Expert Analysis: Transparency: With the Right Process, It’s Easier Than You Think, Part 2

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February 29, 2024

(Editor’s Note: 3E is expanding news coverage to provide customers with insights into topics that enable a safer, more sustainable world by protecting people, safeguarding products, and helping businesses grow. Expert Analysis articles, produced by 3E subject matter experts, researchers, and consultants as well as external thought leaders, examine the regulations, trends, and forces impacting the use, manufacture, transport, and export/import of chemicals.)

Chemical transparency is the practice in which suppliers of goods share the chemical content of their products with their customers. This enables customers to evaluate their actual compliance with regulations, rather than utilizing basic compliance determinations from suppliers (e.g., yes/no this product complies with regulations-type answers).

In our first article, Expert Analysis: Transparency: Reveal Your Materiality Without Revealing Your Trade Secrets – Part 1, we delved into how common ingredients, existing disclosures, exact percentages, and competitive advantages enable leading companies to embrace full material disclosure. This second article in our series examines the benefits of a standardized process for full material disclosure/chemical transparency.

Adopting a proactive full material disclosure process can help position you as a preferred vendor, demonstrating your commitment to being a high-quality, low-risk business partner. By moving from the traditional approach to a proactive full material disclosure approach, you are preparing your company for the future — with updated information that is ready to share with customers — so you can stop chasing answers from the past.

If adopting a standardized full material disclosure process can help position a company as a supplier of choice, then why isn’t everyone doing it?

A huge hurdle preventing companies from embracing transparency is the perceived burden of making additional disclosures. Many companies perceive the effort required for maintaining transparency documentation as being too cumbersome. However, a supplier often neglects to compare the efficiencies of adopting a standardized process to their current ad-hoc responses.

There is a better mousetrap! Don’t get stuck doing what has always been done because you are not considering other options.

Let’s examine the steps for the typical disclosure process versus a new, standardized process (the better mousetrap):

1. Product supplier receives the request and evaluates.

Traditional process: The supplier gets a request from another company. The supplier’s response could vary based on whether the request is coming from an indirect or direct customer. Often, in the case of an indirect customer, the supplier will not respond or will suggest the requester seek information from their own tier 1 supplier. However, if the requester is a direct customer, the supplier will then evaluate the value of that customer. In some cases, the evaluation encompasses both historical and opportunity for future business based on company size. After the supplier evaluates the business relationship, a final determination is made whether that customer is “valuable enough” to receive full material disclosure information.

It is likely multiple discussions, emails, and meetings with internal stakeholders such as sales and marketing occur when a request for information is received, with those responsible for providing compliance information tasked with determining how to address the customer’s request. In many scenarios, the sales team will forward the request from a customer, then the compliance team will claim it’s not possible to provide the information. The sales team will respond, noting how big the sale could be and so forth until someone in leadership makes a decision about supplying the requested information. In the end, only the largest or biggest opportunity customer or those who threaten the business relationship will get the full material disclosure answered.

Full material disclosure process: The supplier receives a request for product information. It determines that the request is coming from a valid business, either a known direct customer or a likely indirect customer (i.e., doing business in a relevant market/industry where the supplier operates). This is done by checking domains and web security certificates. In many cases, this step can be automated. The supplier has already created a standardized response for all companies, so a templated response is sent.

2. Company creates the response.

Traditional process: For the most valued customers, the product steward or compliance manager completes the customer’s regulatory form, often taking the time to answer the customer’s specialized questions. They will also need to reconnect with product managers and suppliers for any custom questions or chemical lists that have been collected via standard determinations. Sometimes, the supplier will need to reach out to the customer to make sure everyone correctly understands the customer’s questions. With multiple time zones, busy schedules, and language challenges, that exchange with the customer can take several weeks, if not months. If the supplier’s data campaigns for compliance determinations have not been finished, their designated responder may need to include outdated compliance information because that is all that is available.

Full material disclosure process: For all products, the supplier will determine which chemicals are considered confidential and will obscure their identity (typically with a generic name) but still share compliance list data and hazard information. In addition, the supplier will determine which percentages are trade secret and obscure those data points using ranges.

If there are customer questions, the user can easily screen the existing data for the information, rather than having to reach back out to suppliers. Users can work with their own upstream suppliers to keep data up-to-date, and as their suppliers share updated information, users automatically update their information. Anytime a customer requests new regulatory information, they will know they are responding with the most current information.

3. Keeping responses up-to-date.

Traditional process: Regulatory and product stewardship information is rarely static. For global companies, it seems like regulations or product information is changing somewhere almost daily. Even for companies whose focus is on a limited geographic area or a limited commercial sector, changes at a regional or local level or in standards or codes of practice frequently occur.

Let’s take the EU’s Regulation on the Registration, Evaluation, Authorization, and Restriction of Chemicals updates to the Substances of Very High Concern list (SVHC list) that occur twice per year as an example. When the EU’s SVHC list is updated, companies often kick off a new campaign of inquiries to all suppliers. It can take several months to receive updated supplier contacts, ensure any new regulatory updates are included, get buy-in from internal stakeholders, and finally send the survey. At this point, the compliance team is already tired of the survey and hasn’t even received any responses yet.

The company usually then needs to wait between 1–3 months for suppliers to respond to the survey. The compliance team then needs a few weeks to update their existing data sheets. By the time the information is received, and data updated, it is time for a new group of chemicals to be added to the list and the process starts all over again, often before the last update is even finished. Six months after the change, a supplier company can begin responding to the backlog of their own customer requests about the change. No wonder compliance teams always feel they are behind. THEY ARE!

If an important customer requests updated information on an accelerated timeline, the compliance team will need to drop what they are doing to push for answers from relevant suppliers. Even expedited compliance checks can drag out the response process by days or weeks.

Full material disclosure process: Because the supplier is already keeping full material disclosures from its own suppliers up to date, it can simply run the existing known materials against the newly updated regulatory list. If there are any hits, it will be automatically notified in 3E Exchange, and then the supplier can confirm any updates (if needed) with the specific suppliers of the materials. Any material that passes the review will be ready for an automatically generated updated compliance letter, which immediately can be sent to the customer.

The full material disclosure process saves significant company resources by reducing staff time, supplier chasing, and improved response time to customer requests. It can even allow a supplier to answer sustainability questions and inquiries about emerging chemical concern groups, such as PFAS or phthalates, because the compositional information is already in hand.

Moreover, it helps demonstrate a company's commitment to being a high-quality, low-risk business partner to its customers. By helping customers future proof their business, a company is future proofing its own as their preferred vendor.

Stay tuned for our next article in this series. Part 3 examines examples of transparency reporting and data in various industries, including food, building products, cosmetics, cleaning products, and more.


About the authors:

As Senior Solutions Engineer at 3E, Evelyn Ritter applies technology to simplify the complex world of product compliance, supplier outreach, and sustainability for manufacturers and customers. During her tenure at 3E, she has improved the supplier outreach capabilities and ensured that customers are getting the data needed to accomplish their compliance and sustainability goals. She has collaborated with a variety of compliance, sustainability, and circularity initiatives, including serving on the committees for the Health Product Declaration, Product Circularity Data Sheet, and USGBC. Prior to Toxnot, she worked in product stewardship for the furniture manufacturer Herman Miller and helped commercialize a screening technique for PFAS chemicals. Evelyn holds a B.S. in Engineering from Hope College in Michigan.

Having spent over 40 years leading product regulatory and stewardship activities for global industrial chemical companies based in the U.S., EU, and Korea, Rob Campbell recently joined 3E to help our customers find better ways to manage their Product Stewardship, Global Chemical Compliance, and Sustainability challenges using software tools and data management. Together, we can find solutions that are smart, cost effective, bring value to the business, and help you sleep at night.

About the editor: Sandy Smith, Senior Reporter, 3E, is an award-winning newspaper reporter and business-to-business journalist who has spent 20+ years researching and writing about EHS, regulatory compliance, and risk management, and networking with EHS professionals. She is passionate about helping to build and maintain safe workplaces and promote workplace cultures that support EHS. She has presented at major conferences and has been interviewed about workplace safety and risk by The Wall Street Journal, CNN, and USA Today.