Why the socio-economic analysis within REACH isn’t “socio” at all
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Socio-economic analysis within REACH isn’t “socio” at all

The authorisation process, once put in place to make sure that REACH could accommodate specific exemptions, have become the back door for companies in order to continue their use of hazardous chemicals.

The fact that only a single authorisation has ever been denied during the twelve years of REACH is baffling. Especially since the aim of the chemicals policy is to phase out hazardous substances and replace them with safer alternatives.

How is it possible that all of these applications for authorisation are being granted?

Today, ChemSec publishes a report on one of the reasons for this counterproductivity, namely how the socio-economic analyses (SEAs) are performed within this legal framework.

Lost at SEA*

Read the full report here. Or download it in PDF version here.

This is how it works. In the European Union, companies that wish to use hazardous chemicals, so-called Substances of Very High Concern (SVHCs), need to apply for an authorisation. These authorisations are meant to be granted only when it can be proven that the chemical is used safely, or when it can be argued that the pros outweigh the cons and when there are no alternatives available on the market.

As part of the application process, the company is tasked with providing a socio-economic analysis. But since the burden of proof lies on the company itself to provide this information, it makes for a very one-sided analysis.

“The applicant has never concluded that the risks outweigh the benefits”

The company needs to demonstrate that the societal benefits of continued use are greater than the risks, and according to the company applying for an authorisation, this is of course always the case.

In none of the hundreds of applications for authorisation has the applicant come to the opposite conclusion – that the risks of continued use outweigh the benefits. Which makes sense since all the time and money that they have spent on the application would otherwise be wasted.

In a way, the socio-economic analysis only make good on the latter half of its name – the economic part – but fails to relate to the part concerning what would be good for society as a whole. Soft values such as human health and protection of the environment do not fit into the equation and are mostly ignored.

Instead, what constitutes the lion share of the analyses are hard numbers – supply, demand, loss of profits, and so on.

“The methodology has obvious limitations since human health and the environment in general are priceless. This is why it’s important to be very clear about what has been included in the analysis and what has been left out”, says Frida Hök, Senior Policy Advisor at ChemSec.

The technique which is most often used to determine whether or not the pros outweigh the cons is the Cost-Benefit Analysis (CBA), which compares the costs of regulation with the benefits.

But for the technique to work, it needs to put a price on everything – including human life and the environment. Aside from this being ethically questionable, it is almost impossible to quantify such benefits.

Anything that can be sold is seen as a benefit and therefore important to society”

In the analyses, it all comes down to money. Anything that can be sold is seen as a benefit and therefore important to society. It does not matter if the product as such is important to society, what is important is that the sale of it gives economic value.

A clear example of this are shiny lipstick cases which, for decorative purposes, are often produced with the cancer-causing chemical chromium trioxide. The European Chemicals Agency (ECHA) concluded in their opinion that the operational conditions and risk management measures related to this chemical were not sufficient and estimated eleven cancer deaths per year due to exposure to the substance.

Nevertheless, the agency went on to recommend the continued use of it just so that society can continue to enjoy this decorative feature. This really begs the question of just how important it is that lipstick cases are shiny, and whether this really can be labelled as beneficial for society.

“The way that ECHA’s opinions are formed today doesn’t provide policymakers with accurate information regarding uncertainties and doesn’t give them all the relevant information to make well-founded decisions based on the precautionary principle”, Frida Hök comments.

Even zooming in on just the economic equation, the analyses are one-sided.

The applicants very seldom analyse the economic aspect in a wider sense than their own financial situation. Progressive market competitors that have already invested heavily in innovation and safe technology are left out of the equation. The socio-economic analyses often ignore or misrepresent the economic impacts that an authorisation would have on these businesses.

“A well-functioning market will innovate and adapt to regulation without major problems”

Alternative providers, innovators and progressive competitors might very well be positively impacted by a rejected authorisation. This is, however, always neglected in the socio-economic analyses.

“The market is also very often painted out to be static and unable to adapt to regulation. This is not true. A well-functioning market will innovate and adapt to regulation without any major problems, there is even evidence that regulation stimulates innovation”, says Frida Hök.

Another problem is the tendency to overestimate the costs of complying with the REACH legislation.

ECHA itself came to that conclusion after reviewing the first hundred applications. Benefits to society were found to be overestimated in 75 percent of the cases while the negative impacts an authorisation would imply for workers and the general public were found to be underestimated.

The review also observed what one could have guessed – that applications typically highlight aspects that would favour the granting of an authorisation and ignore or misrepresent aspects that would disfavour a granting.

It is clear that the socio-economic analysis, in its current form, does not paint the whole picture. And it is absolutely necessary for the EU Commission to see the whole picture when deciding on whether or not to grant an authorisation.

Otherwise, this procedure threatens to counteract the very aim of REACH, namely to move away from the use of hazardous chemicals and promote safer alternatives.

ChemSec report: Lost at SEA*

Read ChemSec’s full report on the challenges of the socio-economic analysis within REACH and what can be done to improve it here. Or download it in PDF version here.