Chemical leasing
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Chemical leasing is a
business model A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, social, ...
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. 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.


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. 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. 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. 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 A circular economy (also referred to as circularity and CE) is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. CE aims ...
, performance-based, functional-based, service-oriented, chemicals-as-a-service, and others. The
United Nations Industrial Development Organization The United Nations Industrial Development Organization (UNIDO) (French: Organisation des Nations unies pour le développement industriel; French/Spanish acronym: ONUDI) is a specialized agency of the United Nations that assists countries in e ...
(UNIDO) defines chemical leasing as follows: * Chemical leasing is a service-oriented business model that shifts the focus from increasing sales volume of chemicals towards a value-added approach. * The producer mainly sells the functions performed by the chemical and its functional units are the main basis for payment. * Within chemical leasing business models, the responsibility of the user and the supplier is extended and may include management of the entire lifecycle. * Chemical leasing aims at increasing the efficient use of chemicals while reducing the risks of chemicals and protecting human health. It improves the economic and environmental performance of participating companies and enhances their access to new markets. * Key elements of successful chemical leasing business models are proper benefit sharing, high-quality standards and mutual trust between participating companies. 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 In the field of waste management, extended producer responsibility (EPR) is a strategy to add all of the environmental costs associated with a product throughout the product life cycle to the market price of that product. Extended producer respo ...
. 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. 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.


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 The official title President of the European Union (or President of Europe) does not exist, but there are a number of presidents of European Union institutions, including: * the President of the European Council (since 1 December 2019, Charle ...
during the first half of 2006, chemicals policy was on top of the environmental agenda. Austria continues to promote chemical leasing. The Federal Environment Agency (UBA) of
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
proposed to promote chemical leasing in its "Sustainable Chemicals" paper.


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.


Examples

Akzo Nobel Powder Coatings S.A.E has supported the chemical leasing of
powder coating Powder coating is a type of coating that is applied as a free-flowing, dry powder. Unlike conventional liquid paint which is delivered via an evaporating solvent, powder coating is typically applied electrostatically and then cured under heat or ...
in Egypt to ABB ARAB. Environmental benefits are said to include recycling of powder waste, compliance with environmental regulations, and enhancement of supply chain management.


REACH

The reversal of the burden of proof is a key component of the
Registration, Evaluation, Authorisation and Restriction of Chemicals Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) is a European Union regulation dating from 18 December 2006. REACH addresses the production and use of chemical substances, and their potential impacts on both human he ...
(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 The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organization, intergovernmental organisation with 38 member countries ...
(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 Thomas Jakl is the former chair of the European Chemicals Agency's (European Chemicals Agency, ECHA) Management board and is Deputy Director General of the Austrian Environment Ministry responsible for Chemicals Policy. His field of activity incl ...
, Chairman of the
European Chemical Agency The European Chemicals Agency (ECHA; ) is an agency of the European Union which manages the technical and administrative aspects of the implementation of the European Union regulation called Registration, Evaluation, Authorisation and Restricti ...
(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 In tort law, a duty of care is a legal obligation that is imposed on an individual, requiring adherence to a standard of reasonable care while performing any acts that could foreseeably harm others. It is the first element that must be establis ...
(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.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).


Project phases

Chemical leasing projects are divided into planning, implementation, evaluation and dissemination stages, based on a
Deming Cycle PDCA (plan–do–check–act or plan–do–check–adjust) is an iterative design and management method used in business for the control and continual improvement of processes and products. It is also known as the Walter A. Shewhart, Shewhart cy ...
. 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 A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it en ...
(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.


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.


References


Further reading

*Jakl T, Joas R, Schott R, Windsperger A (2004), ''Chemical Leasing: an intelligent and integrated business model with a view to sustainable development in materials management'', Springer, Vienna *Jakl T, Schwager P (2008) "Chemical Leasing goes global – selling services instead of barrels: A Win-Win model for Environment and Industry." Springer Wien New York *Jakl T, and Schwager P (2011) "Global Chemical Leasing Award 2010", Technology and Investment, 2011, 2, 20–26; Scientific Research * United Nations Industrial Development Organization (2016)
Global Promotion And Implementation Of Chemical Leasing Business Models In Industry
*Vojislavka Satiric, Maria Grineva,"Chemical Leasing - The Solution to Managing Chemicals Sustainably: 12 Things You Need to Know" (2018
LinkedIn


External links


Strategic Approach to International Chemicals ManagementUnited Nations Industrial Development Organization - Cleaner Production Programme
at the United Nations Industrial Development Organization
Chemical Leasing
{{DEFAULTSORT:Chemical Leasing Chemical industry Leasing Life sciences industry