Accenture Reach survey suggests missing opportunities should be grasped

Reach - meeting requirements, missing opportunities?

07 September 2009 00:00  [Source: ICB]

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The global chemical industry is in top gear as the 2010 Reach registration deadline fast approaches. Clever thinking now could capture some extra business benefits

Consultant's Corner
By Theo Jan Simons/Accenture

CHEMICAL COMPANIES are in danger of missing more than the deadlines that Europe's chemical regulation, Reach, sets. Many also risk overlooking some considerable business opportunities.

The majority of chemical businesses are focusing on compliance with the regulation in terms of preregistering and registering substances. A far smaller number are investing in the processes and systems required to ensure that ongoing compliance can be maintained effectively, and fewer still are taking advantage of the portfolio optimization and sustainability platform that Reach offers.

These findings emerge from a recent ICIS/Accenture survey of chemical companies around the world. The survey drew detailed responses from a representative global cross-section of the chemicals industry. The profile of the survey participants confirms that while European in origin, Reach is very much a global consideration.

Download the full survey findings here.

The survey reveals that for the 72% of businesses who have established a Reach team, there is a strong focus on safety, health and environment personnel (50%) and regulatory affairs (40%) (see figure 1). Other functions such as procurement, production, research and development (R&D), marketing and sales feature far less prominently, reinforcing the view that Reach compliance is being driven by a technical and regulatory agenda rather than from a business perspective.

Just over one-third of respondents have established a formal steering committee for Reach. Moreover, low levels of awareness throughout the business across functional areas and all layers of management add to the view that Reach has been "parked" with the regulatory/health and safety team with comparatively little participation and awareness from other parts of the business.

At this stage of the regulatory process, this low level of awareness is perhaps surprising, and even a little worrying given that Reach has been around for several years. Companies that are ignorant of the issue could potentially face very large fines for noncompliance, while in some member states, there is even the possibility of jail for the worst breaches. The assessment of overall risks and the development of suitable responses are in danger of being overshadowed by the focus on technical detail and the mechanics of complying with the regulation.

Among other things, this means that chemical companies are potentially missing out on an opportunity to tell a powerful story about their efforts to protect and prevent harm to people and the planet in line with the regulation's original aim and guiding spirit.

RATING THE PROGRESS SO FAR
The survey also shows that few companies have taken a critical or considered approach to meeting the preregistration deadline. Eight out of 10 companies had preregistered more than 1,000 substances in the run-up to the preregistration deadline of December 2008. However, when asked about the proportion of substances that they would take forward to full registration, only one-third of all respondents said that they would register all of their preregistered substances.

The assessment of which substances should be fully registered is only now taking place, and the preregistration process has largely been used as a way to buy time before having to conduct the analysis about which substances should be taken to the next stage.

Some 62% of companies have completed the process of preregistering substances in time, and the same proportion have either completed or are well on the way to completing a substance inventory. Progress is less evident in the forward-looking processes that will help to ensure compliance such as communicating use information along the supply chain, developing exposure scenarios, collaborating with industry partners or full registration of substances (see figure 2).

Time is pressing, and yet for many companies, processes are only just starting. Time pressures and the cost of achieving the deadlines are the major challenges cited by respondents to the survey. For smaller companies cost is a particular concern, with some suggesting that the total costs they estimate arising from registering a substance, will exceed the value of their European sales.

SPECIALIST SCARCITY
The availability of specialist resources is also cited by many respondents as a major challenge and, as the deadline looms nearer, the scarcity of the technical expertise required in toxicology, environmental toxicology and regulation will only increase.

The pressure on specialist resources is compounded by a significant degree of inefficiency of the administrative processes. This is highlighted in the finding that 81% of respondents say that email is the most common form of communication within the supply chain. Only 20% have a more systematic and efficient approach to data gathering, such as a web-based questionnaire.

More than half the companies surveyed say that they expect to use some form of third-party support to help them achieve registration of their substances. Of those, more than 40% will seek assistance for specialist tasks where specific expertise is necessary, while a much smaller proportion will look for help with program management (7%) or to address peak loads in administration (6%).

This reinforces the view that those specialist resources will be in increasingly acute short supply. Many companies, particularly at the smaller end of the scale, are likely to find that their ability to compete for the specialists they need, will be severely constrained as the first "real" Reach deadline approaches.

BARRIERS TO COLLABORATION
A critical element of the Reach regulation is the provision for sharing information and collaborating throughSubstance Information Exchange Forums (SIEFs). By obliging companies to share substance data, this clause in the regulation - next to reducing required vertebrate animal testing - will help companies avoid the full cost of testing all their substances.

However, many respondents express reservations about working in partnership with what are, in many cases, direct competitors. They are equally concerned about the value they will receive from participating in SIEFs or consortia and their ability to recover costs along with the protection of valuable intellectual property. Aside from competition law concerns and deeply rooted secrecy habits, the resulting complexity of negotiations to establish SIEFs explains why, to date, few contracts (only 20% of respondents) have been signed between partners.

REGISTRATION JUST HALF THE BATTLE
Achieving initial compliance - the registration of substances - meets only one half of the Reach challenge. It is, in effect, just the starting point. Condemned to live under continuous scrutiny, companies also need to address how they will maintain operational compliance in the future, as well as developing the systems and processes they will need to realize that aim.

Most companies are only just beginning this phase of the journey, and around a quarter have yet to start any activities related to maintaining future compliance.

The need to remain continuously compliant raises a number of major challenges above and beyond those already considered for initial registration. Ongoing compliance requires chemical companies to understand, capture and document substances through the value chain, from raw materials to end products.

Today, that information is often not captured in a seamless flow within a company's internal supply chain. Reach demands a far more integrated view. This will require, for example, a single product definition throughout the supply chain, which in turn will drive the need for, among other things, business processes to be redesigned and systems developed to handle the flow of information and the sheer volume of new data created.

Reach requires of companies not only physicochemical, toxicological and eco-toxicological analysis and documentation of substances, but also information about how they are used in the products that their customers make. This again places a burden of ongoing communication and documentation that will need to be constantly refreshed.

THE ROLE OF IT
In many cases, the development of information technology (IT) solutions to support tasks associated with Reach also lags. While respondents point to a range of activities that will be supported by IT, with supply chain communication being the most likely, 40% say that they do not know which specific tasks and processes IT will support. And over half of the respondents have yet to identify which tasks they believe will require IT support. IT clearly has a key role to play in addressing many of the processes that will help to capture, store and disseminate the high volumes of data generated by the requirement to maintain operational Reach compliance.

The survey results show an industry that is addressing the immediate pressure to achieve Reach compliance. Companies are focusing their efforts on ensuring that conformity with the letter of the law is in place by the first deadline for substance registration by December 2010.

But these efforts are diverting attention away from consideration of how they will achieve compliance, and how that will be maintained in the future. The survey suggests that the relative lack of engagement across business functions - coupled with a generally low level of awareness - is preventing companies from taking a more holistic view of Reach's implications and building the capabilities to manage their response more effectively and efficiently.

BEYOND COMPLIANCE
Companies that are able to find the time and energy to invest in some objective consideration and analysis of how they are approaching Reach may well uncover some additional - and considerable - benefit from doing so. A longer-term outlook is needed to ensure that companies can structurally achieve and sustain compliance without becoming stuck in a cycle of repetitive and duplicative tasks.

Successful approaches to Reach will require companies to build solutions that can help drive standardization and automation across operations, from beginning to end, and help them to collaborate and share information with their suppliers and customers (and their SIEF partners) as effectively as possible.

Reach offers a chance to examine the business with a view to focusing on the most valuable parts of the product portfolio as well as rationalizing and optimizing the investment in compliance. But this more accurate and complete picture can only be created with input from all relevant business functions - from marketing and sales, R&D, production and so on - and with clear stewardship from the most senior level of management.

The survey reinforces Accenture's observations from the Reach work it is engaged in across the chemical and energy industries. We believe strong Reach program management, a business-process-oriented approach and a solid IT strategy and road map are critical success factors for achieving and sustaining Reach compliance.

With the next deadline just over a year away, companies need to accelerate their efforts to build the capabilities, systems and processes that they will need to operate in the future under Reach. They will have to address many unknowns and uncertainties along the way. But time is slipping away fast.

Most companies are only just beginning this phase of the journey

Download the full survey findings

Keep up with Reach developments at ICIS news

The survey is part of a series of offerings from ICIS custom publishing.

For more details, please contact John Baker.

Accenture is a global management consulting, technology services and outsourcing company. Its "high-performance business" strategy builds on its expertise to help clients perform at the highest levels, so they can create sustainable value for customers and shareholders.

Theo Jan Simons leads Accenture's Chemical Industry Group. Based in Amsterdam, he can be emailed or reached at + 31 20 493 8352

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