NACD and ACC explain their Responsible Care initiatives

Shared sense of liability

19 May 2008 00:00  [Source: ICB]

Responsible Care Partnership and Responsible Distribution don't just make better corporate citizens, they can also save money and create opportunities

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Ivan Lerner/New York

ONE DAY soon, almost every chemical carrier or distributor will likely be enrolled in either the American Chemistry Council (ACC) Responsible Care Partnership Program (RCPP), or the Responsible Distribution Process (RDP) of the National Association of Chemical Distributors (NACD). They may even enroll in both.

Chemical carriers and distributors are finding that customers prefer to work with RCPP or RDP-accredited companies. They are also finding that the Responsible Care and Responsible Distribution processes help them run more effectively.

Both the RCPP and RDP use formal, third-party certification to achieve the goals of Responsible Care, a management system adopted by the ACC in 1988 to improve environmental, health, safety and security performance. In 1993, the ACC set up its partnership program.

The NACD launched the similar RDP in 1991. It has required third-party document verification since 1995 and on-site third-party verification since 1998.

"To be a member of NACD, you have to comply with RDP," says Chris Jahn, president of NACD.

The RDP also satisfies the ACC's Responsible Care requirements in respect to distribution. According to Tom Walker, director of chemical markets and compliance for A. Duie Pyle, of West Chester, Pennsylvania, US, the RCPP actually became more difficult because of the certification process. The company joined the RCPP in November.

"It became a more substantial program. Now you had to meet standards that had real certifiable steps behind them - and we thought that added more value," says Walker.

He describes it as a very difficult process, where three years are given for a company to put a Responsible Care management system together.

Additionally, a company needs two sponsors to join the partnership. A. Duie Pyle had chemical giants BASF and Rohm and Haas as sponsors. "Both have been very open and supportive in helping us with the education process," says Walker. Other companies, such as Honeywell Specialty Materials, have also offered to help with the procedure, he adds.

A. Duie Pyle has about 830 trucks and 1,575 trailers. Its clients also include global paint company PPG Industries and US chemical major DuPont.

Joining the RCPP "will make us a better company - we are a better company already," says Walker. "Everyone [in the RCPP] is focused on improving the entire [system of] transportation and distribution of chemicals."

COSTS AND BENEFITS

The RCPP's management system technical specifications for partners are the same ones ACC members use for their plant sites.

"We have a common audit process, but obviously tailored to the partner's sector," says David Gleason, the ACC's senior director for Responsible Care.

There are nine sectors of partners from which representatives elect members to a steering committee: bulk motor carriers non-bulk motor carriers, or "less than truck loads" (LTLs) equipment service rail terminals warehouses marine and third-party logistics providers (3PLs).

At the behest of ACC members, the RCPP is in the process of creating a new partner sector, tentatively called "ocean freight."

Participating in the RDP or RCPP may impose new costs, but the additional business opportunities it will bring are a huge benefit, says Jahn. "Many in the supply chain require RDP, with some suppliers requiring their distributors to be a member of NACD," he says.

Depending on the size of the site and the risks associated there, the fees for RDP range from $2,900-4,900 (€1,870-3,160).

For some members, the cost of RDP verification may actually be higher than their membership dues, but Jahn notes that some insurance companies will cut premiums if the company passes RDP verification.

Gleason offers a similar analysis of Responsible Care, which is based on understanding where risk is, and employing a management system that mitigates or avoids that risk.

If something happens, "the cost of litigation is much more expensive than any costs incurred implementing the program," he notes.

Members of the ACC tend to look for a carrier that already participates in the RCPP, says Gleason, but most ACC members have agreed to waive the audit for a partner that can show an effective management system is in place. The logistics provider then finds a significant reduction in the audit burden. Anything outside the norm (such as hazardous materials) will be audited, though, depending on its critical nature.

Steve Russell, founder, CEO and chairman of US-based Celadon, says he was compelled to sign up his company after a colleague described the ACC program's benefits.

"I felt we could do it," he explains, and given Celadon's 800 or so hazardous material (hazmat)-certified drivers, he saw it as a good business opportunity as well.

Depending on existing safety practices, the additional costs associated with the RDP and RCPP may be modest. Celadon's Russell says the process of being audited was affordable "because we were spending [money on safety] anyway." Celadon became an ACC Responsible Care Program partner in April.

"We think it's a great program. It's not inconsistent with the way we operate," he says.

Celadon has roughly 3,000 tractors and 8,000 trailers (with about 2,300 tractors in the US, and the rest in Mexico and Canada), and includes DuPont, BASF, technology company 3M, and oil giants ExxonMobil and BP among its clients.

A CLEAR VISION

Transparency and oversight drive the benefits of both the RCPP and RDP. Reporting the metrics, says Walker, "constantly pushes you to a zero-defect operation, [which] has to be the ultimate goal."

If all potential customers can look at the metrics, "it will push you to look at root-cause analysis and corrective actions for any incident that you might have," he adds. "It's really a continuous improvement program at the end of the day."

When companies have failed RDP verification, the NACD will work to bring them up to speed, says Jahn. "But if they can't perform, we can't keep them. Our program must have some teeth - it's obviously not in our financial interest to do that, but we've still done it."

The ACC works closely with the US Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA), the US Coast Guard and many other safety organizations, and it will usually have a representative of one of them attend a certification audit.

A group such as OSHA can help ACC members navigate its Star program - which leads to reduced inspections and reduced staff compensation injury claims, while acceptance into the EPA's Performance Track program leads to expedited permitting and less regulatory pressure.

"But we're not satisfied with meeting the regulations - we want to go beyond compliance," says Gleason.

And post-9/11 legislation has made obtaining a hazmat driving certificate more difficult, with a more thorough security background check needed.

"Many drivers are not re-upping," says Celadon's Russell. Security will nonetheless continue to increase, he projects.

"In a couple of years, every driver is going to need a Transportation Worker Identification Credential (TWIC) card," he says. "That will probably reduce the number of drivers."

TWIC cards are proposed for all workers connected with ports or maritime duties, including truckers. For them, the TWIC is in addition to obtaining a Hazardous Material Endorse-ment that requires all drivers who transport hazmats to undergo a security threat assessment.

UP AND RUNNING

With more than 100 verifications completed last year, and more than 100 expected to be finished this year, RDP implementation is going well, reports Jahn.

"'Continuous improvement' are the words we live by with RDP," he says. "We think we've been ahead of the curve all along the way, and we want it to stay that way."

The NACD has roughly 250 distributor members, out of approximately 800 chemical distributors in the US, but their share of the market is 75-80%, Jahn estimates.

NACD members made 5.6m shipments of 50.7bn lbs (23,000 tonnes), worth about $19.3bn, in 2006. Of the Top 100 distributors recently ranked by Purchasing magazine, 83 are NACD members.

Over the past 10 years, the NACD member retention rate has been 96-98%. Although members are lost, usually through mergers or going out of business, the NACD generally gains enough members to keep the rolls filled.

The NACD's process involves multiple steps. Each of its members has to demonstrate the implementation of their environmental, health, safety and security practices under the RDP via two components: document verification and site verification, both conducted by a third party. Additionally, a member needs to have at least one facility site verified every three years.

For some of the NACD's larger members, suppliers request audits of multiple facilities, in which case the supplier will pay for the audit.

Last year was the first when the ACC imposed certification deadlines on partners, and some companies left the RCPP because they did not want to publicly report their metrics, one of the program's requirements.

"I was frankly disappointed - and a bit surprised - that anyone would leave the program because of metrics, but that was their decision," Gleason says.

Former RCPP partners such as these did not recognize the value associated with the program, he adds. "Some, I think, were hoping that the certification requirements would go away."

A factor influencing transportation companies that left the RCPP was the proportion of business affected.

"For them, [chemicals] was a small market, and it was not cost-effective to move the management system into place," explains Gleason.

He highlights the contrasting experience of partners that have persisted. After putting certification in place for chemical-specific areas, they saw that the robust discipline imposed by Responsible Care has broad business value.

"[The partners] decided it was the way to run the whole company," says Gleason.

CONTINENTAL RISK MANAGEMENT

In 2007, the board of the European Association of Chemical Distributors (FECC) decided to establish a European Responsible Care Program (ERCP) for chemical distributors.

"One of the main objectives of this program is to facilitate companies in the new EU Member States to participate in Responsible Care," says Hendrik Abma, director general of the FECC.

In 1999, the FECC and the European Chemical Industry Council (Cefic) signed a partnership agreement committing itself to promoting Responsible Care. Abma says roughly 500 chemical distributors are already committed to Responsible Care.

The FECC and Cefic developed the European Single Assessment Document (ESAD), one of the third-party assessment tools for European chemical distributors.

Meanwhile, the NACD is a member of the International Council of Chemical Trade Associations, and meets with the FECC several times a year.

About two years ago, the ACC's RCP signed a memorandum of agreement with Chemical Distribution Ireland (CDI), one of the first national associations to join ERCP in 1999.

The CDI has a protocol to certify international shippers, explains David Gleason, senior director for Resonsible Care at the American Chemistry Council (ACC). With many ACC members already CDI members, the ACC and CDI have integrated their protocols regarding international shipping.

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