To confront the challenges of optimizing resource use and reducing climate impact, businesses need to adapt and find ways that enable them to be more flexible and resilient to change, while optimizing their profitability. Chemical Leasing is the way to go.
In order to cope with such an overarching and urgent global challenge as climate change, business models and the way business is conducted need to be reconsidered and adapted to an ever-changing environment. This is where sustainability plays an important role, as it ensures long-term competitiveness. And this is where Chemical Leasing can really make a difference.
Chemical Leasing is a performance-based business model for sustainable chemicals management. It aims at a more efficient use of chemicals in the production process by redefining the business relationship between the chemical user and the supplier. Chemical Leasing can help businesses optimize their processes, particularly helping workers and engineers use processes with a lower use of resources when it comes to materials, chemicals, energy and water.
Reference: Maria Grineva, UNIDO
An innovative business model
Chemical Leasing has a strong partnership component between user and supplier. This allows for the continuous improvement of business processes and the business model itself.
The conventional business model assumes that the more you sell, the more you earn. However, in Chemical Leasing the supplier does not sell quantities; rather, the supplier sells the performance, the function of the chemical. This is the service rendered by the chemical or the purpose for which the chemical is applied. For example, the function of the chemical could be to clean or degrease metal parts, or to protect a surface. Payment is then made according to functional units, that is, the number of pieces cleaned or the extent of area coated.
By strengthening business relations between partners, this innovative model helps the chemical industry and suppliers of chemicals be more involved in client operations, which facilitates feedback, knowledge and sharing. The know-how collected through Chemical Leasing by chemicals suppliers in turn leads to a better understanding of how to improve the (chemical) product or processes, how to address the markets, and consequently better comply with regulatory changes.
Moreover, Chemical Leasing serves as an efficient tool that can help business go hand in hand with major global sustainability approaches, such as the circular economy. It also contributes to achieving the UN Sustainable Development Goals (SDGs) by minimizing resource and energy use and pollution.
Reference: Maria Grineva, UNIDO
A win-win approach for sustainable business operations
Examples taken from the industry show that companies that apply the Chemical Leasing business model considerably improve their performance in economic, environmental and social terms, which results in better access to investments, better public standing, better resource efficiency and better profitability.
Compared to other voluntary initiatives and measures used by companies, such as corporate social responsibility, Chemical Leasing truly integrates sustainability into the core of a business’s operations.
UNIDO’s initiatives
The United Nations Industrial Development Organization (UNIDO) is strong advocate of Chemical Leasing since 2004 as a way to lower environmental impact and increase positive social impact. Specifically, the UN agency acts as a facilitator in bridging the gap between governments and businesses to upscale such an innovative business model. UNIDO sees an interest and value in bringing the model closer to the academic and scientific communities, as they can play an important role in advancing the further development and mainstreaming of Chemical Leasing on a global scale.
Through its Global Chemical Leasing Programme, UNIDO works on facilitating uptake, advising companies about the various benefits, collecting experience and bringing it to a wider audience. The Global Chemical Leasing Award scheme, launched in 2009, specifically acknowledges best practices, innovative approaches and inspiring ideas around the globe related to applying the Chemical Leasing business concept.
Since 2016, UNIDO led a global and multi-stakeholder initiative on Chemical Leasing to strengthen awareness and cooperation of partners. This legally non-binding declaration was initially signed between UNIDO, Austria, Germany, Switzerland with Peru, Serbia, El Salvador and Sri Lanka later joining the initiative.
In addition, in 2020, UNIDO, together with its partners from the Austrian, German and Swiss governments, published the book: “Chemical Leasing: Function to Impact”, which is a unique collection of insights, best practices and real examples of how the private sector, society at large, and the environment can benefit from this sustainable business approach.
Given that Chemical Leasing strongly addresses some of today’s global environmental challenges, the model in increasingly being used by more and more companies. This is not surprising as it offers a great solution for sustainable chemicals management and reaching sustainable goals.
