11 Oct 2012
Staying green, despite belt-tightening in the EU
Many think that the lifestyle of “living green” is prone to derailment in tough economic times, but it is not quite the case in the EU even amid the lingering European debt spiral and persistently high joblessness. An overwhelming majority of consumers believe that protecting the environment is important and are ready to opt for green options even if they cost a little bit more.
As a green leader, the EU keeps forging ahead with new environmental regulations. These new and usually tougher regulations will not only have cost implications on compliance for exporters with regard to material use and production process, but also design refinement and new product design.
Saving by greening
Contrary to what many would expect, sustainable consumption and production by minimising waste and pollution continues to play an increasing role in purchasing decisions made by European consumers. In addition to price and quality, green elements such as carbon footprint, energy efficiency, recyclability and biodegradability are evolving into important design criteria that Hong Kong manufacturers have to rely on to maintain a distinct competitive advantage over the laggards.
According to the latest European Commission’s survey1 on Europeans’ attitudes towards the environment, an overwhelming majority of European consumers (95%) consider protecting the environment important to them personally, while 72% of the respondents are ready to pay a premium for environmentally friendly products.
This not only reflects the high importance of environmental performance of a product placed by European consumers despite the economic fallout, but also sheds light on the pursuit of green consumerism with implications for manufacturers to develop money-saving green products for cash-tight consumers during economic bad times.
In line with the growing green consumerism, nearly 80% of the respondents agreed that environmental protection or efficient use of natural resources can boost economic growth in the EU. Many European environment ministers and activists also claim that a green transition of Europe is precisely the way to recover from the economic recession and the solution is not to avoid the environmental agenda with the excuse that a greener environment is costly.
Hot on the heels of its forerunning nature, the EU keeps forging ahead with its all-out effort to roll out a number of initiatives aimed at protecting the environment and consumers, which, according to past experience, will likely become a universal norm of green development. For instance, the phase-out of traditional light bulbs in the EU started with a ban on 100W incandescent bulbs in 2009 (all incandescent bulbs will be phased out on the EU market in September 2012) in favour of a new generation of energy-efficient lighting has been closely followed by many others.
These new and revised green regulations will have long-range implications for companies manufacturing in, exporting to, or distributing in the EU, including Hong Kong companies. The enforcement of the new or revised regulations will put an extensive burden upon Hong Kong manufacturers and traders with respect to compliance, material use, production process and design refinement of existing and new products.
Given the predominance of the EU market in Hong Kong’s consumer exports, it is pivotal for Hong Kong companies to stay tuned to the constant toughening up of green laws and regulations in the EU so as to enhance their competitiveness in the market. Meanwhile, voluntary participation or collaboration with other traders in green development is also becoming the foreseeable, general trend of development.
Staying alert to EU green regulations
Among the latest green regulatory initiatives, the recast of the WEEE and RoHS Directives, review of the REACH regulation and ongoing implementation of the Ecodesign (ErP) Directive form the most substantial part that Hong Kong companies have to take heed of in the EU market.
WEEE II entered into force on 13 August 2012
As Hong Kong traders are likely aware, the WEEE Directive aims to increase the collection, reuse and recycling of used electronic and electrical equipment and reduce electronic and electrical waste. Operating according to the “producer responsibility” principle, it makes EU manufacturers and importers financially responsible for the collection, treatment, recovery, and environmentally sound disposal of WEEE, while incentivising them to improve product design in ways that will reduce waste and allow for reuse and recycling.
On 7 June 2012, the Council of the European Union formally approved the recast of the WEEE Directive2, expanding the scope to cover all electrical and electronic equipment (EEE) six years after the date of entry into force. Aside from a narrow list of exceptions, including large-scale stationary industrial tools and large-scale fixed installations, the scope of the new Directive is widened to cover categories such as household appliances, small IT and telecommunications equipment, photovoltaic panels, and equipment containing ozone-depleting substances.
Another key modification concerns Member States’ collection targets which need to be achieved annually and in accordance with the “producer responsibility” principle. From 2016 onwards, Member States will have to ensure collection of at least 45% of the average weight of EEE placed on their respective national markets in the three preceding years. After 2019, however, this minimum collection rate will increase to 65%, or, alternatively, 85% of WEEE generated on the territory of that Member State. Ten Member States (mainly in Central and Eastern Europe) may, however, benefit from lower, more flexible targets, due to their lack of necessary infrastructure and their relatively low level of EEE consumption.
In terms of recovery, Member States must ensure that producers meet minimum targets for each category of WEEE, set out in three stages. For example, from 13 August 2012 until 14 August 2015, 75% of IT and telecommunications equipment, consumer equipment and photovoltaic panels shall be recovered and 65% recycled. Thereafter, between 15 August 2015 and 14 August 2018 these figures will rise to 80% and 70% (the latter figure includes preparation for re-use) respectively.
Hong Kong traders should be informed, too, that the recast Directive introduces novel and more stringent provisions concerning shipments of used EEE and WEEE. Member States must require the holder of a shipment of used EEE (which is not declared as WEEE) to have available, among others, a copy of the invoice and contract relating to the sale and/or transfer of ownership of the EEE which states that the equipment is destined for direct re-use and that it is fully functional; evidence of evaluation or testing in the form of a copy of the records (certificate of testing, proof of functionality) on every item within the consignment; and appropriate protection against damage during transportation, in particular through sufficient packaging.
The recast Directive also requires Member States to maintain a register of EEE producers (including suppliers by means of distance communication) in order to monitor compliance. Each producer, or its authorised representative, will have to register to submit the required information including name and address, national identification code, category and type of EEE, how the producer meets its responsibilities, declaration that information is true, etc.
The recast WEEE Directive entered into force on 13 August 2012. Member States will then have until 14 February 2014 to transpose its provisions into their national laws, while the old WEEE Directive will be repealed on 15 February 2014.
RoHS II is pending transposition into national legislation
Since 1 July 2006, any new electrical and electronic equipment (EEE) that Hong Kong sellers place on the market of all EU member states must not contain hazardous substances, namely lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE), above a maximum concentration value.
After years of discussion and revision, the recast RoHS Directive3 was passed on 8 June 2011. Although the new Directive already entered into force on 21 July 2011, Member states will have until 2 January 2013 to transpose the Directive into their own national laws.
On top of the EEE previously covered by the old version, the new RoHS Directive encompasses additional categories including medical devices, toys with electrical functions (e.g. “talking teddy bears”) and consumer electronics powered by photovoltaics that may not have been covered previously, as well as any EEE that is not specifically excluded. Hong Kong traders can find a complete list of the covered product categories in Annex I of the new Directive.
The recast Directive continues to prohibit only the six substances of the old RoHS Directive, while a review of the scope of the restricted substances will be carried out within three years (no later than 22 July 2014). The four substances that have been identified for priority review include Hexabromocyclododecane (HBCDD), Bis (2-ethylhexyl) phthalate (DEHP), Butyl benzyl phthalate (BBP), and Dibutylphthalate (DBP).
Concerning the exempted application, Annex III contains 39 specific applications of EEE (and their respective expiration dates), while an additional 20 exemptions specific to medical devices and monitoring and control equipment can be found in Annex IV. The new Directive includes also a process by which manufacturers apply directly to the European Commission to grant, renew, or revoke an exemption.
The new Directive adds new obligations on all economic operators, including the shared responsibility of accurately labelling any EEE sold in the EU. Manufacturers are now required to keep a register of non-conforming EEE and product recalls, and keep distributors informed thereof, while importers, are required to ensure that the appropriate conformity assessment procedure has been carried out by the manufacturer, and that the manufacturer has drawn up the technical documentation, that the EEE bears the CE marking and is accompanied by the required documents.
In view of the significant extension of the scope, the new Directive introduces transition periods of up to eight years for the EEE that was outside the scope of the old Directive until 22 July 2019. For instance, for medical devices and monitoring control instruments, the Directive will apply from 22 July 2014; for in vitro diagnostic medical devices, from 22 July 2016; and for industrial monitoring and control instruments, from 22 July 2017.
The long-overdue review of the ubiquitous REACH is in the offing
Since its introduction on 1 June 2007, the REACH (Registration, Evaluation, Authorisation, and Restriction of Chemicals) Directive has introduced an obligation to register with the European Chemicals Agency (ECHA) every chemical substance or mixture, whether manufactured in or imported into the EU in quantities exceeding one tonne/year.
Substances in articles (e.g. toys, textiles, clothing and electrical appliances) that are intended to be released are also subject to the same requirement. The use and placing on the market of substances of very high concern (SVHCs), bioaccumulative and toxic (PBT); or very persistent and very bioaccumulative (vPvB) substances that may cause serious effects to humans or the environment also require authorisation and notification.
Recent developments regarding the REACH Regulation include the addition of 13 new SVHCs, which have all been classified as carcinogenic, mutagenic or toxic for reproduction, in the “Candidate List”4. An example of these is Lead(II) bis(methanesulfonate), which is mainly used in plating processes for electronic components such as printed circuit boards.
Another concern that is likely to be addressed or touched upon in the ongoing review of the REACH Regulation is the so-called “cocktail effect” of chemical substances. Unveiled earlier by the European Commission, the Commission has undertaken to assess the combined effect of toxic chemical mixtures which could lead, in the future, to additional laws regulating chemical mixtures used in consumer goods that pose risks to human health and the environment.
The new approach will involve the Commission identifying priority mixtures of chemicals to be assessed, and ensuring that the different EU laws regulating the dangerous substances to which people are exposed deliver consistent risk assessments for these cocktails. The Commission has pledged to ensure that, as soon as a priority mixture is identified, it will be assessed in a coordinated and integrated manner. By 2014, the Commission will also develop technical guidance to codify best practice for the assessment of priority mixtures.
Hong Kong traders should be aware that REACH is still believed to fall short of proper regulation of the “cocktail effect”. The Commission’s plans and efforts could therefore eventually lead to additional legislation covering priority substances in articles deemed to be most in need of regulation for this type of risk, thus including toys, clothing and other household goods that come into daily contact with EU consumers. It is likely that the Commission’s review of the Regulation will provide more direction on this important subject, though the Commission remains vague about when exactly the long-overdue review of the 2006 REACH Regulation will be presented.
From EuP to ErP to a 20% energy-saving target by 2020
Hong Kong traders with EU trade interests should be familiar with the Ecodesign Directive which is based on the premise that a considerable part of a product’s environmental impact is determined at the design stage. By regulating the design of certain products, the EU hopes to contribute to its 20% energy-saving target by the year 20205.
While the first Directive (2005/32/EC) concerned only energy-using products, the scope of the current Directive (2009/125/EC) further encompasses energy-related products such as construction materials, bathroom fittings like taps and showerheads and insulation products like windows.
The Directive foresees two types of mandatory product requirements. Specific requirements are requirements which set limit values, such as maximum energy consumption or minimum quantities of recycled material while generic requirements may require, for example, that a product is “energy efficient” or “recyclable”, provision of which are the best practices to use and maintain the product in order to minimise its environmental impact and provision of a life-cycle analysis of the product in order to identify alternative design options and solutions for improvement.
The European Commission carries out the Ecodesign Directive according to a Working Plan, which sets out an indicative list of product groups considered as priorities for the adoption of implementing measures in the subsequent three years. The draft Communication on the Working Plan for 2012-2014 includes a priority list of five product groups which will be considered for inclusion in the plan. These product groups, all of which are likely to interest Hong Kong traders, are:
- window products for buildings;
- steam boilers with a power over 50MW (e.g. oil-fired boilers, coal-fired boilers);
- power cables;
- enterprise servers and storage equipment; and
- smart meters/appliances.
Hong Kong companies should also note that an expert committee reached agreement in July 2012 on new EU ecodesign rules to make Anglepoise lamps, LED light bulbs and related equipment more efficient. The proposal aims to introduce gradually stricter energy efficient standards between 2013 and 2016.
On the other hand, to deliver the policy objectives faster or in a less costly manner than mandatory requirements, the Commission will continue to call on the industry to propose self-regulatory measures. This year, the Commission intends to adopt ecodesign measures, as well as energy labelling measures for product groups which include boilers, water heaters and storage tanks, domestic lighting, specifically reflector lamps and luminaries, household tumble driers and vacuum cleaners.
Furthermore, by the end of this year, the Commission aims to amend existing ecodesign measures for circulators and electric motors and revise the ecodesign legislation on televisions. The Commission views these reviews as an opportunity to capture environmental aspects which may not have been taken into account in previous analyses.
Together with other policy tools such as the Energy Labelling Directive, which was adopted on 19 May 2010 and other voluntary schemes such as the EU Ecolabels, ecodesign “pushes” the market away from the worst performing products, while energy label “pulls” the market towards more efficient products by better informing consumers to choose products according to their efficiency, with an A to G scale (A being the most efficient and G the least efficient) for example.
Lastly, in the area of labelling regulations, Hong Kong traders should also be aware of the review of carbon dioxide labelling for commercial products (with a report expected by the end of 2012). The review intends to minimise the problem of “flexibility” in calculating carbon footprints, and is likely to propose a more structured framework to determine and grade carbon dioxide emissions of consumer products, basing on results of the 10 pilot studies currently being rolled out in areas including ICT and manufacturing (e.g. footwear and TVs).
Recommendations for Hong Kong Companies
Acting ahead of regulations
Sustainable consumption has always been a key objective of the EU. Green regulations will likely cover all products in the EU market sooner or later. To enhance the competitiveness and chance of continued success in the market, Hong Kong traders have to act ahead of the wave of regulations by taking initiatives in adopting and developing new green design trends and green manufacturing methods.
For instance, in light of last March’s proposal to amend the EU’s batteries Directive of 2006 and a recent consultancy report commissioned by the European Commission on the potential for reducing mercury pollution from batteries, Hong Kong companies can strive to modify their products to further reduce or even eliminate the use of mercury and cadmium to prep for the likely adoption of relevant EU’s legislative proposals in the near future.
Aside from basic, minimum requirements as stipulated in relevant EU green regulations, Hong Kong companies can pay more attention to the feasibility of going the extra mile to adopt other voluntary standards such as ecolabels and collaborate with other traders to develop voluntary agreements with which environmental protection requirements can be fulfilled in a less costly manner.
Thinking Cradle-to-Cradle (C2C)
Marketing alone cannot make a product environmentally friendly, unless the product is designed, produced, packed and moved green. Beyond compliance with EU green rules and regulations, the prevailing green trend encourages manufacturers and designers to think cradle-to-cradle and take green steps right from the start of the production when materials are chosen and recycling capabilities are determined.
Gaining in popularity includes the trends of using materials that can “re-enter” the environment such as biodegradable, organic and synthetic material includes agricultural, marine or forestry-based raw materials, as well as the inclusion of C2C assessment and declaration in production.
Making effective use of the money-saving appeal
Needless to say, energy saving and product safety will continue to dominate the floor as the EU is charging ahead with new and tougher green regulations. As such, making more effort at product design and development to enhance energy efficiency and product lifespan, while putting more emphasis on minimising hazardous substances contained in consumer products and their end-of-life waste, will become increasingly a prerequisite for access to the EU market.
To loosen the tighter purse strings of belt-tightening EU consumers, however, Hong Kong companies can ride on creativity and product innovation to introduce environmentally friendly alternatives that can help EU consumers save money and preserve the health of the environment at the same time.
1Special Eurobarometer Survey 365 – EB75.2 was conducted by TNS opinion & social at the request of the Directorate-General for the Environment.
4The latest updated Candidate List can be accessed at the following link: http://echa.europa.eu/web/guest/candidate-list-table.
5According to a research publication released on 21 June 2012 by an EU think-tank, the benefits of properly implemented and enforced ecodesign regulation could involve €90 billion in savings per year for businesses and consumers, as well as 20% savings in the EU’s energy consumption.