Stephan Sickars

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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.

Monitoring

Verification of the number of units to be paid

Documentation

Evaluation

Presenting results

Extending the Chemical Leasing mode

Monitoring

Monitoring is in principle a continuous process that needs to be performed once a Chemical Leasing contract is established. It provides both partners with data on:

The consumption of chemicals
The quality of the chemicals (e.g. whether in line with the specification)
Process parameters
The quality of process outputs (e.g. the cleanness of metal parts or the efficiency of the lubrication process)
Data on maintenance (if needed)
Other

Table 4 on baseline data collection can be extended and adapted for the recording of monitoring data (e.g. some companies might need to add process parameters such as temperature and pressure).

Monitoring activities should be agreed between the partners and the results should be shared in a transparent way in order to maintain trust and facilitate joint decisions on modifications.

Verification of the number of units to be paid

The supplier should be able to confirm whether the producer’s report on the number of units to be paid corresponds to the real situation, e.g. if the company pays per cleaned pieces, the number of pieces cleaned should be verified.

Documentation

Monitoring results must be well documented and communicated between the partners as they might form the basis for later contract modifications.

Evaluation

The evaluation should compare the baseline data (before implementation of the Chemical Leasing model) with current data to assess real achievements. The evaluation should answer the questions:

What are the real savings achieved?
Have the targets been met?
Is there a need to modify the contract?

The result of the evaluation can be:

A definition of real achievements and a clear idea of where the company stands
A decision to continue optimizing the process(s) targeted in the Chemical Leasing contract because the evaluation results stimulate new ideas that are in the interest of both partners
An adjustment of the price per unit of payment, e.g. because consumption of chemicals has changed due to the change in process parameters.

An evaluation schedule must be agreed between the contractual partners. A three- to twelve-month evaluation period is recommended. (Shorter periods require excessive effort and the results might not be stable. Longer periods might cause corrections to come too late.)

Presenting results

The company might want to present its achievements after a certain period of applying a Chemical Leasing model: this could be useful, for example, for the company’s annual report; for speeches and meetings with stakeholders; for ISO 9001, 14001, EMAS and CSR reports; for corporate news, leaflets and presentations; and for meetings with the supplier to discuss contract extension.

The results can be presented in different formats, e.g. in a “before and after” comparative table and photograph (see Figure 5) or in a short summary of the results achieved, as shown in Table 5.

Picture 5. The same packaging line before and after implementation of Chemical Leasing for conveyor lubrication

Table 5. Sample summary table of results

Economic figures	Environmental improvements	Safety and health improvements
• Savings planned and achieved • Change in product output • Return on investments/Payback period	Change in pollution intensity: Reduction in: • Consumption of chemicals • Hazardousness of chemicals • Water consumption • Waste water generation • Energy consumption • Waste generation	• Reduction in accidents related to the handling of chemicals • Reduction in adverse health effects in workers due to exposure to chemicals
Intangible benefits (For example, The company can better control and predict the costs related to the target process.)

Extending the Chemical Leasing mode

Very often partners start by implementing the Chemical Leasing model in one particular line or area. With time, if the cooperation between the partners is positive and the user’s expectations are met regarding the costs, the results, and the quality of the products and services, the user can decide to extend the model to other production lines and areas.

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

GO TO 3 STEP GUIDELINE

Task 2: Pre-Assess Chemicals and Processes

Example
1. Chemicals for the lubrication process:Lubrication is needed in many industry sectors. Picture 1 below demonstrates conveyer lubrication where different chemicals are used for the different aims. Picture 1: Conveyor lubrication
2. Chemicals for cleaning and disinfection of fillers and conveyors:
  - Automated CIP (Cleaning in Place): Cleaning and disinfection of tanks, fillers, pipes).
    
    Automated COP processes (Cleaning out of Place): Cleaning of equipment by removing items from their operational area and taking them to the cleaning station for cleaning (there are static and mobile versions).
3. Bottle disinfection
4. Glass bottle washing
5. Bonding of labels (applying water-based or hot melt adhesive).

Pre-Assessing a Chemical in a Process

Some chemicals have hazardous properties and can have negative impacts on human health and/or the environment. You should consider these, as well as economic factors, when pre-assessing the chemicals. Each chemical should be analyzed (“pre-assessed”) based on three parameters: quantity consumed, cost and hazardousness.

Parameter 1 – Quantity consumed

Define the amount of the chemical consumed annually in a given process and assign the chemical “points” as shown in the chart below. The greater the quantity of a chemical used, the higher the general suitability for Chemical Leasing.

Quantity of chemical X applied	Recommended criteria	Points
High	More than 100 tons/year	5 points
Medium	More than 10 tons/year	3 points
Low	More than 1 tons/year	1 points

Parameter 2 – Cost

Check the annual purchasing cost of the chemical and assign the chemical “points” as shown in the chart below. The higher the cost, the higher the general suitability for Chemical Leasing.

Cost of chemical	Recommended criteria	Points
High	More than €100,000/year	5 points
Medium	Between €100,000 and €10,000/year	3 points
Low	Less than €10,000/year	1 points

Parameter 3 – Hazardousness

Most chemicals present some degree of hazard, such as toxicity, flammability, or corrosiveness. The greater the hazard associated with a given chemical, the greater the need to optimize its use or to consider substitution with a less hazardous/lower risk alternative. Identify each chemical’s hazardousness and assign the chemical(s) “points” as shown in the chart below. Information about a chemical’s hazardousness can be found on the product label. The detailed information can be found on the product Safety Data Sheet (SDS), which can be obtained from the supplier.

Hazardousness of chemical X	Relevance	Points
High	Hazardous chemical of high or potential concern	5 points
Medium	Chemical that have hazardous property(is) (for example, chemical is corrosive, flammable etc)	3 points
Low	Non hazardous chemicals	1 points

Calculating the Final Score
Calculating the final score

Add up the points in the three charts to give each chemical a final score.

A company with a lubrication process consumes lubrication chemicals in high volumes, the costs are estimated as medium and hazardousness as low. The final score will be: 5+3+1=9
- If the final score is equal to or more than 7, implementation of the Chemical Leasing model may be relevant.
- If the final score is less than 7, Chemical Leasing is not recommended.
You may repeat this procedure for other 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

GO TO TASK 3

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

Economic indicators	Environmental indicators	Health and safety indicators
Costs for materials, energy, water, waste-water treatment, waste management, etc.	Input: • Chemical consumption • Water consumption • Energy consumption • Waste water generation • Waste generation • Air emissions • Pollution intensity	Accidents related to the handling of chemicals Adverse health effects in workers from chemical exposure

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.

Input	Unit in l, m³, kg, etc./year	Comments
Lubricant Type Hazard: medium, low or non-hazardous Volume per year		e.g.: The idea is to change to a dry lubricant that does not need water
Sodium hypochlorite Hazardous chemical	volume per year
Water for the lubricant	m³ per year
Chemicals for waste water treatment	volume per year
Energy		Not relevant for this case
Output	Unit in l, m³, kg, etc./year
Waste-water	m³ per year
Waste Packaging waste for the lubricant	number of packages
Economic data	Unit in €, $, local currency/year
Costs for lubricant	Euro (or other currency) per year
Costs for sodium hypochlorite	Euro (or other currency) per year
Costs for water	Euro (or other currency) per year
Costs for waste water treatment chemicals	Euro (or other currency) per year
Costs for energy		Not relevant for this case
Costs for waste water treatment	Euro per year
Costs for waste disposal/treatment	Euro per year	Not relevant for this case
Social data	Unit
Number of jobs in the process	Nr of people working on the line per shift
Working conditions: Aerosols in the air – risk of worker exposure Slippery floor – risk of injuries Lubricant is manually applied – risk of worker exposure

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

GO TO TASK 7

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.

Example
The conveyor belt in a beverage company shown in Picture 1 and Table 4 provides an example. The Chemical Leasing team in this real-life case considered several possibilities to improve the lubrication process, which was using a lubricant dissolved in water.
- Option 1: replace the lubricant that is currently used with another lubricant that is equally hazardous/risky but more efficient and that requires less water in its application, leading to a significant reduction of water consumption (up to 50%) and of waste water in the production process. Another benefit of the new chemical is that it can also be used for cleaning the conveyor belt, which provides additional savings.
- Option 2: replace the lubricant with a dry lubricant that does not need to be dissolved in water and that has no hazardous properties, according to the Safety Data Sheet. Because water is no longer used, no waste water will be generated and no chemicals for water treatment will be required.
- Option 3: optimize the process by replacing nozzles, tubes and/or other parts if there is any leakage, and in this way reduce consumption of water and of the lubricant currently used.
In its analysis of the investments (costs) and benefits of the three options, the Chemical Leasing team concluded that the investments for option 2 would be much higher than the investments for option 1, but that the economic, environmental, and health and safety benefits would be considerably higher for option 2 (due to less chemical consumption, no water consumption, lower waste water treatment costs, better working conditions, etc.). The analysis showed that option 2 was the most sustainable and sound, and that the investments needed for shifting the lubrication process to the dry lubricant would be paid back in 2 to 3 years. Process optimization, option 3, was considered as well but the savings were less than with the first two options.

As result, the team decided on option 2, noting that option 3 could be done as a supplementary measure if the existing equipment was not changed (in fact, the line was regularly maintained and there was no leakage). The company had 80 nozzles at the target production line, the average consumption of water per nozzle was 5 litres/hour, and the line is in operation 3500 hours/year, so the yearly consumption of water was 1400 m³. This water was saved thanks to the change to a dry lubricant.

Continue with Task 8 – Test the identified options

GO TO TASK 8

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

Categories of chemicals	Processes	Possible unit of payment	Sectors/Subsectors
Adhesives	Packaging/Bonding	• Number of bonded pieces • Bonded square meters	• Food and beverage sector • Construction of buildings (e.g. for bonding of windows) • Manufacture of footwear • Manufacture of wood products
Adhesives	Labeling	• Packed (labeled) bottles • Bonded square meters of label	Food and beverage sector
Detergents, disinfection materials	Cleaning/ Washing	Occupied room	• Accommodation (Tourism) sector • Healthcare sector
Detergents, disinfection materials		Number of cleaned (disinfected) bottles	Food and beverage sector
Solvents and detergents		• Cleaned pieces Cleaned area • Working time /operations (see note below)	• Manufacture of fabricated metal products • Automotive industry
Detergents, disinfection materials	Laundry	Kg of laundry	• Accommodation (Tourism) • Healthcare sector
Oils, greases	Lubrication	Working hours	Mining and quarrying
Other types of lubricants	Lubrication of packaging conveyor	• Working hours of conveyor • Packed product	Food and beverage sector
Powder coatings, solvent- and water-based paints, chemicals for phosphating	Surface protection	• Square meters of treated area • Number of pre-treated/painted products	Manufacture of: • fabricated metal products • vehicles and machinery • wood products • electrical equipment • rubber and plastic products
Inks	Printing	Printed copy	Publishing and printing
Coagulants, Flocculants, defoamers	Waste water treatment	Cubic meters of treated water	Different sectors
Bore hole chemicals (Calcium bromide, zinc bromide, caesium formate)	Oil drilling	Daily fee	Oil and gas field services
Catalysts	Chemical reactions	t of synthesized product	Manufacture of chemicals and chemical products

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

GO TO STEP 2

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

GO TO TASK 6

For Consultants

Core competence: Supports/promotes/facilitates the establishment of a ChL contact

Benefit: Portfolio development and new business opportunities

Task 1: Identify Potential Chemicals and Processes

Categories of chemicals	Processes	Examples of sectors/subsectors
Adhesives	Packaging/Bonding	• Food and beverage sector • Building construction (e.g. for bonding of windows) • Manufacture of footwear • Manufacture of wood products
Adhesives	Labeling	Food and beverage sector
Detergents, disinfection materials	Cleaning/washing	• Accommodation (Tourism) sector • Healthcare sector
Detergents, disinfection materials		Food and beverage sector
Solvents and detergents		• Manufacture of fabricated metal products • Automotive industry
Detergents, disinfection materials	Laundry	• Accommodation (Tourism) sector • Healthcare sector
Oils, greases	Lubrication	Mining and quarrying
Other types of lubricants	Lubrication of packaging conveyor	Food and beverage sector
Powder coatings, solvent – and water-based paints, chemicals for phosphating	Surface protection	Manufacture of: • fabricated metal products • vehicles and machinery • wood products • electrical equipment • rubber and plastic products
Inks	Printing	Publishing and printing
Coagulants, flocculants, defoamers,	Waste water treatment	Different sectors
Bore hole chemicals (e.g. calcium bromide, zinc bromide, cesium formate)	Oil drilling	Oil and gas field services
Catalysts	Chemical reactions	Manufacture of chemicals and chemical products

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

GO TO TASK 2

For Supplier

Core competence: Know-how about application of different chemicals

Benefit: Long-term business partnership and better market competitiveness

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:

Scope of the contract (chemicals, processes, line covered)
Required quality of the chemical(s) (technical specification in Annex)
Application of the Chemical Leasing business model (short definition)
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.
Unit of payment
Price per unit of payment
Terms of payment
Way of verifying the number of units to be paid
Liability (e.g. for damages to the site, quality problems with the manufacturers’ products, health or environmental impacts) and warranty
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)
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)
Waste and emissions management (legal compliance must be assured)
Cost sharing of potential investments (recommended)
Confidentiality (covering any technical ownership or other confidential business information of which the parties to the Contract become aware)
Publication and utilization of results
Contract duration and termination (including possible probation period)
Contract modifications (e.g. price changes)
Conflict resolution
Applicable law
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.

GO TO STEP 3

For User

Core competence: Know-how about the company’s key industrial process and final product

Benefit: Economic, environmental, health and safety benefits; better chemical management

Stephan Sickars

STEPHAN SICKARS

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