How Differing State Environmental Regulations Impact Manufacturers and Distributors

New rules from federal regulating bodies such as the Department of Energy or Environmental Protection Agency often stifle innovation and create burdensome requirements on industries, including foodservice equipment and supplies. But state-level regulations and policies on environmental matters can have far-reaching impacts as well.

Having spent most of his career working on and influencing legislation, Kevin Washington, head of government affairs at ITW, is deeply knowledgeable about how states develop environmental regulations and how industries can work with policymakers to negate the harmful consequences of policies. Washington joined ITW in 2012 as the FEDA manufacturer member’s first executive to focus solely on government affairs. Previously, he worked for the Association of Home Appliance Manufacturers and served in the George W. Bush Administration, where he managed state and federal legislative affairs. Washington spoke with FEDA about the state environmental regulations foodservice equipment and supplies dealers should be aware of and how they can help to shape those regulations.

When we’re talking about state-level environmental regulations, are we mainly looking at power consumption specifications for an equipment product or are there other aspects, such as the actual manufacturing, that are included?

Kevin Washington: Generally speaking, there is opportunity for state regulations to cover a range of manufacturing and distribution aspects. In more recent years, though, various energy resource issues (e.g., electricity and water) have been the main focus of legislation or regulatory agency policies, with the objective of both mandating increased resource efficiency in appliance performance and, thereby, ostensibly, promoting additional, resource-efficient products to consumers. The trade-off that policymakers often miss is that these new policies are not zero-sum propositions; the increase in product performance will always come at some cost, so the question then is where and how those costs get realized.

How widely can environmental regulations vary from state to state? Can you provide some examples?

Because states as legal jurisdictions can and do set their own policies, they are free to set what works for them regardless of any variance or inconsistency with other – even neighboring – states. And, as an additional note, lots of stakeholders will use the term “regulations” broadly to mean any policies that impact commercial appliances. It is important, though, to understand that three main policy types can be impactful: legislation (crafted by state legislatures), regulations (created by regulatory agencies) and codes (e.g., building codes generally, but to include electric, fire, mechanical, energy, etc., that are work products of consensus standards organizations that get adopted and enforced by state and/or local regulatory agencies). Collectively, these can be referred to as “public policy,” in general. All can carry the effect of law and the requirement on all of us to live by them according. They will only differ depending on which governing body (legislature or regulatory agency) is putting it forward.

Various environmental policies can cover a wide range of differences between states A simple example might be where one state set of building codes allows for a particular type of appliance while another state code does not. The appliance can be identical between two states, and yet, a manufacturer can experience difficulty from one state to another.

 

What are some examples of state environmental regulations that you are closely monitoring? How could these regulations impact manufacturers, and, in turn, distributors?

Well, the data set is pretty broad here, there’s no shortage! But one of the most overarching and impactful regulations is found in California’s Proposition 65 chemical content regulation. As a body of regulation, it was first put into force in the mid-1980s and experienced its first, significant update in 2016 (taking effect in 2018). Well, at the top of 2021, the regulatory agency overseeing the law – OEHHA (Office of Environmental Health Hazard Assessment) for short – unveiled some draft changes to narrow manufacturers’ ability to use certain abbreviated labeling constructs in favor of longer, more descriptive ones. The manufacturer and end-user community have been very active in raising concerns about the changes, including especially so soon after OEHHA’s wholesale update just a few years ago. The good news – and yet, it still creates some uncertainty – is that OEHHA did not really anticipate the degree of blowback it received in the form of public response and criticism toward the proposed changes. So, the agency is still considering the input it received to its proposed changes and the anticipated timeline to finalize its proposal has passed while the agency considers how to proceed.

Based on understanding Proposition 65’s breadth and depth, it seems pretty clear that the whole of the manufacturing user chain can seriously be upset by hanging in the balance of waiting for such a consequential agency action to be finished. This regulation, among lots of other public policies, does and will shape how manufacturing stakeholders – including distributors – provide notice to enhance consumer awareness of the chemical content of the equipment we make and sell.

When states impose environmental regulations on equipment manufacturers, how does that influence products across the country? Are there times when a single state has effectively created a nationwide regulation?

There certainly can be. The example above on California’s Proposition 65 is a great example. Manufacturers have chosen to label products to comply with the Proposition 65 regulations, and those products may be found in different parts of the United States. This is especially true since most product makers do not manufacture to a specific market, and it is all the truer when manufacturers use the commercial distribution chain to go to market without any controls on where individual units wind up being installed.

How are manufacturers like ITW working to reduce the burden of state regulations? What successes have you had?

The primary way to manage the benefit or impact of a proposed policy is to be directly involved in shaping it. Of course, that can only happen when you are aware the policy is out there in the first place. ITW holds a somewhat unique position in being a company with in-house, dedicated resources to engage in the practice of government affairs, or monitoring of and engagement on public policy across the globe. While we are not alone in that, most companies don’t have a specific function for that engagement and rely on peer groups, such as trade associations, to engage policymakers on member companies’ behalf.

Whichever way it happens, policymakers have to hear from subject matter experts in order to make the best public policy (whether they’d admit that helps or not!). Manufacturing, while a broad area, is a unique area of expertise because of what we all know goes into manufactured goods, including the aspect of distribution, which is another expertise area. Policymakers generally do not have backgrounds in business – much less manufacturing specifically. It stands to reason that policymakers’ ideas can only be strengthened when they have the best information supporting them, which can only best come from subject matter experts like manufacturers and the distribution outlets on which we rely.

One case in point is environmental regulation that mandating switching out the refrigerant used in commercial refrigeration equipment (CRE). As FEDA members well know by now, the EPA first mandated a refrigerant switch in 2015. But when the agency got sued over that regulation and lost, states picked up the mantle – and first up was California. ITW had a leadership role in convincing state regulators to basically pick up and replicate the dead federal regulation for a broad scope of our products, and thankfully the agency did exactly that, citing the insights shared directly by product makers as the reason why.

In one important sense, ITW and other companies who engaged with California on that regulation made the regulators’ job easier; we showed why the EPA had written something workable for manufacturers and, because California was acting so soon after the EPA finalized rule, the state could rely on the work shown in the EPA rule for CRE instead of reinventing the wheel, which freed the state regulators to focus on other areas where they had to write policies from scratch.

What else do equipment dealers and distributors need to know about state-level environmental regulations?

Local. Voices. Matter. If you are not directly – or indirectly through a group like FEDA – engaging your lawmakers’ policies on behalf of your businesses, don’t be surprised when bad laws make their way to your door – and that goes for every level of government. That can happen even with the most intense lobbying work but is much more guaranteed without it. Be a proactive part of public policy advocacy, especially environmental issues impacting what you sell. You can’t stop the public policy from coming, but you can shape what it looks like and how it affects your business and customers.