September 15, 2014 — Imagine if instead of making a list, buying groceries and sometimes running out of milk or ending up with spoiled food in the fridge, you engaged a company that helped analyze exactly how much food your household uses each week based on the meals cooked and eaten. That company would then deliver precisely the right amount of food for seven days of breakfast, lunch and dinner and charge you based, not on volume of food purchased but on meals consumed. Such a system could easily pencil out as better for your budget and for the environment.
Businesses around the world have begun to shift from buying chemicals as such, to purchasing the services those chemicals provide.This is essentially the idea behind chemical management services, also known as chemical leasing. To reduce waste and the inefficiency (and corresponding environmental burdens) that can easily occur in buying and handling individual chemicals — particularly for a large company that uses lots of different chemicals — businesses around the world have begun to shift from buying chemicals as such, to purchasing the services those chemicals provide.
Focus on Service
Under the conventional approach, chemical manufacturers and distributors have an incentive to sell as much product as possible, which can easily lead to excess financial, environmental and potentially health-related costs and liabilities, explains Chemical Leasing, a program of the United Nations Industrial Development Organization, based in Vienna. In the chemical service model, rather than owning a chemical, the “customer uses it for its function,” says Solazyme, Inc., sustainability director Jill Kauffman Johnson. So, instead of paying for chemicals by volume, users pay for the services provided by those chemicals — for example, number of assembly line machines cleaned or product components painted or coated.
“Replacing a product with a service has positive environmental benefits,” says UNIDO industrial development officer and global chemical leasing programme coordinator Petra Schwager.
One of the major outcomes of this approach is “chemical use reduction,” says Johnson, who previously served as executive director of the nonprofit Chemical Strategies Partnership, working with businesses on reducing waste and risk throughout the chemical supply chain. Focusing on the service a chemical provides helps home in on exactly why chemicals are being purchased and how and where they’re being used.
Chemical leasing, UNIDO explains in its definition of the concept, “shifts the focus from increasing the sales volume of chemicals towards a value-added approach.”As Johnson and other chemical supply chain experts note, large manufacturing companies — and particularly those with many divisions and production lines that involve lots of different parts and processes — historically have tended to have inefficient inventories. This has led to waste and also to storing quantities of chemicals, including hazardous materials. Such practices have obvious potential environmental consequences and are also business costs that don’t add value to a company’s products.
Chemical leasing, UNIDO explains in its definition of the concept, “shifts the focus from increasing the sales volume of chemicals towards a value-added approach.” By using chemical leasing or chemical management services, a company can streamline its inventory and cut down on the volume of chemicals purchased.
As part of this trend, a number of companies supplying chemicals have shifted to providing services that go beyond simply delivering these products.
“It’s a lot more services than just product,” explains Tom Bryant, a manager in cleaning, personal care and industrial products manufacturer Henkel Corporation’s Chemical Management Division. A chemical management service provider can help reduce the paperwork involved with purchasing and using chemicals, Bryant says. It can also help with chemical sourcing and make it easier for clients to find the best material for a particular job or application. It also means something of a shift in how chemical suppliers think about their business model from focusing on chemical volume to services associated with chemical use. In addition, the chemical service model can help a company “get the maximum out of its operations” where chemicals are involved, Bryant says, and this can translate both to dollars saved and environmental benefits.
Bryant explains that shifting to the chemical service approach means cutting not only the volume of chemicals purchased but also the number of chemicals used. That in turn reduces the environmental impacts associated with handling chemicals, including occupational exposure impacts. It also means fewer transportation and storage costs, which in turn means fewer environmental liabilities and potentially lower insurance costs and less time and moneyShifting to a chemical service model can also help a company shift to safer chemistry. spent on complying with related regulations. Cutting down on chemicals stored at a facility also reduces potential safety risks.
Shifting to a chemical service model can also help a company shift to safer chemistry, says Bryant. “Most manufacturers are generally aware of things that can be replaced with safer alternatives,” he says. “But we can help locate alternatives.”
Manufacturers are “not always very good at this. It’s not typically a core competency,” says Thad Fortin, executive vice president and chief strategy officer of Wesco Aircraft, parent company of chemical services provider Haas Group International.
In the U.S., GM, Lockheed Martin, Harley Davidson and electronics manufacturer Seagate are among the companies using chemical management services in their manufacturing processes. In Europe, among other companies, Coca-Cola has used chemical leasing with water, hygiene and energy technology and service provider Ecolab for equipment cleaning and maintenance at a bottling plant.
UNIDO is working on establishing pilot programs for chemical leasing in the hotel industry, in which the service would be measured by rooms or dishes cleaned or area disinfected rather than in bottles of cleaning product or disinfectant sold.SAFECHEM, a wholly owned subsidiary of the Dow Chemical Company that is based in Europe, has been using the chemical leasing model to provide industrial surface cleaning services for the aerospace, automotive, electronics and other industries. Business manager Steffen Saecker explains that this has enabled companies to both “prolong the life of solvents and use less solvents.” Rather than selling a company a quantity of solvents for industrial cleaning and working on what Saecker calls a “volume basis,” SAFECHEM sells a service based on the solvents’ performance. What this translates to, he explains, is thinking in terms not of “kilos or pounds of chemical” but of “square meters cleaned.”
Looking to the future, UNIDO is working on establishing pilot programs for chemical leasing in the hotel industry, in which the service would be measured by rooms or dishes cleaned or area disinfected rather than in bottles of cleaning product or disinfectant sold. “This gives an incentive for continuous improvement” in resource efficiency, says Schwager.
UNIDO is also helping establish pilot programs with businesses that range from potato farms to candy manufacturers, from textile dying to water bottling plants in countries including Egypt, Kenya, Colombia, Mexico, India, Sri Lanka and Russia.
Still Some Challenges
Despite the benefits, the concept of chemical leasing still faces some challenges. For one, Bryant notes, shifting to this model means moving to longer term thinking about overall cost savings. “It’s not just saving 20 cents a tube on adhesive,” he says. The service model means thinking about chemical use more strategically and holistically, considering costs of chemical use throughout both a product’s supply chain and its life cycle.
Johnson points out that reducing chemical volume used is not always coincidental with toxics use reduction. When“There’s an incentive to use less and that is good. But that also leaves you open to use some pretty nasty stuff.” — Joel Tickner introducing the chemical service model, it made sense from a business perspective to focus on volume reduction as that is an easy goal to accept, she explains. However, “there’s not necessarily a big incentive for safer substitution” in the chemical service model says Joel Tickner, associate professor and director at UMass Lowell’s Department of Community Health and Sustainability.
“There’s an incentive to use less and that is good. But that also leaves you open to use some pretty nasty stuff,” Tickner says. To help advance this part of the process, he would like to see chemical suppliers and distributors engaged in more of the ongoing discussions about safer chemistry and toxics reduction policies.
Another challenge in the chemical leasing or service approach, at least initially, is introducing new practices. “A major aspect is trust in something new,” says Saecker. And with chemical leasing or service, this means letting new people — and often new processes — into your business, which has inherent challenges as logistics and responsibilities are sorted out.
While new efforts to expand use of this model are being launched in the “transitional” economies with which UNIDO works, it’s actually now quite mainstream in the U.S. where chemical service programs have been up and running since the 1990s. There is, says Johnson, still work to do on the toxics reduction side of the equation. But the service approach has helped companies get “a handle on what’s being used,” and that’s a significant part of the groundwork involved in considering safer alternatives, she explains. Overall, she says, “it’s been a success from my perspective.”