GLOBAL CONTEXT
BINDING INTERNATIONAL AGREEMENTS AND CONVENTIONS

Task 10: Monitor, Document and Evaluate Results

The Chemical Leasing business model is intended to generate a sustainable business and to support long-term working relationships between  the partners. It is therefore important to consider modifications and corrections if the business develops differently to expectations. It is also important to be flexible enough to adapt business activities continuously based on results.

Task 10 aims to manage this process, facilitating corrections and further optimizing chemical use in the company’s production process.

Having finished Task 10 you are aware of results achieved and have developed a basis for continuous improvement.

Task 2: Pre-Assess Chemicals and Processes

With this Task done, you have completed the pre-selection and pre-assessment of chemicals and processes which can provide you with promising Chemical Leasing cases.

Continue with Task 3 – Pre-defining the unit(s) of payment

Task 6: Collect Data and Define the Baseline

This task involves gathering all relevant data to describe the current situation in the selected process (e.g. one of the production lines) before implementation of Chemical Leasing. The data are needed to establish a baseline that is used to evaluate the results: the costs and benefits of implementing Chemical Leasing, over a given period of time.

In gathering the data, the Chemical Leasing team should be aware that:

• Many of the data are typically already available, so the team should first collect data that already exist. If important data are missing, the team should define an approach to collect it (measure or calculate or assume).
• The data should be documented properly.
• The company should use consistent methods to measure and calculate data collected over the period in order to make them comparable.
• The results of previously tested process modifications and chemical alternatives should be taken into account.
• Ideas for improvement are often generated during the systematic elaboration of data. These ideas (which are mainly addressed in Task 7) should be documented and discussed within the team.

To establish a baseline it is necessary to define indicators relevant to the selected process. The indicators should be specific, measurable, available/achievable in a cost effective way, relevant, and time-related (SMART), and they should be the same as the indicators used in monitoring and evaluation (task 10)

Information about indicators can be found here.

Table 3.  Examples of indicators for target processes

Table 4.  Example of baseline data collection for a specific industrial process: lubrication of the PET bottle packaging conveyor.

To ensure the smooth movement of bottles during packaging, the conveyor belt has to be lubricated. The current process uses a lubricant dissolved in water.

The baseline data is the starting point for development of the Chemical Leasing and any subsequent monitoring and evaluation.

▶ When you have defined the baseline for the process, continue with Task 7 – Define measures to optimize chemical use and processes

Task 7: Define Measures to Optimize Chemical Use and Processes

In Task 7, the Chemical Leasing team will analyze the options for optimizing chemical use in the selected process(es).

Available benchmarks e.g. BREFs might be considered. For this task it is important to apply the sustainability criteria, which exclude the substitution of higher risk chemicals for chemicals currently used. There are three possible approaches:

• optimize consumption of the current chemical
• substitute the chemical with a less hazardous/lower-risk alternative (“substitution”)
• optimize and substitute

Ideas for optimization should be evaluated against expected advantages and disadvantages, yielding a list of “most promising” measures. A detailed cost benefit analysis of these measures should be undertaken that includes other savings from the optimization of chemical use. Such savings, for example from a reduction in the use of water, energy and materials and in the production of waste, can be quite significant.

Continue with  Task 8 – Test the identified options

Task 3: Pre-Define uUnits of Payment

The third task is to identify possible units of payment based on the services rendered by the chemicals.

As previously noted, Chemical Leasing is based on a shift from a volume based payment (e.g. $/t of chemical) to a benefit oriented payment (e.g. $/m2 cleaned surface). Table 2 provides examples of possible units of payment in different industry sectors and processes.

Table 2. Possible units of payment for different processes

As the table illustrates, in some cases the unit of payment may be based on the operating hours (working time) of equipment rather than on the direct services rendered by the chemicals. For example, in the production of metal parts, there are many parts with different shapes and sizes. It would be difficult to apply as a unit of payment the number or surface area of cleaned parts, and would make more sense to relate the unit of payment to operating/working hours.

Picture 2: Different sizes and shapes of metal parts

Once the chemicals and units of payments are pre-defined, it is essential to check which measurement devices, equipment, and/or information are required to measure, monitor and verify these units of payment. In some cases, several options are possible. The supplier should be able to check whether actual results/outputs correspond to reported figures.

Example

For the lubrication process of a packaging conveyor, the unit of payment could be the number of working hours of the conveyer but also the number of packed bottles. To monitor the number of working hours, the supplier could install a counter on the packaging line (see Picture 3). To monitor the number of packed bottles, the supplier would need to have access to the production company’s database, to check how many bottles were produced.

Picture 3: A counter on the production line

Continue with Step 2 – Development and implementation

Task 4: Create an Internal Working Group

Task 4  is to create a committed internal working group that will develop and implement the Chemical Leasing model and will become a driving force in all of the developmental changes.

The group should at a minimum include members from the company’s production and purchasing departments. Ideally it should also include members from the R&D department, the quality assurance department, the legal department, the financial department, the health and safety and environmental department, and potentially members of the management board.

The importance of the working group cannot be overestimated. Success in modifying and optimizing the company’s processes will depend on the efforts of these people and their knowledge, efforts, and understanding of the company´s strengths, weaknesses and potential problems. A skilled team that collaborates well is an absolute necessity for successful implementation of a Chemical Leasing business model.

As soon as the internal team is established, it is essential to set-up the core Chemical Leasing team which should include the supplier(s) and eventually other partners. This will facilitate the further development of the Chemical Leasing model and the exchange of know-how.

Continue with the Task 5 – Establish a core Chemical Leasing team

Task 5: Establish a Core Chemical Leasing Team

As soon as the internal working group is established, task 5 is to set up a core Chemical Leasing team that includes the supplier(s) and possibly other partners. This team will facilitate the further development of the model and the exchange of know-how.

The role of the core Chemical Leasing team is to:

• Identify ideas for process optimization
• Identify possibilities for the potential substitution of chemicals with less-hazardous/low risk alternatives
• Assess consequences on quality, investments, costs, etc
• Elaborate a work plan that includes:
• Defining the scope of required testing
• Preparing and signing a letter of intent to address the confidentiality, costs and liability of subsequent tasks.
• Identifying potential implementation efforts for the different partners
• Establishing a time schedule and allocating tasks.

The process of creating the core team should begin with a discussion of the Chemical Leasing model with the supplier(s) of the chemicals and processes selected in Step 1. During the discussion you should present your ideas about possibilities for optimizing chemical use and also ask the supplier(s) for their ideas. If a supplier does not have the necessary knowledge and skills to support chemical optimization or is not willing to accept a Chemical Leasing business model, you might consider changing suppliers for the target process.

Under the Chemical Leasing business model, the supplier is intricately involved in process optimization, providing not just the chemicals but also know-how on how to optimize their consumption and/or replace hazardous chemicals with less hazardous/lower risk alternatives. Often the supplier can provide training on site and can recommend equipment changes, upgrades and/or installation.

When selecting a supplier for the core Chemical Leasing team, be aware that you may have the possibility of choosing between several partners (chemical manufacturers or distributors) in the supply chain. In addition, if your company has a procurement department, be sure to apply its internal policy, which might require you to initiate an individual or public bidding process for potential suppliers. Also be aware that other partners could be included in the core team, such as equipment and plant suppliers, recycling and disposal companies, and financial institutions.

Three models of interaction between different numbers of partners are shown in the diagram below. Model A illustrates the basic form of Chemical Leasing, with an intensified collaboration and knowledge exchange between a chemical supplier and user. Model B includes the equipment supplier in this exchange (and the option of “classical” leasing of equipment). Model C extends the collaboration to further partners such as recycling companies or financial institutes. As the leadership of such a group becomes more and more difficult, in practice joint ventures or consortia are typically formed.

Picture 4. Models of cooperation

Once the work plan is defined and concrete ideas have been developed for process optimization and/or substitution, the team should begin to collect data and define the baseline.

Continue with the Task 6 – Collect data and define the baseline

Task 1: Identify Potential Chemicals and Processes

The identified processes and chemicals are the basis for further analysis.

If you have identified potential chemicals and process(es), continue with Task 2 – Pre-assess chemicals and processes

Task 9: Establish a Contract

The final task before actually implementing the optimization option(s) is to establish a contract between the chemical user and supplier.

Every company has its own contractual standards and forms, but to facilitate implementation of a Chemical Leasing contract, the key elements listed below should be included. It is advisable to begin with only one production line for a certain period of time, and if it goes smoothly, to extend the Chemical Leasing model to other lines.

Key elements for a Chemical Leasing contract:

1. Scope of the contract (chemicals, processes, line covered)
2. Required quality of the chemical(s) (technical specification in Annex)
3. Application of the Chemical Leasing business model (short definition)
4. Agreed average consumption of chemicals and percentage of variation tolerance (deviation from agreed amount of chemicals consumed) acceptable to all parties, if applicable. If the agreed percentage is exceeded, this will have to be discussed and addressed.
5. Unit of payment
6. Price per unit of payment
7. Terms of payment
8. Way of verifying the number of units to be paid
9. Liability (e.g. for damages to the site, quality problems with the manufacturers’ products, health or environmental impacts) and warranty
10. Obligations of the chemical user (i.e. compliance with  process parameters, as specified by a supplier; reporting to a supplier of any significant variations in the process parameters that may influence consumption; maintenance of records and documenting of the number of  payment units as the basis for payment; refraining from using other chemical brands on the line; appointment of a person responsible for monitoring the line operation and informing the supplier of any modification or situation requiring the supplier’s attention)
11. Obligations of the chemical supplier (i.e. provision of technical specifications and application instructions; fulfillment of required chemical quality; provision of Safety Data Sheets; industrial testing and necessary adjustments for optimal application; specification of  process parameters for optimal consumption; training of the staff; installation of additional equipment; work on further consumption optimization in line with new development, regular service)
12. Waste and emissions management (legal compliance must be assured)
13. Cost sharing of potential investments (recommended)
14. Confidentiality (covering any technical ownership or other confidential business information of which the parties to the Contract become aware)
15. Publication and utilization of results
16. Contract duration and termination (including possible probation period)
17. Contract modifications (e.g. price changes)
18. Conflict resolution
19. Applicable law
20. Monitoring

If you have signed a contract and are interested in how to monitor and evaluate the results of the Chemical Leasing implementation, go to Step 3 –  Monitoring and evaluation.

Task 8: Test The Identified Options

Task 8, testing of the identified options, should prove the applicability of the Chemical Leasing model in the selected process, provide concrete figures for costs and savings, and demonstrate that quality requirements are met.

The design and the plan of the testing should be defined by the core Chemical Leasing team and should take into consideration:

• Costs of the testing: The team needs to decide who will cover the costs. Sharing of costs between the chemical user and supplier is recommended if possible.
• Liability: Advance agreement on who is responsible for the testing and the eventual outcomes is recommended
• Occupational health and safety requirements
• Specification of chemicals required by the user, which should be respected by the supplier.

Unit of payment:

The testing should also cover the new unit of payment that was identified in Step 1. This unit should now be analyzed and verified in practice. In addition, at the end of the testing process, the Chemical Leasing team must agree on the price per unit of payment (for example: 1 Euro/ m² cleaned surface). In comparing the costs of traditional and Chemical Leasing models, it is important that the calculations be based on real costs related to chemical use (energy, water, etc.) and that they take into consideration all potential savings that can be achieved under Chemical Leasing.

The testing should result in:

• Proof that optimization options are feasible and will bring economic, environmental and other benefits
• Final decisions on the unit of payment and pricing

If the testing has been successful and the price determined, continue with  Task 9 – Establish a contract