The impact of RoHS - now and in the
The European Union's (EU's) Restriction
of Hazardous Substances (RoHS) directive took effect in July 2006 to ban
the use of lead and five other substances from electronics equipment and
other products. As we reflect on the past two years under RoHS, we ask
ourselves a few questions: What lessons have been learnt by businesses?
And what happens next?
The backdrop to the introduction of
RoHS in 2006 was one of increasing environmental regulations worldwide
and increasing concern for human health and safety and ecosystems around
the world. Ongoing technological innovation together with consumer desire
to have the latest gadgets is leading more products to be disposed of
more frequently. Waste generated from these products has grown at a rate
four times faster than common household waste. Hazardous chemicals in
products were fast becoming a health and environmental concern. RoHS was
created to limit the concentrations of certain hazardous substances in
products ranging from mobile phones and toys to photocopiers and hairdryers.
When RoHS came into effect, manufacturers
had two options: either do nothing and face the consequences of non-compliance,
or redesign products with components that would meet the legislation.
The past two years have seen companies taking both approaches and some
interesting changes within the industry.
RoHS adoption trends
Many companies were not willing to
face the risk of damage to their business from non-compliance and redesigned
their products. Even certain exempt businesses have changed or are starting
to change their products and supply chain to convert materials and parts
to be RoHS-compliant. RoHS has influenced sectors of the electronics industry
in the past two years outside what may be seen as its strict scope. The
automotive and even aerospace sectors have trended towards RoHS-style
elimination of some substances for example1.
To achieve RoHS compliance, many manufacturers
moved forward by passing compliance down their supply chain. However a
key challenge was getting assurances from the supply chain, where there
were none. Manufacturers required suppliers to provide certificates of
compliance but also to show supporting evidence such as test reports to
prove that their products meet RoHS requirements.
From the time raw materials are received
until the time final products are distributed, both procurement and manufacturing
has the potential to introduce non-compliances. The only complete way
to know a product is compliant is to understand the composition of each
part or component and thereby the materials used to manufacture these
parts. Both monitoring and control needs to be implemented to control
risk in the supply-chain. One time compliance is not the panacea for brand
protection. RoHS compliance must be continually validated.
The key for businesses who have successfully
managed RoHS has thus been mitigation of risk and limiting these non-compliances
to an acceptable minimum. Most who have achieved this have created a compliance
strategy, typically creating and collecting material disclosures, and
have established effective communication with their suppliers. Some have
invested in expensive test infrastructure or partnered with third party
experts to obtain RoHS assurance. Others have even established a restricted
substances management system. All have reasonable due diligence in mind,
but also weigh up cost versus risk.
And what has been the cost of RoHS
to the industry? Research from a study done for the Consumer Electronics
Association (CEA) by researcher Technology Forecasters Inc. (TFI)2
found that the RoHS directive cost the global electronics industry more
than $US 32 billion for initial compliance and about $US 3 billion annually
to maintain compliance. The study also found the average cost per company
was $2,640,000 to achieve initial RoHS compliance and another $482,000
for annual maintenance.
However, those who have spent money
on RoHS compliance also cited the additional knock-on benefits, such as
having improved their supply chain processes in the process. Many outsourced
compliance to third party companies to implement global conversion programmes
and to gain efficiencies after seeking initial consultancy advice. Some
gained market share. Others reduced their product offerings to address
RoHS. Many companies in the last two years companies have started to also
leverage their "RoHS compliant" status as a core part of their
corporate social responsibility and environmental strategy.
Enforcement trends and non-compliance
So, for those companies that chose
not to ensure adherence to RoHS, what has been the consequence?
Failure to comply with RoHS comes
with direct business consequences beyond only monetary fines. While some
companies may have made a commercial decision to 'run the risk' of a fine
without the cost of compliance, this overlooks the wider business costs.
Exposure for non-compliance leads to the cost of implementing a product
recall and disposal process and write-downs of obsolete inventory. However,
more significant is the long-term opportunity costs of lost sales, damage
to the company's brand from negative publicity and loss of market share
that may never be regained.
What have the governments of the European
Union done to enforce the RoHS directive? The regime allows authorities
to impose fines and ban products from sale where they are in breach. Rumors
of companies being asked to provide proof of their due diligence have
prevailed over the past two years. To date, the industry has not seen
the publication a lot of high-profile RoHS prosecution cases, although
authorities clearly publicise that (legal) actions have been taken. In
addition, recent collaboration between EU governmental authorities suggests
that better monitoring, information sharing and publication of failed
products is afoot.
In 2007, the Safety Technology Authority
of Finland moved to improve RoHS monitoring by identifying qualified third
parties to perform the testing for surveillance. Next, the Nordic European
Countries of Denmark, Sweden and Norway implemented a more coordinated
RoHS monitoring and enforcement programme. This saw authorities 'split
the load' of monitoring across the different product types and industry
sectors industries. By sharing information they aimed to achieve deeper
and better monitoring more efficiently.
In 2007, Danish authorities' found
non RoHS compliant disposable cameras for sale and forced the importer
to remove the goods from the market. While the company was not named,
the cost of the recall and removal of the goods would have allowed competitors
to take market share, imposing significant long-term damage on the importer's
business. In the UK, the RoHS enforcement body, NWML successfully concluded
its first "prosecution" for noncompliance with RoHS. A British
company settled out of court with NWML for breaches of the lead ban.
The Nordic authorities carried out
a survey of 152 electronic products earlier this year. A preliminary assessment
of the results was then released by Sweden's KEMI chemicals regulatory
authority. In Sweden, 60 products were analyzed, with 3 found to be non-compliant.
In Denmark, 29 products were analyzed and 6 non-compliant, while in Finland,
63 products analyzed and 13 non-compliant. Examples of non-compliance
included electric glue guns in which the nozzle contained an excess of
lead. These were imported from China and which resulted in a prosecution,
lead in solder and lead in plastic. KEMI will release a complete report
later this year and the authority plans more RoHS investigations throughout
Nordic authorities are also understood
to have identified some instances of RoHS non-compliance within 'bigger
brand' companies. However, where companies have been able to demonstrate
that they have a thorough system of RoHS monitoring in place and were
able to quickly and effectively track, recall or fix the non-compliant
products, authorities have perhaps been less punitive in their handling
of the cases. Companies showing a failure through recklessness or a lack
of due diligence are less likely to have the same treatment.
Currently, the authorities in EU countries
more widely are considering adopting the Nordics monitoring model. This
is on the agenda for discussion by European RoHS enforcement bodies meeting
this year. It is likely that we will see more cross-border information
sharing regarding non-compliant companies and products between all EU
countries as the enforcement bodies make their RoHS monitoring efforts
more effective by 'joining forces'. A more co-ordinated approach is likely
to see more incidents of non-compliant RoHS products being identified
across Europe and incidents published in the annual or regular reports
of these bodies.
This trend towards greater co-ordination
between individual European governments to enforce EU regulations more
efficiently together is being seen in other legislative areas. For example,
the new EU's new chemicals registration regulation 'REACH' has instituted
a formal enforcement-committee forum within the regulation itself, with
the stated purpose of enhancing cooperation and aligning enforcement of
RoHS-style environmental legislation
has taken hold in other parts of the world. We have also seen governmental
desires for trans-national approaches to monitoring and enforcement, and
this was a key agenda point at the Global RoHS Enforcement International
Forum last year held in Shanghai. Companies gearing up to sell products
in fast-growing and emerging economies must look before they leap. The
People's Republic of China (PRC) implemented tough new criteria to limit
the use of toxic or hazardous substances in electronic information products
(EIPs). On March 1, 2007, the Administrative Measure on the Control of
Pollution Caused by Electronic Information Products, commonly referred
to as "China RoHS," became law in China. It encompasses products
containing any of the following hazardous substances: lead; cadmium; mercury;
hexavalent chromium (Cr VI); polybrominated biphenyls (PBB); and polybrominated
diphenyl ethers (PBDE) flame retardants, excluding decaBDE; and any other
toxic or hazardous substances or elements to be named by the government.
China RoHS requires all covered products,
without exemption, to be labeled and marked. The labeling includes detailed
tables that state whether levels of these restricted substances exceed
maximum RoHS concentration and the location of those substances in the
product. In addition, a so-called Catalogue will be published by China
later this year, with a list of products required to meet the maximum
concentration values via mandatory certification.
In the United States, in addition
to California's own RoHS and many state-specific bans of selected RoHS
metals and flame retardants, California' has enacted another major legislation
for harmful chemicals, which is being very actively enforced. The so-called
Proposition 65 ('Prop 65') law limits various substances in products sold
within its borders. Products containing potentially harmful chemicals
must have a warning label and the law is enforced by the California Attorney
General's Office and district and city attorneys. However, under Prop
65 lawsuits for non-compliance can also be filed by individuals acting
on behalf of the public interest. The risk of exposure for non-compliance
with Prop 65 and consequent negative publicity is therefore currently
much higher under Prop 65 than under RoHS
There have been numerous instances
of high-profile disclosure of companies for Prop-65 breaches, due to both
public and regulatory investigations. Penalties imposed under the legislation
include per-day fines for each violation and injunctions and bans of goods
In 2007, Greenpeace used Prop 65 to
threaten a lawsuit against Apple and allege that its newly launched iPhones
were 'toxic' to consumers. Apple subsequently announced plans to phase
all polyvinyl chlorides (PVCs) out of its products by 2008. The company
attracted harsh criticism from consumer and environmental groups and generating
negative publicity to call the company's hall-mark 'green' brand into
In April 2008, the LA City attorney
reached agreement with Coca-Cola on a Prop 65 lawsuit regarding the sale
of soft drink bottles imported from Mexico containing excessive amounts
of lead in the labels. Testing found that consumers were at risk of being
exposed to lead through hand-to-mouth-contact, and lead occasionally found
its way into the soft drink soda itself. Coca Cola was required to pay
more than US$ 1.25 million in penalties and to immediately switch to lead-free
paint on all its newly-made products throughout Mexico. It was further
required to engage qualified food quality auditors to inspect all Mexican
suppliers for potential sources of lead contamination and to phase out
all existing leaded bottles throughout Mexico over five years. Coca Cola
was also required to take action to keep the relevant products off California
shelves and to pay US$200,000 in legal fees and US$600,000 to charity.
PepsiCo faced and settled a similar
law suit in 2006. The company agreed to move to lead-free labels on new
bottles of Pepsi to eliminate existing lead-painted bottles for Mexican
soft drinks within 10 years. The company paid US$500,000 to fund surveillance
activities to keep old Mexican Pepsi bottles out of California and US$750,000
in investigative and legal costs. Pepsi also paid a US$1 million civil
penalty and could face an additional US$4.3 million in civil penalties
if it fails to meet a 95 percent phase-out target for existing bottles
with leaded labels.
The EU's RoHS directive is being actively
reviewed for adjustment in 2008 by the European Commission. The Commission
is examining the regime's current exemptions which include effects of
materials on medical devices and some definitions within the directive
as to what products are impacted. Two key foreseeable changes are that
a number of new chemicals will be added to the list of substances that
manufacturers need to ensure that their products and their components
do not contain. Which new chemicals, and how great the changes will be,
is now the subject of stakeholder input and a determination is expected
from the Commission this year.
It is widely expected that EU RoHS
will be broadened in the coming years to include medical devices and monitoring
and control instruments. Design engineers for medical devices would no
longer have to simply consider the technical performance of components
that they intend to use and medical device regulations, they would also
need to ensure that they comply with RoHS legislation. Already, changes
in the RoHS directive have influenced sectors of the electronics industry
that are outside what may be seen as its strict scope, with automotive
and even aerospace seeing a trend towards the elimination of RoHS substances.
For medical device manufacturers selling
to global markets, potential RoHS changes are of immediate concern. The
medical device product development and design cycle has a long lead time.
Typically, it can take 4 years from initial inception through to final
availability in the market, meaning that any new 'take effect date' of
RoHS application to medical devices in the next 4 years will require urgent
reviews, action and testing, conversion programmes and consultancy support
for manufacturers to meet compliance but avoid delays in product delivery
and development. Product conversion programmes and compliance and testing
outsourcing offered by third parties such as Intertek can help manage
the pressure. We already have experienced demand in initial consultancy
from a number of healthcare and medical device brands to preemptively
keep ahead of the anticipated changes.
Should the EU regime extend to medical
devices, it is foreseeable that some other countries may follow suit,
subject to the local existing regulatory provision for medical device
It will thus continue to be a year
of challenge and further change for businesses as they are faced with
updating their strategies to meet the ever expanding global environmental
legislation. But everyone should keep in mind that compliance performance
is less dependent on level of effort than on implementation of best practices
and enabling those practices with the appropriate compliance infrastructure.
1The EU has banned four
heavy metals in the Automotive sector by imposing Directive 2000/53/EC
on End-Of-Life Vehicles ('ELV').
Electronics Association (CEA) by researcher Technology Forecasters Inc.
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