Over 1,000 per cent off the mark

We’ve all been in such situations before. When you’re absolutely certain of something, you might say it is about 1,000 per cent safe.

But what if even 1,000 per cent isn’t enough?

We’ve just experienced this again whilst calculating the socio-economic costs of the SEAC.

We were already quite certain that the SEAC’s calculation couldn’t be right. But even we wouldn’t have guessed that the costs would ultimately be 40 times higher – or, to be precise, around 4,054 per cent.

Of course, there will be objections. One can question who commissioned the study. One can discuss the size of the sample. It is also possible that certain costs were not taken into account on the other side. From a scientific point of view, this critical examination is not only legitimate but necessary.

However, this does not change the key message of the result:

The costs of the ‘non-use’ scenario “Closure of an electroplating company” were massively underestimated.

But I would first like to take a step back mentally.

Regarding the current public consultation on the restriction of Cr(VI) regarding the sector of SEAC. SEAC’s task is to assess the defined scenarios in ECHA’s draft restriction proposal against socio-economic criteria. To this end, the costs of closing down a job plating company are calculated for all scenarios.

On the other hand, there are benefits to society from lower healthcare costs or reduced environmental impact. In SEAC’s jargon, the scenarios are labelled as ‘proportionate’, ‘probably proportionate’ or ‘probably not proportionate in the short term’. The devil is here in the detail. A single word makes all the difference here and determines the regulatory judgement on entire economic sectors across the European Union.

So, if these costs play such a decisive role, let’s take a closer look.

In collaboration with the renowned consultancy company EPPA in Brussels, the impacts of 35 cluster companies and 12 individual authorizations were examined.

It was a huge amount of work, but it paid off in the end.

The calculation covered not only a company’s ‘lost EBIT’ but also side-effects, such as the decommissioning of galvanic lines, disposal costs of chemicals and the valuation of lost jobs. The assessment was carried out strictly in accordance with ECHA’s guidelines to ensure a comparable basis.

However, particular focus was placed on what is known as the ‘wider economic impact’ – the consequences for the downstream supply chains of a electroplating company. These are the consequences that our customers ultimately will face in the case of the Non-use Scenario. Relocation costs, costs of qualifying non-European suppliers, transport and, in the worst-case, supply bottlenecks, loss of market share and the migration of entire supply chains to non-European economic areas.

To this end, we have analysed the letters of support that our applicants received from their customers during the authorization process for Cr(VI). The costs range from a 18-month sales stop at a global market leader to the closure of entire sites and relocation to Switzerland. In one example, a renowned company has just invested over €100 million at a site in Germany; should the substance be banned, this could be described as a huge misinvestment.

These costs account for over 80 per cent of the total socio-economic costs.

A responsible industrial policy must not turn a blind eye to these effects. Especially as the functioning of the European market and supply chains is one of the three stated objectives of the REACH Regulation.

What happens if the higher costs are taken into account?

Do all the scenarios in the draft restriction then become obsolete?

Yes and no.

We have already emphasised on several occasions that there are other aspects to be considered. Not everything in society can be expressed in euros. In principle, I believe that restriction of Cr(VI) is the more practicable form of regulation compared to authorization. Nevertheless, with a view to greater protection for workers and the environment, scenarios such as R01 and A01 can still be supported. The figures from the Hapoc database show that this can be already implemented by Vecco’s member companies. In this case, the ‘non-use’ scenario remains a theoretical one for the electroplating companies.

The introduction of the Maximum Release Factor (MRF), as described in scenario A05, is also, in principle, to be viewed positively for larger electroplating companies.

The Cr(VI) regulation is therefore by no means merely a matter of chemicals legislation and occupational health and safety. It has become a decision on industrial policy for European society.

What sort of economy do we want in Europe in the future?

We are now keen to see how things will turn out in the end.

Matthias Enseling