More electronics executives treat supply chain compliance as an increasingly pressing concern, especially as more world leaders establish additional regulatory compliance. It is no longer sufficient for product makers to source raw materials and parts and get items on the market soon enough. These parties must also consider finding ethically sourced, traceable options free from potential counterfeit risks.
However, meeting current standards and preparing for upcoming ones comes with numerous regulatory compliance challenges. Knowing the requirements makes it easier for the relevant parties to identify weaknesses and shortcomings and tackle them to avoid fines, reputational damage or other adverse consequences.
New EU sustainability standards
The European Union is like many other parts of the world in that its leaders have set ambitious sustainability targets centered around waste and emissions reductions. Some of those affect products in the electronics supply chain.
More specifically, in June 2023, the European Commission adopted a regulation mandating eco-friendly designs for phones and tablets. A related requirement concerning various power-saving and standby modes to minimize energy consumption extends to electrical and electronic household and work equipment.
Additionally, regulators will review these requirements every three years to see if they still serve the intended purposes. Those periodic checks mean electronics supply chain professionals must remain ready to meet new regulatory requirements if they arise.
The European Union’s requirements remain in the early stages, but they signal a broader push toward waste reduction and sustainable designs. That means even electronics companies trading outside the EU may need to change their processes to meet similar regulations elsewhere.
Addressing conflict minerals
As modern supply chains become more extensive and often extend to many parts of the world, it becomes more difficult for those managing them to verify sustainable sourcing occurred for the relevant goods. Brands in the United States that source certain minerals commonly used in electronics must file reports with the Securities and Exchange Commission to show the materials did not come from conflict zones.
A report published in 2023 showed 53 percent of entities could not reach final origin-related determinations. That was after 51 percent of representatives from reporting businesses had preliminary evidence indicating those minerals may have come from conflict areas.
Additionally, those polled during the research detailed regulatory compliance challenges due to increasingly complex supply chains and a lack of access to the necessary information. The study’s authors also suggested many industry parties may submit incomplete filings or not provide the information at all, believing noncompliance could lead to SEC enforcement actions.
Compliance against forced labor
Similar to the regulations that forbid supply chain managers from sourcing conflict minerals knowingly are those that prohibit the importation of goods linked to forced labor. In the United States, the burden of proof rests with importers, who face detention or penalties. Canada also has these laws and requires parties to file supply chain disclosures to show they abide by them.
Even though the extensive and sometimes opaque nature of modern supply chains can make compliance more difficult, numerous technologies exist that can show what happens to goods at each stage, from sourcing raw materials to when the finished goods end up in consumers’ homes. Such supply chain mapping tools give people up-to-the-minute information as goods move through the network. Authorized users can then act quickly if the details highlight anything unusual that could lead to an unintentional lack of compliance.
Additionally, online databases reveal the product categories most at risk for ties to forced labor and nations where such practices are most common. Staying abreast of that information allows supply chain leaders to monitor possible concerns and investigate further when necessary.
Moving toward voluntary actions
Supply chain compliance can also involve organizations establishing internal policies to increase quality and consumer confidence. One example is the Cyber Trust Mark — a voluntary designation indicating internet-connected devices that are less vulnerable to attacks or breaches. Many purchasers are increasingly concerned about this cybersecurity, so manufacturers can no longer treat it as an afterthought.
One study revealed 18,638 devices with internet connectivity had insecure default settings. This finding is problematic since many people do not take the time to change those, especially when they are particularly eager to start using their new purchases.
Electronics manufacturers still need to receive the final Cyber Trust Mark specifications, but all involved parties must examine how they can make their offerings meet the minimum requirements. This voluntary compliance could become a significant selling point, especially as shoppers evaluate a dizzying array of seemingly similar products.
Getting something approved to bear the Cyber Trust Mark will likely require tighter supply chain oversight. If a batch of devices received counterfeit components due to a visibility-related shortcoming, it could raise cybersecurity risks. Similarly, executives will need to monitor for reports of device parts with identified vulnerabilities, being ready to source alternatives when necessary.
Succeeding despite regulatory challenges
Supply chain compliance standards for electronics change due to societal trends, regulatory updates, emerging risks and other factors. Although it can be tricky to follow the current regulatory requirements while preparing for those that authorities will enact soon, leaders have numerous tailored strategies to support them in getting the best outcomes.
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