Compliance

Market compliance programs are a critical component of sustainable market transformation. These programs revolve around monitoring markets, verifying compliance, and enforcing regulations on companies that fail to meet them. Therefore, the compliance program design includes determining the mechanisms for implementing compliance through three steps – conformity assessment, market surveillance, and enforcement (see figure below). The first step, conformity assessment, protects suppliers’ competitiveness by ensuring that they are all subject to the same robust market entry conditions. The market data and intelligence gathered through the testing, certification, and registration process enables compliance authorities to effectively target and investigate the market and check for potential cases of non-compliance under the second step, market surveillance. If conducted efficiently and strategically, market surveillance activities can significantly reduce costs and reduce the burden on government bodies to prove and rectify cases of non-compliance under the third step, enforcement. 

 

Effective compliance programs offer benefits to all supply-chain key stakeholders. First, consumers benefit from getting the product they are expecting. At the time of purchase, they can trust the packaging, the labels, and the information they see in the advertising. Businesses – both importers and manufacturers – benefit from having a level regulatory playing field, a fair market that encourages and rewards investment, technological innovation, and compliance. And finally, governments benefit from ensuring that their adopted policy measures are followed, achieving their country’s public health, environmental, and economic policy objectives.

As governments worldwide adopt regulations to phase-out inefficient, toxic fluorescent lighting, it will be necessary to ensure that national compliance programs are in place to enforce the new policies and prevent illegal or substandard products from getting onto their markets. This section focuses on establishing and strengthening national compliance programs that will underpin the regulations adopted by governments to achieve their policy goals. The actions below provide an overview of steps governments and member states take to set up their programs.

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• Legal and Administrative Framework

A strong foundation within the national legal framework is crucial for a compliance program. This foundation should encompass legal authority, enforcement powers, and penalties. The legal framework for an energy-efficient enforcement regime will depend on the national governance structure, existing legislation, and the infrastructure and design of the compliance process.

Legal frameworks must clearly delineate responsibilities between the different government agencies that implement compliance programs across the country. This should include the agency responsible for coordinating the compliance program and other agencies such as customs, standards, and testing, who all have central roles. For example, the legislative framework could bestow the coordinating authority the ability to issue fines and block the sale of non-compliant products from entering the market.

The operational framework within which the enforcement authority operates should be transparent. This improves compliance rates through clear communication and understanding of the MVE scheme. 

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• Financing Compliance Programmes

The cost of a national compliance program varies as it depends on the program’s scope and local or regional factors, including labor and services costs. When planning how to allocate funding for a compliance program, the coordinating agency will consider the relative scale of the harm caused (cost of wasted energy, loss of consumer confidence) through non-compliance. Ideally, the budget allocation for compliance should be an evidence-driven, risk-based process that is transparent and defensible. 

The areas of a compliance program that incur costs are listed below:

• Establishment costs – setting up the main office and possibly field offices with new equipment; 
• Staff costs – hiring and training of the staff, covering the key areas of administration, investigation and management, and in specialist areas such as customs officials and test labs;
• Communications – informing the market about the regulations, the compliance program, and enforcement proceedings, as deterrence is highly cost-effective; and
• Legal and enforcement action – the coordinating agency needs to have (and be seen to have) sufficient funding to use its full range of legal powers.

The success of a compliance program depends on identifying a secure and sustainable source of funding that’s maintained for the given market. Governments must assess equitable and feasible solutions and construct a solution that fits their framework. Robust schemes require good market awareness, sampling, and testing. The most common source of funding is the government’s general operating budget. However, this does not need to be the only source of funding. Cost-recovery from suppliers can also be another source of funding, with many programs around the world introducing cost-recovery elements to their schemes. Cost recovery can be partial or complete and can be achieved through, for example, registration fees, verification testing fees, and enforcement fines.

Many programs collect funds from suppliers during registration in the form of an annual payment, a one-off payment for a specified period, or a higher initial fee followed by a smaller annual payment. Registration fees are generally levied on product models rather than brands or suppliers, which best reflects the costs involved. 

In addition, many national compliance programs require a third-party test certification of products. This comes from an independent body as a condition of entry to the program. While this is not cost-recovery per se, it can reduce the program’s costs. This is because the system administrator is delegating some of the responsibility for ensuring products meet the requirements to third parties that the product suppliers pay. 

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• Product Registry Systems

Product registration systems offer an initial compliance gateway. Suppliers register compliant products with the regulatory authority. The registration process requires manufacturers to submit test results on the products and certify that the product performance meets the regulations, standards, and any labeling requirements before the product is placed on the market. The data recorded typically include brand, model, lamp type, rated power, light output, efficacy, CRI, and CCT. In addition, energy performance data, technical product specifications, sales figures, and product prices can be included in these systems.

Governments set up product registration systems via legislative and regulatory authority. Mandatory registration systems are in place for products with energy labeling in Australia, Canada, China, the European Union, New Zealand, Singapore, the US, and others. Registration systems meet the needs of many different stakeholder groups:

• Policymakers / Government – Provides a record of baseline data to support policy-making; expands the evidence database for market surveillance; and serves as a storehouse of ancillary information and data about products on the market.
• Manufacturers and Suppliers – Facilitates declaration of conformity with regulatory or voluntary requirements; provides information about innovation in product design (fostering competition and innovation); strengthens brand credibility, and helps to ensure a level playing field.
• Consumers – Provides a database of product-specific information in the public domain; opportunity for advanced features through apps or other tools, doing product searches; and enhances the transparency of communication about product performance.
• Distributors – Retailers can verify that products supplied are registered and compliant with local laws
• Other Players – Registry information can determine product performance for market pull programs that incorporate financial incentives, subsidies, and prizes.

• Test Laboratories

Product testing constitutes the cornerstone of any product compliance certification report, whether for a voluntary or mandatory program. There are two principal pieces of photometric measurement equipment. These are the integrating sphere and the goniophotometer, both of which require ongoing calibration maintenance to ensure the accuracy and reliability of measurements. 

However, laboratories are expensive facilities to establish, commission, earn accreditation and maintain; there needs to be a minimum level of business in a given market to sustain the laboratory and ensure it has adequate revenue to operate and maintain its calibration and accreditation. 

Countries with smaller economies may consider outsourcing laboratory test needs to neighboring countries. Then later, as their economy grows and the volumes increase, they can justify direct investment in a domestic testing facility.

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• Proactive Communications 

Communication is a critical element of any successful MVE scheme. For manufacturers, it helps to ensure they are aware of their legal obligations and what happens if found to be non-compliant. Further, it informs consumers that their government is working to ensure that the national market for a given product offers a fair and level playing field. Communications can also be a powerful tool in gaining the respect of the regulated businesses and improving compliance rates – for example, taking quick action to minimize market damage and making it visible as a deterrent to others.

Governments must develop a communications plan. This plan should be fine-tuned and appropriate for the domestic market and should consider all the main stakeholders involved in the supply chain. The campaign should communicate the key messages to the stakeholders about the requirements, the risk of detection and sanctions, and any corrective actions taken. For example, governments can choose to list the number and frequency of surveys and tests, identify plans for future compliance work and publish information about their work. Some governments may also consider identifying products and brands that are non-compliant (also called the ‘name and shame’ approach).

Governments can offer several tools, training, and guidance to improve compliance rates. For example, they can offer training courses to explain regulatory requirements or maintain a regulatory hot-line or email service to answer the suppliers’ questions. In addition, they can publish a frequently asked questions (FAQ) website and guide on compliance reporting and documentation requirements. These approaches help minimize the cost of demonstrating compliance, thereby helping ensure higher compliance rates and more successful outcomes.

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• Regulatory Enforcement 

In a non-compliance scenario, the coordinating authorities will carefully consider the degree of non-compliance and the proportionate enforcement actions. The available enforcement actions should be flexible, enabling the enforcement authority to assess the situation and initiate proportionate action. The penalties and powers of the enforcing authority should be set out in law. Further, the powers and steps should be outlined in administrative procedures or operational guidelines. 

Many authorities develop an ‘Enforcement Pyramid’ to inform and manage their enforcement response strategies. The bottom of the pyramid typically features more informal actions, while the top should reflect the most severe enforcement response to noncompliance (see Figure 3).

The pyramid can be populated to be most effective for the national enforcement strategy, in accordance with the legal requirements and resources available to the enforcement authority and the characteristics of the program and its participants and stakeholders. 

Source: UN Environment 2016.

Figure 3. Pyramid of escalating enforcement

For more information on effective enforcement schemes, please see a recent UN Environment report that serves as a practical resource to policy-makers on the steps to follow when implementing a national enforcement program. This report covers:

• Legal and administrative foundation for enforcement,
• Enforcement budget and activity planning,
• Identifying types of non-compliance, and communicating to stakeholders.