The traditional business model of chemical suppliers selling their products in the largest possible quantities, while profitable, encourages the overuse of chemicals and places a strain on human health and the environment. But another model has emerged that decouples payment from consumption.Chemical leasing is a business model in which chemical manufacturers and distributors charge for the function that the chemicals perform rather than selling chemicals. Companies that use the chemicals pay for the service that the chemicals provide instead of buying the chemical. The model reduces the waste and inefficiency that often occur with the conventional approach to buying and handling chemicals.
The traditional business model of chemical suppliers selling their products in the largest possible quantities, while profitable, encourages the overuse of chemicals and places a strain on human health and the environment. But another model has emerged that decouples payment from consumption.
Chemical leasing is a business model in which chemical manufacturers and distributors charge for the function that the chemicals perform rather than selling chemicals. Companies that use the chemicals pay for the service that the chemicals provide instead of buying the chemical. The model reduces the waste and inefficiency that often occur with the conventional approach to buying and handling chemicals.
The model is championed by the United Nations Industrial Development Organization (UNIDO), which claims: “This results in clear environmental advantages as well as consequent economic benefits for both suppliers and users of chemicals.”
By encouraging companies to focus on improving their operational efficiency, UNIDO says that chemical leasing draws attention to four main environmental problems: climate change, freshwater management, environmental pollution and waste-resource management.
Several companies have launched chemical leasing pilot projects, including Carlsberg and Coca-Cola. For the last five years, Carlsberg has scaled its chemical use based on the price of chemicals per hectolitre of beer produced. This has allowed the company to use chemicals and resources more efficiently.
In 2012, Coca-Cola contracted Ecolab to improve the use of chemicals in its Serbian operations, which focused on three processes: lubricating the bottling conveyors, cleaning equipment surfaces and washing bottles. Payment was based on the number of packed products that the operations shipped out, instead of the quantity of chemicals used.
UNIDO says the project was scheduled to start in January 2013 and that its economic savings are estimated at around $73,900 per year.
In other recent chemical news, a group of corporate and NGO leaders last week released a new tool for assessing leadership in corporate chemicals management. The Chemical Footprint Project (CFP) provides the first-ever common metric of its kind for publicly benchmarking corporate chemicals management and profiling leadership companies. The CFP will enable purchasers to preferentially select suppliers and investors to integrate chemical risk into their sustainability analyses and investments. Its results enable brands to market their progress and success in using safer chemicals.
Also this month, sustainability software firm CRedit360 has helped global chemistry company Solvay to introduce a consistent, group-wide approach to sustainability reporting, following its acquisition of Rhodia. Equipped with the CRedit360 system, Solvay is set to streamline its data management, improve the quality of the group’s sustainability disclosures and promote greater collaboration between business units.
Published Dec 16, 2014 12pm EST / 9am PST / 5pm GMT / 6pm CET
Founder & Principal Consultant, Hower Impact
Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.
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