5 EHS challenges for industrial manufacturing companies
EHS requirements are evolving around environmental issues, well-ness for employees, and pressure to be more sustainable – just to name a few.
EHS compliance is becoming even more complicated for industrial manufacturing businesses. Providing chemical, textile, automotive and electronic products to businesses and individuals alike, this industry holds an important position within many economies. As such, its companies’ compliance is subject to many evolving requirements.
Today, industrial manufacturers face significant challenges, including demand for sustainable products, increased enforcement, and the need to ensure environmental health and safety (EHS) at manufacturing facilities and across the global supply chain. Evolving regulations around the world have also required fundamental changes to industrial manufacturing operations. Here are 5 issues that I’ve identified as key impactors on compliance for these companies:
1. Changes in EHS regulations are causing supply chain disruptions
Climate change and an increased focus on sustainability and environmental, social and governance (ESG) initiatives mean that businesses are under constant scrutiny from consumers, stakeholders, and investors. The ongoing evolution in EHS regulations is steering companies towards managing their EHS footprint across their global supply chain network. This is in turn helping them to meet sustainability goals and the expectations of various stakeholders.
Companies must address and adapt to supply chain constraints, including regulatory developments. They must also eliminate or minimize their negative impact on the environment and public health. For example, the US is increasingly restricting per- and polyfluorinated alkyl substances (PFAs), and the EU is proposing to prohibit more than 10,000 of those chemicals. These restrictions are likely to have a significant impact on global supply chains, affecting both manufacturing and distribution.
Manufacturing companies are also likely to be subject to more regulations designed to reduce climate change, including on Scope 3 emissions. It is extremely complicated to set up emissions targets across a whole supply chain. Companies will need to focus on strategic approaches, because reporting requirements will only get more stringent.
2. Expanding EHS landscape related to the manufacturing workforce
Many companies have located their manufacturing operations in developing countries to take advantage of the availability of cheap labor. However, many of these countries, including India, China, Thailand and Bangladesh, have seen significant wage increases in recent years. This will increase the cost of manufacturing without necessarily increasing quality. In developed countries, there are different workforce challenges, including the instability of the workforce and the difficulty finding qualified workers.
Around the world, workers themselves are experiencing problems such as low pay, demanding jobs, burnout, and occupational mental health-related issues. These affect their health, which in turn affects the day-to-day operations of manufacturing companies. Regulatory bodies and governments are increasingly focusing on inclusivity and health and safety of workers, including mental health and stress. This places further pressure on companies to comply. It seems likely that 2023 will be a big year for employee well-being, happiness and engagement.
Manufacturing companies are, of course, also subject to health and safety requirements linked to hazardous and dangerous activities, equipment and substances used in the manufacturing and distribution processes. The level of regulation around these issues is also increasing. For example, OSHA plans to update several health and safety requirements such as heat exposure limits to improve workplace safety. It has also announced plans for stricter enforcement and penalties. Industrial manufacturing companies can therefore expect stricter regulations and enforcement measures in future.
3. Product certification requirements are likely to become more stringent
Product certification lends legitimacy because it shows that the product complies with safety regulations. This generally means that it is safe, reliable and meets a certain level of quality. However, obtaining product certification may mean redesigning and adapting products or processes to comply with changing requirements and regulations. These changes could be expensive or require a significant allocation of resources or time.
Certification may be either mandatory or voluntary. Voluntary certification usually gives manufacturers a competitive advantage. However, both voluntary and mandatory requirements are constantly evolving. It is important for companies to keep track of changes. There are other significant changes on the horizon in Europe, where the European Commission has made recommendations for changes to encourage the replacement of hazardous materials in products and processes. This is likely to transform how products are designed and the use of hazardous and dangerous materials in products is controlled.
4. Growing expectations about manufacturing’s role in the circular economy
The ‘polluter pays’ principle is generally implemented through waste management rules. It requires companies to take back and dispose of their products appropriately at the end of their life cycle.
This extended producer responsibility (EPR) is not a new concept. Regulations around the world already require manufacturers to comply with these requirements, especially in Europe and Asia. However, laws are getting more stringent and moving towards a circular economy model. They have a stronger focus on reuse and recycling of materials and products, minimizing use of raw materials, and addressing environmental problems such as waste generation, pollution and climate change. Countries that have already implemented EPR initiatives are revising their recycling targets very ambitiously. In India, for example, many EPR laws have been amended to minimize consumer responsibility and impose stricter obligations on manufacturers.
5. Increasing pressure to demonstrate EHS compliance and sustainability
It is no longer considered sustainable for any business to focus solely on financial gains. Instead, they are expected to focus equally on the environment and people. Consumers and investors increasingly want to be associated with companies that are minimizing their carbon footprint and working towards welfare and diversity in the workplace. ESG has become one of the benchmarks to measure and rank business performance.
Multinational industrial manufacturing units face a challenge to stay aware of and comply with all the jurisdiction-specific requirements. ESG regulations are mainly focused on holding companies accountable for their actions. They increasingly require companies to declare both their impact on the environment and the measures they are using to minimize it. For example, the EU Corporate Sustainability Reporting Directive (CSDR) has shifted attention from non-financial to sustainability disclosure. It also requires more companies to report their environmental and climate impacts in greater detail.
Evolving your business alongside changing EHS regulations
For global businesses, there’s more to managing EHS compliance than monitoring a few regulatory changes. ESG, climate change and pollution-related legislation is expected to accelerate over the next few years.
Like other companies, industrial manufacturing businesses will be increasingly subject to EHS regulations and ESG requirements focused on transparency and accountability, coupled with increased scrutiny. They will need to hold themselves accountable in a transparent way for their environmental and social impact and embrace environmentally healthy and sustainable methods in their activities. Stay tuned as I expand on each of these topics in our upcoming series. And in the meantime, read what our clients said were their top EHS and sustainability challenges in our latest survey report.