Many SMEs lack capacity to produce Reach documentation alone

Interview article by Tom Brown

HELSINKI (ICIS)–Many small and medium-sized enterprises (SMEs) lack the capacity to meet the documentation requirements of the Reach regulation without third party assistance, according to European Chemicals Agency (ECHA) executive director Geert Dancet.

Many will need to pay consultants to help fulfil the information disclosure requirements of the legislation, he added.

“It’s clear to us that many of the smaller operators don’t have the regulatory capacity to produce the dossiers or documentation that is necessary for the chemicals legislation, so in that way are depending on consultants quite a lot,” Dancet said.

Due in 2018, the third phase of the Reach legislation covers chemicals used or produced in quantities of 1-100 tonnes per year, smaller amounts than covered in the previous phases meaning that some companies face having to comply with the regulations for the first time.

The European Commission estimates the median cost of registration for SMEs at €50,000 per product, compliance could stand to decimate the profit margins for smaller firms on some product lines for several years.

While the costs of Reach can only be mitigated to a certain extent, ECHA is attempting to provide guidance to smaller firms, and is sending several of its employees to work at SMEs for a period to better understand the needs of producers operating at that level compared to giants such as BASF.

Assistance in the form of subsidies or other financial aids is under discussion in some EU member states for strategic industries, including essential oils in France and dyes in Italy, according to Dancet.

“Some member states are indeed considering subsidies or even government support in preparing sector-specific guidance,” he said.

70,000 registrations are expected for the 2018 deadline, more than triple the highest amount in either of the previous phases, and the process is proceeding as expected so far for ECHA, the body overseeing the roll-out of the legislation, except for fears that delays in European Commission oversight could lead the agency to push back some of its own deadlines.

“We get a bit nervous [at the prospect of Commission delays], because we have taken a public commitment that we would not modify any of our guidance or IT tools after 1 June 2016 unless it is absolutely unavoidable,” Dancet said.

While companies of all sizes may grumble about the impact of Reach, few have been seen to relocate production facilities in direct response to the regulations, according to Hugo Waeterschoot of ECHA stakeholder group Eurometaux.

However, facilities for the production of compounds included in the Reach authorisation list, intended to lead to the reduction or outright abolition of the use of certain materials in the EU, have been moved outside the region in some cases, Waeterschoot added at an ECHA press conference earlier this week.

The authorisation list is intended to push for the substitution of greener chemicals for especially hazardous materials, rather than simply pushing their production out to less regulated areas, but Dancet maintains ECHA may have additional tools to deal with those shifts.

“There is the obligation for us at the end of the authorisation process to identify if these substances end up in articles, and whether we need a restriction of the imported articles,” he said.

“On the other hand we are seeing that lots of companies are able to substitute. There is simply not enough publicity around successful substitutions, and it happens every single day… but there is no need to report back to us on this,” he added.

One concern of the Reach legislation – popularly perceived as “heavy, complex, demanding regulation”, according to the European Commission – is that it will lead to the competitive position of lower-margin bulk chemicals eroding further within the EU.

Energy, labour and feedstock costs had already straitened operating conditions for commodity chemicals operations in Europe, and the cost of complying with the most ambitious regulatory framework for producers anywhere in the world has served to increase operating costs further.

Reach has and will serve to force producers to examine their chemicals portfolios and decide which of their products are the most commercially viable, and to focus more tightly on the most profitable parts of their operations, according to Dancet.

“Companies have been able to identify which of the substances in their portfolio has a future, because of the cost of registration and authorisation and other processes, they can make choices and they are guided by the legislation to reflect better on the profitability that they have,” he said.

“Sometimes it’s better to be focusing on fewer profitable and safer chemicals in growing markets than having a large set of substances where they don’t know what is profitable and safe, and what is not. So, the cost and safety information that companies have acquired due to the registration is an enormous advantage for running their business,” he added.