Extended Producer responsibility “Chemical Leasing as a case study”

Eng V.R. Sena Peiris, President-

Lanka Responsible Care CouncilFormer Chief Executive Officer

, National Cleaner Production Centre, Sri LankaImmediate Past President,

Asia Pacific Roundtable on sustainable consumption and Production

International conference on safe & secure handling of Hazardous Material -2015

Sustainability Basics

Resource Optimization• Get more out of less resources with minimum

ecological impacts• Close the Loop through Dematerialization

Towards Zero Waste• Need to change the perception of waste as a normal by-

product of society• Redesign processes and systems to eliminate waste

g

• 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 functional units are the main basis for payment.

• Within Chemical Leasing business models the responsibility of the producer and service provider is extended and may include the management of the entire life cycle.

• Chemical Leasing is a win-win situation. It 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.

Definition Chemical Leasing

Concept of Chemical Leasing

Objectives and Approach of Chemical Leasing Principle:

Chemical Leasing suggests new forms of payments for chemicals that direct the economic interests of all partners towards process optimization and reduction of chemicals consumption

Products or Benefits of Products

What do you need products for• Air conditioning

– Comfort and Convenience• An Automobile

– Mode of Mobility, Comfort and Convenience• Chemical

– A service to fulfill a need (Painting,cleaning)

• We buy products by Paying for it• We own it• We are responsible for maintenance and down

stream management of it

From the moment we own the product manufacturer and/or supplier disown it and we have to pay for any additional services from them

Conventional Practice

Extended Producer Responsibility

• OECD defines EPR as an environmental policy approach in which a producer’s responsibility for a product is extended to the post-consumer stage of a product’s life cycle.

Related Features of EPR Policy (OECD)• Shifting of responsibility upstream toward the

producer and away from local authorities– Only producers have the ability to redesign

• Provide incentives to producers to incorporate environmental considerations in the design of their products– Cradle-to-cradle

• The Producer has the knowledge and the Information to optimize the service benefit to user

• The producer of the product has the greatest ability to minimize adverse impacts.

• Many other stakeholders play a role, too.

Product Stewardship?

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An Alternative Definition to Extended Producer Responsibility

• A Producer is responsible to support a customer to obtain best out of a product through sharing of expertise and Knowledge on the product and then to look after ‘down stream management’ of the residues of the consumption ( packaging, residuals of the product, remaining quantities)(Derived from product stewardship)

Benefits of Product Stewardship:

More Sustainable

Products

Environmental Protection

Fiscal Relief

Job Creation

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Chemical Leasing Business Models Bundle Motivations

Traditional business models:

Contradictory motivations

Chemical leasing models:

Bundled motivations

material

(costs, volume)

supplier

"the more the better"

consumer

"less is more"

Delivery of goods

Life cycle costs(material, work, waste

management)

supplier consumerDelivery of services

"less is more" "less is more"

Willingness and culture of corporation is required

provides chemicals to(no sales)

the user

payment not for the chemical itself, but for the benefits of the chemical(e.g. not for tons of solvents used, but for number of pieces cleaned!)

Chemical producer

“leasing”

amount of produced chemicals will decline as chemicals volume turns from a factor for earnings (“the more you sell the more you earn“) to a cost driver (“less is more“)

Payments on the Benefits of ChL

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Producerof chemicals User

Chemical fulfilsproduct specifications

used chemical

Model A

Producerof chemicals

User

supplierof plants

Solution

Model BProducer

of chemicals

Usersupplierof plants

other partners

Jointventure

Model C

• The user pays for the benefit of the chemical

• Material flow is closed

• Examples:- active carbon- solvents

• The user pays for the complete solution

• Examples:- abrasives

• A joint venture bunches all interests of partners and generates synergies

• User has one responsible partner and pays for the complete solution

Different approaches for service-oriented business models

Service oriented business strategies: Basic ideas

Amount of produced chemicals

Added value

Will decline

As chemicals volume turns from a factor for earnings

(“the more you sell the more you earn”)

To a cost driver

(“less is more”)

Can be shared

Among the involved partners

Service oriented business strategies: Basic ideas

User of a Chemical

Does not pay to own a chemical,

But spends money for the benefits provided by a chemical

Producer of a chemical

Sells the function of a chemical,

Including know how on efficiency and risks,

Adding services like

production management, logistics and process optimization

In Chemical Leasing (ChL) business models two actors are essential:

Main Actors Chemical supplier

Chemical userOther Actors

Equipment suppliers

Recycling/disposal companies

National governments

Quality assurance institutes

Consultancies

UNIDO

Involved Actors

Examples from other Countries

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Example 1: Partners

Trilateral cooperation between

UserSupplier

Egyptian CPC

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Example 1: Results

Economic benefits

Annual gain of $ 68.000

Enviromental benefits

Recycling of powder coating wastes

Reduction of energy consumption

Reduction of air emissions

7% reduced losses

20% higher efficiency

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Classical business model: payment per t of chemicals

Chemical leasing: payments per m³ of purified water

Chemicals

International experience 2: ChL project “Waste water treatment” in Russia

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Example 2: Partners

CRPPRussian CPC

ERG

UserSupplier

Trilateral cooperation between

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Example 2: Results

Economic benefits

Cost reduction of 33%

Environmental benefits

10-15% reduction of Iron(III)Chloride FeCl3 and of natron (NaOH) consumption

Improved effectiveness of discharge management

Examples from Sri Lanka

Traditional role model

Introduction: Traditional role models in Sri Lanka´s agricultural industry

Local suppliers "hammer their agents that they should sell as much as possible to the farmers and that the farmers better use more than recommended" (Statement of an international ChL expert).

Problems of this models have been identified at place in view of human safety, chemicals’ environmental impact and chemical risks, among others.

Chemical supplier

Farmers

Chemical supplier

Agents Farmers

(1)

(2)

(1) Direct sales only(2) Sales via intermediary

New Chemical Leasing approach

The new ChL concept has the advantage of including all relevant stakeholders for sustainable agricultural development and directs incentives into one direction thanks to a Unit of Payment approach.

Chemical supplier

Farmers

NCPC facilitates

monitoring and training

Local service provider

Advises

ChL contract

Local service provider brings in knowledge of local conditions, indicator systems and personal experienceto advise farmers on the most adequate and safe usage of fertilizers and pesticides

Country Sri LankaSupplier: Kandurata Agr User/farmer: Nanayakkara FarmIndustrial process: Cultivation of potatoesChemicals: Chemical pesticides and fertilizers

New Chemical Leasing approachtowards a service-oriented business

model and one concrete unit of payment:

The yield of potatoes harvested per

season

Case Study: CHEMICAL LEASING

CASE STUDY: Stakeholders

Chemical leasing-driven progress: Pilot Project stakeholders

Location: Nuwara Eliya (Latitude 6.93 Logitude 80.787)

Name of the farmer (Potatao): Asanka Kumara Jayasena

Name of the service provider (independant): Manjula S Jayasingha

NCPC consultancy: Lakmini Edirisinghe, Jagath Athula Kumara

Suppliers: BASF Lanka Ltd ,CIC Holdings, Lankem Ceylon, JL Morisons, Hayleys, FarmChem, MChem

CASE STUDY: Stakeholder roles

Chemical leasing-driven progress: Project details

Field 2, treated under observation of the service provider

Farmer purchases pesticides and stores them, application is done by employees of the farmer

Supplier 1 Supplier 2 Supplier 3 Supplier 4

Service provider input:was paid based on a success fee that is generated by the savings achieved on field 2 compared to field 1

Consultant (NCPC) did monitoring and conducted documentation

Field 1:Treated only by the farmer

Field size has been equal

Financial savings:

Conventional costs : 31,227.25 Rupies per Ha

Total Cost saving through ChL: 13,490 Rupies

Equals to 100 - 150 USD/ha

Environmental savings and benefits

Water • 500 m³ (50% savings compared to the conventional practice)

Wastewater • 170 m³ (40% savings compared to the conventional practice)

Agrochemicals • 40% reduction of agrochemical costs

Yield • Increased yield: + 10%

Pilot Project Results

Strategic Forecast: ChL and SCM

Performance based, success fees,

training and service provider integration

Chemical Leasing

in agriculture

Sound

Chemicals

Management

Fixed Unit of Payment, Pure Chemical

Leasing based on sustainability criteria

4

Chemical

Leasing pilots

3

Service-oriented

approaches

2

Traditional role

models

1

Sales based, no

knowledge-sharing

Next step

Chemical Leasing might be a promising avenue to shifting business models towards more sustainability and might offer a unique opportunity to join forces with industrial stakeholderswithin the agriculture sector

News Paper Printing Project

Supplier : General Ink Ltd User : Wijeya Newspapers Ltd

Printing Ink wastages

Evaporation of Ink (Solvent) during printing process

Ink waste in duct

Ink waste in storage

Type of waste

Estimate after CHL

During the printing process a large amount of inks (solvent) are evaporated (about 10% of total ink usage) and wasted. The total loss of ink is estimated to be between 17% to 20% of input

With Chemical Leasing – to reduce 12 % ink usage (3 year target) Ink Saving per annum: 14976 kg per annumPossible cost saving per annum by the user : 14976*3

Added value 44,928 USD

Savings to the Supplier

The amount of Ink produced- 109824 kgsNew Revenue- 329472 USDReduced Production cost by the supplier through savings of raw materials and use of energy : 109,824*2.1 =230,630 USDNew Tax payment = 51,068.16USDFixed cost = 21,600 USDNet income =40,320.64 USD

Added Value7632.64USD

Signing for a cooperation Contract for Chemical Leasing between Linea Intimo (MAS group) and Water care with NCPC as the Independent Advisor

Thank You

The End