Rising REACH Compliance Costs May Force Rethink

To date, there are a total of 84 chemical listings on the Substances of Very High Concern (SVHC) candidate list. The last thirteen additions were all carcinogenic, mutagenic, or toxic for reproduction. The target number by the end of 2012 is 136 substances. Now for the sake of politics, the European Chemicals Agency (ECHA) plans to do hurry-up dossier submittals containing just the name of 38 additional substances along with their classifications.

There will be no risk management options included in the dossiers. Although ECHA has not yet released the names of these additional substances, it is common knowledge that half of the new substances will contain lead, including some fuel additives.

On another note, results from the EU Commission's "Innovation Study" were summarized in Sitmae Reach Services BV's Newsletter No. 12. The purpose of the study was to determine the impact of meeting REACH requirements upon new product development and innovation in general. The results indicated that fully two thirds of the respondents said they had to divert resources from R&D and other innovation efforts in order to meet REACH requirements. Almost half had to increase R&D expenditures because of REACH. Only 13 percent found that REACH actually had a positive effect on innovation; 44 percent found the impact negative or strongly negative.

These are not numbers the EU would want a company to see as part of a PR campaign for selling REACH policy around the world. While half of the responses indicated the R&D cost went up, half also stated that REACH influences the direction for R&D and spurs innovative actions related to health, safety, and the environment. In a few companies, REACH led to a fundamental reappraisal or research orientation.

In my opinion, as R&D costs increase and the rate and the nature of innovation is affected in order to meet REACH requirements, the United States and other countries will generate a counter-movement against REACH implementation in regions where it is not absolutely mandatory to do business. No company wants to see either its product introduction plans or costs change dramatically. The numbers that came out of the returns of the EU's Innovation Study will become the backbone that will brace the arguments against REACH-like policy introduction and adoption in countries like the United States.

China responded to the DEHP ban in Europe by making the toys shipped to the EU without DEHP and by shipping the same toy with DEHP to the rest of the world. Will manufacturers in the US also run parallel product lines using selective region-based materials? If a chemical substitute or production process cost more than the original offending composition or process, will the US company change over the entire product line to meet EU standards?

Sadly, the answer will be based upon the bottom line and not the company's concern for health and safety of its customers.

REACH is not just changing the money allocation map inside of participating companies, but also ECHA itself is running low on funds. The basic EU subsidy is currently sitting at 385 million euros ($481 million) per year until 2020. Typical cost for a registration is in the range of 50,000 to 100,000 Euros. For the 2013 deadline, ECHA expects some 3,600 registrations tallying up to 180 million to 360 million Euros in registration fees alone. This cost is much higher than the estimate set by the commission in 2003.

ECHA may have to charge registration and inquiry fees going forward. So now you can take about 100,000 Euros off the company's bottom line for every new registration. At some point, the cost of the end product is affected, or the incentive or ability to register for smaller companies is reduced significantly. Whatever the cost, better environment and human health are the bigger prices to be paid for non-implementation.