Reach and small business concerns - The Federation of Small Businesses explains how SMEs see the chemical poroposals.

When the Commission proposed a new EU regulatory framework for the Registration Evaluation and Authorisation of Chemicals (REACH) in 2003 the stated aim of the proposal was '...to improve the protection of human health and the environment...' whilst at the same time improving innovation and competitiveness of the EU chemicals industry.

Many small businesses would support the former case but in terms of the latter the general view is that the regulation will stifle and not improve innovation and competition.

The regulation will cover both new and existing substances and will require producers and importers of chemicals to register them with the competent authority within a new European Chemicals Agency.

The FSB, which represents 190,000 small businesses, has lobbied hard for recognition of the special difficulties this regulation would hold for businesses. A key emphasis for FSB has been for micro businesses (9 employees or less) further down the chemical supply chain known as downstream users.

Downstream users of chemicals could include construction, adhesive manufacturers, cleaning contractors, engineers and specialty industries to name but a few sectors.

It is our view that despite the significant improvements made to the regulation, following its progress through the European Parliament, a number of areas need to be addressed to ensure the workability of the new regime and to protect the viability of SMEs.

Small Business Concerns - Overview

Burdens

In general terms, small businesses welcome the consolidation of regulation that REACH represents but key concerns relate to the cost and administrative burdens that are likely to be imposed on them.

Businesses will incur costs as a result of the new registration requirements; reformulations and product rationalisation may be necessary if products are banned or worse removed from the market for economic and not safety reasons.

The European Commission has assessed that Reach will cost industry between 2.8bn and 5.2bn euros (between £1.5bn and £3.5bn) over 11 years. Other assessments put the figure as high as 12.8bn euros (£8.6bn). Reach costs fall especially hard on small businesses as they are least able to absorb costs or pass them on, unlike larger concerns.

A low level of awareness of new legislation is a recurrent factor affecting small businesses' ability to anticipate and prepare for the impact of new and in this case complex regulation.

The FSB is an active member of the Commission's REACH Implementation Projects (RIPs), which aim to develop guidance and tools for industry in readiness for REACH implementation.

John Holbrow, FSB Environment Policy Chairman, who represents downstream users in these forums, consistently makes the point that the technical language of the regulation must be simplified and the complex administration process reduced.

In the typical small business environment the owner often wears many hats and is responsible for health and safety, human resources, finance, legal, environmental issues inter alia.

Anecdotal evidence from FSB members make clear that unless Reach is simplified innovative small businesses in fast moving niche markets will collapse.

Commercial confidentiality

The regulation requires as part of the registration process, that suppliers produce a chemical safety report detailing all uses of a chemical substance along the supply chain. Downstream users would be forced to disclose confidential information to the supplier on how they use a particular substance or produce their own reports, a difficult option for the average micro business.

An additional area of concern relates to the 'One substance one registration' (OSOR) aspects of REACH proposed by the British Government which could force companies to share the costs of registration by forming consortia and making joint applications.

Again, information relating to precisely how a substance is used in a preparation would be widely available along with other data. The FSB has lobbied for an opt-out from consortia to preserve commercial confidentiality and the competitiveness of small businesses.

Imports loophole

Reach only applies to chemicals manufactured in or imported into the EU and does not apply to chemicals used in finished products. Imported articles should be subject to the same rules detailed in the REACH regulation.

Failure to ensure a level playing field for imported products will adversely affect the competitiveness of small businesses. There is an additional concern that manufacturers will shift production outside of the EU where less stringent controls could make production more economic.

Solutions

The FSB believes a number of the current amendments to the REACH regulation will clearly provide a more workable regulation. Particularly welcome is the move towards a risk based approach for registration as opposed to the former tonnage basis.

In terms of the British OSOR proposal, the FSB acknowledges the potential to reduce registration costs through consortia formation but concerns remain about the ability of SMEs to engage and exert influence in consortia and the commercial sensitivity of information required for that purpose.

A strong and effective enforcement body is essential to safeguard the interests of small businesses. The current proposals for the working of the European Chemicals Agency and its inter-relation with other institutions and Member States seem bureaucratic and unwieldy.

The FSB considers that an increased centralised, co-ordinating and decision-making role for the Agency would render the operation of the REACH programme more efficient. The small business community must have faith in such a body. As such, there is a need for increased stakeholder involvement including that from downstream users.

In addition an appreciation of the special position of small businesses within the Agency is essential.

In conclusion, the new regulatory regime must be non-discriminatory in terms of small businesses, incorporate clear definitions and involve minimum administrative requirements. Small businesses do not object to the REACH legislation in principle but in practice REACH must be fair and workable for all businesses.

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