Chemical Leasing Business Models—A Contribution to the Effective Risk Management of Chemical Substances

Cornelia Ohl and Frank Moser

Risk Analysis, 2007, vol. 27, issue 4, 999-1007

Abstract: Chemicals indisputably contribute greatly to the well‐being of modern societies. Apart from such benefits, however, chemicals often pose serious threats to human health and the environment when improperly handled. Therefore, the European Commission has proposed a regulatory framework for the Registration, Evaluation and Authorization of Chemicals (REACH) that requires companies using chemicals to gather pertinent information on the properties of these substances. In this article, we argue that the crucial aspect of this information management may be the honesty and accuracy of the transfer of relevant knowledge from the producer of a chemical to its user. This may be particularly true if the application of potentially hazardous chemicals is not part of the user's core competency. Against this background, we maintain that the traditional sales concept provides no incentives for transferring this knowledge. The reason is that increased user knowledge of a chemical's properties may raise the efficiency of its application. That is, excessive and unnecessary usage will be eliminated. This, in turn, would lower the amount of chemicals sold and in competitive markets directly decrease profits of the producer. Through the introduction of chemical leasing business models, we attempt to present a strategy to overcome the incentive structure of classical sales models, which is counterproductive for the transfer of knowledge. By introducing two models (a Model A that differs least and a Model B that differs most from traditional sales concepts), we demonstrate that chemical leasing business models are capable of accomplishing the goal of Registration, Evaluation and Authorization of Chemicals: to effectively manage the risk of chemicals by reducing the total quantity of chemicals used, either by a transfer of applicable knowledge from the lessor to the lessee (Model A) or by efficient application of the chemical by the lessor him/herself (Model B).

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:wly:riskan:v:27:y:2007:i:4:p:999-1007

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