1. BiPRO 1 Workshop Chemical Leasing Promotion and Implementation of Closing-the-Loops Cooperation and Business Models UNIDO, VIC, Vienna March 2, 2005 Dr. Reinhard Joas, BiPRO GmbH, Munich

2. BiPRO 2 1 Introduction to Chemical Leasing

3. BiPRO 3 Service oriented business strategies: Basic ideas user of a chemical producer of a chemical Does not pay to own a chemical, but spends money for the benefits provided by a chemical Sells the function of a chemical, including know how on efficiency and risks, adding management services like production management and logistics

4. BiPRO 4 Service oriented business strategies: Basic ideas amount of produced chemicals added value will decline as chemicals volume turns from a factor for earnings (“the more you sell the more you earn“) to a cost driver (“less is more“) can be shared among the involved partners

5. BiPRO 5 Chemical leasing : Basis for a sustainable development Economy: win-win situation with added value that can be shared air pollution water pollution waste load pollution that ceases to exist Costs Users Costs producers of chemicals Costs others added value producers of chemicals users of chemicals disposal companies plant constructors recycling companies authoritiesothers Environment: lower emissions and risks due to higher efficiency of chemicals use players:

6. BiPRO 6 Chemicals Serve... …to fulfil customer needs, e.g. cleaning tasks in industrial applications  Customer benefit consists in function, not ownership of the product:  Optimum problem solving wanted Offer customer specific solutions: Value from application knowledge

7. BiPRO 7 Chemicals Cost... …5-10 times as much as their price: users incur lifecycle cost, e.g.storage, handling, risk management, disposal  Customer benefit increases due to efficient material flow management:  Product & process know-how wanted Offer Management Services: Value added from knowledge transfer

8. BiPRO 8 Chemicals Perform... …differently in different contexts, depending on process design, equipment, and sequence of operations  Customer benefit increases by matching product and process design  Integrated Planning wanted Offer Joint Development Activities: Value added from long-term business relations

9. BiPRO 9 Chemicals Are Paid... …in reward of customer benefit, which is independent of chemicals volume used  Willingness to pay increases with quality of outcomes, not input  Utility based compensation wanted Offer Payment per unit, e.g. fixed price per parts cleaned Common interest in process efficiency: Value added from co-operative conduct

10. BiPRO 10 A Shift from Product Supply to Performance Delivery Why Chemical Leasing can foster trust and efficiency: Source: Chemical Strategies Partnership

11. BiPRO 11 Requirements of Service Partners Important legal requirements: Liability Contracting Waste classification Plant permission Occupational health responsibilty Important economic requirements: Quantifiable Output Cost improvement in outsourcing Network and service management competencies

12. BiPRO 12 Stakeholders Involved Customers Business partners (especially traders) Plant constructors (Motivation for co-operative strategy Pro: Extended Customer Basis Con: Co-ordination cost, bad experiences in service remuneration Investors (High investment intensity, esp. with leasing of installations) National / international authorities as potential supporters Internal stakeholders (employees, management, reporting & accounting)

13. BiPRO 13 2 Cooperation and Business Models in the Chemical Industry based on CL

14. BiPRO 14 Producer of chemicals User Chemical fulfils product specifications used chemical Model A Producer of chemicals User supplier of plants Solution Model B Producer of chemicals User supplier of plants other partners Joint venture Model C The user pays for the benefit of the chemical Material flow is closed Examples: - active carbon - solvents The user pays for the complete solution Examples: - abrasives A joint venture bunches all interests of partners and generates synergies User has one responsible partner and pays for the complete solution Different approaches for service-oriented business models

15. BiPRO 15 Recycling and disposal company Producer of abrasives Model A Model C Practice Example: Abrasives Joint ventureUser Producer of abrasives Producer of machinery Machinery Recycling and disposal company job can be done at the location of the joint venture Producer of abrasives User Model B User partial stream for other uses or disposal Inputs from other users Abrasive/abrasive corn recycled Abrasive fulfills product specifications Abrasive does not fulfill product specifications

16. BiPRO 16 How to Make It Work For Efficiency:Funnel Competencies Optimum Integration of product design process technology logistics equipment personnel training in production and recycling allows for optimal material efficiency (closed loop cycles).

17. BiPRO 17 For Efficiency:Funnel Competencies Task allocation according to core competencies  Leverage value by strategic partnership with specialists in logistics (JIT) risk management marketing processing Contracting Strategies How to Make It Work

18. BiPRO 18 How to Make It Work For Efficiency:Create Incentives Profits should correspond to partners‘ contributions  reward for efforts to increase process efficiency and for the generation of customer benefits  Share earnings within the network according to decisions taken cost incurred risk accepted by each partner Compensation Concepts

19. BiPRO 19 How to Make It Work For Efficiency:Communicate systematically Profitable co-operation depends on linkage of organisational structures and information flows  Develop organisational framework External Coordinator Joint Venture Focal Company to hub information flows ?

20. BiPRO 20 How to Make It Work For Trust:Establish rules of the game Common use of resources and know-how calls for rights and deliverables to be clear among partners  Develop concepts to handle responsibility Control mechanisms Contract Design Negotiation Strategies ?

21. BiPRO 21 How to Make It Work For Trust and Efficiency: Share your Vision Stringent action within networks needs clear intentions and plan of actions  Communicate concepts to potential partners reflecting motivation: show advantages realisation: indicate steps to take adaptation: elaborate implications for industries of concern

22. BiPRO 22 How to Make It Work For Trust and Efficiency: Share your Vision Case Studies Internet Presentations to find new partners and customers ? Vision Statements Pilot Partners Workshops Industry Benchmarks

23. BiPRO 23 3 Practical Experience in Introducing CL to industry

24. BiPRO 24 Experience 1 Integrate chemical leasing in marketing and network development strategies: Company choices STEP 1 select appropriate partners for chemical leasing (strategic decision) STEP 2 establish a successful business model in one country and for one type of benefits STEP 3 adapt business model for further clients adapt business model for further countries adapt business model for further products

25. BiPRO 25 Experience 2 Authorities and federations can support the process STEP 1 select appropriate partners for chemical leasing (strategic decision) STEP 2 establish a successful business model in one country and for one type of benefits STEP 3 adopt business model for further clients adopt business model for further countries adopt business model for further products support to find partners (information provider) support research and development activities support the establishment of a public platform to communicate success stories

26. BiPRO 26 Experience 3 Essential partners are suppliers of plants/machinery individual efforts to realise potentials of chemicals is often difficult Chances of chemical leasing individual efforts to optimise potentials of machinery is often difficult better use of existing know- how more efficient research and development balance with respect to acces to the client Optimisation potentials of chemicals and machinery

27. BiPRO 27 Experience 4 Recycling companies often strengthen a chemical leasing concept Producer of chemicals recycling company User ecological benefits of a recycling concept it is not the intention of chemical leasing to find an exclusion of waste law

28. BiPRO 28 Experience 5 Take care of know how protection and don‘t neglect internal communication!  Communicate the business model to your staff. In many cases they are afraid to give away their competence and to loose their job (what is neither the intention nor the consequence of chemical leasing concepts).  Establish clear contracts with your partners on intellectual property rights. Try to find a good balance between necessary protections and communication of know-how.  Check pros and cons of models A / B / C

29. BiPRO 29 Experience 6 Don‘t stick too close to chemicals! Use synergies between internal and external chemical leasing! STEP 2: synergy to optimise production processes producer of abrasives Producer of chemicals Users in several branches STEP 1: external activity business model Abusiness models A,B

30. BiPRO 30 Experience 7 Chemical leasing can be an opportunity for joint research activities Producer of chemicals Recycling company User Supplier of plants Other partners + network of know how  better products and technologies  new concepts  environmental advantages  sustainable development examples for possible support: 6th EU Framework Programme on Research national programmes (initiatives of Austrian ministries)

31. BiPRO 31 Pero’s visions towards chemical leasing Local Centre of Excellence for metal cleaning (joint venture) CHEMICAL PRODUCER: holds share in the joint venture gets its money not for the chemical but for the benefit of the chemical is involved in R&D MACHINERY PRODUCER: holds share in the joint venture gets its money not for the machine but for the benefit of the machines is involved in R&D CLIENTS: cleaning at the client or at the centre of excellence do not pay for chemicals do not pay for machinery payment for the benefit: cleaned work pieces

32. BiPRO 32 4 Obstacles and Success Factors

33. BiPRO 33 Need for co-operation defines chances and obstacles Producer of chemicals Recycling company User Supplier of plants Other partners + network chances:  better products and technologies  combined know- how as a specific resource  environmental advantages  sustainable development obstacles:  cost of business reorganisation  confidentiality  quality standards  fair allocation of benefits

34. BiPRO 34 What implementation difficulties are expected?  confidentiality intensified know-how exchange needs new rules confidentiality agreements with suppliers required for user information on chemical applications competitiveness problems related to know how sharing and intellectual property  fair allocation of benefits enhanced visibility of value contributions communication structures for clear targets and gain-sharing often do not exist yet

35. BiPRO 35 What implementation difficulties are expected?  quality standards shift of responsibility causes need for more and higher internal standards environmental benefits can only be achieved with compliance with standards related to the risk of chemicals (“less is more but less can be more risky!“)

36. BiPRO 36 What Can be Gained ? Customer Specific Solutions and Joint Development Activities Avoid cost of unnecessary product features Cut prices Reduce complexity for customers Enable optimisation of material flow  Value added  Enhanced customer loyalty  Barrier to market entry for competitors

37. BiPRO 37 What Can be Gained ? Chemical Management Services and Utility Based Compensation Realise optimised material flow Reduce complexity for customers  Value added  Provide revenue sources apart from product sales  Motivate common interest of supplier and customer in process efficiency: Conflict of interests solved  Increase trust  Reduce threat from knowledge transfer

38. BiPRO 38 5 Requirements for a Plan of Action

39. BiPRO 39 Draft Action Plan 1.Selection of companies (deadline: end of March)  Exchange of necessary information (checklist 1.1)  Suggestions for branches, chemicals, applications (checklist 1.2)  Selection criteria (checklist 1.3)  Use of already existing contacts (CP and CL activities) 2.Preparation of visits for selected companies  Business models and economic issues (checklist 2.1)  Technical details, innovation (checklist 2.2)  Administrative support (checklist 2.3) 3.Program for the visit in the countries  Preparation  Company visits (checklist 3.1)  Conference (checklist 3.2)

40. BiPRO 40 Checklist 1.1 Exchange of information 1.Type of company (producer, user, products, position on the market) 2.Size of company (employees, financial key figures) 3.Technologies, processes, chemicals used 4.Potential partners (willingness to participate in CL) 5.Already existing loops, waste treatment, CP measures 6.General: Country specific information Legal aspects General obstacles for CL CP Strategies, Official / national programs Classification of industrial sectors If necessary: main international suppliers

41. BiPRO 41 Checklist 1.2 Suggestions for Chemicals, Processes 1.Solvents 2.Cleaning agents 3.Chemicals for galvanic processes 4.Pickling 5.Extraction 6.Cooling, Heating 7.Textile finishing 8.Waste water treatment 9.Process additives NOT: Chemicals that become part of the final product

42. BiPRO 42 Checklist 1.3 Selection Criteria 1.The industrial application for which the respective chemical is used must yield a quantifiable product. 2.Process design must ensure, or allow modifications as to ensure that the respective chemical is not completely emitted during the use phase. 3.All involved business partners should be able and willing to enter reliable cooperation contracts, share know how and contribute to communicate CL. 4. The top management should support the new approach. 5. There should be a potential for multiplication of a pilot project 6.Scope of application, regional feasibility

43. BiPRO 43 Checklist 2.1 Economic Issues 1.Added value (elements, first calculation) 2.Economic arguments (direct and indirect) for the partners 3.Necessary investments 4.Arguments and calculation scheme for banks (in case of necessary investments) 5.Possibilities for additional funding 6.Monetarian and non-monetarian benefits

44. BiPRO 44 Checklist 2.2 Technical Issues 1.Higher efficiency of processes 2.Technological innovation, new technologies 3.Necessary technical measures 4.Quality criteria 5.Necessary testing

45. BiPRO 45 Checklist 2.3 Administrative Issues 1.Confidetiality declaration 2.Issues to be covered in contracts  Basis for payments  Quality criteria and specifications  Liability  Legal compliance  Intellectual property rights and sharing of know how  Mutual obligations 3.Schedule (testing, pilot phase, full implementation) 4.Training and external support 5.Development of networks

46. BiPRO 46 Checklist 3.1 Company Visits 1.Agenda for the day 2.Involved managers and staff 3.Clear tasks of national and international experts 4.Clear expectations on the outcome (committment to start!) 5.Sufficient time for discussion and questions 6.Creation of “own ideas” = better identification

47. BiPRO 47 Checklist 3.2 Conference 1.Agenda for the Conference 2.Invited participants  Companies (supplier, user, technology provider)  Associations  Authorities  Banker, representatives of funding institutions 3.Clear expectations on the outcome (generation of additional candidates and supporters) 4.Sufficient time for discussion and questions