IS YOUR PRODUCT STEWARDSHIP FUNCTION CREATING AN OPERATIONAL RISK BLIND SPOT?A Maturity Model Framework

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INTRODUCTION

Over the past decade, product stewardship information management has become increasingly complex with the introduction of a slew of new and evolving regulations and a far higher profile awarded to socio-environmental concerns raised by customers and consumers. Based on evidence from detailed global research over the past five years and validation interviews with senior executives at ten multinational corporations, this study identifies four phases of maturity for product stewardship information management. Each of these phases can be assessed through eight dimensions which are: (i) organizational culture, (ii) governance, (iii) workflows and processes, (iv) digitization, (v) breadth of coverage, (vi) analysis and reporting, (vii) supply chain management, and (viii) education and awareness. While each dimension has four distinct phases, large firms and conglomerates may find that more than one phase is applicable to them depending on the business unit and region of concern.

Product Stewardship Performance Is Best Evaluated Across Eight Separate DimensionsFor the purposes of this report, ‘product stewardship’ is defined as software, services and content that enable firms to minimize the environmental, health and safety impacts associated with the manufacture, distribution, use and disposal of a product for both regulatory and voluntary reasons. While traditionally a decentralized and facility-specific issue, product stewardship has become too complex to manage in a siloed and ad hoc manner. Today, the management of product stewardship requires coordination of various functions ranging from supply chain and procurement to product design and engineering as well as fit-for-purpose systems for the management of data, workflows and processes.

This research identifies eight dimensions to product stewardship

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ORGANIZATIONAL CULTURESetting the appropriate tone and organizational culture for product stewardship starts from the top and heavily influences the budget, scope and perceived importance of all activities throughout the remaining seven dimensions. While laggards view product stewardship as a burden or compliance-driven necessity to avoid fines, most firms have begun to tackle product stewardship through a risk-centric lens. Leading firms recognize product stewardship as an

opportunity to improve stakeholder relations through continuous improvement and strive to strengthen market presence. Witness Interface, the world’s largest manufacturer of carpet tiles, who have embedded product stewardship principles into the design process for all product offerings as well as firms such as Adidas, Nike, Patagonia and Speedo who have launched new products targeting the circular economy by using recycled materials.

Culture is what really differentiates a leader

from a laggard for product stewardship and all other

program characteristics get designed with that in mind. What’s interesting is culture

can also vary from one business unit to another so it takes significant effort to get

it right.

—$13 billion global chemicals and plastics firm

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It’s extremely important to involve all internal

stakeholders. You must have a cross-functional

committee to engage othersin a structured manner and

full-time specialist(s) to help them implement the infrastructure, workflows

and processes.

—$1 billion global specialty chemicals manufacturer

GOVERNANCEThis research finds that an effective product stewardship governance structure typically requires a combination of both dedicated product stewardship personnel as well as a centralized, cross-functional committee to balance the involvement of diverse functions and technical expertise needed to address complex regulatory and voluntary requirements.

Solvay, a Belgian-based chemical firm with over €11 billion in annual revenues, for example, has a cross-functional team involving marketing, operations, research and development, product engineering and other functions who meet in-person twice annually to review banned substances, chemicals of concern, regulatory shifts and NGO feedback.

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WORKFLOWS & PROCESSESMaintaining chemical and components compliance as well as responding to customer requests for product stewardship information demands comprehensive documentation as well as structured processes that help progress action items and maintain accountability. For example, OSHA’s Hazard Communication Standard requires all employees to have access to health and safety information for substances whilst Canada’s WHMIS regulation requires

labelling of all hazardous chemical containers to be no more than three years old. Similarly, customer requests can sometimes include an auditable trail demonstrating proof of eco-certification validity and other code of conduct requirements. Embedding and communicating clear, firm-wide workflows and processes for managing product stewardship minimizes the chances of cross-functional confusion and duplication of efforts.

We have 7,000 requests per year [for product stewardship information] and this number

is growing year on year. Having an efficient and accurate process which enables

quicker response times is a key challenge for us right now. Customers often have their own custom lists so

minimizing manual one-off processing is essential

—$1 billion global specialty chemicals manufacturer

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Digitization is not about having the perfect architecture or

integrating everything since IT systems are always

evolving. It’s really about improved integration of our systems to more effectively and efficiently facilitate the

release of materials and products to market.

—$30 billion global conglomerate firm

DIGITIZATIONMultinational firms face stiff challenges in managing information globally for product stewardship. As an example, Halliburton is a $20 billion oilfield services and equipment firm who oversee over 37,000 safety data sheet (SDS) document records in 20-plus languages globally. While paper-based processes enable firms to meet minimal compliance requirements, running searches or validation exercises on this

volume of data is incredibly time consuming and often falls short on accuracy. Digitizing the data is transformational in terms of the speed and effectiveness of running these basic search and data validation exercises. Furthermore, it enables far more value to be driven from the data through introducing automated alerts, real-time product updates and integration with national compliance registers.

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BREADTH OF COVERAGEThe range of activities firms may undertake with respect to product stewardship is growing ever wider. At a minimum, firms dealing with chemicals must typically conduct authoring, collection, distribution and management of SDS documents to ensure compliance with regulations globally such as EU REACH and Singapore RoHS. For most firms involved in producing or using bulk chemicals, product

stewardship also entails chemical inventory tracking, labelling, managing material requests and approvals as well as conducting hazard and risk assessments. Similarly, brand-sensitive firms may wish to be involved in developing or using ‘greener ’ chemistry, conducting product lifecycle assessments and seeking environmental product declarations or eco-certifications.

The complexity of EU REACH alone has forced us to have a full-time team specifically to address that issue. Product

stewardship activities are very diverse, complex and time-consuming. To tackle these issues properly, most firms will require separate teams to manage compliance as

opposed to voluntary product sustainability efforts.

—$30 billion global conglomerate firm

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ANALYSIS & REPORTINGThe adoption of centralized, digitized technologies enables firms to conduct more sophisticated data analysis and reporting than previously possible through decentralized, paper-based methods. While the majority of firms will rely on lagging indicators with a focus on managing compliance, leading firms will also look to automation and artificial intelligence capabilities to provide targeted, real-time analysis and alerts related

to operational risk. Firms looking to adapt to variations of the Globally Harmonized System of Classification and Labelling of Chemicals (GHS) standard around the globe can utilize software to automate the classification of chemicals based on the mixture ingredients, concentrations and attributes. Similarly, ‘what if’ scenario analysis and product alerts can be conducted based on forecasts in regulatory changes.

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Leading teams will have at least one dedicated employee

focused specifically on leveraging product stewardship data for analysis and reporting.

—$50 million global environmental services firm

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Working with the suppliers is a nightmare – they’re

contractually obligated to keep us updated on safety

data sheet changes, but they don’t follow through

and we can’t replace them. Sometimes suppliers don’t

even understand whatwe are asking.

—$75 billion global chemicals manufacturer

SUPPLY CHAIN MANAGEMENTFirms that struggle with collecting and managing product stewardship information often underestimate the challenges associated with supplier and supply chain management.

For most firms, suppliers are managed using tools such as emails, spreadsheets or online portals for the purposes of conducting risk-based EHS and

sustainability evaluations. Leading firms recognize that most suppliers have minimal awareness of chemical compliance or product sustainability issues and will require both educational and capacity building support to develop their own organizational structure, workflows, processes and information management systems and meet product stewardship data requests.

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EDUCATION & AWARENESSWhile most firms recognize that hiring and retaining qualified employees for the role of chemicals compliance and product sustainability is a minimum requirement, not all firms place consistent emphasis on on-going product safety awareness and training

sessions for front-line employees. In addition, leading firms will often proactively establish structured consultative engagement processes with NGO, advocacy and government groups to ensure continuous improvement and minimize negative publicity risks.

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The regulations and job duties are so complex you really need to have at minimum a BSc in chemistry to manage product

stewardship. Continuous training is needed as well.

Awareness training for non-product stewardship functions such as sales and marketing

would be beneficial.

— $30 billion globalconglomerate firm

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A lot of firms still simply want to comply with the minimum

requirements. The extent of compliance activities will be based on enforcement potential i.e. how likely will someone come and check

my work?

— $200 billion global oil and gas firm

THE FOUR PHASES OF PRODUCT

STEWARDSHIP MATURITY ARE:

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With all the potential compliance changes and

information data points you must manage, it is nearly

impossible to rely on paperto ensure compliance. You

need an integrated platform to guide the multiple functions involved on what they need to do and control systems

that prevent something from happening if it does not follow

approved protocols.

— $9 billion global chemicals manufacturer

PHASE 1: COMPLIANTFirms in the first phase of maturity recognize product stewardship as a compliance-driven necessity. Efforts are typically driven by the legal or regulatory affairs team with the goal of ensuring compliance with all relevant regulations in order to maintain operations and avoid fines. Depending on the complexity of the

firm and products produced, this may mean they are engaged in SDS (Safety Data Sheet) documentation, chemical inventory tracking, labelling and chemical registration, notification, and regulatory reporting. Compliance-driven organizations typically operate with an authoritative, top-down approach.

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PHASE 2: EFFICIENT Firms in phase two have accepted the value in complying with regulations and are looking to remain ahead of future regulations and product stewardship risks that may affect them in the near-term. While still focused on compliance, firms in this phase are looking for opportunities to involve EHS and operations personnel in identifying more efficient workflows

and processes that minimize health and safety related incidents from chemicals and product related issues. Example activities include the supplier EHS and sustainability risk evaluations and ratings, employee product safety awareness and training, as well as use of software point solutions alongside Excel spreadsheets.

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To mitigate risks, we try to determine future

legislation trends and inform management about regulatory

changes that might be expected so we can proactively manage that risk and improve

our raw material bases.

— $75 billion global chemical manufacturer

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PHASE 3: OPTIMIZEDThere is a notable shift in thinking from phase two to phase three as firms begin to recognize product stewardship as an opportunity to optimize processes through engagement with internal stakeholders, such as employees, as well as external stakeholders, such as customers and community citizens. Firms in phase three are likely to have already established a centralized, dedicated function to

lead product stewardship efforts with attention towards continuously improving workflows and processes based on stakeholder feedback and industry best practices. To strengthen data access and visibility, firms in phase three typically utilize consolidated software solutions to enable cooperation with other functions such as supply chain, EHS, operations and regulatory affairs.

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Product stewardship requires a balance between business-

driven activities and corporate risk-driven activities and it’s not

always easy to achieve that balance. Being transparent on objectives and activities and focusing on improving

performance of the function and wider business is typically the most appropriate way to

manage this.

— $9 billion global specialty chemicals manufacturer

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PHASE 4: LEADERThe most advanced phase of the maturity model describes firms that have recognized product stewardship as an opportunity for revenue growth, through directing funding to new products, services or business models that are less environmentally harmful than its ‘business as usual’ practice. To achieve this, firms in phase four have a centralized product stewardship

function to lead and coordinate efforts as well as a cross-functional committee to involve diverse functions when necessary. To enable collaboration, firms in phase four will also have highly integrated solutions that leverage real-time data analytics and structured processes for engaging with external stakeholders such as suppliers, NGOs and government agencies.

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Product stewardship leaders would distinguish their

business not just through more eco-friendly products

but also in terms of new ways of providing their service or product offering. Perhaps

using a leasing model where you take ownership of product

takeback and material recycling and reuse efforts.

— $50 million global environmental services firm

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FIRMS MUST ALIGN PRODUCT STEWARDSHIP STRATEGY WITH THE WIDER ORGANIZATIONAL STRATEGY

This report sets out the four phases of product stewardship maturity. While some firms may wish to achieve product stewardship leadership and fulfil the criteria in phase 4 of the maturity framework, this target maturity level may not be realistic for all firms. It is recommended that firms with product compliance requirements review this model and diagnose their existing level of maturity. Alongside this assessment, firms should review the wider maturity framework and evaluate which level of maturity is best aligned with the overall strategic aims and objectives of the organization. Having established both ‘as-is’ and ‘to-be’ levels of maturity, the product stewardship function can begin to build the transition plan, the cost and the business case for such a change in approach.

Product stewardship has evolved incrementally within many firms as organizations have tactically adapted to the latest piece of compliance legislation. Without taking a formal review of the product stewardship function, firms are likely to operate with a blind-spot in their operational risk dashboards. Evaluating the function through a structured product stewardship maturity framework turns a spotlight on these risks. Beyond this, it can also uncover operational efficiencies and even new revenue generating opportunities.

Sphera helps businesses improve decision-making and performance with an integrated view of their unique risk portfolio.

This online self-assessment provides directors of product stewardship, product compliance and materials traceability with an overview of the five stages of maturity for product stewardship information management. As organizations learn to better manage their product stewardship efforts, they must adopt stronger management discipline across eight distinct dimensions which will be diagnosed. For firms looking to strengthen their product stewardship activities, this tool will provide a framework to help you self-assess your maturity phase, identify opportunities for further performance improvement and highlight several examples that illustrate best practices for product stewardship.

PRODUCT STEWARDSHIP Maturity Model Self-Assessment Tool

Start Your Self-Assessment Now:sphera.com/tools/product-stewardship-maturity-assessment

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