Manufacturers Score Victory on Proxy Firms
The NAM achieved a significant victory in court Wednesday in a case that sought to bring needed oversight to proxy advisory firms—and, more broadly, to ensure regulatory certainty for manufacturers.
The background: Proxy firms make recommendations regarding the way shareholders should vote on proxy ballot proposals that come before public companies.
- These firms operate with minimal oversight despite their outsized influence and even though their decisions can have significant and sometimes harmful impacts.
The fight: In 2020, the Securities and Exchange Commission finalized an NAM-backed rule that included a range of modest but critical reforms to proxy firms’ business models.
- In particular, the 2020 rule ensured that companies had more information about the firms’ voting recommendations and provided investors with companies’ responses to those recommendations.
- But in 2022, the SEC rescinded critical portions of that rule.
- The NAM sued the SEC, asking the U.S. Court of Appeals for the Fifth Circuit to strike down this arbitrary and capricious agency action.
The victory: This week—in news covered by Reuters, POLITICO Pro (subscription), Law360 (subscription), Pensions & Investments (subscription) and Bloomberg (subscription)—the Fifth Circuit ruled in the NAM’s favor, deciding that the SEC acted unlawfully in rescinding the 2020 rule. In particular, the court made two critical points:
- The court held that the SEC’s stated justification for its decisions to rescind NAM-supported proxy firm reforms didn’t pass muster and called the agency’s reasoning “facially irrational” and not “reasonable [or] reasonably explained.”
- The court also ruled that a government agency reversing course despite no change in its underlying factual findings must “explain its about-face” by “giv[ing] a more detailed explanation” than the SEC provided.
- This ruling builds on existing case law that prevents agencies from arbitrarily reversing policies after administrations change, thus encouraging regulatory certainty for manufacturers.
Our take: “This decision confirms that federal agencies are bound by the rule of law, even as administrations change,” said NAM Chief Legal Officer Linda Kelly.
- “Manufacturers depend on the SEC to be a steady regulatory hand at the wheel of America’s world-leading capital markets—an obligation the agency abandoned in rescinding the commonsense, compromise 2020 proxy advisory firm rule. … We will continue to fight in court to uphold the 2020 rule—and to work with the SEC and with Congress to ensure appropriate oversight of these powerful actors.”
NAM, ACC Challenge EPA’s National Drinking Water Rule
The NAM and the American Chemistry Council yesterday filed a petition challenging the Environmental Protection Agency’s first-ever national drinking water standard limiting the presence of six types of per- and polyfluoroalkyl substances, or PFAS.
What’s going on: The organizations are seeking to overturn the final rule—issued in April by the EPA—in the D.C. Circuit Court of Appeals on the grounds that it exceeds the agency’s authority under the Safe Drinking Water Act of 1974 and “is arbitrary, capricious and an abuse of discretion,” in violation of the Administrative Procedure Act.
- Under the rule, PFAS in municipal water systems are limited to near-zero levels. Systems nationwide will have three years to monitor for the chemicals and two subsequent years to install technology to reduce the compounds’ levels in the water.
- The water systems will (and, in fact, have already begun to) sue manufacturers to cover their costs. Meanwhile, plaintiffs’ attorneys are using the standard in product liability and greenwashing suits against manufacturers.
- PFAS are a diverse group of chemicals that have been used widely for decades due to their unique ability to douse fires and resist grease, stains and corrosion. Today they’re a key component in a wide range of critical products, from semiconductors, to the components of the electrical grid, to renewable-energy production equipment.
Why it’s problematic: The final regulation of PFAS “is wholly infeasible and threatens these vital substances’ continued application in manufacturing processes,” said NAM Chief Legal Officer Linda Kelly, adding that the agency’s rulemaking is based “on a deeply flawed cost-benefit analysis” and fails to follow Safe Drinking Water Act procedure and other statutory requirements.
- “In many instances, there is no viable alternative for these chemicals, and companies may be forced to change plans dramatically” to follow the new rule, NAM Managing Vice President of Policy Chris Netram said in April.
- “In everyday life, including emergency situations like a fire or operating room circumstance, there’s a real reliance on these products—it’s not just about job losses and costs but fundamental decisions that have widespread ramifications,” Netram added recently.
What should be done: The rule should be vacated as soon as possible, the NAM and the ACC told the court.
Thermo Fisher Scientific Helps Manufacturers with PFAS Testing
As government regulation of per- and polyfluoroalkyl substances ramps up worldwide, Thermo Fisher Scientific is seeing a boom in its PFAS testing business.
“We’ve seen an increase in demand from a number of countries in the Americas and in Europe,” said Toby Astill, director of environmental and food safety in chromatography and mass spectrometry at the life sciences giant. “Those regions are driving more discussions around current and future regulations than other regions.”
- In recent weeks, the Environmental Protection Agency has issued several final rules concerning PFAS. These include the first-ever national regulation limiting PFAS in drinking water to near-zero levels and, just last week, the designation of two PFAS chemicals as hazardous substances under the Superfund law.
Writing is on the wall: Thermo Fisher foresaw the need for comprehensive PFAS analysis early on. That’s why it’s been offering clients a full suite of testing capabilities for more than a decade.
- Commonly called “forever chemicals” because they do not break down easily in the environment, PFAS were used widely in everyday products starting in the 1940s, owing to their ability to put out fires and resist grease, corrosion and stains in addition to countless other consumer and industrial applications.
- Using chromatography—“technology that allows lab users to separate and analyze the different components in samples,” according to Astill—Thermo Fisher can “confirm the presence of a specific substance and determine how much is there.”
- The tech is not limited to PFAS, however; it can also detect, down to parts per trillion, the presence of pesticides, heavy metals and other substances, Astill said. And it works on samples of almost anything, including food packaging, water and even air.
Aiding compliance: In coming years, manufacturers may need to analyze their PFAS exposure comprehensively to remain compliant with Toxic Substances Control Act and other international regulations, including those from the EPA, Astill said.
- In 2021, the EPA released its PFAS Strategic Roadmap, addressing the entire lifecycle of PFAS.
- Early last year, the agency proposed the first federal limits on PFAS, instituting maximum allowable levels for six substances in drinking water.
- In January, it finalized an “inactive PFAS” rule, mandating that any company wishing to manufacture or import PFAS chemicals that haven’t been made in years must first get approval from the EPA.
- That’s where testing comes in. “Manufacturers will want to figure out their [level of] PFAS exposure—whether it’s from their supply chains or the products they’re making,” Astill went on. “Because we see an evolving regulatory landscape, manufacturers need to have a baseline of where they are today, in 2024. That way they’re more prepared for regulatory compliance, and if needed, can review data retrospectively to understand trends. In fact, in October 2023, the EPA issued a mandatory one-time reporting rule on most PFAS manufactured or imported into the U.S. since 2011.”
- This February, the EPA proposed two regulations under the Resource Conservation and Recovery Act that added nine PFAS to the list of RCRA hazardous constituents with superfund implications.
Smart legislation: Thermo Fisher recognizes that we still have much to learn about PFAS chemicals, including whether many of them are harmful in the first place and whether there are practicable alternatives. In light of the many unknowns, the company recommends that legislators take a judicious approach to their regulation.
- “We don’t yet know everything about PFAS or all the PFAS” in existence, said Astill. “We need longer-term studies so we understand what we need to regulate and what we need to measure—be it in manufacturing materials or water—before we start regulating more.”
- Forthcoming regulations should also take into account the difficulty and expense of implementing PFAS remediation solutions, she added. “Legislators and regulators should consider the fact that this is not an easy feat for companies.”
Working on an alternative: While Thermo Fisher is not involved directly in inventing alternatives to PFAS, it is working actively with organizations that are doing just that, and it’s optimistic about the outcomes.
- “It’s [been] very difficult to find something with equal properties that is less of a potential health and environmental issue,” Astill said. “But what we have is a lot of intelligent global groups collaborating to share testing data and understand what potential replacement materials make sense—and that’s a tremendous opportunity.”
Thermo Fisher Scientific Helps Manufacturers with PFAS Testing
As government regulation of per- and polyfluoroalkyl substances ramps up worldwide, Thermo Fisher Scientific is seeing a boom in its PFAS testing business.
“We’ve seen an increase in demand from a number of countries in the Americas and in Europe,” said Toby Astill, director of environmental and food safety in chromatography and mass spectrometry at the life sciences giant. “Those regions are driving more discussions around current and future regulations than other regions.”
- In recent weeks, the Environmental Protection Agency has issued several final rules concerning PFAS. These include the first-ever national regulation limiting PFAS in drinking water to near-zero levels and, just last week, the designation of two PFAS chemicals as hazardous substances under the Superfund law.
Writing is on the wall: Thermo Fisher foresaw the need for comprehensive PFAS analysis early on. That’s why it’s been offering clients a full suite of testing capabilities for more than a decade.
- Commonly called “forever chemicals” because they do not break down easily in the environment, PFAS were used widely in everyday products starting in the 1940s, owing to their ability to put out fires and resist grease, corrosion and stains in addition to countless other consumer and industrial applications.
- Using chromatography—“technology that allows lab users to separate and analyze the different components in samples,” according to Astill—Thermo Fisher can “confirm the presence of a specific substance and determine how much is there.”
- The tech is not limited to PFAS, however; it can also detect, down to parts per trillion, the presence of pesticides, heavy metals and other substances, Astill said. And it works on samples of almost anything, including food packaging, water and even air.
Aiding compliance: In coming years, manufacturers may need to analyze their PFAS exposure comprehensively to remain compliant with Toxic Substances Control Act and other international regulations, including those from the EPA, Astill said.
Read the full story here.
PFAS CERCLA Designation Will Harm Manufacturing
In a move that will hinder the growth of manufacturing in the U.S., according to the NAM, the Environmental Protection Agency on Friday designated two widely used chemicals as hazardous substances under the Comprehensive Environmental Response, Compensation and Liability Act, or Superfund law, Law360 (subscription) reports.
What’s going on: The addition of two per- and polyfluoroalkyl substances, or PFAS, to the federal list “means the EPA can investigate and clean up releases of the chemicals and ensure that leaks, spills and other releases are reported. Under CERCLA, the government and other parties can sue for contributions to cleanups and to recover costs related to those actions.”
- The newly added PFAS are perfluorooctanoic acid, or PFOA, and perfluorooctanesulfonic acid, or PFOS. PFAS have been used across industries for decades for their unmatched ability to douse fires and resist corrosion, stains and grease.
- The news comes the same month the EPA announced the first-ever national regulation limiting PFAS levels in drinking water to near-zero levels.
What’s in it: “The rule requires entities to immediately report releases of PFOA and PFOS that meet or exceed the ‘reportable quantity’ to the National Response Center, state or tribal emergency response commission, and the local or tribal emergency planning committee, according to the EPA.”
Why it’s problematic: “[T]his unprecedented use of CERCLA authority by the EPA will only hamper President Biden’s vision of growing the manufacturing sector in the U.S.,” NAM Managing Vice President of Policy Chris Netram said, adding that manufacturers support smart efforts to remove harmful substances from the environment.
- “The unique and unmatched chemical bond of these compounds means that there are no existing replacements for the critical products they make up.”
- Furthermore, the overly broad designation of PFOA and PFOS as hazardous “will make it harder for our industry to create innovative products and jobs.”
Home Sales Decline
Sales of previously owned homes in the U.S. declined in March, CNN reports.
What’s going on: “Existing home sales, which make up the majority of the housing market, fell 4.3% in March to a seasonally adjusted annual rate of 4.19 million, the National Association of Realtors reported Thursday.”
- The median price for a previously owned home last month was $393,500, an increase of 4.8% from March 2023, which was the highest on record.
- The only region of the country to see an increase in existing home sales last month was the Northeast.
Why it’s happening: Higher list prices combined with still-elevated mortgage rates continue to make home purchasing difficult for Americans.
What it means: “Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” said NAR Chief Economist Lawrence Yun.
- However, “[t]here are nearly six million more jobs now compared to pre-Covid highs, which suggests more aspiring homebuyers exist in the market.”
NAM: EPA’s National PFAS Drinking Water Standard Threatens Manufacturing
Municipal water systems will soon be required to remove six types of per- and polyfluoroalkyl substances, or PFAS, from drinking water, The New York Times (subscription) reports.
- But the move could backfire and have adverse effects on manufacturers, the NAM said Thursday.
What’s going on: The Environmental Protection Agency on Wednesday announced the first-ever national rule limiting PFAS “to near-zero levels.”
- PFAS are compounds that have been used for decades due to their rare ability to douse fires and resist grease, corrosion and stains. They’re found in everything from semiconductors to medical devices and renewable-energy production equipment.
- But under the new mandate water systems across the U.S. will have three years to monitor the chemicals and a further two years to put into place technology to reduce the compounds’ levels in the water.
- The utilities “would be required to notify the public and reduce contamination if levels exceeded the new standard of 4 parts per trillion for [PFOA and PFOS]. Previously, the agency had advised that drinking water contain no more than 70 parts per trillion of the chemicals.”
The background: The rule comes just over a year after the EPA proposed the first federal limits on two PFAS chemicals, known as PFOA and PFOS.
The funding: The 2021 Bipartisan Infrastructure Law set aside $9 billion to help communities with PFAS removal. The government will make $1 billion of it available to states and territories to help defray the cost of testing and treatment over the next few years.
Higher prices, less security: The new standard is wholly infeasible, NAM Managing Vice President of Policy Chris Netram said, and will lead to cost increases throughout the supply chain and make our national defense more difficult.
- “In many instances, there is no viable alternative for these chemicals, and companies may be forced to change plans dramatically” to comply with the new rule, he said. “The severity of the proposed regulations will mean higher prices for everything—community water and waste systems, medical treatments and electronics. More alarming, the regulations will make it more difficult to produce the equipment our military needs to defend our nation.”
What we’re doing: The NAM is weighing legal options for reversing the final rule, according to Netram.
Cereal Contest Stirs Interest in Manufacturing
Gilster-Mary Lee Corporation has discovered a way to interest students in manufacturing: through their stomachs.
With support from the Illinois Manufacturers’ Association, the Chester, Illinois–based private-label food manufacturer recently chose the winner of its second annual “Create A Crunch” cereal-design contest for local high schoolers.
- “It’s critically important for our nation’s future that we attract the next generation of creators and makers, dreamers and doers who want to make our world a better place to live,” said IMA President and CEO Mark Denzler. “‘Create A Crunch’ is a fun and innovative way to encourage kids to explore all facets of manufacturing.”
A winner of an idea: The contest, which each year poses an essay-writing question on a manufacturing-related topic, came about when Gilster-Mary Lee was brainstorming ways to participate in National Manufacturing Month, which is October.
- “We were looking for a way to participate that would be meaningful and get kids—students—excited” about manufacturing, said President and CEO Tom Welge, a direct descendant of the company’s founding Gilster family, which started the firm in the late 19th century as the Gilster Milling Company.
- “We’d done a lot of celebrity cereals [such as a recent one featuring college basketball star Caitlin Clark], and they’re really popular. So I thought, why not involve students in the creation of a product and turn it into a way to educate them about manufacturing, maybe focusing on a particular topic in the industry we believe is important?”
An educational opportunity: “Create A Crunch” was born and is already off to a roaring start. In 2022, the contest garnered more than 300 entries from students throughout Illinois and Missouri. In 2023, it received more than 400.
- In addition to getting to choose the type of cereal, name and box design for their limited-run branded breakfast food, each year’s winner gets 2,500 boxes for their school, which “they can sell in a fundraiser, donate, whatever they want,” Welge said.
- The most recent winner, a senior at Notre Dame Regional High School in Cape Girardeau, Missouri, chose a blue, fruit-flavored ring-shaped cereal, which will be called “Bulldog Bites” in honor of her school’s mascot. The cereal boxes are slated for delivery in April.
- The 2023 writing prompt: What are the best things artificial intelligence can do for manufacturing, and do you think there are any things we should be concerned about?
Tough choices: Once the entry deadline has passed, a panel from Gilster-Mary Lee reads and rates every submission, then develops a short list of finalists. It sends these 10 names to the IMA for winner selection.
- The IMA has a difficult task before it in choosing the best submission, Welge added.
- “It’s not easy, but an understanding of the question is key, as is originality,” Welge continued. “The best essays [are] the ones that do the research and really put some thought behind it.”
More than a contest: Gilster-Mary Lee and the IMA are hoping that thought will transcend the contest and translate to participation in the manufacturing industry, which is in serious need of talent nationwide.
- In Illinois, the industry employs more than 650,000 people, Denzler said, making it “the single largest share of our economy.”
Perception change: “Create A Crunch” seems to be opening kids’ eyes to modern manufacturing, Welge said.
- “I think we have more visibility [now] into what we do,” he told us. “We produce for wholesalers across the U.S. and outside as well. So this is a way for us to pull back the curtain a bit and let people know there’s pretty big-sized manufacturer in this rural area, and we’re looking for talent.”
Up next: The contest may have started with cereal, but don’t be surprised if other foods come into play, said Welge, whose company also makes pancake mix, macaroni and cheese and many other convenience foods.
- “Should we do ‘Make A Mac’ next year? We’re not ruling anything out.”
Trend of the Week: Smart Factories
In 2024, factories will just keep getting smarter. From product design to supply chain management, the sophistication of Manufacturing 4.0 (the current wave of technological evolution) will keep on growing. Here’s what manufacturers should know about these advances and how the NAM can help.
What manufacturers should do: Manufacturers looking to make their factories smarter are focusing on four key strategies:
- Creating efficiencies to improve the bottom line with automation and other M4.0 technologies
- Leveraging smart factories to overcome challenges, such as the workforce crisis and supply disruptions
- Ensuring connectivity on the factory floor to allow for use of plant data to create new business models and revenue streams
- Using M4.0 technologies to improve quality control, speed time to market, enhance safety, boost profits, contribute to sustainability goals and engage employees
Expert opinion: Companies are increasingly investing in industrial connectivity, according to PTC Vice President of Market Development of IoT James Zhang.
- “Rather than approaching industrial connectivity with point-to-point integrations, companies are developing holistic, enterprise-wide strategies,” he explained.
- “This approach streamlines and standardizes data from heterogenous manufacturing environments to a single industrial connectivity platform to provide secure, reliable data for OT systems, including MES and SCADA, and IT systems, including data analytics and industrial IoT.”
Resources for you: Check out these NAM resources that will help guide you through these technological changes:
- The Manufacturing Leadership Council, the NAM’s digital transformation division, offers extensive advice and expertise on Manufacturing 4.0 technologies and how to use them.
- NAM Cyber Cover can help you protect your smart factories, as the increase in digitization also opens new avenues for cyber criminals.
- Check out this podcast from the Innovation Research Interchange (the NAM’s innovation division), which covers current research into the adoption of cutting-edge technologies.
Read the full 2024 trends report here.
Primary Goals: NAM Hits the Road in 2024
As candidates look to claim the support of manufacturers in 2024, the NAM launched its year-long 2024 Competing to Win Tour in South Carolina, days ahead of the South Carolina GOP primary.
- The tour spotlights the issues critical to winning not just manufacturers’ votes but also more manufacturing in the U.S.
Why it’s important: “We came to South Carolina to showcase the people and stories behind our industry and to translate their perspectives into action that will make our industry and country stronger,” said Johnson & Johnson Executive Vice President and Chief Technical Operations & Risk Officer and NAM Board Chair Kathy Wengel, who joined NAM President and CEO Jay Timmons, South Carolina Chamber of Commerce President and CEO Bob Morgan and South Carolina Manufacturers Alliance President and CEO Sara Hazzard on the first day of the tour.
- “Building these strong relationships beyond Washington, D.C., in the cities and states driving our sector deepens our understanding of regional challenges and reinforces the NAM as the leading voice representing all manufacturers, large and small,” Wengel added.
The launch: The tour began at Milliken & Company’s headquarters in Spartanburg on Wednesday, a poignant reminder of the importance of just one global technology-based manufacturer to lives, innovation and progress.
- The company’s 3,200 associates in the Palmetto State, as well as its broader U.S. and global team, make everything from safety gear and wound dressings and bandages to eco-conscious materials and technological innovations, such as digital printing, flooring, sustainable coating additives and more.
- “The average person touches about 30 to 50 [Milliken products] a day,” said Milliken President and CEO Halsey Cook.
- “Milliken embodies what we believe: manufacturing makes a positive difference. Their commitment to sustainability, ethics (named a World’s Most Ethical Company 17 years running) and a people-first workplace create a ripple effect,” said Timmons. “It’s why we need everyone supporting the success of manufacturers in South Carolina and the United States—to empower companies just like Milliken and help us grow more of them right here in America,” Morgan emphasized.
- “Milliken is a remarkable brand ambassador for the entire manufacturing industry in the United States,” summed up NAM Managing Vice President of Brand Strategy Chrys Kefalas. “As Michael Brown, Milliken’s executive vice president of operations, conveyed to us, the company is showing that digital transformation and artificial intelligence can be a force for good, helping its people leverage data analytics, for example, accelerating innovation and making modern manufacturing even more exciting for the next generation to be a part of.”
A boom story: Springs Creative Products Group CEO Derick Close, who heads several small enterprises in South Carolina, brought the NAM tour to Fort Lawn, South Carolina, where state-private partnerships and sound competitiveness policies have led to a boom in manufacturing investment and jobs.
- According to Close, recent investments in the community exceed $2.5 billion and stand to add 1,500 new jobs.
- Close, who is an economic development champion for South Carolina, took time to brief the group on how the area is ground zero as well in the story of the revival—and revolution—happening for the U.S. textile manufacturing sector, showing that U.S.-based textile manufacturers can compete against the rest of the world at quality, speed and price, so long as misguided policies don’t impede current advances. Springs Creative’s digital printing facility, which the NAM toured, is just one example. Springs Creative produces fabrics for such companies as Disney, Tempur-Pedic and Walmart.
- An added highlight of Close’s showcase was a tour of the new 1.5-million-square-foot, $423 million E. & J. Gallo wine and spirits production and distribution center—a testament to U.S. ingenuity and the more than 275 jobs it’s already created (with more on the way) to produce the best-selling spirit in the U.S.
The message: The discussions at Milliken and Springs Creative focused on the need for policies that support manufacturing’s growth, from R&D incentives and competitive taxes to sensible regulations, resilient supply chains and permitting reform, to workforce development, including immigration reform, and energy policy.
The platforms: As newsrooms dwindle, the NAM is stepping into the breach, using its platforms, like NAM.org, social media and its email newsletters, including Input, to amplify manufacturing’s narrative. It’s a bid to ensure that as policymakers and candidates court manufacturers, they’re armed with real stories and concrete policy needs from the ground.
Looking ahead: The tour will continue across the United States, gathering insights and stories to bolster the NAM’s advocacy efforts. Next up: the Competing to Win Tour brings the NAM State of Manufacturing Address to Roseville, Michigan, as well as to Sanders Chocolate and Triumph Gear Systems in Macomb County on Thursday.