Doing Business in the Age of Transparency: A case study of Full Material Disclosure in the electronics sector

Abstract: Electronic products consist of substances that can be harmful to human health and the environment if exposed or leaked during the product use and end-of-life phases. Full Material Disclosure (FMD), which usually requires suppliers to disclose on the concentrations or masses of all substances in a product, is one method of increasing supply chain transparency on chemicals in products. This case study developed a framework to systematically analyze the development and implementation of FMD at hard drive manufacturer Seagate Technology Ltd., with the purpose of improving the understanding of how a firm’s external and internal environments can relate to and influence the outcomes of FMD as a chemicals-in-products (CiP) disclosure strategy. It assessed, for Seagate, why FMD was chosen, how it was developed, how challenges were overcome and what factors led to its success. The relevance and influence of Seagate’s business environment (the political environment, external stakeholders, market environment and organizational context) were analyzed. Comparisons with four other electronics companies were made. This study found that client requirements were the biggest driver for Seagate’s FMD, though regulatory requirements, NGO pressures and industry initiatives were more significant for downstream OEMs. A trickle-down effect was observed where downstream companies pass such requirements up the supply chain which can manifest into voluntary (i.e. non-regulatory) substance restrictions. This study demonstrated that the likelihood of success for a company to establish FMD is dependent on two elements. First, a set of preconditions related to the external and internal contexts of the company, such as high buyer power, long-term collaborative relationships with suppliers, high supplier capability, high vertical integration and complex and irregular changes to regulatory and client requirements, fewer product lines and relatively non-complex products, and a networked firm structure that values sustainability and meaningful corporate responsibility engagement. Second are a number of actions that a company can take to facilitate FMD implementation and overcome common challenges. Areas of further research were recommended on understanding FMD adoption trends in the electronics industry, perceptions on existing FMD data standards to improve FMD standardization and additional studies using the same units of analysis to verify the findings. NGOs should also take a company’s size (product diversity and production quantity), position in the supply chain and overall supply chain structure into account when promoting FMD as a strategy to enhance supply chain transparency on CiP.