As part of its Better Regulation agenda, the European Commission carried out a Cumulative Cost Assessment (CCA) represented by the chemical industry’s regulations. This study, conducted with the Cefic’s aims to:
- Quantify the cumulative costs linked to the European regulations in the chemical industry’s sector
- Show the development of costs over the 2004-2014 period
- Compare these costs with relevant financial indicators of the chemical industry
A report highlights the high regulatory costs of the chemical industry
The chemical industry: a very regulated sector
The report classifies the regulations of the chemical industry into 7 groups, on the basis of their general and specific policy objectives:
The report shows that the biggest contributions come from emissions and industrial processes (33%), chemicals (29%) and worker’s safety (24%).
On the other hand, the product-specific regulations barely account for 1% of these legislations (0.6%), and that includes very different regulations like the 2009/48/EC directive on the safety of toys or the 2011/65/UE directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (ROHS 2).
The economic burden of the regulations in the chemical industry
According to the Cefic, the total regulatory costs doubled between 2004 and 2014 to a total amount of almost €9.5 billion euros per year. It represents almost 2% of the annual turnover, which equals 12% on gross annual added value created by the chemical industry.
Plus, companies can be subjected to indirect costs linked to raw materials (or other inputs like electricity or machinery), but also to opportunity costs (withdrawal or ban of the substances, market share decrease). Although these companies evoked these costs, no estimation could have been made regarding the qualitative information obtained.
Using the same regulation groups suggested in the report, we can compare the costs generated by these regulations to the gross annual added value created by the chemical industry:
Compared with the Gross Operating Surplus (GOS) of the chemical industry in the European Union, the additional costs amount to 30%.
For the Cefic, regulatory costs is a “significant factor shaping the profitability of the chemical industry”
Regulatory costs may vary in the upcoming years
The costs related to the CLP and REACH regulations will respectively decrease after 2017 and 2018.
On the other hand, the costs to comply with the regulations on biocides and pesticides will continue to grow.
The regulatory costs concerning worker’s safety and transport legislation "should remain stable” according to the study.
Mixed opinions about the European Commission report
Before anything, the fact that the figures presented in the report do not necessarily provide global statistical data must be taken into account, because it is often impossible to gather data directly from the companies in some sectors.
Furthermore, this report only deals with the first part of the study. Still underway, this study will enable to compare the cumulative costs of the regulations at the international scale, which includes China, India and the US. The final report is expected within a year.
Cefic’s opinion
Cefic underlined the European Commission study in a press release. For the managing director Marco Mensink, “Europe needs to focus on its competitiveness, of which the regulatory burden is a big factor”.
Cefic's executive director of industrial policy, René van Sloten, reminds that this evaluation is “not a deregulation-orientated exercise. It gets the facts on the table and serves as a tool to make things better”.
Cefic adds that the results were "subjected to a plausibility test in a workshop with other companies and validated by means of a broader online consultation".
European Commission’s Opinion
The European Commission worries that the report "is only a first step and does not allow [them] to draw direct conclusions on the competitiveness of the chemicals industry". And though the report highlighted the costs for the chemical industry, it is part of a much wider assessment of the regulations’ efficiency, which also evaluates the benefits of said regulations.
These benefits “must be taken into account before drawing any policy conclusions and without compromising the high level of health and environmental protection”.
L’avis de CHEMTrust
In an article of CHEMTrust’s blog (a UK charity that works with ECHA), Michael Wahurst stresses the report is based “on reported costs from the chemical industry, which has a long record of overestimating the financial cost of regulation. Cefic describes these costs as 'high', even though they give no data from other countries to compare them with.”
He adds that it is “"vital that these Regulations are followed by all players in the market, so CHEMTrust would like to see a substantial increase in resources going to monitoring and enforcement.”
The European Environmental Bureau
For Dolores Romano of the European Environmental Bureau, this study shows only half of the story. She also recalls it is vital that chemicals on the European market become safer.
How to reduce your regulatory costs?
It is possible to reduce the regulatory costs thanks to the use of dedicated softwares.
The latest innovation with applications in the Cloud enables you to automate most of the process related to the chemical data on regulations and in turn drastically reduce the associated costs.
Indeed, the software tools enable to:
- File all the chemical data in a collaborative and centralized place
- Automate recurring tasks and optimize team collaboration
- Speed up regulatory dossier creation
- Ease the chemical data collection in the supply chain
A few concrete examples:
Simplify the management and creation of your Material Safety Data Sheet
After entering the information related to your chemical products portfolio in the database (chemical composition, substances, classification, etc.) you can automatically create MSDS compliant with the REACH Regulation and translate it into all European languages. Learn more over here!
Automate the creation of the Product Information File of the cosmetic product
For all cosmetic products launched on the European market, a regulatory and toxicological dossier called PIF (Product Information File) must be compiled. From the validation of the product’s composition to the evaluation of its security, many steps can be automated, thus speeding up the compliance of ranges of products. Learn more about this over there!
Trace the dangerous substances in the supply chain
Article 33 of REACH, as well as many other regulations (RoHS, DEEE, etc.), require to communicate about the presence of hazardous substances downstream the supply chain. Software tools exist to ease the data collection from suppliers and circulation of information upstream/downstream. Learn more by clicking here!
As part of its Better Regulation agenda, the European Commission carried out a Cumulative Cost Assessment (CCA) represented by the chemical industry’s regulations. This study, conducted with the Cefic’s aims to:
- Quantify the cumulative costs linked to the European regulations in the chemical industry’s sector
- Show the development of costs over the 2004-2014 period
- Compare these costs with relevant financial indicators of the chemical industry
A report highlights the high regulatory costs of the chemical industry
The chemical industry: a very regulated sector
The report classifies the regulations of the chemical industry into 7 groups, on the basis of their general and specific policy objectives:
The report shows that the biggest contributions come from emissions and industrial processes (33%), chemicals (29%) and worker’s safety (24%).
On the other hand, the product-specific regulations barely account for 1% of these legislations (0.6%), and that includes very different regulations like the 2009/48/EC directive on the safety of toys or the 2011/65/UE directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (ROHS 2).
The economic burden of the regulations in the chemical industry
According to the Cefic, the total regulatory costs doubled between 2004 and 2014 to a total amount of almost €9.5 billion euros per year. It represents almost 2% of the annual turnover, which equals 12% on gross annual added value created by the chemical industry.
Plus, companies can be subjected to indirect costs linked to raw materials (or other inputs like electricity or machinery), but also to opportunity costs (withdrawal or ban of the substances, market share decrease). Although these companies evoked these costs, no estimation could have been made regarding the qualitative information obtained.
Using the same regulation groups suggested in the report, we can compare the costs generated by these regulations to the gross annual added value created by the chemical industry:
Compared with the Gross Operating Surplus (GOS) of the chemical industry in the European Union, the additional costs amount to 30%.
For the Cefic, regulatory costs is a “significant factor shaping the profitability of the chemical industry”
Regulatory costs may vary in the upcoming years
The costs related to the CLP and REACH regulations will respectively decrease after 2017 and 2018.
On the other hand, the costs to comply with the regulations on biocides and pesticides will continue to grow.
The regulatory costs concerning worker’s safety and transport legislation "should remain stable” according to the study.
Mixed opinions about the European Commission report
Before anything, the fact that the figures presented in the report do not necessarily provide global statistical data must be taken into account, because it is often impossible to gather data directly from the companies in some sectors.
Furthermore, this report only deals with the first part of the study. Still underway, this study will enable to compare the cumulative costs of the regulations at the international scale, which includes China, India and the US. The final report is expected within a year.
Cefic’s opinion
Cefic underlined the European Commission study in a press release. For the managing director Marco Mensink, “Europe needs to focus on its competitiveness, of which the regulatory burden is a big factor”.
Cefic's executive director of industrial policy, René van Sloten, reminds that this evaluation is “not a deregulation-orientated exercise. It gets the facts on the table and serves as a tool to make things better”.
Cefic adds that the results were "subjected to a plausibility test in a workshop with other companies and validated by means of a broader online consultation".
European Commission’s Opinion
The European Commission worries that the report "is only a first step and does not allow [them] to draw direct conclusions on the competitiveness of the chemicals industry". And though the report highlighted the costs for the chemical industry, it is part of a much wider assessment of the regulations’ efficiency, which also evaluates the benefits of said regulations.
These benefits “must be taken into account before drawing any policy conclusions and without compromising the high level of health and environmental protection”.
L’avis de CHEMTrust
In an article of CHEMTrust’s blog (a UK charity that works with ECHA), Michael Wahurst stresses the report is based “on reported costs from the chemical industry, which has a long record of overestimating the financial cost of regulation. Cefic describes these costs as 'high', even though they give no data from other countries to compare them with.”
He adds that it is “"vital that these Regulations are followed by all players in the market, so CHEMTrust would like to see a substantial increase in resources going to monitoring and enforcement.”
The European Environmental Bureau
For Dolores Romano of the European Environmental Bureau, this study shows only half of the story. She also recalls it is vital that chemicals on the European market become safer.
How to reduce your regulatory costs?
It is possible to reduce the regulatory costs thanks to the use of dedicated softwares.
The latest innovation with applications in the Cloud enables you to automate most of the process related to the chemical data on regulations and in turn drastically reduce the associated costs.
Indeed, the software tools enable to:
- File all the chemical data in a collaborative and centralized place
- Automate recurring tasks and optimize team collaboration
- Speed up regulatory dossier creation
- Ease the chemical data collection in the supply chain
A few concrete examples:
Simplify the management and creation of your Material Safety Data Sheet
After entering the information related to your chemical products portfolio in the database (chemical composition, substances, classification, etc.) you can automatically create MSDS compliant with the REACH Regulation and translate it into all European languages. Learn more over here!
Automate the creation of the Product Information File of the cosmetic product
For all cosmetic products launched on the European market, a regulatory and toxicological dossier called PIF (Product Information File) must be compiled. From the validation of the product’s composition to the evaluation of its security, many steps can be automated, thus speeding up the compliance of ranges of products. Learn more about this over there!
Trace the dangerous substances in the supply chain
Article 33 of REACH, as well as many other regulations (RoHS, DEEE, etc.), require to communicate about the presence of hazardous substances downstream the supply chain. Software tools exist to ease the data collection from suppliers and circulation of information upstream/downstream. Learn more by clicking here!
