Global supply chains are at risk from 'duty of care' rules that are part of the European Union's REACH (Registration, Evaluation and Authorisation of Chemicals) legislation, according to Marsh.
In its report, "The Risk Management Impacts of REACH", Marsh outlines the increased business risks that chemicals suppliers and users globally are facing as a result of REACH, which comes into force on 1 June 2007. The European Commission has stated that REACH will cost the chemical industry €2.3bn over 11 years.
More than 100,000 chemical substances are commonly in use within the EU, most of which have not had their properties evaluated and documented for safety. In response to this, REACH is intended to make the trading, handling and usage of chemicals safer for European workers and citizens and promote environmental protection. As a result, any company trading in the EU which either directly supplies chemicals into the EU, or has investments in the EU which manufactures chemicals or uses chemicals, will have to be compliant with REACH.
REACH imposes 'duty of care' within the supply chain, which creates an obligation to communicate substance usage and exposure data to those working with the substance. Manufacturers, importers, downstream users and distributors will have a requirement to keep records for 10 years after the last supply.
For example, a manufacturer of children's toys may use materials originating from outside of the EU, but as their products are sold within the Union, both they and their suppliers are bound by REACH.
Commenting on Marsh's report and the REACH legislation, Christopher Bryce, Industry Practice Leader, Chemicals and Life Sciences EMEA, said: "REACH is one of the most important and complex pieces of regulation to be introduced by the EU in the past 10 years. The risks arising from REACH are many and varied and its effect will be strategic, operational and financial, depending upon whether a firm is a manufacturer, importer or downstream user.
"The 'duty of care' rules are onerous. Firms that have either direct or indirect trading relationships with, or investments in, the EU need to evaluate how they may be affected by the REACH regulation, understand what the risks are and decide on the action they should be taking to ensure that they can comply with the wide obligations that REACH will impose."