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Ensure Compliance with Take-Back and Recycling Regulations — Without Breaking the Bank

by Jennifer Scholze | SAPinsider

October 1, 2011

With growing environmental concerns, sustainability is becoming more important than ever. Many companies are making strides to make their business practices greener. For manufacturers, however, the topic becomes even more complicated because they must think about packaging, recycling, and product end-of-life processes. In this article, discover how SAP enables manufacturers to meet their product and packaging recycling goals and requirements with SAP Recycling Administration.
 

Manufacturers and brand owners are under increasing pressure to take a more sustainable approach to their packaging, recycling, and product end-of-life processes. Regulatory agencies, non-governmental organizations, retailers, consumers, and investors are asking manufacturers to detail what’s in their products and how those products will be disposed of or reused when their useful life is complete. Manufacturers that do not have a product and packaging recycling strategy that encompasses the full supply chain — from raw materials sourcing to consumer sales — risk serious harm to their brand reputation, sales, customer and supplier relationships, and stock price.

To combat this risk, SAP offers a solution portfolio that enables manufacturers to meet their product and packaging recycling goals and requirements. By running applications like SAP Recycling Administration on top of their SAP ERP system, manufacturers can ensure compliance with the growing list of take-back and recycling regulations in their markets, while meeting reporting and documentation requirements via a central platform.

Why Invest in Recycling Management?

For starters, in many cases, it’s the law. Product environmental and end-of-life regulations are increasing in number, scope, and complexity.1 And while the European Union has led the way in regulating extended producer responsibility and product take-back, Japan, Korea, China, and the United States are getting more aggressive in issuing and enforcing regulations for electronic devices or battery recycling and disposal. And these regulations are no less serious in terms of their goals, requirements, and consequences for non-compliance. Similar to the EU markets, regulations in the US vary from state to state, so ensuring compliance is a challenge.

Next, your recycling strategy carries top-line revenue implications. Consumers are more knowledgeable about the “green” aspects of products they purchase. Companies that commit green violations or get fined for non-compliance can suffer brand damage, while those that are recognized by industry groups and non-governmental organizations for their packaging, recyclability, and sustainability efforts see measurable benefits: market share gains.

And for manufacturers in the consumer packaged goods market, mandates from retailers are another reason to invest in developing a product and packaging recycling strategy. Some retailers require suppliers to provide detailed product and packaging composition and recycling information, which they can roll up into their own supply chain data. If you want to keep that coveted shelf space in those super stores, you need a strategy and the relevant data to back it up. And if you don’t have that shelf space now, this could be the chance you’ve been waiting for.

Even Wall Street wants the details on manufacturers’ recycling strategies. Ratings firms and investors want to see real results in these areas, as evidenced by the traction gained by the Dow Jones Sustainability Index. Initiatives like the Global Reporting Initiative require manufacturers to disclose their recycling strategies. In their sustainability reports, multinationals spend chapters explaining their recycling and take-back programs, their use of recycled materials, and their measures to optimize packaging efficiency.

IT plays an important role in implementing product recycling and reuse strategies, since large amounts of data need to be managed for the regulatory reporting. But surprisingly, many companies today still rely on multiple, disparate systems for storing and reporting the necessary data for this important initiative. Companies often track detailed sales information separately from product and packaging bills of materials. An integrated environment like SAP’s can help a manufacturer streamline its regulatory compliance processes, reduce compliance costs, and increase the amount of recyclable materials in its products.

Accurate Data Drives Lower Costs

Accurate reporting is the key to maintaining regulatory compliance at the lowest cost. Developing and executing a recycling management strategy is the first step, but collecting the right data from reliable data sources provides the evidence sought by regulators, retailers, and auditors alike.

For example, for some regulations, companies must track the quantity of products being sold by country or region, match recovered amounts, and calculate recycling fees based on factors like sales amounts, market and return shares, weights of included components, material recycling costs, and other conditions. But many companies lack visibility into details such as the exact weight that must be considered to produce a correct fee. To be on the safe side, most enterprises knowingly overpay by basing the fee on the product’s gross weight.

By leveraging the tight integration between SAP Recycling Administration and the back-end ERP system, manufacturers can classify recyclable materials by type, net weight, usage, destination, brand, and category. Specific data filters separate material streams and components that are irrelevant to the required calculation, so that regulatory recycling fees can be calculated accurately based on the actual weight of the regulated components, not the total weight of the product being shipped. This difference has saved electronics giant Panasonic as much as 15% per year in recycling costs, a number that puts the savings in the millions.

Furthermore, an efficient process in which data can be easily accessed and pulled for reporting or audits is much less disruptive to a manufacturer than a disorganized audit in which employees are searching for various pieces of information in disparate systems. This also makes external audits much less painful and can build credibility with regulatory bodies that require detailed proof that correct processes are in place. Similarly, for retailer mandates, the ability to easily access and report the information that retailers seek can be the difference between your product being on the shelf at Wal-Mart or on a shelf in your warehouse.

SAP Recycling Administration lets users centrally manage product and packaging composition data, maintain contractual information about take-back schemes and recycling partners, and verify quantity flows of products in circulation. Preconfigured report templates for more than 50 compliance schemes, stewardship programs, and retailer mandates streamline reporting and can produce bottom-line savings.

Internal Impacts

In addition to streamlining compliance and reporting processes, SAP Recycling Administration brings a host of internal benefits. For starters, it allows users to create cross-product, cross-country, and cross-customer reports to analyze recycling costs and identify areas of best practice. Having a centralized data repository also reduces the effort required to collect and produce regulatory data, freeing up resources for other work and giving the company a head start toward automated compliance. Eliminating data hunting and automating much of the regulatory reporting process can result in up to a 50% reduction in the amount of resources needed to support the effort. In addition, rather than each country or business unit leveraging a different process for managing and presenting its recycling data, a single source of information provides management with an accurate set of consistent numbers against which to measure the organization’s progress.

Whether the driver is regulatory compliance, retailer mandates, or KPIs for sustainable packaging and products to save costs, executing a successful recycling and product end-of-life strategy makes real business sense today. Learn more at www.sap.com/solutions/business-suite/erp/corporate_services/recycling-administration-software.

Jennifer Scholze (jennifer.scholze@sap.com) is Senior Director of Solution Marketing for the Product Safety and Stewardship pillar of Sustainability at SAP. Previously, Jennifer was Investing Partner at SAP Ventures, was Strategic Assistant to the SAP AG Board, and held management positions in global marketing and communications. She also spent five years at International Data Corporation (IDC) as a Senior Industry Analyst.

1 Learn more about these growing global regulations in the “End-of-Life Reporting and Beyond“ white paper, available at www.sap.com/solutions/business-suite/plm/brochures. [back]

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