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Resources, Conservation and Recycling 86 (2014) 53–60

Contents lists available at ScienceDirect

Resources, Conservation and Recycling

jo ur nal home p age: www.elsev ier .com/ locate / resconrec

ull length Article

ritical reflections on the Chemical Leasing concept

odrigo Lozanoa,b,∗, Angela Carpenterb,c, Francisco J. Lozanod

Copernicus Institute of Sustainable Development, Utrecht University, The NetherlandsOrganisational Sustainability, Ltd., Cardiff, United KingdomSchool of Earth and Environment, University of Leeds, United KingdomTecnológico de Monterrey, Monterrey Campus, Mexico

r t i c l e i n f o

rticle history:eceived 3 November 2013eceived in revised form 4 January 2014ccepted 18 February 2014

eywords:hemical leasingreen chemistryustainable chemistryustainability business models

a b s t r a c t

Chemical Leasing has been developed as a collaborative business model to complement the two mainapproaches (policy initiatives and scientific/technological) used to foster green chemistry and sustainablechemistry. Chemical Leasing is based on using chemicals more efficiently, reducing waste, and closing thefeedback loop more effectively. This is done by shifting the focus away from profit generation, throughincreased sales, towards a value-added approach by providing a service. Most of the available ChemicalLeasing studies have been empirical and descriptive, and generally identify only short-term benefits fromprocess change. This paper provides critical reflections on the Chemical Leasing model based on typesof chemicals, green and sustainable chemistry, business models, collaboration, and the chemical leasingcases available. Chemical Leasing offers a more efficient business model alternative to traditional industry

practice, bringing economic and environmental benefits to both suppliers and users; however, its use isrestricted to some specific types of chemicals (such as solvents and catalysts). The paper proposes aclearer and more precise definition of chemical leasing and argues that chemical leasing needs to be partof a holistic approach, so that the economic, environmental, social, and time dimensions of sustainabilityare fully addressed.

© 2014 Elsevier B.V. All rights reserved.

. A brief overview of the chemical industry

“to an amount not usually recognised, chemicals are part of oureveryday life” (Perthen-Palmisano and Jakl, 2005, p. 49)

In 1998, the global chemical industry was worth around US$1.5rillion in sales and employed around 10 million people globallyOECD, 2001). By 2010, the global chemical industry–excludingharmaceuticals–had increased its worth in global chemical saleso US$3.2 trillion, with the top 100 companies generating an esti-

ated $1.23 trillion of those sales (Hartnell, 2011). It is estimatedhat by 2015 the global chemical market will be worth US$4.16rillion (Meyer, 2011). This has resulted in a complex network ofhemical industries, which involves several stakeholders, and haseen mainly based on the economic return of marketing and selling

hemicals.

The chemical industry has been highly innovative. The centen-ial anniversary of the American Institute of Chemical Engineers

∗ Corresponding author. Tel.: +31 302536708.E-mail addresses: r.lozano@uu.nl, rodlozano@org-sustainability.com (R. Lozano),

.carpenter@leeds.ac.uk (A. Carpenter), fjlozano@itesm.mx (F.J. Lozano).

ttp://dx.doi.org/10.1016/j.resconrec.2014.02.003921-3449/© 2014 Elsevier B.V. All rights reserved.

lists 100 market innovations related to chemicals mainly by USAcompanies (CEP, 2008), and celebrated the innovation and impor-tance that is representative of the profession.

Chemicals are used to make almost all man-made products,including many which can be used to protect crops and increaseyield, prevent or cure disease, and provide many benefits toimprove people’s daily lives. According to Miller (2002), every year,1000 new synthetic chemicals enter the market, adding to theapproximately 75,000 chemicals already commercially available.The health and environmental risks from the use of chemicals havelong been recognized, for example carcinogenic effects (see Hayes,1998, Tomatis et al., 1978, and Tolbert et al., 1992) and negativeimpacts on agriculture and forestry (see the seminal work of RachelCarson (1962)).

The OECD (2001) identified the main chemical types as basic(or commodity) chemicals, specialist chemicals that are derivedfrom those basic chemicals, products derived from life sciences(including pharmaceuticals and pesticides), and consumer careproducts (including soaps and detergents). The general structure

of the chemical industry, including the types of chemicals and con-sumers of those chemicals, is outlined in Fig. 1.

Another way of classifying chemicals is by their type, whichincludes: inorganic industrial, organic industrial, ceramic products,

54 R. Lozano et al. / Resources, Conservation and Recycling 86 (2014) 53–60

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purchasing it.Schwager and Moser (2005) postulated that different ChL

approaches may be necessary depending on who owns the sub-stance (chemical) to be used, who owns and operates the plant

Fig. 1. General structu

etrochemicals, agrochemicals, polymers, elastomers, oleochemi-al, explosives, and fragrances and flavours. Chemicals can also belassified into: reactants (e.g. acids and bases) and non-reactantse.g. solvents and catalysts).

This paper is aimed at providing clarity through critical reflec-ions to some of the challenges to Chemical Leasing (ChL) raised bylas (2008) and Lozano et al. (2013), as well as its potential limita-ions of the concept and its application. The remainder of the papers structured in the following way: Section 2 offers an overviewf green and sustainable chemistry; Section 3 provides an expla-ation of the ChL concept; Section 4 discusses business models

or sustainability and how they relate to ChL; Section 5 presentshe principle of collaboration and its importance to ChL; Section

provides a comparison of a traditional chemical selling modelllustrative example against a ChL one; Section 7 discusses the ChLn order to help elucidate the concept, its challenges, and its lim-tations; and Section 8 concludes by providing a more robust andlearer definition of the ChL concept.

. Green and sustainable chemistry

Green chemistry has developed as an alternative to reducer eliminate the use, or generation, of feed-stocks, products, by-roducts, solvents, reagents, or other hazardous chemicals thatre, or might be, dangerous to human health or the environmentAnastas and Breen, 1997). It is aimed at preventing waste before its ever formed by considering the environmental impact, or poten-ial impact, of a product or process (Anastas and Breen, 1997).ustainable chemistry is a concept which links preventative pro-ection of the environment and health with an innovative economictrategy which will result in more jobs, and which is of concern totakeholders across the scientific community, the economy, publicuthorities, and also environmental and consumer organisationsGerman Federal Environment Agency, 2013).

Often, the terms green chemistry and sustainable chemistryre used interchangeably (Tundo et al., 2000). However, they arenherently different. Some authors have highlighted that greenhemistry under-emphasises the social dimension of sustainabilitye.g. Böschen et al., 2003; Lozano, 2012), and the time dimensionLozano, 2012).

It should be noted that both green chemistry and sustainablehemistry are mainly directed at improving operations and produc-ion in a company and they need to be linked to the other elementsf the company system (strategy and management, organisationalystems, procurement and marketing, and assessment and commu-

ication) (see Lozano, 2012), as well as to the company’s businessodels, strategies, and practice.In the past decade, a number of international initiatives have

een adopted to more safely manage chemicals and promote green

he chemical industry.

and sustainable chemistry. Some of these include the UN GloballyHarmonized System of Classification and Labelling of Chemicals(GHS)1 adopted in 2006, the EU Regulation on Registration, Eval-uation and Authorisation of Chemicals (European Commission–Environment, 2012), and other REACH-like regulations in China(see China Chemical Inspection and Regulation Service, 2011),together with actions in a number of countries to strengthenthe regulation of chemicals (see Lozano et al., 2013). Addition-ally, a Strategic Approach for International Chemicals Management(SAICM) policy framework was adopted at the International Con-ference on Chemicals Management held in Dubai in 2006 (UNEP,2006), where the concept of ChL(ChL) was discussed for the firsttime. Within this context and to assist businesses globally, UNIDOlaunched its Global Chemical Leasing Programme in 2005, withsupport from Austria and Germany (UNIDO, 2011).

3. The concept of Chemical Leasing

The United Nations Industrial Development Organization(UNIDO, 2011, p. 2) defined ChL as “a service-oriented businessmodel that shifts the focus from increasing sales volume of chem-icals, toward a value-added approach”. The ChL concept is aimedat achieving this by including: more efficient use of, and reducedrisk from, those chemicals; protection of human health; improvedeconomic and environmental performance of participating compa-nies; and enhanced access for those companies into new markets(UNIDO, 2011).

Under the value-added approach used in the ChL concept, ratherthan generating profit by high volume of sales to companies usingits chemicals, the chemical producer/supplier, who remains theowner of the chemicals, is paid for the service provided by them (forexample, instead of volume or weight of chemicals, they might usesquare meters of painted surface). Breaking the link between salesand profit can result in both increased efficiency in the applicationof chemicals within a specific production process and also lead tooptimisation of that process as a way of reducing the volumes ofchemicals needed to carry it out, minimizing any chemical waste ordischarges generated by the process (see for example Geldermannet al., 2009; Gilbert and Downs, 2010; Ohl and Moser, 2007). Gilbertand Downs (2010) highlighted that a basic assumption with ChL isthat the user pays for services rendered by the chemical rather than

1 The third revised edition of the GHS (2009 version) is available online at:http://www.unece.org/trans/danger/publi/ghs/ghs rev03/03files e.html.

R. Lozano et al. / Resources, Conservation and Recycling 86 (2014) 53–60 55

Table 1Chemicals that could be used in Chemical Leasing business models.

Application Chemicals Activities involved

Cleaning/degreasing solvents Solvent agents Treatment of iron/steel; treatment of non-ferrous metals;surface treatment; electronic motors, generators; electronics

Adsorption/desorption e.g. activated carbon Chemical products; printing; mineral oil processing; food andstimulants; electrical engineering

Pickling e.g. hydrochloric acid; sulphuric acid; nitric acid;hydrofluoric acid

Treatment of iron/steel; manufacture of plastic products;surface treatment

Synthesis (e.g. polycondensation) e.g. dimethylformamide, butyl acetate, dichloromethane,chlorobenzene

Manufacture of chemical parent substances; manufacture ofchemical fibres

Extraction e.g. chloroform, chlorobenzene, dichloromethane, hexane,methanol, propanol, butanol, acetone, acetic ester, ethanol

Manufacture of chemicals; manufacture of chemical fibres;manufacture of pharmaceutical products; detergent andcleaning agents; manufacture of pyrotechnical products;photochemical products; manufacture of other chemicalproducts; manufacture of essential oils

Cooling/lubrication Emulsions Treatment of iron/steel; treatment of non-ferrous metals;electronic motors, generators; pumps/compressors;agricultural and forestry equipment; manufacture of machinetools; other machinery, conveyors lubrication

Textile finishing/mercerization Caustic lye of sodaCatalysis Catalytic converters Chemical products; mineral oil processingCooling Ammonia, pentane Abattoirs and meat-processing; fish processing; manufacture

of fruit and vegetable juices; wholesale in fish and meatproducts

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ource: (Schwager and Moser, 2005)

here it is to be used, and where that plant is located, togetherith country specific factors which can influence whether ChL

s an appropriate model or not. Schwager and Moser (2005) fur-her noted that only chemicals which do not form part of the finalroduct, and which are highly concentrated in the waste are mostppropriate for the application of ChL, with potential chemicalsncluding high risk and high value substances. A table of potentialhemicals for which the ChL model may be applicable is providedn Table 1, which shows that they are mainly non-reactants and, to

great extent, easy to recover.It is widely acknowledged that the functions of chemicals differ

or each industrial process; this depends on the context where theompany operates, the equipment it uses, and the order of its unitperations. Most chemical users for whom chemical processes areot in their core business (e.g., surface protection of metal in theetalworking industry) usually have limited knowledge on how to

ptimise the process to reduce the chemicals consumption.Examples of the ChL implementation can be found in Austria,

razil, Colombia, Croatia, Germany, Nicaragua, Russia, Serbia, Srianka, Uganda, Ukraine, and the United Kingdom (see Geldermannt al., 2009; Gilbert and Downs, 2010; Miller, 2002; UNIDO, 2011).he sectors where ChL has been implemented include car manufac-uring and the textile, petrochemical and printing industries, whilehe range of chemicals include solvents, dyes, lubricants, glues andatalysts (UNIDO, 2011).

There have been limited examples of recovery rates in the litera-ure for chemical leasing, for example: Schwager and Moser (2005)resented a case of 100% recovery of nickel and iron in electro-lating; Kromer et al. (2009) discussed a case of platinum recoveryuture fuel-cell vehicles in the United States with over 98% recov-ry; and Gerrard and Kandlikar (2007) indicated that 75–80% of aehicle is recycled or re-used, following the European Union end-f-life directive.

Joas (2008) highlighted that economic advantages of ChL arehared between the chemical supplier and user in terms of higherarnings, through reduced production and reduced consumptionosts respectively.

Lozano et al. (2013) recognised the following benefits for the ChLartners: increased ability to create value for both parties; flexibil-

ty and speed of joint responses to changing market or customereeds and expectations; and optimisation of costs and resources.

Manufacture of rubber and plastic products

This can lead to establishing and improving relationships thatbalance short-term gains with long-term considerations betweenthe partners, such as communicating more clearly and openly,sharing information and future plans, and establishing joint devel-opment and improvement activities.

Some questions have been raised in respect of ChL, includingwhether it results in increased dependency of chemical users ontheir suppliers, particularly if longer-term contracts are signed, andthe potential for technical and logistical problems (see for examplePlas, 2008). Additionally, Lozano et al. (2013) raised the followingquestions about the ChL concept: (1) to which type and function ofthe chemical can it be applied? (2) What happens when the envi-ronmental impacts of other processes are larger than the one beingaddressed? (3) What happens if there is a breach in communica-tion or response between the user and the producer? (4) How toovercome a lack of full honesty between the partners, prior andduring the implementation? (5) What happens when the potentialpartners are too far from each other, geographically? And, (6) howattractive is ChL to a producer when the user is a small company?

A significant aspect of ChL in Europe has been its alignment withthe requirements of to protect human health and the environmentwhile maintaining and enhancing competitiveness in the EU chem-ical industry (EC, 2007). In ChL, the chemical supplier has to provideall the necessary information on the chemical through knowledgetransfer and also be able to manage hazards and risks through theservice it offers to the chemical user. This also has the potential ben-efit, according to Geldermann et al. (2009), of reducing research anddevelopment costs for the chemical user, particularly where the useof chemicals is not part of their core competencies.

4. Business models for sustainability and Chemical Leasing

Traditional sales business models for chemicals have offeredlittle or no incentive to prevent over-consumption, promote knowl-edge transfer for efficient use of chemicals and effective recycling(Ohl and Moser, 2007), or for reducing environmental impacts andultimately eliminating hazardous materials from products and pro-

cesses. In such models, the interest of the chemical producer is tosell as many chemicals as possible. In contrast the ChL model isbased on collaboration, optimisation, and reduction of chemicalsconsumption. ChL can provide a complementary business approach

5 rvation and Recycling 86 (2014) 53–60

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o the policy initiatives and scientific/technological ones to fosterreen chemistry concerns (Lozano et al., 2013).

According to Teece (2010) “[a] business model is more generichan a business strategy”. It articulates the logic, the data, and othervidence that support a value proposition for the customer, and aiable structure of revenues and costs for the enterprise deliveringhat value. Traditional business models have been based on a clearistinction between the acting companies (Perthen-Palmisano and

akl, 2005), where each company has a specific task or activity.owever, as traditional business models have been gradually chal-

enged, a shift has been taking place from selling products toroviding service solutions to customer needs (Lay et al., 2009;ont et al., 2006).Additionally, businesses must consider the entire life cycle of a

roduct or service, from downstream (i.e. extraction), to upstreami.e. disposal), and its use (DeSimone and Popoff, 2000; Hollidayt al., 2002; Robert, 2000). This includes: (1) costs in the usage andervice sides, including utilities (steam, cooling water, electricity),abour, waste treatment, inbound and outbound logistics, over-eads, and insurance (Turton et al., 2012; Perry and Green, 1984);nd (2) environmental and social impacts and costs (DeSimone andopoff, 2000).

According to Porter (1998) companies are affected by five majororces (threat of new competition, threat of substitute productsr services, bargaining power of customers, bargaining power ofuppliers, and intensity of competitive rivalry), which are instru-ental in deciding what business model is the most suitable, and

ventually, most profitable for the company.Lay et al. (2009) identified that manufacturing industries have

een considering alternative business concepts that change theelationship between the supplier and buyer of goods and moveway from product-focused to service-focused operations. The usef full service contracts, where the customer pays not only forhe product but also for maintenance activities as part of the con-ract, is an example of such an alternative business concept. Thiselationship is different in the traditional business model in thehemical industry where there are clear distinctions between com-any actors, Perthen-Palmisano and Jakl (2005) identifying thatompany A sells a chemical to Company B and any waste is thenealt with by Company C.

Lay et al. (2009) proposed three alternative business models: (1)easing, where the supplier becomes a service provider by retain-ng the ownership and assuming responsibility for maintenance, inhis case the customer pays a regular fee for unlimited individualccess to the product; (2) renting, similar to leasing, however, theustomer does not have unlimited access; and (3) ‘product pool-ng’, where the equipment is used simultaneously by several usersnstead of a sequential mode of use. Agrawal et al. (2012) arguedhat leasing can be more profitable and greener than traditionalusiness models, especially when the products have higher dura-ility and high use impact. However, leasing can create anotherroblem in situations where consumers’ valuations for the productepend on the availability of complementary products (Bhaskarannd Gilbert, 2005).

The concept of fungibility (acceptably replacing or replaceabley another item) can help to decide whether to lease a prod-ct/service or not. Fig. 2 shows an analysis of this concept. Productshat have a high probability of recovery and high price, they are

ore likely to be considered for leasing. Products that have a highrobability of recovery but low price, or high price but low probabil-

ty of recovery are less likely to be considered for leasing. Productsith low probability of recovery and low price should not be con-

idered for leasing. Eisfeldt and Rampini (2009) discussed the termsor leasing within the legal, taxation, and accounting context. Theyndicated that leasing is when the least term exceeds 75% of theconomic life of the product.

Fig. 2. Fungibility/residual value risk analysis.Source: (Penza, 2012)

Mont (2002) proposed the ‘product-service systems’ (PSS) mod-els, which are focused on addressing the use phase to reducethe total environmental burden of consumption. Tukker (2004)divided them into product-oriented services (including productrelated services and advice and consultancy), user-oriented ser-vices (including product lease, product renting or sharing, andproduct pooling), and result-oriented services (including activitymanagement/outsourcing and pay per service unit). In this clas-sification ‘outsourcing’ is considered part of the result-orientedservices (Tukker, 2004). However, Mont (2002) provided a morecomplete classification, encompassing: (1) products/services com-binations/substitutions; (2) services at the point of sale; (3)different concepts of product use (subdivided into use oriented andresult oriented); (4) maintenance services; and (5) revalorisationservices. PSS models require close collaboration with suppliers andservice producers or final consumers. This requires changes in lev-els of exchanged information, but also in the nature of relationshipsbetween the actors in the network (Lockett et al., 2011).

As it can be observed a number of alternative business mod-els, grouped under the PSS term, have been proposed to reducethe environmental burdens in the use of products. They have beenswitching towards a service approach, where the products are nolonger sold, but ‘rented’ or ‘leased’ and the responsibility to dealwith such products lies with the producer rather than with theuser.

5. Collaboration as a key element for sustainability

An important element in ChL is collaboration (for more detailsrefer to Lozano, 2007; Lozano et al., 2013). Some of the bene-fits of collaboration include the ability to optimise financial andhuman capitals, access markets and knowledge, enrich creativity,avoid confrontation, decrease time needed to accomplish objec-tives, and make processes more efficient (Fadeeva, 2004). Otherbenefits include being action orientated, offering benefits to allthe players, reducing or removing conflicts, and in some casestrans-disciplinary learning (Lozano, 2007). However, collaborationhas inherent difficulties: such as (1) coordination costs, referringto operational dependence between the activities of the differ-ent actors (Genefke, 2000); (2) vulnerability costs, referring to therisk of safeguarding the important and unique resources (Genefke,2000); (3) information, referring to who gets the benefits and thereal, or hidden, agenda (Chilosi, 2003); (4) bargaining, how to splitthe gains (Chilosi, 2003); and (5) free riding, where those who

choose not to participate still get the benefits (Chilosi, 2003).

Two Japanese concepts can be helpful in understanding andimplementing collaboration: Kyosei, or “spirit of co-operation”(Kaku, 2003); and keiretsu, where companies engage into

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ong-term cooperative systems with their suppliers (Hill and Jones,001). These can bring long-term benefits through more collabora-ion, better standardisation, quality improvements, and productsnd services that are more in accordance with the needs of theutsourcing organisation (Lozano, 2008a).

According to Lozano et al. (2013) ChL offers many of the benefitsf collaboration while avoiding the three of the practical difficul-ies discussed at the start of this section. Information is sharedetween participating actors, i.e. the suppliers and users of chem-

cals have a relationship which includes knowledge sharing whichs, as noted previously, a requirement of the EU REACH, and otherEACH-type regulations. The ChL parties obtain economic gains

rom that relationship, and also environmental gains, potentially,hrough reductions in the production and use of chemicals. Thessue of free riding is avoided, while the information and economicenefits of such a relationship, facilitated by a body, can offer evi-ence of the benefits of collaboration to other companies seekingo develop similar relationships.

. Comparison of a traditional chemical selling modelllustrative example against a Chemical Leasing one

This section compares the mass balance and monetary flowsonly materials’ costs and prices of the materials) of a traditionalhemical selling model illustrative example against a ChL one. Allther costs (e.g. labour, energy, and overheads) are considered toe the same for each example, since these have not been reported

n the ChL literature.Fig. 3 shows an illustrative example of a traditional chemical

elling business model. The example is based on a traditional linearnput/output flow, where all the chemical that is sold to the chem-cal use and the material that is extracted from the process endp being treated through pollution control mechanisms (e.g. wastereatment, scrubbers, and landfill), see Eq. (1). The cost of the raw

aterials is D 0.5/kg and the price of the chemical leased is D 2/kg.he supplier’s profits are the difference between the price for thehemical use and the cost of the raw materials (Eq. (2)), whilst theost for the chemical user are the sum of how much it has to pay forollution control mechanisms and the price of the chemical boughtEq. (3)). In this example, the profits for the supplier are D 150 andhe cost to the user are D 260.

Traditional selling business model mass throughput

= Ch + M (1)

here W = waste from the chemical user (kg), Ch = chemicalold/leased (kg), M = material removed from the chemical user dur-ng the process (kg).

Traditional selling business economic flows

hSP = Ch(ChP − ChC) (2)

here ChSP = chemical supplier profit (euros), Ch = chemicalold/leased (kg), ChP = chemical price paid by user (euros/kg),hC = chemical cost to supplier (euros/kg).

hUC = PCC ∗ W + Ch ∗ ChP (3)

here ChUC = chemical user cost (euros), PCC = pollution con-rol costs (euros/kg), W = material extracted from the user (kg),h = chemical sold/leased (kg), ChP = chemical price paid by usereuros/kg).

Fig. 4 shows the formulas of an illustrative example of a ChLodel, with almost closed loop material flows, where almost all

he chemical that is sold to the chemical user is recycled withinhe system (Eqs. (1)–(8)). In ChL, the R (the recovery rate of thehemical) plays a key role in the system (Eq. (8)). This has been set at0% of the chemical leased, since this is typical in the ChL literature

n and Recycling 86 (2014) 53–60 57

(see Section 4). The price of the raw material is D 0.5/kg, the cost ofthe chemical leased is D 1.8/kg, the cost of the chemical treatmentis D 0.1/kg, and the pollution control costs (for the supplier andthe user) is D 0.2/kg. The profits to the chemical supplier are theprice of the chemical leased minus the chemical treatment costof the chemical recovered (plus any material that comes from thechemical user) plus the cost of raw materials and the pollution-control cost to the supplier (Eq. (9)). The profits for the chemicalsupplier are D 160. The cost to the chemical user is the price of thechemical leased plus the pollution control cost to the user (Eq. (10)),which is D 190. The input of new raw materials is equivalent to thechemical leased lost in the process (Eq. (6)).

Chemical Leasing mass balances

W = M + ChL (4)

M = M1 + M2 (5)

V = ChL (6)

ChL = ChL1 + ChL2 (7)

ChR = (R ∗ Ch) + M2 = (Ch − ChL) + M2 (8)

where W = material extracted from the user (kg), M1 = materialremoved from the process and managed by the user (kg),M2 = material removed from the process and managed by thesupplier (kg), V = raw material (kg), Ch = chemical leased (kg),ChL = chemical leased lost in the process (kg), ChL1 = chemicalleased lost in the process by the user (kg), ChL2 = chemical leasedlost in the process by the producer (kg), ChR = chemical recoveredfrom the user (kg), R = recovery rate.

Chemical Leasing economic flows

ChSP = Ch ∗ ChP − (ChTC ∗ ChR + PCC2 ∗ (ChL2 + M2) + V ∗ ChC)

(9)

where ChSP = chemical supplier profit (euros), Ch = chemical leased(kg), ChP = chemical price paid by user (euros/kg), ChTC = chemicaltreatment cost (euros/kg), ChR = chemical recovered from theuser (kg), PCC2 = supplier’s pollution control costs (euros/kg),M2 = material removed from the process and managed by the sup-plier (kg), ChL2 = chemical lost in the process by the producer (kg),V = raw material (kg), ChC = chemical cost to supplier (euros/kg).

ChUC = Ch ∗ ChP + PCC1 ∗ (ChL1 + M1) (10)

where ChUC = chemical user cost (euros), Ch = chemical leased (kg),ChP = chemical price paid by user (euros/kg), PCC1 = user’s pollutioncontrol costs (euros/kg), ChL1 = chemical lost in the process by theuser (kg), M1 = material removed from the process and managed bythe user (kg).

As it can be seen from the two examples (Figs. 3 and 4), the ChLbusiness model is more complex, but the benefits to the two partiesand the environment are potential larger.

7. A discussion on the Chemical Leasing concept

This section provides a discussion on the ChL concept basedon critical reflections of the arguments presented in the previoussections.

The first argument that can be raised is on which type of chemi-cals can ChL be applied to. As Schwager and Moser (2005) indicated,these must be chemicals that do not form part of the final product.Good candidates include chemicals which are highly concentratedin the waste as being most appropriate for the application of ChL.

Potential chemicals including high risk and high value substancessuch as caesium formate brine, a rare specialist chemical withlimited availability, used for well-head maintenance in the oil pro-duction industry (see Gilbert and Downs, 2010). Therefore, it can

58 R. Lozano et al. / Resources, Conservation and Recycling 86 (2014) 53–60

Fig. 3. An illustrative example of a mass balance and economic flows for a traditional chemical selling business model.

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e considered that ChL is only applicable to non-reactant chemicalshat are indirectly used in processes, i.e. not ending up as part ofhe final product.

The second argument relates to the percentage of recovery (R inq. (8)). According to the literature on product and chemical leas-ng it ranges from 75% to 100% (see Gerrard and Kandlikar, 2007;romer et al., 2009; Schwager and Moser, 2005), whilst the liter-ture on law, taxation, and accounting indicates more than 75% ofhe economic life of the product (see Eisfeldt and Rampini, 2009).

The third pertains to the focus of the concept, as indicated inhe green and sustainable chemistry approaches (see Anastas andghbali, 2010; Anastas et al., 2000; Anastas and Kirchhoff, 2002;nastas and Warner, 2000; Collins, 2001). Therefore, the purpose is

o use chemicals and chemical techniques to reduce negative envi-onmental and health impacts, and ultimately eliminate the use ofazardous materials throughout the life cycle of such products.

The fourth argument relates to the company system, where ChLinks operation and production with business models, i.e. to man-gement and strategy (as posited by Lozano, 2012). This argumentsostulates that these two elements (or functions) of the companyeed to be inter-linked in order to be aligned (see Lozano, 2008a)nd create a more synergetic, holistic, and systemic approach inddressing sustainability.

The fifth argument postulates that in ChL the supplier becomes aervice provider by retaining the ownership and assuming respon-ibility for maintenance, in this case the customer pays a regular feeor unlimited individual access to the product (as indicated by Layt al., 2009). Therefore, the approach changes from traditional sell-ng of products to providing a service. However, the question arisess to whether the service provider has the capacity to undertake

hat maintenance responsibility, particularly if it involves employ-ng additional staff that must become familiar with the processesf the chemical user. To become a service provider, the chem-cal supplier has to change the nature of its core business (the

omic flows for a Chemical Leasing business model.

production of chemicals), which might be a barrier to change. Thiscould pose a problem if the chemical supplier is a small companywith limited resources. Another problem that might arise is that ofpower, where a big chemical supplier has a large bargaining powerover the smaller customer. A disincentive for the ChL is when a cus-tomer is so small that providing the service becomes a cost ratherthan a benefit for all.

The sixth argument pertains to setting the price for the service.This price needs to include the costs to the service provider (down-stream, upstream, and use (see DeSimone and Popoff, 2000; Ohland Moser, 2007; Robert, 2000). These costs should include: non-material costs (e.g. utilities, labour, waste treatment, inbound andoutbound logistics, overheads, and insurance) (see Turton et al.,2012; Perry and Green, 1984); environmental and social costs (seeDeSimone and Popoff, 2000); and profit generation for the serviceprovider. Two important questions that arise are: (1) what percent-age of the delivered mass is supposed to return to the companythat leased the product? And (2) how to set the price, so that bothpartners (user and supplier) have an adequate profit?

The seventh argument specifies that collaboration is a prereq-uisite for ChL, where there are benefits for all the stakeholdersengaged in the relationship (as indicated by Fadeeva, 2004; Lozano,2007, 2008a). There are inherent challenges in this, such as coor-dination costs, vulnerability costs, information exchange, and howto split the benefits (i.e. how to set the price of the service). Theconcepts of Kyosei and keiretsu (see Hill and Jones, 2001; Kaku,2003; Lozano, 2008a) can help to overcome such difficulties byexplaining the importance of inter-company relations in the short,medium, and long term. They also indicate that all parties shouldhave benefits. This raises the following questions: (1) what is the

shortest term a lease should be signed, so that it is beneficial forall parties? And, (2) what are the implications or consequencesif the relationship breaks down (or if one of the companies goesbankrupt)?

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The eighth argument pertains to sustainability’s dimensions (asostulated by Lozano, 2008b). ChL mainly focuses on reducing envi-onmental impacts (refer to Jakl and Schwager, 2008; Lozano et al.,013; Plas, 2008; Schwager and Moser, 2005; UNIDO, 2011), whichesult in economic benefits for the parties. Although it can have ben-fits to occupational health (see EC, 2007), its contribution to theocial dimension is rather limited. This limits the ChL contributiono the United Nations Global Compact principles 7–9 (UNGC, 2012).rguments two and five demonstrate how ChL can focus on the

ong-term, through collaboration and the precautionary principle,nd therefore address the time dimension.

These arguments show that ChL can be a more efficient busi-ess model alternative to traditional industry practice, bringingconomic and environmental benefits to suppliers and users, butts use is restricted to some specific types of chemicals (such as sol-ents and catalysts). The ChL concept is a new business model thatrovides value to the companies involved in it, and at the same timeeducing the negative impacts to the environment. This poses thehallenge on how to get more companies involved in the concept.

. Conclusions

Chemistry has been recognised as an important disciplineor contributing to the design and implementation of sustain-ble development strategies. Green chemistry and sustainablehemistry involve a reduction and eventual elimination of haz-rdous substances usage. Green and sustainable chemistry focus onmproving the operations and production of companies through theesign or modification of chemical reactions to be more environ-entally friendly and not on better management and control of the

se of chemicals in an industrial process. The two main approacheshat have been used in fostering green and sustainable chem-stry have been through policy initiatives and science/technology.

ithin this context chemical leasing has been recently developeds a collaborative service-oriented business model that can com-lement these two.

Chemical Leasing is based on using chemicals more efficiently,educing waste, and closing feedback loops more effectively. Thiss done by shifting the focus away from profit generation, throughncreased sales, towards a value-added approach by providing aervice. Most of the available studies have been mainly empiri-al and descriptive, and generally identify only short-term benefitsrom process change. This paper provides a critical discussion onhL based on types of chemicals, green and sustainable chem-

stry, business models, collaboration, and the chemical leasing casesvailable. These theoretical arguments serve as bases to propose theollowing definition:

“Chemical Leasing is a business model based on collaborativeapproaches between two or more industrial partners, whereone uses the chemical and the other provides their service, sothat environmental impacts and use of hazardous chemical arereduced. As a principle of leasing, it involves unlimited access tochemicals from the user. The types of chemicals that are coveredby the concept are non-reactant products that are easy to recov-ery and have a high recovery rate (more than 75%), for examplesolvents and catalysts, and that are not part of the final product.Good candidates include chemicals that are high risk for humanhealth or the environment and have high value.”

ChL shows great potential to help move the chemical indus-ry to become greener, through business models innovations and

ollaboration. However, it needs to be integrated and aligned inolistic way with other sustainability efforts in the company sys-em. Although ChL has only existed as a concept for around aecade, there is already empirical evidence of the economic and

n and Recycling 86 (2014) 53–60 59

environmental benefits to be gained by both the suppliers andthe users of chemicals, through collaborative activities. However,currently the majority of those collaborations are small scale andhave resulted from funding the activities of UNIDO and its CleanerProduction Centres. In practical terms, it is important to provideevidence through the pooling of knowledge and experience by pro-ducers and users to promote its use by larger companies wherethere is the potential for much more significant economic and envi-ronmental gains.

The future of green and sustainable chemistry can be greatlyenhanced by business models that involve dialogue, collaboration,and pooling of the knowledge and experiences by producers andusers. Further research about ChL is needed on: (1) the relevancefor company size, whether ChL is more relevant for big companies,small ones, or a combination, and if so of which type; (2) the specifictypes of chemicals; (3) the efficiency and efficacy of the chemicalusage; (4) the proximity of the supplier and user; (5) how to set theprice, including non-material costs (e.g. labour, energy, and over-heads); (6) the lease time, e.g. what is the shortest time possible;(7) the percentage of recovery in practice; (8) the collaboration pro-cess, including knowledge exchange, advantages, challenges, andrelation between the partners; and (9) how to get more companiesinvolved in the concept.

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