Air / Water/Wastewater / Ground

Compliance Won’t Suffice

Good corporate behavior now goes beyond just following federal regulations

By Lynn Bergeson, regulatory editor

For manufacturers of products, especially those marketed to consumers, a very real question is whether raising the stewardship bar is a mandate or option. Stated differently, can manufacturers today realistically calibrate “compliance” by relying solely on whether they meet standards enforced by the government? Increasingly the answer is no, for reasons explained below.

Manufacturers must be mindful of the increasingly powerful influence of “soft” law drivers.

The Changing Landscape

For many years, chemical manufacturers and their downstream customers focused primarily on satisfying the traditional metrics for gauging compliance, historically viewed as a surrogate for good product stewardship. These included adherence to federal and state “command and control” requirements imposed under traditional effluent control laws like the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, and their state analogs. Companies that managed to avoid being called into the spotlight of enforcement scrutiny were more or less considered “good” stewards of their shops, while those whose indiscretions were publicized through enforcement actions were thought otherwise. Certainly, the traditional drivers then for good stewardship, including the absence of enforcement reprisal, maintenance of a positive public image, and “compliance” with applicable regulations, were compelling motivators of good behavior and continue to be so now.

In addition, certain “legal” drivers historically have been important in prompting good corporate behavior and continue so today, perhaps more than ever. Manufacturers of products, particularly consumer products, are motivated by the ever-present threat of tort and product liability, whether based on a theory of a failure to warn or test, or a breach of a duty of care. Due to our system of tort liability and the ever-expanding theories of liability that courts are endorsing, legal liability based on tort and product liability are here to stay — so vigilance in this area is needed.

However, manufacturers also must be mindful of the increasingly powerful influence of “soft” law drivers rooted in less quantitative and legally enforceable standards. These are not rule-based or the result of due process or notice and comment rulemaking. They are nonetheless influential factors compelling good behavior, or at least intended to prevent adverse inferences that might flow from not complying with these new and increasingly demanding standards for product stewardship. These drivers include:

Non-Governmental Organization (NGO) Drivers: NGOs have been extremely influential in identifying chemicals of concern and focusing product deselection and regulatory efforts on them. Bisphenol-A (BPA), flame retardants, solvents and plasticizers are a few examples.

Social Responsibility Drivers: Increasing attention on producer-focused social responsibility requirements are significantly impacting supply-chain relationships and compelling disclosures that influence product profiling. Dodd-Frank conflict mineral disclosure requirements are a good example. The European Commission’s proposed regulations on responsible trading strategies for minerals from conflict zones are another.

Evolving Stewardship Standards: Standards are evolving based not on legal requirements but on demands made by retailers that unilaterally or otherwise decline to market certain products to their downstream customers. Similarly, voluntary codes of conduct or standard-setting initiatives by standard-setting organizations set the tone and the standard for what is and isn’t appropriate conduct for a particular business sector. Some of these initiatives are prompted by the European Union’s chemical management program, the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) — see: “Put Success Within REACH”  — and the growing number of REACH-like programs emerging globally. While not enforceable in the U.S., the consequence of these programs has a global impact as product manufacturers cater to global, not regional markets.

Competitor Actions: The growing interest in “claims” made regarding products has prompted the Federal Trade Commission (FTC) to revise its Green Guides and increasingly enforce them more routinely. State consumer protection agencies and state Attorneys General also have sharply boosted their emphasis on compliance with consumer protection laws and stepped up their enforcement of these laws.

Conclusion

Compliance with federal and state law is essential, but insufficient as a metric of good corporate stewardship. Compliance is the floor while the ceiling is defined by a complex and increasingly crowded mosaic of initiatives driven by voluntary standard-setting initiatives, retailers, NGOs, competitors and consumers. Manufacturers need to pay close attention to the hard law mandates and growing soft law initiatives that are redefining “good corporate behavior” and the way companies portray their commitment to stewardship.


bergeson-color.jpgLYNN BERGESON is Chemical Processing's Regulatory Editor. You can e-mail her at lbergeson@putman.net

Lynn is managing director of Bergeson & Campbell, P.C., a Washington, D.C.-based law firm that concentrates on conventional, biobased, and nanoscale chemical industry issues. She served as chair of the American Bar Association Section of Environment, Energy, and Resources (2005-2006).