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REACH Is In Force Now! – So What? October 29, 2007

Posted by liverpoolchamber in Environment, Legislation, News.
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REACH, the EU regulation for the Registration, Evaluation and Authorisation of Chemicals that came into force in June 2007, has one key central aim: to protect human health and the environment from the potential risks arising from the use of chemicals. It represents the latest step in the next generation of EU Health, Safety and Environmental legislation and is gong to affect almost all businesses that operate within the EU. Dr. Jo Lloyd, Technical Director of REACHReady Ltd, a subsidiary business of the Chemical Industries Association, talks us through the effects on the supply chain.

REACH – threat or opportunity?

Legislators these days like to respond to public opinion. In the past the general public were concerned about industry’s activities at a site level and a whole raft of regulations now control manufacturing operations. Public focus in recent years has begun to shift – to concern about our products, the affects upon our health and the impact on the environment. We are now seeing the introduction of a new generation of legislation as a result – regulations such as WEE and RoHS are already affecting the electronics sector. And now we have REACH – perhaps the most complex, far-reaching and costly piece of regulation ever to originate from Brussels. REACH has the potential to impact us all, the textile industry being no exception.

REACH has been a long time coming, its origins date back to 1998 and it intends to achieve its goal by requiring business to fully ascertain the risks posed by the use of chemicals. In simple terms (and nothing is simple about REACH!) anyone that makes, imports or uses a chemical within the EU will need to consider his or her obligations. These obligations can range from ensuring that your supplier includes your use of their substance in its REACH dossier, to generating expensive toxicological data, to needing to undertake research and development activities to discover “safer” replacements for certain hazardous chemicals.

But what impact will REACH have? Much has been written about the various impact studies and cost estimates – ranging from €2 billion to over €11 billion – and at this stage it’s impossible to know which is right, though some say these are underestimates! The EU chemical supply chain is highly complex and diverse; coming up with concrete figures therefore is a very difficult thing to do.

Firstly it’s true to say that REACH challenges every part of industry, no matter how it is defined. Indeed REACHReady has found that almost every manufacturing company (i.e. not just chemical businesses!) within the EU is affected in some way and that whilst manufacturers and importers of chemicals will bear the brunt of REACH, it is the downstream user that suffers most of the unintended consequences – for example REACH may require you to substitute one of your vital raw materials but you may not be in a position to do so.

For all firms directly affected, REACH will present a major cost burden and for the vast majority this will directly impact the bottom line. Few firms believe they will be able to pass these costs on to customers. No surprises then that our experience through interacting with hundreds of companies tells us that many will struggle to cope.

This issue is particularly acute for small and medium sized businesses and start-ups. SMEs are offered a substantial reduction in the fees they will have to pay to register substances with the REACH authorities. However I’m afraid to say that they are unable to take any comfort from this. The registration fees are insignificant when compared with the overall costs of compliance including testing, administrative activities and indirect costs such as reformulation. These are costs that SMEs will have to meet in full.

REACHReady are also finding that even for larger firms who have the financial muscle and economies of scale to cope, there will be problems in human resources terms. There just aren’t enough experts out there to deliver REACH and many organisations are considering re-training their staff and diverting valuable resource away from other business activities, such as innovation, to deliver compliance instead.

It’s not difficult to see then that REACH has a high potential for negative impact on the EU industry’s competitiveness. That’s why it’s vital that well-meaning companies do not overreact – we have learned that it’s not just responding to REACH that’s important but responding in a proportionate and appropriate manner.

Up until now we have largely been talking about chemical suppliers and supply chains located in the EU. However, for those who operate at the retail end of the supply chain and who import finished goods from outside of the EU, this is where REACH can come full circle and where the responsibility to comply with REACH rests with the importer so we will see retailers registering the chemicals contained in the shampoo they import and car accessory suppliers registering engine oil.  REACH also says that if a  ‘substance’ in an ‘article’ (finished good) is designed to be released during normal and foreseeable conditions then it also needs to be registered if not already done so. So for example the ink in a felt tip pen, the paint used on a scratch card, the lubricant used in a car or the dye used in a pair of fade-out jeans will all need to be registered.

So whilst a preliminary mapping of substances and initial liaison with suppliers is vital we recommend a strict prioritisation of further effort. Users should concentrate on product critical substances, especially those from one or a few suppliers and those that have properties of concern. Resources should be focussed on these, and the risk of interruption to supply carefully assessed. It may be necessary to seek alternative supplies, to consider how a small importer can be supported in the registration task, or to initiate programmes for substitution. Only when product continuity is assured should work spread to other substances, and then again on a priority basis.

REACH then paints a pretty bleak picture, backed up by the lack of any evidence that it will improve the competitiveness of EU businesses. All the above factors put it at risk.

That said there is a growing body of opinion that says REACH also presents an opportunity!

Many downstream users of chemicals have publicly stated that in future they will only source chemicals from manufacturers or importers that have registered and support their uses in the form of exposure scenarios. It’s clear then that REACH compliance to some is going to be a major competitive advantage and may even provide a source of added value.

In addition, EU suppliers will be able to sell products to any market in the world, safe in the knowledge that they have sufficient data to comply with anyone else’s system. This will be particularly important if other countries follow the EU’s example and adopt similar legislation.  It’s also not difficult to see how there will be a growing market for “safer” alternative substances. REACH plus a patented substitute substance may equal a considerable market opportunity!

So in conclusion, REACH will have a considerable impact on the competitiveness of all EU industry as a whole and for many companies its negative effects will be unavoidable. But many others will be in a position to decide whether REACH becomes a threat or an opportunity.

If you would like to register your interest in learning more about REACH and its impact on businesses or how you might prepare your business please contact Gareth Elliott at the British Chambers of Commerce on g.elliott@britishchambers.org.uk

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