the consequences of reach for smes - european parliament · the consequences of reach for smes...

The consequences of REACH for SMEs

Jacques Pelkmans

Lorna Schrefler Ineke Gubbels

Committee on Industry, Research and Energy (ITRE), European Parliament, 23 January 2014

•1 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

STRUCTURE

• REACH, pain or even threat for SMEs

• Impact of REACH so far: internal

• Impact of REACH so far: costs and markets

• Support for SMEs: experience

• Does REACH have value-added for SMEs?

• Conclusions

• Recommendations

•1/22/2014 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

•2

REACH is a genuine concern in general, why?

(1) very demanding regulation for any firm

(2) preceding “EU Better (smart) Regulation”, hence more costly than necessary and without primacy of ‘benefits’ for society

(3) firm costs precede benefits(?) by decades

(4) full REACH introduction/implementation takes very long: 15 yrs [ 11 yrs + aftermath ]

•1/22/2014 •3 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

REACH even more genuine SME concern, WHY

(a) SMEs are (more) specialized in substances with lesser known risk profiles (2018)

(b) SMEs have fewer or no specialists on regulation, or, wider corporate environment >> many (downstream) SMEs know less/later

(c) SMEs have lower volumes per substance than the chemical giants due to specialization >> REACH costs (esp. testing) per unit higher


(d) some 27 500 SMEs in EU chemistry, hence, SME disadvantages multiply for EU!!!

(e) REACH aims to promote innovation (before REACH, innovation suffered from rules), but in fact, REACH may well discourage ‘yollies’ (young & innovative entrepreneurs) from entering markets or develop new substances or e.g. nano applications

(f) REACH discredits the SME strategy of the EU: no.1 on ‘most cumbersome’ EU list.


IMPACT OF REACH SO FAR: internal

REACH impact on intra-SME organisation:

i. SMEs allocate 1 FTE or less to REACH; internal organisation of SMEs not changed that much, so far

ii. Additional human resources, from € 25 000 to € 50 000; but a lot have outsourced to consultants; not only costly, but it pre-empts ‘learning’ and development of in-house know-how about REACH, indispensable later.

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iii. Minimal or no job creation due to REACH, possibly ‘regulatory jobs’ & extra consultancy; however, fears about a ‘fall-out’ for SMEs around 2018 are widespread

iv. Do note that – even when broadly these inferences are correct – there is no one-to-one [inverse] correlation of the size of REACH tasks with the size of firms >>> the no. of substances (dossiers) and the no. of products produced/imported/formulated matter most.


IMPACT OF REACH SO FAR: costs and markets

• REACH officially based on (very demanding) balancing act:

high level of protection, health & environment

enhancing competitiveness & innovation

• Business fears that competitiveness (and innovation, too) is the main loser

• SMEs feel so much stronger about this as SMEs are disadvantaged also vis-à-vis big firms

• If correct, the balancing act has failed and turned into a trade-off

•1/22/2014

•Thinking ahead for Europe • Centre for

European Policy Studies (CEPS) •

www.ceps.eu

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Serious cost concerns of REACH for SMEs:

i. unit cost drawback for SMEs hurts

ii. overall direct costs of REACH: € 1.1 bn extra, in 2018 € 1.5 bn or (far) more extra

iii. Many cost sources for SMEs (some, for all firms): testing, consultants, in-house, restructuring plants, costs due to uncertainty, travel costs, portfolio strategy [withdrawals] + SIN lists [‘stigmatise it now’], fear of relocation.

1/22/2014 10 Thinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

iv. Innovation hampered, diversion of R & D resources to REACH compliance or substitution checks (for years); SMEs discard more projects >>> time to market, test queues, trigger new registration when scaling up ‘new ideas’

v. CBI (secrets) huge problem for SMEs (like formulators); need their recipes to be secret >> hard in value-chain communication

vi. Two-way traffic in value-chains can be huge burden; IT tools costly yet necessary.


Market structure and prices:

• exit from the market expected for traders and some others with ‘listed’ (authorisation) substances, due to stigma’/uncertainty/bans

• In (highly special) submarkets, higher concentration likely

• Fear: extra costs, withdrawals and problems of substitution together >> loss of market share vis a vis non – EU suppliers

• When prices not up (commodities), REACH costs absorbed by firm, hence lower profits (next slide)


SME complaints about SIEFs:

• SIEFs generally regarded as expensive, if not abusively priced (e.g. LoA, letters of access)

• Again, a matter of unit costs at least

• No clue about the final costs of being in a SIEF

• Non-price abuse reported as well

• Redress for SMEs or withdrawal from SIEFs ignored in REACH regulation; also, no anti-trust guidance despite asymmetry of information


SME support: experience so far

• Lots of support offered but how ‘deep’ and truly experted?

• CEFIC and national trade associations effective

• ECHA legally limited; cumbersome guidance, with 1000ns pp. of very technical (good) info; annoying IT updates

• National helpdesks below standard

• Fee reductions, symbolic, if not a joke


Added-value of REACH for SMEs:

• CSES reports 3 benefits >>> new knowledge; ‘our’ SMEs hardly or not >>> MS authorities say ‘REACH fundamental’ but why did they not pay for it before REACH ? >>> better risk management & occupational H & S

• Some SMEs > better knowledge, transparency

• So far, the value-chain use of SDS is a problem, rather than a benefit; eSDS mainly a failure

• Reputation effect chemical industry: zero [bitter]

•1/22/2014 •17 Thrinking ahead for Europe • Centre for European Policy Studies (CEPS) • www.ceps.eu

CONCLUSIONS • REACH widely regarded as expensive by SMEs.

• Overall (direct) cost figures of REACH will be higher than the original estimations in the 2003 impact assessment.

• REACH might lead to changes in market structure (withdrawals, loss of market share to non-EU producers).

• Reduction of registration fees of March 2013 for SMEs only addresses a minuscule fraction of overall compliance costs.

• Perceived added value of REACH for SMEs remains limited.

• Open question: how will the SME-landscape in the chemical sector look like after 2018?


RECOMMENDATIONS (I) • Do not change the REACH Regulation, it would add uncertainty

• On SIEFs and Letters of Access: set-up a neutral and official forum (within ECHA) to set templates and perhaps even LoA fees.

• Address the potential competition law implications of current SIEF arrangements and the protection of CBI in the supply chain to reduce "take it or leave it" situations for SMEs.

• Guidance Note from DG Competition on the main anti-trust problems in SIEFs by 2014 and in time for the 2018 wave of SME substance registrations would be welcome.


RECOMMENDATIONS (II) • Review content & format of Safety Data Sheets (especially that

of the extended part, the eSDS): not fulfilling their knowledge transfer role for SMEs.

• IT systems to generate compliant SDSs are necessary: joint action of authorities and industries (case of IUCLID)?

• Improve communication of REACH and its intended goals to the wider public.

• Perform as soon as possible and before the 2018 deadline, a dedicated ex-post assessment focusing exclusively on SMEs.

• In the event of a later review of REACH, the logic (especially related to SVHC/authorisation) should be more risk-based than hazard-based.


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