A Complete Guide to the Fundamentals of the Product Regulatory Compliance Landscape
Regulatory compliance refers to a company adhering to state, federal, and international laws or regulations relevant to its operations and products. The specific requirements can vary, depending on the industry and type of business. Regulatory compliance differs from other aspects of corporate compliance, such as following internal policies and rules. However, both regulatory and corporate compliance help drive accountability in the workplace.
Legally, regulatory compliance represents guidelines that companies must follow. For example, U.S. companies must adhere to rules outlined by the Occupational Safety & Health Administration (OSHA) to ensure a safe work environment for employees or follow the guidelines of the Equal Employment Opportunity Commission (EEOC) to ensure discrimination-free hiring practices.
This e-book covers the fundamentals of regulatory compliance, including the drivers behind regulatory compliance, the complexity of the regulatory landscape, how to determine regulatory applicability, and the consequences of non-compliance. It will also provide an overview of the product compliance solutions offered by Source Intelligence and how they can help simplify and streamline compliance management.
The Drive Behind Regulatory Requirements
Several factors drive the need for regulatory requirements, but the four primary ones are crisis, activism, funding needs, and special interests.
In the event of a crisis, regulatory compliance requirements are often dictated by a previous event and intended to mitigate future disasters. Some common areas in this category are endangered species, global warming, and natural or man-made impacts.
The Love Canal incident is a prime example of how regulation can be established in response to a crisis. In the 1920s, companies were illegally dumping chemicals that contained toxins such as benzene and dioxin near a community in Niagara Falls. Residents suffered numerous detrimental health effects from exposure, including leukemia, chromosomal damage, and central nervous system damage. This was one incident that led to the development of the Comprehensive Environmental Response, Compensation, & Liability Act (CERCLA) in 1980, which addresses the dangers caused by abandoned and uncontrolled hazardous waste dumpsites.
Activism has also led to a variety of compliance policies. The celebration of the first U.S. Earth Day in 1970 is an example of activism that led to the creation of several key environmental laws and the EPA itself. By the end of 1970, the U.S. had an Environmental Protection Agency and a Clean Air Act. Over the next few years, important legislation would be passed to clean up rivers and lakes, regulate waste disposal, and protect drinking water.
Environmental special interest groups have a long history of affecting policy at international, national, and local levels. In 1984, state officials discovered that solvents resulting from runoff from electronic product production had contaminated the groundwater in Silicon Valley. Environmental watchdogs had fought for years to shift the burden of proof for toxic contamination onto companies. After industry lobbying stymied their efforts, they took it to the ballot and introduced legislation known as Proposition 65. This initiative became the Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65. This is an example where activism led to the introduction of legislation.
Finally, funding needs play a significant role in dictating policy to financially support other government programs. For example, CERCLA created a Superfund for cleanup and remediation, providing money for response and cleanup measures for contaminated sites listed on the National Priorities List.
The Complexity of Regulatory Compliance
Regulatory compliance has evolved significantly over the last century with new laws, guidelines, and standards to improve government oversight. The regulatory environment is constantly changing, as laws can be amended, and new rules can be established. This means that compliance is not a one-time undertaking but a complex, ongoing process. Many companies have established their own requirements for regulatory compliance, such as restricted substances lists or sourcing policies. Efforts to remain compliant can be further complicated if a company operates in several different cities, states, or countries.
There are also market-driven requirements that can influence a company’s compliance efforts, such as the demand for low halogen products, which may not be enforceable by a government agency, but could drive the need for and/or purchase of a product.
Lastly, synergistic, and sometimes overlapping, regulatory jurisdictions such as OSHA and the EPA can add to the complexity of regulatory compliance. A 1991 agreement between the two agencies allows for joint inspections, relying on one agency to alert the other when an investigation finds evidence of violations in the other agency’s jurisdiction. For example, the EPA might trace a chemical spill back to a company and discover that its employees are being exposed to a hazard from the same chemical, or an OSHA complaint regarding misuse of chemicals in the workplace may reveal improper disposal procedures that endanger the public.
Despite the complexities of regulatory compliance, companies must be able to adapt to the constantly changing regulatory environment. Without adaptation, risk is assumed, which could lead to future supply chain issues.
Types of Product Compliance Requirements
As mentioned earlier, there is more than one type of compliance requirement. Various categories of products have specific standards that apply to them. The key types of product regulatory requirements to be aware of include product-specific, substance-specific, industry-specific, regional-specific, and voluntary.
Product-specific policies control a product category that has its own set of standards. For example, when it comes to consumable packaged items and electronic equipment, you should be aware of the fit, function, and form of a product to meet specific regulations.
Substance-specific requirements directly control compounds used in products to limit human and environmental exposure to harmful chemicals. Some regulated chemical substances include lead, phthalates, and benzene.
Industry-specific policies target common compounds or practices used across an industry. Some heavily regulated industries include cosmetics, medical devices, and children's toys.
Regional-specific compliance focuses on where a product is produced, manufactured, imported, assembled, sold, and distributed.
Voluntary compliance typically includes best practices. Although best practices may not be enforceable, they can be driven by customer demand. Examples include ISO standards, UL, organic, and Fair Trade.
Expand Your Product Compliance Insights
You've just explored the fundamentals of regulatory compliance and the various types of compliance requirements. In the complete guide, you'll find practical examples of product compliance requirements, learn how to assess regulatory applicability, and debunk common compliance myths. Finally, discover how Source Intelligence’s product compliance solutions streamline data management and reporting to reduce risk and enhance efficiency.
Read the complete guide to transform your compliance strategy and safeguard your supply chain.