Last April, European Justice Commissioner Didier Reynders announced he is planning in 2021 to propose legislation with binding due diligence obligations as part of a broader package on sustainable corporate governance. While the exact scope of the proposal is to be determined, it is expected to be broad and cover electronics manufacturing companies. The new requirements would likely obligate companies to establish due diligence systems that identify supply chain risks including forced labor and environmental pollution, and to take steps to mitigate them.

Electronics manufacturers support public and private sector efforts to improve environmental health and human rights around the world, and we have an interest in working constructively with policymakers to ensure that new regulatory requirements are both effective in combatting the issue of concern and practical for the companies affected.  

As always, IPC will keep you informed about this legislation’s progress, and we invite your perspectives to help frame our advocacy. As an industry, we must be involved in this policy discussion.

Why are mandatory requirements going to be proposed?

Both civil society and the European Parliament have long called on the European Commission to fully implement the UN’s Guiding Principles on Business and Human Rights (UNGP) in Europe. Under the new Commission led by EC President Ursula von der Leyen, sustainable corporate governance is on the list of strategic objectives as part of the European Green Deal agenda.

Earlier this year, a study conducted for the EC concluded that voluntary measures have not been effective in encouraging companies to identify, account for, and mitigate social and environmental impacts in their supply chains. COVID-19 has accelerated efforts to ensure that Europe emerges from the crisis in a sustainable, fair, and responsible manner while keeping environmental and social challenges at the top of its agenda.

What has happened since Commissioner Reynders’ announcement?

Reynders’ announcement was met with an avalanche of reactions. Among the EU institutions, the idea has received strong support from the German Presidency of the EU Council (a post which rotates among Member States every six months), which held a large virtual conference on Human Rights and Decent Work in Global Supply Chains earlier this month. The event underlined Germany’s willingness, along with Portugal and Slovenia, to support EU-wide due diligence legislation. In fact, Germany is currently planning its own national supply chain law, for which a proposal is expected early next year. Such national laws already exist in other Member States, including France. EU-wide rules would thus avoid a fragmentation of the Single Market, with different rules applying in different Member States.

Meanwhile, the European Parliament’s Committee on Legal Affairs is preparing two non-binding reports on the topic (here and here), outlining their demands for EU sustainable corporate governance and due diligence legislation. In particular, the MEPs are focusing on a broad definition of scope, liability aspects, enforcement, and “proportionality” for small and medium-sized businesses (SMEs).

What are the next steps?

The European Commission is expected to open a public consultation very shortly, during which all stakeholders can provide their comments. The legislative proposal is expected in Q1 2021. It is now time for companies to engage in the legislative process by sharing sector-specific insights, challenges, and best practices. IPC will work with its Government Relations Committees to contribute to the public consultation and engage with the European Commission.

Does your company have a robust due diligence system in place? How do you work with your supply chain to mitigate risks? If you would like to contribute or if you have any questions, please contact me at AlisonJames@ipc.org.

The U.S. Environmental Protection Agency (EPA) is approaching a critical phase of deliberations under the Toxic Substances Control Act (TSCA), and the next several steps in the process will have major ramifications for electronics manufacturers, who need to focus on this issue now to protect their own long-term interests and help IPC advocate for the industry.

The EPA’s process for assessing and managing risks from existing chemicals has three basic steps: prioritization, risk evaluation, and risk management.

Currently, there are two cycles of this three-step process happening at the same time, for two different sets of chemicals. In the first cycle, EPA is nearing the completion of 10 risk evaluations; in the second cycle, EPA is just beginning the risk evaluations for 20 more high-priority chemical substances.

Just over the horizon, the EPA will begin to consider and then propose actual risk management strategies for the first 10 of these chemicals. By law, the EPA is required to take action to address such risks within two years after a risk evaluation is published. This will be the first time that the EPA is doing risk management under the 2016 amendments to TSCA, so it’s a unique opportunity to get involved.

Thus, now is the time for our industry to get organized, collaborate, and prepare to advocate our views on how the EPA should address any unreasonable risks to human health and the environment. The EPA is seeking input from us, and our expertise will be critical to forging smart solutions to manage and address risks.

Which chemicals are we talking about?

Since June 2020, the EPA has published three final risk evaluations for:

• methylene chloride (CAS 75-09-2);
• 1-bromopropane (CAS 106-94-5); and
• cyclic aliphatic bromide cluster chemicals (CASRN 25637-99-4, 3194-55-6, and3194-57-8), including hexabromocyclododecane (HBCD).

Notably, each of these risk evaluations mentions the use of these chemicals in electronics.

• For methylene chloride, the EPA has determined that the use of this chemical as a solvent in industrial processes where electronics equipment, appliance, and component manufacturing takes place presents an unreasonable risk of injury to human health.

• For 1-bromopropane, the EPA has determined that the use of this chemical as a solvent for cleaning or vapor degreasing in the manufacturing of electrical equipment presents unreasonable risks of injury to human health.

• For HBCD, the EPA has determined that the use of this chemical in solder paste or flux presents an unreasonable risk to the environment.

To manage unreasonable risks, the EPA has several regulatory options at its disposal, including the ability to prohibit, limit, or otherwise restrict their manufacture, processing, or distribution for particular uses; to regulate the manner or method of their disposal; to regulate how risks are communicated to consumers and various supply chain actors; and/or to require monitoring, testing, and recordkeeping.

If you have information that is relevant to these proceedings, we need to hear from you. Specifically, if you have information on safe and essential uses; on safe and effective alternatives; or on uses that have been phased out or can be phased out; then now is the time to get ready to work with IPC and engage with the EPA. 

The IPC Government Relations team will facilitate and coordinate a unified industry response. Ultimately, the EPA needs our knowledge and expertise to arrive at solutions that protect human health and the environment and enable our industry to thrive.

When European Commission President Ursula von der Leyen unveiled her €750 billion Recovery and Resilience Facility (RRF) to help the European Union recover from the COVID-19 pandemic, she stressed that “strategic autonomy” must be at the heart of the EU’s response. As was also seen in North America, the COVID-19 crisis revealed the EU’s dependence on other regions for critical goods, including raw materials, medicines, and medical supplies.

More recently, during the European Council meeting on 1-2 October, national leaders concluded that “achieving strategic autonomy while preserving an open economy” was a key objective of the Union. They called on the European Commission to identify and address various strategic dependencies by diversifying production and supply chains, “especially for microprocessors,” as well as by fostering production and investment in Europe. About the same time, European Council President Charles Michel stressed that the notion of strategic autonomy should not equate to protectionism, but rather it should translate into the dissemination of European standards and values around the world.  

EU leaders have also agreed to focus on the development of next generation digital technologies, including accelerating the deployment of 5G, supercomputers, blockchain, and human-centered artificial intelligence. To help achieve these objectives, EU leaders reiterated that at least 20 percent of the funds under the RRF should be made available for the digital transition, including funds for small and medium-sized enterprises.

To encourage national capitals to draw up recovery plans in line with the overarching goal of more autonomy, the Commission has proposed certain guidelines for Member States. For example, to foster resilience and autonomy at the national level, the guidelines recommend a minimum of 37 percent of expenditures related to climate objectives and 20 percent related to the digital transition.

French Plan Includes Electronics Manufacturing Among Strategic Industries  

In line with the EU’s call for greater autonomy, the government of France’s €100 billion Recovery Plan aims to encourage the reshoring and strengthening of key sectors including electronics manufacturing. A call for specific investment proposals was issued on August 31 and is open through November 17. Projects aimed at strengthening the capacity of electronic manufacturing companies to respond to crisis situations will be given priority. Annex 3 of the document provides a non-exhaustive list of activities that may qualify, such as:

• The creation of new production units;
• Investments in existing production units to make them more productive and flexible;
• The development and implementation of new technologies on an industrial scale; and
• Manufacturing of printed circuit boards, as well as assembly services.

The French plan includes a total of 13 criteria that businesses must meet to qualify for financial support.

How would these proposals and plans affect your company? We would love to hear from you on this and any other EU policy issues of concern. Please reach out to me at AlisonJames@ipc.org with any questions, issues or comments.

Curious about what’s happening in IPC Europe? IPC blog staff took the opportunity to talk to Alison James, senior director, IPC Europe, Government Relations, about the European response to COVID-19, as well as other issues facing the European electronics manufacturing industry.

Q: How are you settling into your role as senior director of IPC Europe? We know that the pandemic is making all of us do our jobs differently, but what specific changes has IPC Europe experienced because of COVID-19?

AJ: I am settling in very well and delighted to be part of a versatile team. I joined IPC at the end of 2019 and was lucky enough to be able to attend IPC APEX EXPO before the pandemic with IPC’s government relations team led by Chris Mitchell. That was an important start to have time with IPC’s executives, to meet members and to see the evolving technologies. Government relations relies on understanding the business and its strategic direction and translating that into objectives regarding anticipated legislation. I was intending a few rounds of European EMS and PCB site visits this year, but all meetings have of course become virtual. However, it has been impressive that contact with European institutions has continued well under changing circumstances. On the policy side, we have seen a re-focusing of governments on managing the pandemic in the immediate term which has shifted policy priorities. Policy going forward will be viewed through the lens of recovery.

Q: Can you provide us with information on the top industry challenges facing IPC Europe? How does your background with the EU help you find solutions to those challenges?

AJ: Prior to joining IPC, I spent 20 years heading up the public affairs departments for a range of technology companies from Kodak to Microsoft to Hollywood studios. Before that I also worked for the European Commission. Europe has its own particular set of challenges and sensitivities.  When it comes to legislation, the EU is leading the way in quite a few areas. That has always been the case in the environmental field and even more so now with Europe’s Green Deal and move towards a circular economy.

All of this implies longer term change for the electronics industry in materials used and a significant increase in reporting requirements in the shorter term. We control the sails but not the wind, meaning that EU legislation will come, but our government relations function is here to speak for the industry, mitigate costs as much as possible and work with the legislators towards solutions that are workable and do not compromise on safety or reliability. There are a high number of policy initiatives underway here that directly or indirectly impact the competitiveness of our sector. We have a European industrial policy under development and an effort towards broad-scale digitalization of infrastructure and processes. Considering COVID-19, much is up for review and we certainly see a new spotlight on supply chains and an increased focus on re-shoring and regionalization.  In addition, there is a review of Europe’s trade policy which can have a substantial impact on businesses and their sourcing and manufacturing strategy. Consequently, it will impact their global supply chains. It’s important that electronics manufacturing can benefit from the push towards digitalization and automation and that future policy here provides a needed boost for our sector in this region. My background helps me to approach industry issues in a holistic way; to understand the different components of the ecosystem and integrate business demands into policy objectives together with the GR team and members’ expertise. To enable a cross-functional approach to deal with multilayered matters.

Q: How does the EU’s Climate-Focused Recovery Plan affect the European electronics manufacturing industry?

AJ: I’ll break this down into a few answers. Firstly, I would say that the EU’s climate focus was already there before the pandemic. Secondly, there are also opportunities in greater production of low carbon technologies from green mobility to energy and beyond. The details of the package still need to be agreed on by the EU Member States. Thirdly, the recovery plan is not all climate focused. Let’s not forget the shorter-term measures that have enabled flexibility for manufacturers in financing short time work schemes, the loans and grants that have been provided at Member State level. The Recovery Plan is also a stimulus for Member States to invest in digital infrastructure and technologies as the EU’s direction for the future is both green and digital. Hence there are opportunities as well as challenges for the European electronics manufacturing industry.

Q: What opportunities exist for manufacturers to align their factories with the European recovery plan?

AJ: The opportunity for manufacturers is to implement advanced manufacturing (AI, Data Spaces) and utilize low carbon technologies and initiatives that together potentially can create a global leading position in electronics manufacturing.

Q: The European Chemicals Agency (ECHA) states that the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) directive to push companies to replace harmful chemicals with safer alternatives has had a notable impact on the industry. How does this directive affect the work you do with IPC to establish collaborative networks across the supply chains?

AJ: What we are seeing not only in REACH and the related SCIP database but also in other requirements pending, is a heightened move towards transparency throughout the supply chain and eventual substitution. Given this general direction, it is important for us in government relations to receive input from industry experts and stakeholders across the chain. There are challenges in reporting for the industry; there is interdependency, the chain is only as strong as the weakest link. Hence integral communication by IPC and collaboration with our standards committees is key.

Q: We understand that IPC provided EU leaders with input via the Roadmap for Economic Recovery. How has that input affected the manufacturing industry in Europe?

AJ: We seized upon the opportunity to provide input and the European Council were very appreciative of receiving it. However, the work is still on-going as recovery is still on-going and as in any process the devil is in the details. There were immediate-term objectives to keep manufacturing sites and supply chains up and running and we worked very closely with the European Commission, its Transport Directorate General and with the Heads of the EU Member States to have this understood and acted upon.

Now with the longer-term objective to re-build we would like to see a resilient, competitive electronics manufacturing sector in this region.

That means it is now critical to continue to work with our members and with the European institutions and Member States. To make sure that the future policy environment reflects the criticality of the electronics sector for Europe’s competitiveness. That together we can provide the right conditions to help it thrive and grow.

As we present the September economic outlook report, the economy has improved over the last month, but momentum is slowing as manufacturers remain cautious. In this report, you will find U.S. and European data on economic growth, employment, Manufacturer’s Sentiment (PMI) and end markets for electronics.

You will also find details on industrial production, capacity utilization, PCB production data and North American PCB bookings.

Please let us know how you use this research along with what other details you would like to see from IPC. We welcome your thoughts and feedback.

Today, IPC joined with almost 40 other industry groups in calling on European Commission President Ursula von der Leyen to postpone the January deadline for a new chemicals database and to study related issues further before it goes forward.

Under current plans, companies supplying articles containing substances of very high concern (SVHCs) to the EU market will be obligated to submit information on these articles to the European Chemicals Agency (ECHA) beginning on 5 January 2021.

IPC supports the intent of the SCIP database to make information about SVHCs available throughout the life cycle of products and enable “circular economy” efficiencies. However, the development and implementation of the database has raised serious doubts about its workability, proportionality, and value. Specifically, we believe the ECHA failed to finalize the database within a timeframe that would enable companies to develop, test and adapt their own systems to meet the January deadline. Moreover, contrary to the EU Better Regulation principles, the requirements were adopted without any prior stakeholder consultation or impact assessment.

To date, the relevant parties have resisted calls for a postponement of the deadline, but IPC and our industry colleagues hope that by shining a spotlight on the flaws in the process, we can persuade the EC to take a more measured, reasonable approach. In the weeks ahead, we will continue to work with you and European policy makers to advocate for a better policy outcome.

View industry joint news release and the list of signatories.

Please contact me if you have any questions and/or want to be involved.