TARGETED REGULATORY REFORM LONG OVERDUE IN CANADA

In September CPCA responded to the federal government’s call for views on regulatory modernization in Canada. As in the past, CPCA remains most concerned about the need for regulatory modernization to address the increasing regulatory burden on industry. Moreover, this is an integral part of ensuring Canada is competitive by aligning regulations with that of other jurisdictions, especially that of the United States, our largest trading partner by far. This is critical for the coatings industry, and other sectors of course, as paint and coatings is still among the most heavily regulated industries in Canada. CPCA’s comments focused on specifics such as the need for regulations to be more agile and more responsive, while continuing to protect health, safety and the environment. Other areas emphasized the need targeted regulatory reviews rather than ones that captures a wide spectrum of business activity; increased use of the Red Tape Reduction Act to alleviate regulatory burden in Canada; more options to make positive changes to regulatory mandates; and specific suggestions for the next annual Regulatory Modernization Bill before Parliament. Many industry sectors know that federal regulations, now number over 132,000 and counting, are a drag on Canada’s economy. Canada ranks 34 of 35 OECD countries in terms of positive regulatory impact on the economy. This has to change.

CPCA believes chemical manufacturing must be considered in Round 2 of the federal Government’s regulatory modernization effort. Canada’s coatings sector is very much in favour of a regulatory system that will facilitate clean technology innovation to enhance competitiveness. This can be done by limiting the number of restrictions and regulatory impediments to any process, product, or chemical that is unique to Canada. Clearly this would require increased alignment with our largest trading partner, the United States. In the case of paint and coatings, as with many other sectors, a large volume of product is shipped to Canada from the United States and many of the companies doing business in the coatings sector are US-owned companies with substantial intra-company movement of goods and people across the border. Its no secret that Canada’s productivity lags that of the United States by approximately $10,000 per worker and new approaches are needed to close that persistent gap. However, those enhancements must be made in the new digital economy and if not new wealth creation will be restricted in the foreseeable future as it relates to manufacturing and chemical manufacturing specifically.

Clean Technology

There are many examples of clean technology in paint and coatings products as follows:

• products that significantly reduce volatile organic (VOC) emissions, which are precursors to fine particulates and ozone that in turn contribute to climate change
• marine products that prevent bio-contamination from causing ‘drag’ on ocean-going ships that would otherwise consume more fossil fuel and emit more CO2 emissions
• new and emerging products such as those preventing the development of bacteria and viruses in hospital and clinical environments, products that kill mosquitoes or can help eliminate atmospheric pollution
• a growing number of smart coatings that prevent corrosion and/or degradation of structures and surfaces such as wind turbines, solar cell platforms, cell phones, etc.

Paint and coatings products are certainly common denominators for virtually all green technologies developed to enhance performance of various substrates, while at the same time reducing the overall environmental footprint of those companies. As such, paint and coatings manufacturing must be viewed as an ‘enabler’ to environmental sustainability for all those industries using coatings to: enhance or extend the lifecycle of their products/structures, reduce overall operating costs, and realize efficiencies and utility from such coatings products. As such the coatings industry in Canada must be supported and sustained via the regulatory process over the long-term as part of efforts to enhance productivity through regulatory modernization.

 CPCA has grave concerns with several legislative and regulatory initiatives being planned beyond 2020, which may act as disincentives to the expansion of clean technology in Canada, for coatings in particular. For example, the ongoing reform of the Canadian Environmental Protection Act (CEPA Reform) will be implemented within the next several years by the federal government. These reforms will be based on many of the recommendations proposed by the Parliamentary Committee on the Environment and Sustainable Development. Some of these reforms will negatively impact productivity. The current federal government has largely endorsed all of these reforms. They include suggesting a European REACH approach to chemical assessment that places the burden of proof on industry for all substances of concern to enhance transparency, but reduce CBI protection in the process. This may indeed introduce undue regulatory pressure on smaller Canadian-based manufacturers who do not have the ability and resources needed for significant R&D or cannot ensure adequate protection of their trade secrets.

The Parliamentary Committee’s recommendations have the potential to create insurmountable barriers to the manufacturing of competitive products in Canada. It could also restrict the availability of key chemicals needed to innovate in a wide range of highly performing paint and coatings mixtures, many of which are water-based. There appears to be a real disconnect between the environmental and health policy targets versus the Canadian government targets for economic growth.  Clearly the former now greatly hinders the latter. Therefore, the current regulatory review of clean technology initiatives must focus on the following:

• Enhance monitoring of all modifications to legislative requirements posing an impediment to development of clean coatings technologies
• Intensify and expand collaboration among advanced manufacturing super-clusters and smaller Canadian-based businesses to further accelerate the development of clean technology
• Support the development of a talented workforce and leading-edge expertise in Canadian industry via diverse federal-provincial regulatory programs including universities and research centers
• Facilitate financial access and support for clean technology start-ups and SMEs as well as related public-private partnerships and international financing sources, while closely monitoring these regulatory programs with respect to their orientation, targets, performance metrics and timing
• Prioritize the development of energy efficiency or clean energy and what are already viewed as truly renewable, sustainable and smart technologies in the coatings sector as they have been overlooked to date

Digitalization and Technology Neutrality

CPCA and its members fully endorse a meaningful review of current legislation that would advance digitalization in the regulatory space. This would also include any tools that could be used to reduce administrative regulatory burden, enhance intellectual property rights and ensure business information protection. Through increased digitalization, the Canadian government will better assist businesses in adapting to increasing globalization and deal with the complexity across supply chains. This may be beneficial with respect to increasing information sharing for new and existing chemicals in commerce, including alternative chemicals and informed substitutions for those chemicals in coatings.

Recognizing the difficulties expressed by our members in fully grasping massive Canadian legislative and regulatory requirements CPCA moved expeditiously and developed its own digital platform for the Canadian coatings industry, the Canada CoatingsHUB. This Hub facilitates ongoing research on existing regulations and regulations being considered for the paint and coatings industry. This new HUB approach, in fact, promotes further compliance and risk mitigation in the coatings industry. It also helps CPCA gather critical data from industry to support the current use levels for many products now under chemical assessment by the federal government. More digitalization of the regulatory space will mean easy access to relevant content on various digital platforms by companies, all searchable on multiple platforms. Government must take a similar approach to the digitalization of its regulatory data points. Antiquated delivery systems and out-dated technology solutions must be addressed across a number of federal departments and agencies to address what has been a range of deficiencies in data dissemination and industry access to critical compliance data.

In the context of a global digital economy, all federal and provincial regulations aimed at enhancing access to information, while protecting confidential business information, will help reinforce competition law in Canada. However, Big Data projects and related analytical development in this area can inadvertently hurt national and global competitiveness and innovation. While embracing new digitalization, business neutrality must rule the day and regulators must refrain from pushing the market toward a particular structure and not pick technological winners and losers in a dynamic digitalized market. It is critical that the federal government participate in international forums with respect to developing harmonized digitalization, including of course our largest trading partner the United States.

International standards

The incorporation of international standards must be facilitated in the regulations without necessarily having to go through an extensive and lengthy consultation process, prior to any changes taking effect. Such an approach would certainly help save time and money while reducing barriers to international trade. However, there should be sufficient time allowed for fully consulting industry prior to ‘fast-tracking’ new standards, with a fulsome cost-benefit impact analysis completed to ensure there is capacity in Canadian industry sectors to easily transition to those standards. This should be done without disrupting existing technology and capital investment. Flexibility is critical in adopting new international standards in Canadian regulations.

Recognizing the need for a standardized framework by which manufacturers can evaluate life-cycle impacts of their products, the paint and coatings industry has also developed its own standards such as several Product Category Rules for architectural coatings (some jointly with NSF), which facilitate Environmental Product Declarations (EPD) by companies for the benefit of the public and the environment. CPCA and ACA (American Coatings Association) have collaborated in the development and adoption of these international standards and continue to consider further actions in this area via the World Coatings Council. There is also various company performance and ecological standards such as ISO standards that are commonly adopted by CPCA members, as well as various national or international certification programs.

Regulatory support

Without necessarily including existing standards, which undergo their own independent reviews, government must understand their existence and/or prevalence in certain industries when considering new regulations or new risk management measures such as codes of practice and pollution prevention plans. Standard management practices contribute to the overall reduction of industrial releases and wastes. Along those lines, many CCME standards developed in the past would need to be updated and further adapted to existing international standards. The government should also support the adoption of low-carbon equipment and sustainable processes in various industries by crafting a specific ‘’innovation standard model” that could be applied across industry sectors.

Administrative Burden

Back in 2012, the ‘One-for-One Rule’ was one of six systemic reforms under the Red Tape Reduction Act meant to reduce regulatory burden. Canada was the first country in the world to legislate the ‘One-for-One Rule’ to control regulatory red tape. All regulations have a significant cost for government and thus the taxpayer. In practice, the number of requirements for businesses has steadily increased between 2014 and 2017, while the government has exempted 76 regulations from the ‘One-for-One Rule’ and thereby adding regulatory burden, despite having eliminated 131 regulations. The actual experience in the paint industry since 2014 related to economic impact analysis of regulations rarely concluded a significant socio-economic impact on the coatings industry, even if there actually was. Due to this situation there has never been one chemical regulation removed when a new regulation or additional mandatory restriction was created. On the contrary, the paint industry has instead experienced an increasing number of regulations; use restrictions for substances, increased risk management measures, and many mandatory industry surveys in that process. Also during that time industry had to comply with several major regulatory mandates (i.e. WHMIS 2015 implementation) and multiple decisions and restrictions have been implemented using mandatory and non-mandatory risk management tools (i.e. hundreds of SNAcs – Significant New Activities) after many voluntary or mandatory surveys.

The Chemicals Management Program (CMP) was an ambitious program covering the assessment of 4,300 substances in a five-year period. By comparison, many more substances in Canada were assessed than were actually covered by REACH in Europe, and over a shorter period of time than Europe. It is also being done hundreds of times faster than the US TSCA chemical reform. TSCA has advanced at a snails pace by comparison with the risk evaluation of 10 substances over a 2-year period (2017-2019) (risk management step to follow) and the 10 per year prioritization step, which led to the identification of 40 more substances in 2019. This illustrates that since 2006, the Canadian industry has been aggressively moving forward on hundreds of chemical assessments, which require massive amounts of industry data and time, which comes at a great cost and increased regulatory burden.

Improved Consideration of Regulatory Burden and Better Accounting Methods

In previous industry-government stakeholder forums CPCA chemical supplier members stressed that they must review a long checklist of hundreds of different Canadian regulations and restrictions before deciding whether or not they would import a chemical for sale in Canada. And, 95 percent of the time they had to pass on the business opportunities offered by the chemical because it would be too complex, highly bureaucratic and onerous for their companies to pursue the opportunity. These regulatory barriers include various import restrictions, permits and licences (i.e. for storage, tankage, etc.) and various acts such as the Transportation of Dangerous Goods Act and regulations, preparedness for the Environmental Emergency Regulations, CEPA (existing DSL controls, limits of use of some chemicals or bans, possible NSN filing of any new substances with pre-consultation (minerals and metals imports, etc.), HPA (GHS hazard classification and OEL limits), Pest Control Products Acts (authorized pesticides/biocides only), Import/Export Lists and tariffs, etc. Not to mention ten times more provincial and territorial laws and regulations to consider.

There must be alternative mechanisms created to alleviate the ‘’cumulative effect’’ of regulatory burden in Canada. These must be focused on simplifying the import/export process through digitalization in the regulatory space. The bombardment from CEPA-related and HPA-related regulatory requirements alone has tempered the enthusiasm for new chemicals in commerce, some of which are better for both health and the environment. Virtually all CMP regulations and risk management decisions published in Canada have had significant business impact on companies operating here. This has lead to the loss of high selling product lines, increasing the need for more studies, requirement for more R&D and reformulation, increased process enhancements, increased data collection for government, extensive testing and re-testing, etc. All these costs have reduced the business enthusiasm to innovate and adapt to international standards. Regulations and risk management measures should only address ‘proven’ risks that are unacceptable and not assessments made under the precautionary principle focusing on ‘possible’ risks, not real risks. Moreover, the Post-2020 federal Chemicals Management Plan will likely address larger groups of domestic and non-domestic substances than it has in the past. It has noted that it may also go back and review substances that were already assessed in the initial days of the CMP.

There is much more to CPCA’s comments on the need for regulatory reform in Canada and available to members on the CoatingsHub. While Canada knows it is over-regulated, the recent actions noted above reinforces the fact that knowing what hurts Canada’s competitiveness is much easier than addressing that ailment. That said, something must be done to effect real regulatory modernization in Canada, once and for all. There is no time like the present!