How the IoT Helps Business with Regulatory Compliance

August 2, 2016

Most stories that involve the Internet of Things and regulatory compliance are about regulating the IoT itself. But it’s worth focusing on how the IoT will help businesses, particularly smaller businesses, to demonstrate compliance with the mass of regulations that govern their operations—regulations that vary from jurisdiction to jurisdiction. Compliance costs are a significant expense for every business, requiring trained staff and constant attention, and the burden is only going to get worse.

Compliance: Not Sexy, but Essential to Business Survival

The visionary technical people that bring us IoT innovations perhaps don’t hang out enough with the back-office types that worry about the costs of regulatory compliance, insurance, and litigation prevention. Because, while there are many benefits to having a clear view of a supply chain, from efficiency to preventive maintenance, a potentially key benefit is the ability to monitor compliance with government regulations, insurance requirements, and conditions that could lead to tort actions.

This may not seem exciting. On other hand, before you can accomplish something exciting, you have to stay in business. Reducing these costs, both in terms of mandatory paperwork and in terms of staying out of hearings, courtrooms, and discovery procedures, is essential to business survival and success. The benefits will be particularly great for small and medium-sized businesses, which face many of the same risks as larger businesses, but have significantly smaller resources.

By providing what is essentially a digital audit trail with precise timestamps, the IoT removes ambiguity, clarifies timeless, and serves as the foundation for prompt and accurate reporting.

Four examples will show how many different businesses can use IoT to minimize these costs.

Agriculture

Modern agriculture is financially complex, reflecting its riskiness and tight margins. RCIS, a crop insurer recently acquired by Zurich American Insurance, allows policyholders using Ag Leader’s SMS software or Trimble’s Farm Works mapping software to submit GPS-based data to meet the compliance and reporting requirements of their policies. In turn, RCIS can use that data to confirm with the Department of Agriculture’s Risk Management Agency that their insurance products comply with the appropriate standards.

Agriculture is already heavily penetrated by the IoT, measuring everything from soil moisture to plant-by-plant insecticide requirements. The ability to submit and adjudicate claims quickly is another benefit.

Pharmaceuticals

The Drug Supply Chain Security Act requires drug manufacturers to provide transaction histories for all prescription drugs, including end-to-end shipping information, in order to minimize the significant number of counterfeit medications in circulation. Manufacturers must comply by late 2017. The IoT is ideal for tracking products throughout a supply chain.

Food Safety

Whenever there is an outbreak of food poisoning, it takes quite a while to trace exactly which contaminated food caused the outbreak (no one remembers exactly what they ate a few days ago, or where they bought it), and then longer to determine the ultimate source of the contamination (it could result from cross-contamination during shipping or processing). The IoT will make the path of any batch traceable, as well as any interactions it had with other batches. This will grow increasingly important as more perishable food moves globally.

The FDA has been releasing rules responding to the Food Safety Modernization Act (FSMA), including those on visibility and tracking, which increases compliance costs significantly for all producers, shippers, and carriers. IoT solutions, such as Thermo King’s telematics for refrigerated and non-refrigerated assets, will be essential for determining where the contamination occurred and who, ultimately was responsible.

Refinery Emissions

Environmental emission regulation is on the minds of everyone in the oil and gas industry. Every oil refinery has a tower with a constantly burning flame. This is called a flare stack, and it consumes vented hydrocarbon releases that might otherwise be released into the atmosphere. One of several regulations governing flare stacks is 40 CFR Part 60 Subpart OOOO, so important to the industry that it is nicknamed “Quad O”.

Faulty valves can release excess amounts of gas. Refineries can monitor their valves through wireless acoustic transmitters, detecting faulty valves and repairing them before incurring a hefty fine. That also makes it easier to collect and submit the necessary emission information demanded by the EPA.

Increased Capabilities Imply Increased Demands

Of course, the better you are at reporting, the more you will be required to report. Your data flows will be discoverable in legal proceedings, and someone you are suing for refusing to accept a shipment can check to make sure that you had no unacceptable temperature variation during shipping. Ideally, this condition of greater information would mean that companies with better business practices would usually win lawsuits against those who just have better lawyers. But perhaps there are things that even the IoT can’t achieve.