Borrowing From EU Approaches - The EU's Reach regulation (EC 1907/2006) enacted a comprehensive approach to chemicals, sweeping away four decades of legislation in 2007. All 31 European Economic Area (EEA) countries enforce this requirement. Beyond those jurisdictions, interconnected global manufacturing supply chains ensure all companies worldwide are affected, at least indirectly. Transparency is a critical principle for future chemicals regulation in the U.S.

Transparency in Regulatory Goals: Hazard vs. Risk

The EU's regulatory climate is informed by the Precautionary Principle, a concept that assumes that if an action carries a suspected risk of harm to the public or to the environment, in the absence of scientific consensus that it is harmful, the burden of proof that it is not harmful falls on the actor. The principle implies a social responsibility to protect the public when scientific investigation suggests a plausible risk. In the EU this principle is instantiated in various statutory requirements, including Reach (Registration, Evaluation, Authorization and Restriction of Chemicals), in which the principle guides enforcement. A perceived historical difference between the U.S. and EU regulatory approaches is that the U.S. has often prioritized regulatory goals by risk rather than by inherent hazards.

Critics have seen the EU's interpretation of the Precautionary Principle as irrationally conservative and stifling marketplace innovation by eliminating useful chemicals from commerce, some of which improve human health and the environment, but which are presumed guilty until proven innocent. These voices are countered by those who see the U.S.'s approach to prioritization by risk as resembling a giant laboratory test tube, dosing 300 million citizens with 100,000 chemicals and waiting on evidence of harm before taking action.

However, thanks to increasing information exchange among regulators, there are signs of global convergence toward approaches that give due regard to both hazard and risk. For example, Reach's phased approach to compliance uses import volume thresholds as a proxy for exposure. This prioritizes higher-volume (hence higher-risk) chemicals for accelerated timelines and for increased regulation. Critics of previously hazard-centric EU approaches perceive this as a step forward.

In a corresponding movement toward convergence on a global regulatory approach, the state of California's draft Safer Consumer Products (SCP) regulation borrows extensively from Reach concepts. California's SCP requirement, as currently composed, requires alternatives assessments, an approach that can often rely on inherent chemical hazards for alternatives selection criteria. The trend toward U.S. "green chemistry" legislation borrows from EU approaches, such as the Reach authorization requirement, which regulates harmful chemicals by confronting hazards at the design stage, rather than by placing products on the market and managing the risks after Pandora's box has already sprung open.

If a global consensus on regulatory goals can indeed emerge, there will be more predictability for executives who are managing compliance in a marketplace that abhors uncertainty and punishes uncertain decision-makers.

Transparency In Harmonized Enforcement

The EU recognized that its 1960s-era regulatory enforcement patchwork was antiquated in a globalized 21st-century economy. Global commerce now involves far-flung supply chains sprawling across multiple regulatory jurisdictions, and disparate enforcement approaches were constructing a regulatory Tower of Babel for companies seeking a coherent global compliance policy.

The U.S. has developed a notorious patchwork of regulations - any presentation on U.S. chemicals requirements includes the obligatory color-coded map to attempt an explanation of the regulatory landscape. As the EU struggles to herd sovereign member states into a harmonized enforcement corral, the U.S. would benefit by observing the EU's measures to facilitate information exchange among member state competent authorities - measures that include joint training sessions, coordination of sanctions and information exchange.

With 31 countries involved (including the three EEA states), initial Reach enforcement has been predictably uneven, with some notable disagreements potentially requiring adjudication at the European Court of Justice. But the consistency is remarkable given the vast differences in languages, cultures, economies and histories.

The challenges faced by this union of sovereign member states mirror the balancing act that the U.S. faces in its own precarious equipoise between federalism and a centrally coordinated approach to interstate regulation of commerce. But surely the U.S. faces lower barriers for regulatory cooperation among its states compared with the EU; and harmonized U.S. enforcement has fairly strong industry support because of the burdens of the current patchwork.

Transparency In Industry Collaboration

Reach requires companies to join Substance Information Exchange Fora (SIEFs) to complete substance registrations. This mandate has placed competitors in an arena in which they discuss sensitive information and build a comprehensive dataset for proper evaluation of chemical hazards and exposure scenarios. There are concerns about running afoul of EU antitrust provisions or compromising trade secrets, so third-party trustees facilitate SIEFs to protect production information, supply chains and proprietary formulations.

Reach was intended to prod industry stakeholders into these resource-sharing arrangements and task them with the data-generation process. Despite the tensions inherent in forced collaboration among competitors, these groups leverage opportunities for resource-sharing and avoid duplication of effort. U.S. regulators are studying SIEF arrangements to conduct cost-benefit analyses and glean the lessons learned from these collaborative endeavors. SIEF-type arrangements hold the promise of providing a common transparent dataset for industrial stakeholders and can create a more level playing field for attaining compliance for small enterprises.

Importance of Transparency for All Stakeholders

The EU's six-year-old grand experiment in comprehensive chemicals regulation has highlighted the importance of transparency for all stakeholders: consumers, voters, regulators, executives, employees and investors. All these parties have decisions to make and if we are truly seeking a workable consensus on regulatory approaches, providing all stakeholders with clear regulatory goals, enforcement expectations and access to information is paramount.

All global jurisdictions require some level of transparency in product feature representations, to allow consumers an informed choice in purchasing decisions. Similarly, publicly traded companies are required to furnish financial information in a transparent manner to provide all investors with an opportunity to evaluate company performance and prospects for future earnings growth.

Increasingly it is also becoming a fundamental obligation for companies to disclose the environmental hazards and risks their products present. Why not likewise consider it a corresponding right for companies to be themselves provided with streamlined, consistent, predictable, transparent regulations that allow them to do long-term planning?  They can then compete and innovate freely on a globally level playing field where the only price of admission is transparency.