A $10-Billion Issue In Europe

NEW REGULATIONS COULD AFFECT MANY U.S. INDUSTRIES.

March 1 2004 by Nance K. Dicciani


A new legislative issue is emerging that could have a major impact on innovation and the cost and availability of products worldwide: The European Commission has adopted a proposal to overhaul existing chemical regulations in the European Union.

While this may seem narrowly focused on the chemical industry, and limited to those companies that operate in Europe, it could have a broad impact across industries and around the world.

The proposal, called Registration, Evaluation and Authorization of Chemicals, or REACH, seeks to improve the protection of human health and the environment. However, there is concern, both within and beyond the EU, that the policy, as written, will harm the very innovation we all rely on to improve the quality of life and our environment.

At Honeywell, we believe in the basic goals of the proposed regulation. Effectively implemented, REACH could remove trade barriers, reduce and avoid unnecessary costs and streamline regulatory approaches globally. The measure also could promote voluntary activities or other effective alternatives to regulation.

But the European Commission estimates that costs associated with testing and registration alone will reach $2.3 billion over the next several years. Add to this a possible $2.8 billion to $5.2 billion for downstream costs and burdens such as re-certifications, additional formulating, fees and other added expenditures. Some estimates of the overall economic impact of REACH on the global value chain exceed $10 billion. The impact will be felt far beyond the chemical industry, because chemicals touch virtually every aspect of our lives, including food, health care, communication, transportation, energy, construction and clothing.

Here are some specifics of the proposal that all CEOs should be aware of:

  • REACH seeks to define a “safe” product as something that has no inherent hazard-a complete reversal of current practices. Now, we sell products in Europe unless a health or environmental problem is suspected or identified. But under the proposal, we would have to prove beforehand that there is absolutely no hazard associated with a product. This is a difficult proposition, given that even table salt is hazardous under certain conditions. Focusing on hazard alone could mean some products safely used now would disappear.
  • Authority under REACH is spread among various EU bodies with no clear means of ensuring consistency in interpretation and implementation.
  • Public sharing of test data is mandated with no protection for confidential business information-i.e., the first good corporate citizen to comply pays the greatest price.

As currently configured, REACH will have no boundaries. New legislation for chemicals and other products demands transparency, confidence and accountability, as well as shared responsibility in managing processes and products safely. We applaud the Commission for its efforts to increase transparency by, for example, inviting stakeholder comments through Internet consultation. But it is critical for everyone, including manufacturers, distributors, importers and end-users in downstream industries, to become involved now to offer insight and opinion on this new policy.

The European Parliament is expected to offer its opinion in April, though upcoming elections will likely delay the first reading. After additional revisions by the Parliament and Council, REACH will be enacted perhaps in 2006. Importantly, REACH is a regulation rather than a directive-and thus automatically will take effect in all member states without further action.

If the chemical industry is to continue to innovate and offer new products that the world has come to expect, it’s critical that new regulatory policies be efficient, sound and practical. They must be developed via a true partnership that includes governments, industries and all other committed stakeholders. I would encourage CEOs to learn more about this proposed legislation and its global impact, and to take advantage of advocacy opportunities-before it’s too late.

Nance K. Dicciani is president & CEO of Honeywell Specialty Materials in Morristown, N.J.