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Sharing the Savings from P2

Ed & Terry,

FYI - The shared savings approach related to service-for-product
substitutions mentioned by Terry, which is so common in the auto industry,
is now being disseminated/implemented in the electronics manufacturing
industry by the Chemical Strategies Partnership
(http://www.chemical.strategies.org).  CSP is a non-profit initiative
supported by Pew Charitable Trusts, Heinz, and others.

The goal of CSP is to reduce the use of toxic chemicals in US manufacturing
firms.  The mechanism is to encourage manufacturing firms to purchase
chemical management services from suppliers, rather than purchasing
chemicals directly.  The supplier contracts have direct "shared savings"
incentives to encourage the supplier to help find process efficiency
improvements at the customer's facility.  In addition, some contracts have a
specific additional inventive for reducing the actual use of toxic chemicals
at the customer's facility.

Environmental accounting is used to estimate the baseline materials use and
reduction goals, as well as to estimate baseline chemical management costs
and set equitable financial incentives for the contract.  Once the contract
is in place, the supplier continues with the data collection on an ongoing
basis, to measure and report performance to the customer.

See the Raytheon case study on the CSP website - Raytheon now has a 5 year
contract with Radian based on this model.  Radian handles ALL chemical/gas
management at Raytheon, from purchasing all the way to disposal.  Radian
also does all data collection and information management on chemicals and
gases at Raytheon.  The contract terms provide a fixed management fee, plus
process efficiency incentives, plus a special bonus for toxics use

CSP has produced manual with guidance on all of this, which I believe is
available on the website.

If you want more details from someone who has worked with Raytheon and
others on the CSP model, feel free to contact my colleague, Tom Votta, for
more details.  tvotta@tellus.org

FYI - we are now expanding the CSP model with a couple of companies to cover
other solid materials and waste.  Tom can give you info on that also.

Happy Holidays!

Deborah E. Savage, Ph.D.
Senior Scientist
Tellus Institute
11 Arlington St.
Boston, MA  02116-3411
tel:  617-266-5400 xt 281
fax:  617-266-8303
email:  dsavage@tellus.org

-----Original Message-----
From: Terry Foecke [mailto:tfoecke@matprod.com]
Sent: Tuesday, December 19, 2000 11:00 AM
To: Weiler.Edward@epamail.epa.gov; p2tech@great-lakes.net
Subject: Re: Sharing the Savings from P2

This makes so much sense on the face of it that we set out 3 yrs ago to find
and talk to people who have tried it.  Most projects have stalled at the
"what to measure" stage.  A successful approach to narrowing that down are
the service-for-product substitutions like the coolant companies selling
successfully machined parts rather than gallons of machine tool coolant, or
painted cars rather than paint, but that is not really the same thing.  In
fact, the academic evidence is saying that those arrangements reduce costs
quite reliably, but may not reliably reduce quantities of materials used in
some cases.

We wrote up a short summary of gainsharing for P2 that I can share with
anyone who contacts me.  We have also tried to write two of these projects
up (one is still active) and discussed it endlessly with colleagues.  The
few good ones we have found that are systemic P2, not just product/process
substitution, are 1) based on complete trust, because pinning down variables
is so difficult; and 2) expensive in terms of attorneys' fees just getting
them down on paper.

--Terry Foecke
Managing Partner
Materials Productivity LLC
6701 Penn Avenue South, Suite 200
Richfield, MN  55423
(p) 612-243-3605
(f) 612-243-3608 

> From: Weiler.Edward@epamail.epa.gov
> Reply-To: Weiler.Edward@epamail.epa.gov
> Date: Tue, 19 Dec 2000 09:35:36 -0500
> To: p2tech@great-lakes.net
> Subject: Sharing the Savings from P2
> +Item in today's NY Times: Big accounting firms share in the savings
> generated by tax shelters they devise for their clients.
> + Item in todays Philadelphia Inquirer: Ex-Gov Florio (NJ) sets up a
> company designed to share  with local governments the savings it generates
> by carrying out various administrative functions more efficiently.
> .....and I'm aware of energy efficiency consultants who provide their
> services on a share-the-savings basis.  But does anyone know of similar
> arrangements for P2?
> Ed Weiler (USEPA)
> weiler.edward@epa.gov
> 202-260-2996