Just hit the play button to start listening..!
Listen to the episode right here 👇👇👇
00:00 – Greetings & Introduction to today’s topic
01:19 – Some background.
There are a lot of regulations coming in Europe that are going to affect importers, this cannot be ignored. The ‘green new deal’ with a 2022-2024 timescale is a big driver of what we’re discussing, in particular the ‘Ecodesign’ regulation. The Ecodesign directive focused on high-energy products, like heaters, but this is going to be much wider in scope for the regulation, so covering all kinds of products.
03:29 – What is the Ecodesign regulation going to be?
The Ecodesign regulation aims for specific product groups to significantly improve their circularity, energy performance and other environmental sustainability aspects. Its scope will be expanded beyond energy-related products to other product types that have a higher impact on the environment, construction materials, textiles, and consumer electronics. EV batteries will be in 2030 and lead-acid batteries banned by then.
07:12 – Verifying the supply chain
Any eco-friendly claims for products will need to be shown in a product passport verified by a notification body. A lack of transparency in Chinese supply chains stops the consumer from getting information, so the Ecodesign regulation aims to provide consumers and economic actors like retailers with more product information than right now. Every product will be marked providing (maybe with an 8-digit code) information about the supply chain, technical file, environmental impact, etc. Customs and market surveillance authorities will be able to scan product codes and quickly decide whether they need to investigate their compliance. All of the information for all products except food and drugs could be collected in a central registry accessible to all of these actors.
17:12 – A LOT more due diligence will be required by buyers.
The burden on buyers to validate supply chains and provide the information will increase. The opportunities for bad actors to place products on the market and hide away behind anonymity will be reduced. The aim is for the customer to have information to make decisions on if they want to buy the product themselves, as well as to make customs and other enforcement authorities’ lives easier. The old EU Ecodesign directive was felt not to have been enforced well enough, so the directive will be more strictly enforced requiring more efforts by buyers to be compliant.
21:00 – What’s the difference between an EU directive and an EU regulation?
A regulation is a law that can be enforced in the European court, whereas a directive is more of a suggestion about what is expected and is normally in place for a period of time before it becomes a regulation, thereby allowing EU member states time to implement it in their own ways and get to grips with it.
23:10 – Compliance with the Ecodesign for sustainable products regulation will be taxable.
Your business tax will be influenced by your sustainability, so this is not something that can be ignored. Companies will be forced to attempt to build a more sustainable supply chain and products. Businesses who overproduce products will have to declare that and pay more tax. This also applies to producers of particularly environmentally-damaging products, like fast fashion.
25:00 – Targeting ‘bad’ industries like Fast fashion.
Microplastics caused by and use of fossil fuels in the fast fashion and plastics industries are a big issue and are targeted by the Ecodesign regulation as they are not sustainable. Textile products use a lot of microfibers that migrate into the oceans and food chain as microplastics, so they’re priority number one, but more sectors like consumer electronics will follow quickly.
28:23 – How ready are YOU?
How many buyers with supply chains in China or elsewhere in Asia can truly prove their supply chain’s efforts to reduce its carbon footprint, for example, right now? Speaking to them and ticking boxes because they assure you that they have plans is not going to be enough. It also covers your complete supply chain, so sub-suppliers and sub-sub-suppliers onwards. In some cases, your supplier may not provide this information in a Bill of Materials at all, so what then? Implementing this regulation’s demands at the factory level in China will be a huge challenge.
33:01 – Traceability using a product passport.
Now products will be treated the same way as medical devices are, as each product will require a product passport including a unique identification number and should allow the tracing of the supply chain actors and manufacturing facilities. All suppliers will need to be named. The passport information will be able to be validated online to assess whether the manufacturer’s claims are genuine. Some importers are worried that their confidential supply chain information may be compromised, so they are pushing back against this.
38:09 – The CSRD (EU Corporate Sustainability Reporting Directive) will replace the NFRD (EU Non-Financial Reporting Directive) reporting requirements starting in 2023.
Businesses are directed to file an annual report using the CSRD’s forthcoming sustainability taxonomy on how sustainability influences their business, as well as the company’s impact on people and the environment. In just 6 months’ time at the time of recording, this will be mandatory. Only 20% have complied with the CSRD up to now, but this number will have to rise to 80% by 2023. The EU is unified in putting this into practice, and this shows the direction the EU is going in for all businesses.
41:02 – What can YOU do to cope with these changes?
What does environmental impact throughout the product lifecycle mean, how do you make progress to collect data from suppliers in Asia now? Sourcing staff will become busier. Companies need to conduct an in-depth risk analysis right now. Do you know what stages and steps have gone into making the products you import, and where? If not, your risks of non-compliance are higher. Do you know what goes into the manufacturing process for a product before you even start buying it? Are your products recyclable? This is a big problem for batteries as it’s toxic and energy-hungry to recycle Li-ion batteries. Textiles are also very polluting.
44:40 – Summary of what the EU Ecodesign regulation focuses on.
What’s coming up for importers into the EU?
Anything that impacts sustainability and circularity is looked at: product durability, reusability, repairability, the presence of harmful substances (REACH+), resource and energy usage and efficiency, recycled content of products, remanufacturing or recycling at the same level of quality rather than downcycling, over manufacturing that leads to unsold products being scrapped (incinerated or landfill).
45:40 – Wrapping up.
In another episode, soon: what companies need to start doing if they import products into the EU from outside.
- How To Get Transparency And Control Over Your Supply Chain? [podcast]
- REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
(establishing a framework for setting ecodesign requirements for sustainable products
and repealing Directive 2009/125/EC) – if you want to read the forthcoming regulation in full.
- Ecodesign for sustainable products
- What is the EU Corporate Sustainability Reporting Directive (CSRD)?
- How To Push a Chinese or Vietnamese Supplier for Supply Chain Transparency
- Sofeast can help you do a full background check on new (or existing) suppliers in Asia
- We can also source suppliers who provide transparent supply chain information to help you comply with EU demands
Subscribe to the podcast
There are more episodes to come, so remember to subscribe! You can do so in your favorite podcast apps here and don’t forget to give us a 5-star rating, please: