extended producer responsibility “chemical leasing as a case study” eng v.r. sena peiris,...
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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
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• 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?
10
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
20
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
23
Example 2: Partners
CRPPRussian CPC
ERG
UserSupplier
Trilateral cooperation between
24
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