On January 31, 2017, we hosted a webinar with Arcadis on product stewardship and supply chain compliance. The webinar looked at current and emerging regulations, and explored the use of technology to improve product stewardship and ensure compliance. The following question came up during the Q&A period:
“How can you request disclosures on ingredients from suppliers when they refuse to provide the information because they consider it confidential business information or a trade secret?”
There is no perfect answer to this question. Getting suppliers to disclose the chemical ingredients in their materials has been a challenge for years, especially in multi-tier supply chains. Companies need to know the composition of purchased materials, due to many chemical and product regulations, such as REACH and RoHS in the EU, , etc. For example, under REACH, if you supply an article in the EU that contains a at a concentration above 0.1%, you must provide sufficient information to allow safe use of the article. In addition, ECHA must be notified if the substance is present in articles in quantities totaling over one ton per year, and the substance is present above a concentration of 0.1%.
Safety Data Sheets (SDSs) include information on compositions and ingredients, but the SDS is not enough to address the challenge of full disclosure because:
- The SDS includes information on hazardous or regulated substances only, not necessarily on all substances. For example, a substance may not appear if it is present below a certain concentration level.
- If a trade secret is claimed, the SDS may provide ranges instead of exact percentages (e.g. 10%-20%), or an alternative chemical name can be used.
- There is no obligation to provide an SDS for articles, parts, or products that are specifically exempt under the regulation.
So what’s the answer to the question? During the webinar, Alain Vassart from Arcadis explained that, depending on the regulation, there are different paths to achieve compliance:
- The supplier can confirm that there are no regulated substances (e.g. SVHCs, RoHS substances) in the materials and parts provided. The declaration must be dated and mention the reference date of the list on which it is based. In addition, the declaration must be updated each time the regulation changes.
- The supplier can certify that the regulated substances are not used as input for the production of the materials and parts (and no chemical reaction is taking place during manufacturing). The substance name can be disclosed under an NDA and you don’t have to name the substance to downstream clients if the substance is not present.
- You can analyze the purchased material or part to ensure compliance, but you should be aware of the costs involved with such tests, as well as the required capabilities (in-house or external).
However, Alain Vassart went further and re-framed the issue to make it more about risk mitigation. Ultimately, you need to assess compliance risks and supply chain continuity risks, and make an informed decision by answering the following questions:
- If you don’t have full disclosure, do you know enough from your supplier to reduce the risk of non-compliance to a very low level?
- If you determine that the risk of non-compliance is too high, and therefore you should switch suppliers, how significant are supply chain disruption risks:
- How many of your finished products are impacted by a change of supplier?
- How many alternative suppliers can provide an equivalent material or part?
- What are the cost differences between the current part or material and the alternative?
- If supply chain disruption risks outweigh compliance risks, did you explore all possible avenues, such as:
- Taking time to educate your supplier about the need for greater transparency (e.g. ECHA had this catchy phrase to encourage REACH registration: “No Data, No Market”).
- Offering to conduct an on-site audit of your supplier.
- Testing the material or part.
To learn more about this interesting challenge, as well as regulatory trends, and best practices and strategies to ensure supply chain compliance, view the recording of our product stewardship webinar with Arcadis.