Chemical leasing

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Chemical leasing is a business model that intends to shift the focus from increasing sales volume of chemicals towards a value-added approach. It intends to address unnecessary over-consumption of chemicals by charging consumers based on functions performed by the chemicals rather than by volume. [1] This treatment of chemical supply as selling a service than selling a product leads to efficient use of chemicals, and to improved health and safety, environmental, and economic benefits. [2]

Contents

Definitions

The term chemical leasing is the name of a business model and is not the same thing as leasing of chemicals, although it may include leasing operations. [3]

The producer mainly sells the functions performed by chemical and functional units, such as the number of pieces painted, which are the main basis for payment. [4] It is a business model in which a customer engages with a service provider in a strategic, long-term contract to supply and manage the customer's chemical and related services. [5]

Chemical leasing is applied in many companies, but sometimes under different names. Similar concepts include eco-efficient services, product-service systems, pay-per-use, circular economy, performance-based, functional-based, service-oriented, chemicals-as-a-service, and others. The United Nations Industrial Development Organization (UNIDO) defines chemical leasing as follows: [6]

Differences between traditional buyer-seller relationship and service-based model of chemical leasing. ChL service.jpg
Differences between traditional buyer-seller relationship and service-based model of chemical leasing.

Chemical leasing promotes the sustainable management of chemicals. By shifting the focus from increasing the sales volume of chemicals towards a more value-added approach, it is an illustration of extended producer responsibility. The chemical company supplies chemicals for a specific service, such as coatings, adhesives, washing agents, solvents, and also advises the user on its best use. [7]

Built on strong cooperation between partners and based on mutual trust, it increases the efficient use of chemicals, reduces the risks to human health brought about by their use, improves the economic and environmental performance of participating companies and ultimately enhances business performance. [8]

Globalization

The Austrian government has played an important role in promoting chemical management based on resource efficiency and precaution. When Austria held the Presidency of the European Union during the first half of 2006, chemicals policy was on top of the environmental agenda. Austria continues to promote chemical leasing. [9] The Federal Environment Agency (UBA) of Germany proposed to promote chemical leasing in its "Sustainable Chemicals" paper. [10] [11]

UNIDO

In 2004, the UNIDO and the Austrian Ministry of Environment decided to jointly support chemical leasing through a number of global projects. In partnership with National Cleaner Production Centers, UNIDO implemented chemical leasing projects in Austria, Egypt, Mexico, and Russia. Since then, pilot projects have been conducted in Latin and South America, Africa, Europe and Asia. Nowadays, more than 100 companies worldwide have included chemical leasing in their business strategies.

Chemical leasing can be applied in many industries and processes, ranging from car manufacturing to cleaning operations, wastewater treatment, textiles, beverage and food production. A joint declaration of intent on chemical leasing was signed between UNIDO, Austria, Germany and Switzerland in November 2016. [12]

Examples

Akzo Nobel Powder Coatings S.A.E has supported the chemical leasing of powder coating in Egypt to ABB ARAB.[ citation needed ] Environmental benefits are said to include recycling of powder waste, compliance with environmental regulations, and enhancement of supply chain management.[ citation needed ]

REACH

Synergies between chemical leasing and EU REACH legislation. ChL REACH.jpg
Synergies between chemical leasing and EU REACH legislation.

The reversal of the burden of proof is a key component of the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) system leading to a "no data – no market" concept, obliging producers or importers of substances to deliver documentation regarding properties of chemicals and possible risks during their application as a pre-condition for market access. The Organisation for Economic Co-operation and Development (OECD) conference in Vienna in 2003 November reiterated that, "... The new EU chemicals policy (REACH) will require a new relationship between provider and user ...." According to Thomas Jakl, Chairman of the European Chemical Agency (ECHA), chemical leasing paves the way to comply with REACH obligations.

Chemical leasing and REACH share the same philosophy of ensuring compliance with a duty of care (REACH recital 16), as a tool to demonstrate adequate control (REACH para 60). They are mutually supportive in developing rules for sharing costs, and ensuring that chemicals are handled properly. Both are involved in several different stages of the supply chain. There is a strong effort by the Austrian and German governments to bring chemical leasing within the purview of EU Chemicals policy and regulations. [13]

Project phases

Chemical leasing projects are divided into planning, implementation, evaluation and dissemination stages, based on a Deming Cycle. The planning stage consists of a preparatory phase, a process optimisation phase and a design phase. In this stage, discussions around the leasing model, its cost implications versus quality and environmental benefits, commercial terms, and conditions begin. A baseline audit is performed, and a report presented to the factory management. This audit outlines the potential for improvements and forms the basis of defining the key performance indicators (KPIs). The resources needed to fulfil improvements are also defined.

The implementation stage starts with the signing of a chemical leasing agreement that defines the scope and conditions, unit of payment, KPIs, roles, and responsibilities. The chemical company supervises the chemical process, transporting and managing the inventory, laboratory management, improving process controls, record keeping, and training workers. Periodic checks and inspections are carried out independently to verify that the implementation is proceeding on expected lines. At the end of the implementation phase, progress is evaluated, often by an external party to secure objectivity. Finally, any project benefits are quantified and learning is documented, to provide input for future projects. [13] [14]

Global Chemical Leasing Award

The Global Chemical Leasing Award was launched in 2009, and award ceremonies were organised for the years 2010, 2012, 2014, 2018, and 2021. The award intends to enhance the global visibility of chemical leasing, acknowledge best practices and inspire companies and individuals around the globe to apply the business concept by reducing the inefficient use and over-consumption of chemicals and developing strong business partnerships and innovation along the entire supply chain. [15] [16]

Related Research Articles

United Nations Industrial Development Organization Specialised agency of the United Nations

The United Nations Industrial Development Organization (UNIDO) is a specialized agency of the United Nations that assists countries in economic and industrial development. It is headquartered at the UN Office in Vienna, Austria, with a permanent presence in over 60 countries. As of April 2019, UNIDO comprises 170 member states, which together set the organization's policies, programs, and principles through the biannual General Conference.

Green building

Green building refers to both a structure and the application of processes that are environmentally responsible and resource-efficient throughout a building's life-cycle: from planning to design, construction, operation, maintenance, renovation, and demolition. This requires close cooperation of the contractor, the architects, the engineers, and the client at all project stages. The Green Building practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. In doing so, the three dimensions of sustainability, i.e., planet, people and profit across the entire supply chain need to be considered.

PEST analysis describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is part of an external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro-environmental factors to be taken into consideration. It is a strategic tool for understanding market growth or decline, business position, potential and direction for operations.

Waste hierarchy Tool to evaluate processes protecting the environment

Waste hierarchy is a tool used in the evaluation of processes that protect the environment alongside resource and energy consumption from most favourable to least favourable actions. The hierarchy establishes preferred program priorities based on sustainability. To be sustainable, waste management cannot be solved only with technical end-of-pipe solutions and an integrated approach is necessary.

Reverse logistics is for all operations related to the reuse of products and materials. It is "the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics." Growing green concerns and advancement of green supply chain management concepts and practices make it all the more relevant. The number of publications on the topic of reverse logistics have increased significantly over the past two decades. The first use of the term "reverse logistics" in a publication was by James R. Stock in a White Paper titled "Reverse Logistics," published by the Council of Logistics Management in 1992. The concept was further refined in subsequent publications by Stock (1998) in another Council of Logistics Management book, titled Development and Implementation of Reverse Logistics Programs, and by Rogers and Tibben-Lembke (1999) in a book published by the Reverse Logistics Association titled Going Backwards: Reverse Logistics Trends and Practices. The reverse logistics process includes the management and the sale of surplus as well as returned equipment and machines from the hardware leasing business. Normally, logistics deal with events that bring the product towards the customer. In the case of reverse logistics, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer.

A sustainable business, or a green business, is an enterprise that has minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy—a business that strives to meet the triple bottom line. They cluster under different groupings and the whole is sometimes referred to as "green capitalism." Often, sustainable businesses have progressive environmental and human rights policies. In general, business is described as green if it matches the following four criteria:

  1. It incorporates principles of sustainability into each of its business decisions.
  2. It supplies environmentally friendly products or services that replaces demand for nongreen products and/or services.
  3. It is greener than traditional competition.
  4. It has made an enduring commitment to environmental principles in its business operations.
Environmental policy

Environmental policy is the commitment of an organization or government to the laws, regulations, and other policy mechanisms concerning environmental issues. These issues generally include air and water pollution, waste management, ecosystem management, maintenance of biodiversity, the management of natural resources, wildlife and endangered species. For example, concerning environmental policy, the implementation of an eco-energy-oriented policy at a global level to address the issues of global warming and climate changes could be addressed. Policies concerning energy or regulation of toxic substances including pesticides and many types of industrial waste are part of the topic of environmental policy. This policy can be deliberately taken to influence human activities and thereby prevent undesirable effects on the biophysical environment and natural resources, as well as to make sure that changes in the environment do not have unacceptable effects on humans.

Pollution prevention

Pollution prevention (P2) is a strategy for reducing the amount of waste created and released into the environment, particularly by industrial facilities, agriculture, or consumers. Many large corporations view P2 as a method of improving the efficiency and profitability of production processes by waste reduction and technology advancements. Legislative bodies have enacted P2 measures, such as the Pollution Prevention Act of 1990 and the Clean Air Act Amendments of 1990 by the United States Congress.

Waste minimisation

Waste minimisation is a set of processes and practices intended to reduce the amount of waste produced. By reducing or eliminating the generation of harmful and persistent wastes, waste minimisation supports efforts to promote a more sustainable society. Waste minimisation involves redesigning products and processes and/or changing societal patterns of consumption and production.

Cleaner production is a preventive, company-specific environmental protection initiative. It is intended to minimize waste and emissions and maximize product output. By analysing the flow of materials and energy in a company, one tries to identify options to minimize waste and emissions out of industrial processes through source reduction strategies. Improvements of organisation and technology help to reduce or suggest better choices in use of materials and energy, and to avoid waste, waste water generation, and gaseous emissions, and also waste heat and noise.

Design for the Environment (DfE) is a design approach to reduce the overall human health and environmental impact of a product, process or service, where impacts are considered across its life cycle. Different software tools have been developed to assist designers in finding optimized products or processes/services. DfE is also the original name of a United States Environmental Protection Agency (EPA) program, created in 1992, that works to prevent pollution, and the risk pollution presents to humans and the environment. The program provides information regarding safer chemical formulations for cleaning and other products. EPA renamed its program "Safer Choice" in 2015.

Sustainable procurement is a process whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a life-cycle basis while addressing equity principles for sustainable development, therefore benefiting societies and the environment across time and geographies. Procurement is often conducted via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works for the best possible price, when aspects such as quality, quantity, time, and location are compared. Procurement is considered sustainable when organizations broadens this framework by meeting their needs for goods, services, works, and utilities in a way that achieves value for money and promotes positive outcomes not only for the organization itself but for the economy, environment, and society. This framework is also known as the triple bottom line, which is a business accounting framework. The concept of TBL is narrowly prescribed, and even John Elkington, who coined the term in the 1990s, now advocates its recall. Indeed, procurement practitioners have drawn attention to the fact that buying from smaller firms, locally, is an important aspect of sustainable procurement in the public sector. Ethics, culture, safety, diversity, inclusion, justice, human rights and the environment are additionally listed as important aspects of SPP.

Product-service systems (PSS) are business models that provide for cohesive delivery of products and services. PSS models are emerging as a means to enable collaborative consumption of both products and services, with the aim of pro-environmental outcomes.

Ecological design or ecodesign is an approach to designing products and services with special consideration for the environmental impacts of the product during its whole lifecycle. It was defined by Sim Van der Ryn and Stuart Cowan as "any form of design that minimizes environmentally destructive impacts by integrating itself with living processes." Ecological design is an integrative ecologically responsible design discipline. Ecological design can also be defined as the process within design and development of integration of environmental consideration into product and service design and development with the aim of reducing environmental impacts of products through their life cycle.

Thomas Jakl

Thomas Jakl is the former chair of the European Chemicals Agency's Management board and is Deputy Director General of the Austrian Environment Ministry responsible for Chemicals Policy. His field of activity includes legislation on chemical substances at the national, European and UN levels. He served as ECHA's president from 2008 until September 2012. He is president of the Governing Board and "Ambassador" of the EU's Human Biomonitoring program "HBM4EU".

EPA Sustainability

The United States Environmental Protection Agency (EPA) was established in July 1970 when the White House and the United States Congress came together due to the public's demand for cleaner natural resources. The purpose of the EPA is to repair the damage done to the environment and to set up new criteria to allow Americans to make a clean environment a reality. The ultimate goal of the EPA is to protect human health and the environment.

A sustainability organization is (1) an organized group of people that aims to advance sustainability and/or (2) those actions of organizing something sustainably. Unlike many business organizations, sustainability organizations are not limited to implementing sustainability strategies which provide them with economic and cultural benefits attained through environmental responsibility. For sustainability organizations, sustainability can also be an end in itself without further justifications.

Circular economy Regenerative system in which resource input and waste, emission, and energy leakage, are minimised

A circular economy is "a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible" that aims at tackling global challenges like climate change, biodiversity loss, waste, and pollution. It is defined in contradistinction to the traditional linear economy.

Sustainability marketing myopia is a term used in sustainability marketing referring to a distortion stemming from the overlooking of socio-environmental attributes of a sustainable product or service at the expenses of customer benefits and values. Sustainability marketing is oriented towards the whole community, its social goals and the protection of the environment. It requires the engagement of national and local governments, organisations and population as well as the necessary capital. The idea of sustainability marketing myopia is rooted into conventional marketing myopia theory, as well as green marketing myopia.

Corporate environmental responsibility

Corporate Environmental Responsibility (CER) refers to a company's duties to abstain from damaging natural environments. The term derives from corporate social responsibility (CSR).

References

  1. "The Concept | Chemical Leasing". chemicalleasing.org. Retrieved 2021-04-19.
  2. http://www.chemicalleasing.org
  3. "Chemical Leasing" vs leasing of chemicals, Vojislavka Satiric and Maria Grineva, (LinkedIn, 2018).
  4. Chemical Leasing Goes Global – Selling Services Instead of Barrels: A Win-Win Business Model for Environment and Industry, Eds Thomas Jakl and Petra Schwager, (Wien : Springer – Verlag, 2008).
  5. M Stoughton, T Votta, Implementing service-based chemical procurement: Lessons and results. Journal of Cleaner Production 11(8) (2003) 839– 849.
  6. Chemical Leasing website
  7. Anurag Priyadarshi, The Colourist, 1 (4) (2009) 8
  8. "Chemical Leasing | UNIDO".
  9. "Chemical Leasing officially recognized by the Government of Austria | Chemical Leasing". chemicalleasing.org. Retrieved 2021-04-19.
  10. Chemical Leasing Unburdens Environment – UBA presents sustainable chemicals concept, UBA Press Release 14 (Umwelt Bundes Amt, Germany, 2009).
  11. Positionen und Kriterien des Umweltbundesamtes
  12. "Joint Declaration of Intent on Chemical Leasing signed between UNIDO, Austria, Germany and Switzerland".
  13. 1 2 Chemical Leasing Goes Global – Selling Services Instead of Barrels: A Win-Win Business Model for Environment and Industry, Eds T Jakl and P Schwager, (Wien : Springer – Verlag, 2008).
  14. Anurag Priyadarshi, Chemical Leasing in Colour and Environmental Management – theoretical framework, implementation methodology and future outlook, paper read at UNIDO – GCPC Chemical Leasing workshop, 2009.
  15. WITTKE, Laura (2018-08-13). "Green chemistry conference & Global chemical leasing award". Newsroom - European Commission. Retrieved 2021-05-15.
  16. "Bundesministerium für Nachhaltigkeit und Tourismus: Ausschreibungsstart "Chemical Leasing-Award" der UNIDO". OTS.at (in German). Retrieved 2021-05-15.

Further reading