Extended Producer responsibility
“Chemical Leasing as a case study”
Eng V.R. Sena Peiris,
PresidentLanka Responsible Care Council
Former Chief Executive Officer
, National Cleaner Production Centre, Sri Lanka
Immediate 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
Definition Chemicalg Leasing
• 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.
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)
Conventional Practice
• 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
Extended Producer Responsibility
• OECD defines EPR as an environmental policy
approach in which a producer’s responsibility
for a product is extended to the postconsumer 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
Product Stewardship?
• 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.
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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:
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Chemical Leasing Business Models
Bundle Motivations
Traditional business models:
Chemical leasing models:
Contradictory motivations
Bundled motivations
supplier
Delivery of goods
consumer
supplier
"the more the
better"
Delivery of services
material
Life cycle costs
(costs, volume)
(material, work, waste
management)
"less is more"
"less is more"
Willingness and culture of corporation is required
consumer
"less is more"
Payments on the Benefits of ChL
“leasing”
Chemical producer
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!)
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“)
Different approaches for service-oriented
business models
Model B
Model A
Model C
Producer
of chemicals
Producer
of chemicals
Chemical fulfils
product specifications
supplier
of plants
Solution
Producer
of chemicals
User
User
used chemical
• The user pays for the
benefit of the chemical
supplier
of plants
• The user pays for the
complete solution
• Material flow is closed
• Examples:
- active carbon
- solvents
• Examples:
- abrasives
Joint
venture
User
other
partners
• A joint venture bunches all
interests of partners and
generates synergies
• User has one responsible
partner and pays for the
complete solution
15
Service oriented business strategies: Basic ideas
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”)
Can be shared
Added value
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
Sells the function of a chemical,
Producer of
a chemical
Including know how on efficiency and risks,
Adding services like
production management, logistics and process
optimization
Involved Actors
In Chemical Leasing (ChL) business models two actors are
essential:
Main Actors
Chemical supplier
Chemical user
Other Actors
Equipment suppliers
Recycling/disposal companies
National governments
Quality assurance institutes
Consultancies
UNIDO
Examples from other Countries
Example 1: Partners
Trilateral cooperation between
User
Supplier
Egyptian CPC
20
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
21
International experience 2: ChL project
“Waste water treatment” in Russia
Chemicals
Classical business model: payment per t of chemicals
Chemical leasing: payments per m³ of purified water
22
Example 2: Partners
Trilateral cooperation between
ERG
Supplier
User
CRPP
Russian CPC
23
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
24
Examples from Sri Lanka
Traditional role model
Introduction: Traditional role models in Sri Lanka´s agricultural industry
(1)
Chemical
supplier
Farmers
(2)
Chemical
supplier
Agents
(1) Direct sales only
(2) Sales via intermediary
Farmers
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.
New Chemical Leasing approach
ChL contract
Chemical
supplier
NCPC
Farmers
Advises
facilitates
monitoring
and
training
Local service provider
Local service provider
brings in knowledge of
local conditions,
indicator systems
and personal experience
to advise farmers on the
most adequate and safe
usage of fertilizers and
pesticides
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.
Case Study: CHEMICAL LEASING
Country
Supplier:
User/farmer:
Industrial process:
Chemicals:
Sri Lanka
Kandurata Agr
Nanayakkara Farm
Cultivation of potatoes
Chemical pesticides and fertilizers
New Chemical Leasing approach
towards a service-oriented business
model and one concrete
unit of payment:
The yield of potatoes harvested per
season
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 1:
Treated only by
the farmer
Field 2, treated under
observation of the
service provider
Field size
has been
equal
Service provider input:
was paid based on a success fee that
is generated by the savings achieved
on field 2 compared to field 1
Farmer purchases pesticides and stores them,
application is done by employees of the farmer
Supplier 1
Supplier 2
Supplier 3
Supplier 4
Consultant
(NCPC) did
monitoring and
conducted
documentation
Pilot Project Results
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%
Financial savings:
Conventional costs : 31,227.25 Rupies per Ha
Total Cost saving through ChL: 13,490 Rupies
Equals to 100 - 150 USD/ha
Strategic Forecast: ChL and SCM
1
2
3
Traditional role Service-oriented
models
approaches
4
Chemical
Chemical Leasing
Leasing pilots
in agriculture
Sales based, no
knowledge-sharing
Performance based, success fees,
training and service provider integration
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 stakeholders
within the agriculture sector
Fixed Unit of Payment, Pure Chemical
Leasing based on sustainability criteria
Next step
Sound
Chemicals
Management
News Paper Printing Project
Supplier : General Ink Ltd
User : Wijeya Newspapers Ltd
Printing Ink wastages
Type of waste
Evaporation of Ink (Solvent) during printing process
Ink waste in duct
Ink waste in storage
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 annum
Possible cost saving per annum by the user : 14976*3
Added value 44,928 USD
Savings to the Supplier
The amount of Ink produced- 109824 kgs
New Revenue- 329472 USD
Reduced Production cost by the supplier through savings
of raw materials and use of energy : 109,824*2.1
=230,630 USD
New Tax payment = 51,068.16USD
Fixed cost
= 21,600 USD
Net 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