Digitalisation: The New Driver for Chemical Leasing

By Petra Schwager
13 February 2020 | Article

This article explains the large range of opportunities that digitalisation offers to enable companies to change to Chemical Leasing. It specifically outlines how digitalisation supports better monitoring of the performance of chemicals services.

Key Words: Circular Economy, Technology & Innovation

Chemical Leasing is a Circular Economy performance-based business model applied to chemicals operations. It shifts the focus from the product to the service rendered by a chemical. Chemical users do not buy chemicals per se, but buy solutions, which can be achieved through the application or use of chemicals in an optimal manner. By doing more with less, Chemical Leasing aligns the interests of the business partners, stimulates continuous innovation and resource efficiency and reduces harm to the environment and people.

A key element for a successful Chemical Leasing business model is accurate measuring and monitoring of the benefits. For this, both the chemicals/chemicals service provider and the user need to define and use performance indicators. The value of the service provided by the chemical is the basis for payment and calculating the Chemical Leasing fee. A few examples to illustrate this would be: Euro per metal piece cleaned instead of purchasing the solvent; Euro per label applied instead of buying the glue and Euro per m2 of surface area coated instead of purchasing powder coating chemicals.

Without adequate measuring and monitoring, remuneration of performance is not manageable. This has been a challenge for the uptake and mainstreaming of Chemical Leasing, especially in developing and transition countries.

The latest technological advancements in bridging the physical and digital application, the so-called “internet of things”, is considerably boosting the opportunities for new performance-based solutions.

Different kinds of low-cost but highly efficient sensors are enabling manufacturers around the global to connect a wide range of services with diverse technologies and platforms. These smart connected products permit remote monitoring and provide large data by continuously tracking products, their performance and use. This brings a new set of possibilities for performance-based solutions that can be tailor made to meet the needs of a specific customer.

Blockchain, which is another part of the “internet of things”, provides trusted protocols of transactions that are verified by a network of computers before recording and approval. This technology creates trust among business partners and delivers secured information that is not controlled by single users. That allows to reduce risks related to Chemical Leasing contracts that are often resulting from outcome uncertainties. Consequently, this nurtures long-term business partnerships and equal sharing of benefits, steaming from the more efficient use of chemicals.

Furthermore, the “on-demand” or “shared economy” thinking raises the question about ownership of products and puts functionality and benefits at the core of a business deal. Customers increasingly raise the questions: What is the result that I want to achieve? Do I need to purchase an expensive piece of equipment that is only being used 4% of its lifetime? Why would I want to buy chemicals if I can purchase a solution?

The digital revolution is creating enormous opportunities for new approaches that shift from the traditional product-oriented philosophy to performance-based business thinking. This offers a unique chance for creative outcome-based solutions and for accelerating the adoption of Chemical Leasing.

To change a business model is a fundamental, strategic decision that a company needs to take. Digitalisation provides a large range of means to enable the change to Chemical Leasing and other performance-based business models for sustainable chemicals management in many industrial sectors.

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Source: The article was published for the first time in:
Image copyrights: Freepik

Petra Schwager

Chief, Energy Technologies and
Industrial Applications Division,
United Nations Industrial
Development Organization (UNIDO)

“My passion? Pioneering newsustainable business models forindustry”

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