INCORPORATING ENVIRONMENTAL CONCERNS IN SUPPLY CHAIN OPTIMIZATION - Environmentally Conscious Materials Handling - page 118

2 LEGISLATIVE FACTORS

In this section, we briefly describe how environmental legislation has evolved
and reflect on the accompanying changes to supply chain decision making. Envi-
ronmental legislation has recently moved toward goal-oriented and market-based
policies that require the beneficiaries of goods and services to incur the exter-
nalities associated with production, distribution, and consumption. In particular,
regulatory instruments increasingly have two goals:
1. Address the ultimate goal of eliminating or reducing discharges into waste
streams (air/water/land).
2. Create a “market price” for such discharges by requiring permits for dis-
charges.
We classify recent legislative instruments into two categories — extended pro-
ducer responsibility (EPR) and cap and trade. Although these instruments are both
punitive in nature, legislation occasionally serves to encourage environmentally
friendly products or processes. Tax credits for energy-efficient equipment are one
example (Internal Revenue Service 2006). The SCO effort should allow for the
consideration of environmentally friendly options that could become viable.

2.1 Extended Producer Responsibility (EPR)

EPR is based on the philosophy that the beneficiaries of products — namely, pro-
ducers and customers — should be held responsible for the environmental impacts
of products, rather than local governments (Lindhquist 1992). Legislative instru-
ments specifying design standards and product take-back broadly constitute EPR.
Within these two broad categories, the specific allocations of physical and finan-
cial responsibilities vary with the particular legislative implementation. We reflect
on the changes that design standards and product take-back entail to SCO.

2.1.1 Design Standards
Design standards aim to prevent discharges into waste streams as opposed to
having to mitigate them. Regulatory instruments such as the RoHS (Restriction
of Hazardous Substances) directive in the European Union (EU) serve to
eliminate toxic materials at-source rather than deal with these materials at
end-of-life. The effect of such a regulatory tactic on SCO is the imposition
of related constraints or the elimination of options such as material-process
combinations (Stuart et al. 1999).

2.1.2 Product Take-Back
Similarly, product take-back focuses on the ultimate goal of preventing end-
of-life products from entering into waste discharge streams. Product take-back
legislation has taken various forms — from the WEEE (Waste Electrical and Elec-
tronic Equipment) directive in the EU that requires manufacturers to take back