Sharon Starr, Director of Market Research, IPC

New and more stringent requirements are clearly on the horizon — changes that will affect multiple aspects of businesses, including product design, procurement, manufacturing processes, compliance administration and marketing. According to a report commissioned by IPC, Executive’s Guide to Environmental Megatrends that Will Shape the Future of the Electronics Industry, there are actions companies can take to be more proactive in anticipating, influencing and responding to proposed environmental legislation.

Environmental legislation has been driven by concern for the risks arising from exposure to hazardous substances; the need to reduce energy consumption due to concerns about global warming, security of the energy supply, and increasing costs; and the decreasing acceptability of the large volumes of waste produced by the developed world. Environmental legislation affecting products can be grouped into three essential categories.

The first is control of hazardous substances which includes RoHS, REACH, labeling, U.S. state-level substance restrictions, China RoHS, etc. The second is energy efficiency and includes such regulations as EuP, the U.S. Energy Act, and incandescent lamp bans. Third is waste electrical equipment collection and recycling such as the End of Life Vehicle (ELV) directive and battery disposal requirements.

By understanding how current requirements came about and the roles played by governments and nongovernmental organizations, such as environmental groups, manufacturers and trade associations, industry executives can formulate effective plans for influencing future requirements.

Many current regulations were initiated by the European Union, with Japan and China following suit or wielding influence with their own regulations. The United States has been slower to formulate a national initiative, but certain states, like California, have taken a proactive role in defining and instituting laws and regulations.

According to Dr. Paul Goodman, director of Reliability and Failure Analysis at ERA Technology, and the study’s author, the electronics industry will continue to be affected by legislation that restricts substances, imposes energy reduction obligations, and requires recycling at end of life. There will be both commercial implications and technological challenges. Assessing worldwide environmental megatrends will help manufacturers to better predict and be involved in the creation of new requirements.

Actions to Influence Legislation

Several actions can be taken to influence legislation. Forward planning is essential to monitor local, regional and national proposals for environmental legislation. Companies can prevent unworkable or unnecessary legislation by providing clear, unambiguous test data to the critical decision makers early in the legislative process.

Governments employ consultants to condense and interpret the large volume of information pertinent to environmental legislation. Electronics companies can be more involved in the legislative process by seeking out these consultants and supplying them with applicable data before the consultants formulate and present their recommendations for legislation.

Companies with shared stakes in the proposed legislation can engage in collaborative research. Although competitive concerns may prevent the sharing of resources, companies can share sponsorship of research that supports the industry position or there can be joint monitoring of existing research. Another way of influencing legislation is through trade organizations. Trade associations anticipate legislation and gather data from members early in the process, which can enable proactive engagement while it is still possible to have a positive impact on the legislation.

Clearly, there will be more legislation and some of it can be predicted. Manufacturers should consider future legislation when designing new products to minimize modifications, redesign, or premature obsolescence. Although a strategy will be required and resources must be provided, the costs incurred with early planning should be significantly less than leaving changes until new requirements are imposed.

Control of Hazardous Substances

Substance restrictions are the most arduous environmental laws at present. Although the most familiar regulations are contained in RoHS and REACH, many other laws exist and the laws vary by geographical area.

According to the Executive’s Guide, new restrictions can be viewed from two perspectives. One is to compare the current scope of substance restrictions with anticipated expansion of that list into other industry sectors. The second is to compare identified hazardous substances now in use or under restriction with potential substitutes, assessing costs, availability, and hazards associated with the use of those substitutes. Assessment of environmental and health differences between substances and their apparent substitutes can be very complex.

A ban of one substance may not be an overall benefit to public health or the environment because of potentially different, but significant, negative impacts arising from possible substitutes.

There are technical challenges accompanying anticipated restrictions. A comprehensive audit of materials being used by a company and prioritizing the materials according to the value they contribute to the company’s products are first steps. Identifying, researching, and evaluating acceptable substitutes come next. This process helps a company build an information database and establish a procedural regimen to deal with and anticipate other restrictions.

In addition to technical challenges, strategic challenges include green procurement guidelines that apply to each step in the supply chain along with auditing procedures and the establishment of communication channels up and down the supply chain to ensure adherence to the company’s green policies.

Energy Efficiency

Energy use reduction by compulsory energy efficiency improvements will continue to be required into the foreseeable future. “Energy efficiency will be increasingly important, not only to comply with legislation, but also to satisfy customer demands,” states the report. “Significant improvements will be possible only from significant innovative design changes, and manufacturers should adopt long-term energy strategies to ensure that products are competitive in terms of energy efficiency.”

Drivers for energy efficiency include environmental scientists from outside the industry to reduce worldwide emissions which contribute to global warming, companies to reduce energy costs associated with electronics production, and consumers to design electronics products that use less energy.

Design engineers must be continuously tasked with making energy efficiency a priority in any new product. Efficiency targets should be created, with specifications tighter than those required from present legislation. Strategic planning includes attention to feedback from sales and marketing departments which provide consumer input that can be used in parallel with input from legislation.

Reuse and Recycling of Electronics Waste

The long-term trend in recycling legislation means that most electrical equipment will be recycled at end of life. Waste electrical equipment is clearly an issue for the electronics industry. The industry’s reputation has been damaged by past lack of attention to how products are disposed of, despite the fact that disposal is costly and most manufacturers have little control over existing collection and recycling methods. The primary challenge that manufacturers face with waste disposal legislation is compliance, as the legislation is variable and inconsistent.

Design for the environment, or eco-design, should be made part of company policy. This creates company-wide consideration of a product’s end-of-life issues from the moment the product is conceived. A specific element of that policy is the requirement that engineers give attention to disassembly as well as assembly.

Managing the Impact of Environmental Megatrends

The electronics industry will continue to be affected by legislation that restricts substances, imposes energy reduction obligations, and requires recycling at end of life. Each segment of the electronics industry will be affected in some way by each trend, and compliance with requirements arising from one trend may negatively affect compliance with others.

Overall, there are potentially three main commercial impacts of these megatrends: added costs, penalties for noncompliance, and lost sales due to an inability to comply. The risk to businesses from all three of these potential impacts can be mitigated by advance planning and by devoting sufficient resources early in the process.

The technical challenge is to establish the extent of obligations and to modify products and processes to comply. The strategic challenge is for longer term planning to preempt new legislation and minimize its impact. The lobbying challenge is to become proactively involved in discussions and planning on proposals for new legislation from the earliest stages to the final political discussions.

A goal of the report is to help executives anticipate, evaluate and contribute to better legislation. Through an understanding of the legislative issues and the rationale behind them, and by providing insight into the multiple facets of these environmental challenges, executives can make better choices for their companies and for the industry.

The Executive’s Guide to Environmental Megatrends is free to IPC members at www.ipc.org/members-only and is available for sale to others through the IPC online bookstore at www.ipc.org/onlinestore. For more information, contact IPC’s director of market research Sharon Starr at sharonstarr@ipc.org or +1 847-597-2817.

Sharon Starr is the Director of Market Research for IPC and as such is responsible for all IPC industry studies and statistical programs and oversees the market studies and conferences of IPC's Executive Market & Technology Forum. Starr is responsible for expanding and globalizing many of these programs since she joined IPC in 2003. She also spearheaded the cooperative efforts of the World Electronic Circuit Council (WECC) organizations, which now share data on the PCB industry and publish global statistics for their members.