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What if the next time you need chemicals in your company, you do not buy them but rather you pay for a specific service to do the job for you? This is the essential idea behind chemical leasing – an innovative chemicals management business model that has begun to shift the conventional practice of buying chemicals to purchasing services that chemicals provide.

Under the conventional approach, it is in the interest of chemical manufacturers and distributors to sell as much of a product as possible. This can easily lead to excess financial, environmental and potentially health-related costs and liabilities. In the chemical leasing model, the producers/suppliers sell the functions of the chemical along with the associated specialist know-how, while the ownership of the product remains with them. So, customers are not paying for their chemicals by volume, but rather agreeing on a value-based unit of payment, such as cleaned area in square metres or coated number of bottles. In the leasing model, the supplier and customer develop a strong cooperation based on trust, exchange of experience, and gain financial as well as environmental benefits.

Initiative already in 2005

The innovative approach was introduced already in 2004 by the United Nations Industrial Development Organisation (UNIDO), together with the Government of Austria. Initiatives were first launched in developing countries - Egypt, Mexico and Russia in 2005; Sri Lanka, Serbia and Colombia in 2008 – to demonstrate the applicability of the model.

These pilot programmes were executed with businesses that ranged from potato farms to candy manufacturers and from textile dying to water bottling plants. Since then, over 50 chemical leasing projects have been implemented all over the world. All the projects are carried out in close cooperation with the National Cleaner Production Centres (NCPCs). In many countries, chemical leasing has a central place in the chemicals policy.

At present, UNIDO is coordinating projects in Serbia, Sri Lanka, Colombia, Brazil, Croatia, Mexico, Nicaragua, Russia, Ukraine and Uganda. The chemical leasing trend has also reached European suppliers and a number of companies supplying chemicals have started providing services. For example, the Dow Chemical Company is using the chemical leasing model to provide industrial surface cleaning services for the aerospace, automotive, electronics and other industries. Ecolab, a global provider of water, hygiene and energy technologies and services, has cleaned equipment at Coca Cola's bottling plant.

Environmental and business benefits 

Chemical leasing projects show that replacing a product with a service has positive environmental benefits, for example, by reducing harmful emissions and decreasing the amount of waste. Chemical leasing also enhances the management of chemicals by making companies think about why chemicals are being purchased and how and where they are being used.

Business benefits include considerable savings, for example, by streamlining inventories and cutting down on the volume of chemicals purchased; establishing long-term partnerships based on mutual trust; and enhancing customer satisfaction and innovation.

More information about UNIDO's projects. 

In the traditional model, suppliers want to increase their sales, while the buyer wants to decrease the use of the chemical product. It makes no sense for a supplier to make a better product as it would only result in a decrease in the sales volume. In chemical leasing, the supplier and buyer are willing to decrease the amount of chemicals used. The supplier becomes a service provider paid on the basis of what the chemical product delivers. Image source: UNIDO, redone at ECHA.

"Chemical leasing should become the standard business model"

Dr Thomas Jakl, Deputy Director General at the Austrian Environment Ministry, has been involved in developing

Dr Thomas Jakl. Image: ECHA.

the chemical leasing model since its beginning. According to him, chemical leasing is the "only business model which makes it economically attractive for the manufacturer of chemicals that less product is used."

UNIDO definition of chemical leasing   Chemical leasing is a service-oriented business model that shifts the focus from increasing the sales volume of chemicals, towards a value-added approach. The producer mainly sells the functions performed by the chemical, and functional units are the main basis for payment. Within chemical leasing business models, the responsibility of the producer and service provider is extended and may include the management of the entire life cycle. Chemical leasing strives for a win-win situation. It aims to increase the efficient use of chemicals while reducing the risks of chemicals, and protecting human health. Today, the UNIDO initiative is supported by the governments of Austria, Germany and Switzerland.   The Global Chemical Leasing Award was launched in 2010 to enhance the visibility of chemical leasing worldwide and recognise best practice in chemical leasing. For the 2014 Award, applications were received from 20 countries.   Watch the video on chemical leasing.

Text by Hanna-Kaisa Torkkeli 

Top image: Fotolia

Sources: Dr Thomas Jakl, Deputy Director General, Ministry of Environment, Austria; member of ECHA's Management Board;  http://www.unido.org/chemical-leasing.html  and http://www.chemicalleasing.com