Europe's new Registration, Evaluation and Authorization of Chemicals (REACH) legislation will have a major impact on the global chemicals industry.
It may come as a surprise to some, but AkzoNobel, the world's largest coatings company and a major producer of specialty chemicals, believes the new legislation presents a business opportunity, as well as an important contribution to preserving the environment.
Politicians started changing Europe's chemical laws in the late 1990s. In addition to mounting concern for health, safety and the environment, the fragmented laws already in existence were in need of fundamental revision to make them more effective, and to make it easier to control or phase out the use of certain substances.
REACH has taken seven years to formulate and, for the first time, makes evaluation of essentially all chemicals on the European market mandatory. Replacing more than 30 chemicals directives, it has been described as the most complex legislation in the European Union's history, as well as the most important for 20 years.
Immediate Impact and Challenges
With the pre-registration period for REACH now underway (June 1), all chemicals of one ton or more in volume that are manufactured in, or imported into, the EU each year, must be tested for their effect on health and safety and registered with a new central European authority-the European Chemicals Agency-located in Helsinki, Finland. Pre-registration must take place before December 2008, with full registrations requested by December 2010, while for some chemicals the deadline is 2018.
REACH will transform the chemicals industry and downstream users, both in the way it operates and in the products it produces. The legislation could also have a big impact on where products are made. Companies from outside the EU that sell chemicals in Europe will be subject to REACH. However, producers of finished goods manufactured outside of Europe will not be restricted to the same choice of chemicals that European manufacturers will be. This could lead to further outsourcing of manufacturing to non-EU countries, particularly the Asia-Pacific region and the U.S.
With REACH, some substances will be phased out of production or become uneconomical because the cost of registering a substance is significant. Registration for a single substance produced at more than 1,000 tons per annum could cost up to EUR 2 million (roughly $3.13 million).
Business Opportunity and Greater Good
Under REACH, new environmentally-friendly substances will become commercially more attractive. The companies that develop REACH-compliant products will naturally establish competitive advantage. But the benefits do not stop there. REACH will strengthen companies by improving relationships with outside suppliers and promote cooperation between divisions within each company. Here at AkzoNobel, for example, every business unit has set up multifunctional teams, including R&D, legal, sales and purchasing to manage their REACH processes and ensure the regulation is correctly implemented.
The benefits of REACH will be far-reaching because it imposes an obligation to everyone in the chemicals industry to share data. This means a much higher degree of communication between users and competitors, moving the industry toward consensus on a common work plan. Dialog between international organizations, including trade associations and consortia will also be brought about. Groups like the American Chemical Society will be in closer contact with European groups such as The European Center of Ecotoxicology and Toxicology of Chemicals and The European Chemical Industry Council.
REACH is not the only legislation that promises to improve the chemical industry. The U.S. Environmental Protection Agency (EPA) has developed a new initiative called the Chemical Assessment and Management Program (ChAMP). Born out of the Security and Prosperity Partnership of North America Leaders' Summit last year, ChAMP promises to improve chemical safety and the environmental impact of chemicals by gauging risk levels in roughly 9,000 chemicals made in volumes of 25,000 pounds or greater.
ChAMP looks at fewer chemicals than REACH (which would apply to more than 30,000 chemical types) and puts the onus of testing on regulators instead of manufacturers. ChAMP advocates argue that safety and environmental consciousness can be achieved without the costs incurred by REACH.
Although there is uncertainty about how the U.S. will move forward, there is no debate that the future holds more regulation, not less. Companies that put sustainability issues at the top of their agendas will be better protected against regulatory mandates and positioned to compete globally. The organizations that will excel will be those that ensure quality while controlling the logistics and communication channels along the supply chain.
Dave Buckland is Corporate Regulatory Affairs Manager at AkzoNobel. AkzoNobel is the largest global paints and coatings company. Based in Amsterdam, the Netherlands, AkzoNobel makes and supplies a wide range of paints, coatings and specialty chemicals. www.akzonobel.com
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