Dr. Song and Dr. Bondy who were also interviewed by King made note that the cell phone industries need to make their data publicly available for independent
evaluation by scientists. A transcript of this conversation is available at here from CNN
In the EMF world,
confusion has mounted over the past 3-5 years as non profit groups and academic
research centers report on research findings that are contradictory or position
dissemination of research as a form of attack and debate. In the UK through
cooperation with the UK’s Minister of Health and Safety, Sir William Stewart a
group of private citizens have formed the Radiation Research Trust, (RRT),
led by Executive Director, Eileen O’Connor. Sir William Stewart retired last year and it is wonderful to see that the dialogue he cheered and supported with RRT is now sustainable.
O'Connor is a breast cancer survivor whose
health was challenged by EMF exposure.
On September 7, 2008, RRT convened a meeting of 72 expert scientists
from around the world, conducting independent research apart from industry to
examine the research to date and make recommendations for the future. The
experts invited to present represent different views, research results and
experiences.
At this time it is unclear
if EMF would be listed as a hazard in the REACH IT data base, since this hazard
is not a substance within a product, but the design of the product can emit
this potentially threatening hazard. While this meeting is drawing from experts
involved years of social networking and research activities across government
agencies of all locales (local to international), it does not address the
question of how manufacturers can exercise precaution and how manufacturing can
benefit from exercising precaution regarding this potential hazard.
With the onus on
manufacturers to now exercise precaution, the method by which to approach this
and operationalize this kind of strategy would consider independent science and
applying that scientific knowledge to a strategic process fo sustainable value
creation, which will shift how the environmental advocates, scientists,
legislators and policy makers relate business.
While advocates for
the environment and scientific researchers have refused to work directly with
business. Pulitzer Prize winner, Jared Diamond believes that big business is
most powerful force in the modern world and it won’t be possible to solve
environmental problems without business. Diamond in his most recent book, 
selected
to write about some of the most significant environmental problems in the
context of business realities, making the case that without business we cannot
avoid collapse of societies.
Yet there are
businesses who have chosen to address potential collapse and launch inquiries
from which sustainable value creation can be measured as a return on
investment.
What is
Sustainable Value Creation and what are its merits?
This idea of
Sustainable Value Creation has been defined by Thought Leader, Chris Laszlo.
Laszlo recently authored
Laszlo is a managing
partner and founder of Sustainable Value Partners,
a global consulting firm based in
Washington DC. Chris defines
through his experience with clients and colleagues, a new
thought leadership for
“how business can be an agent of world benefit.” In the foreward of this book, Tyler J. Elm, former Corporate
Strategy and Finance Director at Walmart Stores points out of the world’s
largest 100 economies, 42 of these economies are corporations not
countries.
In the context of what
Diamond and Elm have asserted, Chris Laszlo provides a thought leadership that
concretely demonstrates how organizations can launch an inquiry process of
learning and design to build sustainable value creation. The stories actual
case studies of how Dupont, LaFarge, Nature Works, a subsidiary fo Cargill and Walmart
engaged with this transformational process and what results they produced in
terms of the environment, society/local.
Within each case study, Laszlo identifies the leadership and
their drivers to author a strategy that produced tangible and concrete results
financially that were environmentally sound and in some instances impacted
improvement in the lives of people who lived near or worked for these
companies.
For example, at Dupont the
intiatives were led by both the CEO, Chad Holliday and Dr. Paul Tebo, Corporate
Vice President for Health, Safety and the Environment. Holliday called for the
development of sustainable initiatives after earnest in 1988 after Greenpeace
activists hung a banner at Dupont labeling this company the number 1 polluter. Tebo saw an opportunity to be ahead of
the curve on government regulation and create a performance and practice that
would shape regulation.
Through the unwaivering
support of Holliday, and the company’s decision to integrate sustainability into
the companies performance metrics and compensation plans for key employees, and
the outreach to other sectors through a partnership with a non-profit
educational institute World Resources Institute to achieve a 10% renewable
energy goal and establishing an advisory board that drew on expertise from
biotechnology and health. In 1995,
Holliday pointed out the value of building many forms of partnerships with
stakeholders from all sectors –government, citizen groups and scientists. He
pointed out the benefits of this through dialogue was the only way to spark
innovation that would address human need.
By 2015, Dupont plans to
double its investment, increase its revenues from non-depletable resources to
at least $8B and grow annual revenues by at least $2B from products that create
energy efficiency or reduce greenhouse gas emissions.
Laszlo also provided a a
description of process and tools to carry out these initiatives that include
- a sustainable value framework from which
managers can engage in a process of conversation to learn with each other
to think out of the box and create and sustain competitive advantage;
- identification of 8 disciplines to learn how
to think across sectors on how to conduct a values assessment and build a
future not based on the past from which something new can be introduced
supported by continuous learning to create value;
- tools and descriptions of learn scenarios
on how to assess, select and
respond to rising societal issues that deserve response and how with those
responses companies can create value for the customers and communities in
which their business is located or draws resources;
- a process for map the integration of a new
disciplines implied by sustainable value creation and how to monitor progress and goals and metrics
achieved;
- and finally suggestions on how to seek
education externally and join in a social network of intelligence,
learning and knowledge share, e.g. The Center for Business as an Agent
at the Weatherhead School of Management, Case Western Reserve University which has become a hub for
perspectives drawn from all sectors globally and served to influence
change in educational curriculum around the world.
Through Laszlo’s storytelling,
he showed the merits of sustainable value creation when integrated with company
strategy and driven by the leadership of the organization.
This thought leadership has moved leaders within many companies to
- learn and hence energize the people who work
with them;
- break from mechanical forms of thinking that
result in declining profits, work environments of low morale and create
harm;
- author a future with a long view from which
to learn, act and succeed;
- shape profits to be more sustainable;
- learn and partner with a wider reaching
social network outside and in the company to learn from each other and
innovate change that requires multiple perspective and expertise;
- concretely demonstrate business as an agent
of world benefit impacting on poverty, preventing environmental harm and
protecting the health of its consumers.
Conclusion
Within the European
Union and China architecture and organization is being established to track
approximately 2000 substances that have the potential of doing harm under the
legislative requirements of REACH.
This legislation places the onus on manufacturing to exercise precaution
and monitor the possibility of doing harm. In legislating this registry into action, the European
Parliament has mandated manufacturing to move past environmental legislative
acts that mandated compliance to influence manufacturing to build a data base
that can assure a process is put in place to assess and monitor potentially
hazardous substances and to share in the continuous learning relative to these
substances from which to learn how to act and prevent harm, hence exercising
precaution.
Previously skeptics
of The Precautionary Principle have gotten lost in the confusion and
contradictory reports of research with respect to waiting until enough research
is collected as proof of harm or no harm. This reinforces the past cycles of
proving harm until harm is so significant, e.g. tobacco before precaution is
exercised and surrounds the topical issue of the time with more confusion
created by liability suits and the discoveries of harmful impact on generations
of people not yet born. This kind of cycle re-enforces advocacy patterns of
protest and debate and dissemination of information that overwhelms people and
creates business to build postures of defense or deceit.
With the onus
implied by REACH on manufacturing, there is a need for new forms of engagement
from which manufacturing can learn if it is doing harm, rather than waiting for
independent resources to point out that harm and the cost to the consumer and
entire communities of people. Thought Leader Chauncey Bell has provided a
thought leadership to measure IT activity in service of tracking return on
investment whereby leaders can learn and translate this learning into
conversations and responsive actions,
Sustainable value
creation as a thought leadership defined by Chris Laszlo provides a concrete
process and method by which manufacturing can engage a leadership practice to
exercise precaution, author imaginative strategies and define tangible and
intangible schemes of how to measure return on investment that is financially
viable and protects the environment and the sustainability of geographical
regions. This form of engagement is created from the perspective of leadership
authoring a strategy that can identify potential harm and build a knowledge
base from which not to do harm that build innovative responses that are
profitable and sustain the value of a company.
This approach
creates value through inquiry, learning and developing systems of application
that shifts a corporation to move from developing costly systems of compliance
to integrating what they learn outside the company with what they do in the
company by identifying who, what and how potential hazards harm to a strategic
approach that integrates the cost of learning with the opportunity to gain
return on investment that is as much about profit as it is preventing or
decreasing environmental harm and assuring societies and the people harm to
their health and the environment in which they live.
It brings
manufacturing to the threshold of opportunity perceived by Practice Leader,
Michael Kirschner who observes that
“the entities with
the capabilities to address, at least to the 80%/90% level, the major chemical
issues worldwide are the largest of the large manufacturers, governments, NGOs,
and universities with major chemistry departments. There is of course a whole
massive set of problems that the SMEs and supply chains that stretch back
upstream and again converge at a few huge chemical manufacturers.”
If you thread
together the thought leadership and practice leadership outlined here, the solutions that can grow out of the
REACH mandate for manufacturing may build a bridge from which large
manufacturers can become hubs of knowledge and sustainable value creatiion
rather than barriers to change and collapse of markets.
