Sustainable Development International

REACH: impact study will not end controversial lobbying struggle


Courtesy of Sustainable Development International

Untitled Document

Although the new KPMG study broadly confirms the Commission's own impact assessment, it raises serious issues about the business impact of the proposed legislation on SMEs and downstream users.


Endless wrangling over the consequences of REACH on Europe's chemicals industry led the Commission to agree, on an exceptional basis, on two additional impact assessment studies:

  • one carried out by consultants KPMG focusing on competitiveness and innovation. The study was led and entirely funded by industry;
  • the second undertaken by the Commission's Joint Research Centre (JRC) and Institute for Prospective Technological Studies (IPTS) on the impact of REACH on the new member states (EU-10) [EurActiv will come back to this study in a separate article].

A high-level stakeholders' group made up of representatives of the three European institutions, NGOs and industry was appointed to oversee both studies. The Commission departments for environment and enterprise policy signed a memorandum of understanding with European business organisation UNICE and the European Chemicals Industry Council (CEFIC) to agree on the terms.

Both sides agreed that the KPMG study would aim to analyse the potential effects of REACH along the whole chemicals supply value-chain, from producers to downstream industry users such as the car industry. Four industrial sectors were selected: automotive, electronics, packaging and inorganics (metals). In July 2004, the two NGOs in the high-level group - WWF and the European Environmental Bureau (EEB) - rejected the methodology adopted for the KPMG study, saying it was biased and used exaggerated cost scenarios.


The REACH impact study carried out by KPMG for the European chemical industry (CEFIC) and business association UNICE was made public on 27 April.

In the final report, KPMG insists that the study is not intended to provide a general macro-economic impact assessment resulting in loss of GDP or employment. It underlines the study only provides business case studies based on interviews.

Key findings of the report:

  • The withdrawal of chemicals used as primary raw materials is deemed 'unlikely', contrary to previous industry allegations that some products would end up being pushed out of the market because of increased costs.
  • Direct costs for registering substances to the future European chemicals agency were found to be 'significant' for one individual chemical supplier (20% of annual turnover). For other suppliers, the report assumed they would 'succeed in passing on' registration costs to customers without specific mention of particular difficulty;
  • In terms of competitiveness, it emerged from the report that 'the increase in product costs ranges from 6 to 20%'. However, these costs only have to be paid once, not every year, and they can be distributed over time (4% over five years instead of the full 20% over one year);
  • 'Delocalisation just because of REACH is unlikely.' But REACH 'may add to delocalisation pressures, especially for commodities,' adds the report in a context note;
  • Direct costs related to REACH are expected to 'have limited impact on the profitability of the downstream users'. But, in a context note, the report adds that 'even a low impact on profitability could be a serious issue' given the chemical sectors' low profit margins and global pressures on profitability;
  • On innovation, 'no increase in R&D expenses are expected', only 'limited diversion of resources';
  • The report indicates 'low vulnerability' to REACH compliance for large chemicals suppliers as far as availability of substances and raw materials are concerned. However, vulnerability was found for the two SMEs tested.


Commenting on the meeting of the high-level group, Enterprise commissioners Verheugen and Environment Commissioner Dimas explained in unison that there had been a very constructive debate in the group. They also highlighted that the KPMG study did not add much to the debate as it confirmed most of the conclusions of the extended impact assessment undertaken by the Commission itself. Mr. Verheugen stated that there was 'light at the end of the tunnel' for this debate. However, he also explictly said that 'REACH will not ruin the European chemicals industry' and that the 'financial' battle (the debate about the costs) is over.

At a press conference, business federations UNICE and CEFIC stressed that the study was not 'intended to quantify direct or indirect costs from a macro-economic perspective'. It had to examine the 'mechanisms of business decisions... throughout the value chain'; Klaus Mittelbach of the German BDI commented that on the issue of costs, the findings of the new report are 'comparable' to the Arthur D. Little impact assessment carried out for industry in 2003;

The business representatives said that they accepted all the conclusions of the KPMG study and underlined the following issues:

  • suppliers will try to maintain their portfolio but at a cost 'which can account for up to 20% of annual turnover' (the report itself mentions costs between 6 to 20% in one specific case);
  • contrary to the KPMG report, industry thinks it is unlikely that suppliers will be able to pass on the costs to the next level of the value chain; this will therefore lead to higher costs and infringes on the industry's competitiveness;
  • because suppliers will concentrate on the maintainance of their portfolios, there will be less room for innovation than the Commission expects;
  • confidentiality of information, especially when forming consortia for registration, remains a serious issue.

The industry suggests several improvements with, as the most important one, a pre-registration phase with prioritisation of the most dangerous substances. Although still criticising the 'biased methodology' of the KPMG study, green NGOs EEB and WWF concluded that the report contradicts the worst case scenarios of the industry and is in line with the Commission's own impact assessment.

Furthermore, the NGOs:

  • stressed the importance of mandatory data sharing (OSOR), which can reduce the costs, especially for SMEs;
  • underlined the fast that the report also highlights the benefits that the interviewed companies see, such as better information and risk management;
  • pointed to the fact that the report clearly mentions that delocalisation because of REACH is 'unlikely'.

Latest & next steps:

  • The Luxembourg Presidency will organise a seminar on the issue on 11 May 2005;
  • The Council will probably have a discussion on this latest impact assessment in June;
  • Commissioner Verheugen said that he expects the first reading of the Parliament and common position of the Council by the end of 2005, with a final decision in the first three months of 2006.

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