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This article was originally written for and published by Fast Company.
Meeting specific regulatory compliance standards across geographical jurisdictions can mean the difference between launching successful brands and struggling to compete.
A recent Thomson Reuters survey cited 61,000 regulatory events in the past decade alone, and that pace has no end in sight. It’s imperative, then, that product companies adopt compliance frameworks that are capable of real-time recalibration amidst continued regulations and market disruptions. The key is to preempt disruption with strategic, proactive data.
Forward-thinking executives are continuously strategizing about what’s around the corner, and for many product companies, the current focus is on digital product passports (DPPs). DPP regulations represent more than technical milestones; they are integral to an effective corporate strategy. Early compliance can differentiate product offerings, facilitating faster market entry and heightened revenue streams. Failure to proactively address DPP requirements can hinder product introductions and/or ongoing sales in critical jurisdictions.
To successfully move forward, it’s often useful to look in the rearview mirror—and addressing DPP regulations requires that exercise. Taking a page from manufacturers’ heightened responsiveness during COVID-19 could help navigate upcoming DPP regulations more effectively. An expert partner at a company that provides environmental compliance, social responsibility, sustainability, and corporate governance objectives recently shared an interesting example:
At the start of the pandemic, when ventilators were in short supply, a company specializing in high-performance connectors and cable assemblies was approached to use their connector as part of ventilator production. Within 24 hours, the order was in, ventilators were made, and devices were delivered to the customer. In the process, compliance certifications were swiftly obtained, demonstrating how agile regulatory frameworks can catalyze new business opportunities. Responsive compliance practices like this underscore the pivotal role proactive business strategies can play in safeguarding market relevance amid disruptive regulatory shifts like DPP.
DPP regulations, slated to be enforced in 2027, mandate requirements for a subset of batteries, followed by textiles/fashion, construction, electronics, and furniture. DPP will standardize a digital record of essential product information throughout the product lifecycle, including composition, material origin, environmental footprint, recycling potential, etc. The goal is to enhance transparency, traceability, and sustainability across supply chains, supporting a circular economy.
Leveraging existing compliance tactics can help forge an easier DPP path. If you’ve prepared for the EU Waste Framework Directive and submitted notification to the Substances of Concern in Products (SCIP) database, you are one step ahead. SCIP relates substances in finished goods covered by REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) to consumers and waste operators to promote safe recycling and disposal. Compliance with REACH, SCIP, and similar regulations requires robust due diligence procedures to collect detailed supplier data on regulatory adherence and internal practices.
Many companies seeking access to specific markets understand the impact of regulations like SCIP. Without adherence, global revenue streams can be severely limited. In addition, U.S. public companies are often impacted by social regulations like the Conflict Minerals Act. Conflict minerals reporting requires executive sign off on reports filed with the Security and Exchange Commission (SEC). These reports detail efforts relative to the identification of conflict minerals sources and corporate policies to stem their use. For example, if any tungsten or gold in your product comes from a “conflict region,” such as Democratic Republic of Congo, the Conflict Minerals Act mandates public disclosure to inform consumers and investors of the potential ties to ongoing conflict and humanitarian crises. By providing a detailed digital product record, DPP will demonstrate conflict minerals status, guide supply chain management, disclose regulatory compliance, and allow customers to verify authenticity and determine environmental impact.
Compliance as a Revenue Accelerator
As the EU pushes DPP to be a mechanism for a circular economy, smart businesses should follow these two mandates:
- Address proposed guidelines in a timeframe that doesn’t hinder progress.
- Turn the requirement into a competitive edge, leveraging sustainability and circularity.
How can you do this? Shift your mindset from viewing compliance as a regulatory checkbox to leveraging it as a strategic driver of business growth. Embracing compliance as an integral part of your product development process can set your business apart in the marketplace. Rather than treating compliance as an afterthought, weave it into every stage of development. While this approach may initially extend innovation cycles, it establishes streamlined workflows that will deliver significant long-term efficiencies and competitive advantages.
Mastering this regulatory agility will expedite access to new markets, fortify client engagements, and accelerate your market position. U.S. businesses should closely follow and learn from companies that are working to successfully comply with a recent Canadian mandate announced in July.
Canada’s recently required per- and polyfluoroalkyl substances (PFAS) reporting is a perfect example. In July 2024, the Canadian government required businesses to report PFAS “forever chemicals” over a certain threshold, and the deadline is January 29, 2025. Failure to respond will result in environmental enforcement and potential penalties to individuals and corporations. However, companies that have been collecting full material disclosure for years are embracing this as an opportunity because they were ready to report on day one.
Product companies need to drill down several layers in the supply chain to inspire the delivery of data required for PFAS. Knowing which manufacturers your company has been working with, and associated part numbers, provides a measurable leg up by having all of that vital product information at your fingertips.
The keys to achieving regulatory success are preparation and transparency. Government mandates like PFAS or SCIP demonstrate the importance of effectively tracking and tracing component parts and material information. With robust digital tracking of your product’s DNA, you can avoid being caught in the compliance net when new regulations pop up unexpectedly. Innovation isn’t just about creating groundbreaking products and services; success in today’s market requires seamlessly integrating compliance documentation into the product development process. The benefits of doing this include streamlined workflows, reducing rework and accelerating time to market.
Modern Technology as a Solution to Regulatory Complexity
Outdated, legacy product lifecycle management (PLM) software solutions and manual tracking are insufficient for addressing regulations like DPP, SCIP and PFAS. Modern platforms integrated with advanced compliance functionality empower enterprises to swiftly conform to dynamic regulations. With sustainability data captured during product development, businesses can collect substance information for each component, with the ability to declare it all the way up to the product level.
Using technology to track substance and sustainability information can also prevent products from being held up at customs. Remember when Microsoft and Playstation battled for holiday dominance, with Microsoft missing out due to Restrictions of Hazardous Substances (RoHS) in the EU years ago? Having real-time access to supplier compliance data prevents these delays, ensuring smooth market entry.
Embracing DPP regulations is a strategic decision that will safeguard market access and drive long-term growth. Acting now can turn compliance into a competitive advantage so you can remain agile and responsive in an ever-changing regulatory environment.
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