Cerium, gallium, germanium, indium, lanthanum, yttrium: these speciality metals sound exotic, but they are in fact core ingredients to produce components for what we would now consider to be everyday objects - energy saving lamps, solar cells, mobile phones, flat screen televisions, computers and other technically sophisticated products.

Indeed, as advance manufacturing has expanded so has the basket of metals and minerals upon which it depends. These are available in sufficient quantities around the world. But increasing demand, the unequal distribution of these natural resources and the decreasing quality of these resources threaten stability of supply.

Governments of high-tech manufacturing nations, such as Germany, are increasingly looking for a sustainable concept to supply its industry with these economically important strategic resources.

So it was fitting that on a cold and snowy morning that I found myself in the mining town of Freiberg, close to Czech border. Until 1969, the town was dominated for around 800 years by the mining and smelting industries. In recent decades it has restructured into a high technology site in the fields of semiconductor manufacture and solar technology, part of Silicon Saxony.I was part of a delegation to visit one of the central planks of Germany’s strategic response to material security – the establishment of the Helmholtz Institute Freiberg for Resource Technology, one of the suite of actions the Germany government committed to in its 2010 raw material strategy.

Its objective is to find new ways to secure a stable supply of high tech metals against a backdrop of the challenging situation of raw materials supply. It is researching new ways to use global deposits better and access deposits more sustainably; assessing domestic geopotential and understanding how marine reserves may be mined in an environmentally sound way. It is also considering how to cost-effectively harvest these metals in the detritus around us - the tailing dams of old mines, in scrapyards and industrial wastes – despite their low concentrations and being finely dispersed.

The technical facilities and laboratories at the Institute are impressive: it has at its fingertips the entire range of methods and technologies needed for processing and metallurgical treatments both at lab and pilot plant scale. Field emission electron microprobe and a mineral liberation analyser enable academics to detect even minute levels of critical materials in samples. New novel bioleaching technologies promise to break new ground in raw material recovery. Further research effort is directed at exploring new approaches to improve the resilience and efficiency of existing materials. Furthermore, it is hungry for international collaboration, with European governments and industry based outside of Germany.

It’s just as well that UK industry might have an opportunity to draw from the expertise being developed in Germany. This is an academic field that had until recently become distinctly unfashionable. There is certainly nothing comparable in the UK.

As well as leading in efforts to ensure material security, Germany is also ahead in the support it offers to industry to use materials as efficiently as possible - what we would call resource efficiency and resource husbandry:

·         The German Mineral Resource Agency is tasked to support German industry, particularly (but not exclusively) those involved in mining or mineral processing, with intelligence of commodity markets, including demand forecasting, assessing global availability of materials and their mining potential.

·         A National Resource Efficiency Network intends to pool, bundle and share know-how and experience within the economy, within science and within politics in respect to resource efficiency through production, products and management.

·         A German Material Efficiency Agency “Deutsche Materialeffizienzagentur” was founded to promote resource efficiency amongst the public and in industry. It works directly with SMEs, develops knowledge networks and runs a German Material Efficiency Prize to encourage innovation.

·         A Centre for Resource Efficiency aims to reduce resource consumption in German industries by promoting an integrated use of technologies, to minimise environmental impacts and preserve natural resources. This is done mainly through case studies and best-practice databases.

·         Finally, a German Resource Efficiency Programme (ProgRess) aims to decouple growth from resource use, reduce the environmental impacts of resource use and improve the sustainability and competitiveness of German Industry by considering the whole value chain – raw materials supply, production and product design, consumption and closed cycle management.

We’re not suggesting that the UK replicates this complicated ecosystem of Agencies, Centres and Institutes but it does help to underline that our calls for a strengthening of the Government's Resource Security Action Plan is not only desirable, but potentially critical to the future health of manufacturing in the UK.

We heard last week that REACH was the most burdensome legislation for SMEs to manage.  What could the Commission do to help SMEs? Here are our top 5 recommendations:

·     Establish a mechanism to monitor the authorisation process.

A stakeholder group, similar to the Commissions Director’s Contact Group (set up to feed industry experience on registration straight to the Commission), should be established to feed in on-the-ground experience with for example the authorisation process into the Commission in a timely and systematic way. This should be combined with external reviews by consultants appointed by the Commission to provide credible, third-party assessment.

·     Set out how authorisation applications will be judged.
For SMEs using SVHCs in maybe niche (but promising) applications then the case for authorisation may not be clear cut. To help smaller companies understand whether they, or their supply chain, has a case for authorisation there should be stronger guidance on what would be a credible case for authorisation so smaller companies are in a better position to assess whether they should cut their losses and move on to other things without wasting time and money to develop an application which is doomed from the outset.

·     Outline how the competitiveness impacts of REACH will be monitored.

      This was announced in the REACH review but we are not sure yet what this actually means in practice. From our point of view this must entail a monitoring of REACH (authorisation, restriction etc.) as well as impacts on innovation activity, raw material costs and inward investment.

·     Outline a clear delivery plan for developing SME-friendly guidance.
We’ve been promised SME-friendly guidance but when, and how. We need to see the Commission and the European Chemical’s Agency spell out how it intends to roll this out and – importantly – how it will engage with SMEs to ensure it delivers to brief. We need guidance that genuinely meets the needs of SMEs, not scaled down versions of existing guidance.

·     Develop a methodology for implementing the Risk Management Options process.
It’s an approach that promises a more risk-based approach to REACH, but if the methodology is unclear how can you expect less experienced Member States to adopt it?

Last week it was revealed that REACH, the EU’s flagship chemicals Regulation, topped the list of the most burdensome legislative acts for SMEs.

The findings underline concerns raised by EEF is the past. We are genuinely worried about SMEs capacity to manage REACH effectively.

Our recent survey of members suggested the SMEs find it difficult to even monitor what’s going on.  As it is a piece of legislation which is still in the early stages of implementing its evaluation, authorisation and restriction elements, it is vital that companies assess which chemicals they are reliant on for their business to function and monitor REACH as new chemicals are brought into regulatory control.

You’ll find few in industry who’ll disagree with the aims of REACH: better protection of human health and the environment. We just want to see it work better.

That’s why - along with some of the proposals outlined by the Commission in the REACH review to help ease the burden on SMEs - we are genuinely excited by the Roadmap on Substances of Very High Concern (SVHCs), published by the Commission early February, just days after the REACH Review itself.

The Roadmap outlines how the Commission intends to manage the regulation of potential SVHCs between now and 2020. It has been published, in part, to help ECHA and Member States plan and to inject some predictability in REACH. However there is a distinct gap in the roadmap for where Industry has a role to play.

The roadmap signals the intention to get known SVHCs onto the Candidate List by 2020. New SVHC will also likely be identified through the evaluation of registration dossiers.

But significantly, it signals to the world a shift in approach: the Commission and Member States will to promote and employ a “risk management options” (RMO) approach. It should mean that Member States will be forced to consider the most appropriate form of regulatory intervention to manage risks posed by a particular substance, either using the regulatory tools provided by REACH (authorisation, restriction) or those outside of REACH (i.e. Water Framework Directive, worker exposure limits).

To us in the UK who have become familiar with risk-based regulation – targeting regulation where there are genuine risks – this probably doesn’t seem at all novel. However, under REACH this has the potential to strip out a significant source of unnecessary burden by targeting action to where it is genuinely needed.

This is particularly important when dealing with chemicals with significant socio-economic benefits despite their relative risks. When used under tightly controlled conditions, there are some really compelling examples of substances on the Candidate List which can enhance product safety and durability with significant resource efficiency benefits – reduced waste, reduced emissions and with associated reduced upstream and downstream environmental impacts. These arguments are particularly strong when there is little or no chance of the general public getting anywhere near these substances. Therefore there is a need to balance the legislative driver of REACH, safer handling of dangerous chemicals, with other desirable policy outcomes notably resource and energy efficiency.

To some Member States this may be quite a different way of working to what they are used to. So it is welcome news to see that the Commission has established RiME, a cross member state joint meeting of risk management experts to discuss technical and scientific issues and to enhance cooperation on screening and RMO assessment. It is also a welcome step forward to see that the Commission intends to disclose which substances will be assessed in any given year.

This doesn’t mean that substances won’t be subject to authorisation in future – the process where use of a substance is only permitted if authorisation is granted by the European Commission. But it should mean that the decision to prioritise a substance for authorisation has been routinely considered alongside other regulatory choices.

This is still a voluntary process. The RMO process has no legal basis and therefore it isn’t mandatory for member states to follow this process. That said, the Commission does has a mid-term objective of assessing 80 substances to the RMO process by the end of 2014 – so there will be a degree of political pressure to adopt this approach.

Of course the RMO brings up its own set of complications. It will be important that the RMO process is applied with the same degree of vigour across all Member States. Likewise, it is difficult to see how this process can operate effectively if consultation of stakeholders isn’t carried out. Consultation is left just to member state discretion. Best practice in RMO analysis should also be promoted and shared across the member states so learning and an informal standard is achieved that’s meets the needs of the SVHC Roadmap and Industry.

But if this approach is undertaken in a sensible and systematic way it could be a far more effective and, at the same time, a less burdensome piece of legislation for industry to manage.

It emerged today that a planned major review assessing issues around resource security and climate change failed to engage the Treasury – despite strong cross governmental support from BIS, DECC, Defra, the Foreign Office and Dfid.

Indeed, Treasury officials appear to have quashed the project citing a lack of resources and said any review presenting long-term, global analysis and UK policy and strategy growth would be too “speculative” for an independent review to get into.

Putting Treasury’s staffing issues aside, is Treasury right to consider any assessment to be too speculative in nature to be worth doing? Well for one, it would be just a review. Presumably if an independent expert was to conduct it isn’t it for them to determine whether that link is too speculative or not? Personally, I’m struggling to understand why we would not want a solid evidence base on which to base decisions – even if that decision ultimately is a “do nothing for now” recommendation.

The story has emerged following a Freedom of Information request made by Friends of the Earth which was reported today in the Financial Times.  We can be pretty certain about what was going to be explored as a draft terms of reference was included in the disclosed emails. It would have assessed:

·         The extent to which expected social, economic and demographic trends could result in changes to the global availability of resources, with specific consideration given to the implications of the economic convergence of emerging economies and the potential advances in the supply of resources.

·         To identify and present the macroeconomic consequences for the UK that could result from the risks identified above including the UK's potential for sustainable growth, its terms of trade, exposure to commodity price shocks and the security of resource supply

·         To investigate the global scope for improved resource efficiency and the linkages between increased resource efficiency and progress towards a low carbon economy acknowledging complementaries and trade-offs between the two outcomes

·         To identify the constraints that changes in resource availability may have on sectoral growth and also the opportunities for growth arising from resource efficiency and low carbon innovation (inc. which sectors have a competitive advantage, the barriers restricting take-up of growth opportunities and preventing sectors from overcoming constraints resulting from resource accessibility, the role of government in overcoming these barriers and the practical solutions for removing constraints and exploiting opportunities cost-effectively.

A chain of emails reveal that DECC’s chief economist had been gathering cross-governmental support. Successfully too. The disclosure shows that the proposal generated interest and good discussions. It also reveals that William Hague has a personal interest in the subject. DECC’s Economic Advisory Group, which includes academics Nick Stern, Dieter Helm and Cameron Hepburn as well as McKinsey's Jeremy Oppenhiem and Julian Allwood were also consulted . The topics and analysis “resonated well and provoked good discussion” – signalling wider support for the Review.

And there would be business support for a review. Far from the impacts being potentially speculative, we believe we are starting to see impacts already. As society explores more sustainable ways to produce energy, driven in part because of our climate change strategies, demand for biomass-based materials is already beginning to increase and is forecast to rocket. This diversion of material to energy production has implications for those industries currently using it in products, be it packaging, paper, chipboard or furniture. This is just one example of some of the trade-offs that are starting to emerge.

There is another important argument for doing this work. Our survey data is now consistently showing that access to materials features highly as a potential risk to growth (2013, 2012). This trend is mirrored in other surveys – the Global Agenda Survey, run by the World Economic Forum Network of Global Agenda Councils in preparation to this year’s Davos summit, asks businesses about the most important global trends likely to impact on the world’s economy, society and environment in the next 12-18 months. Business respondents ranked resource scarcity fourth, up from seventh in 2011. Interestingly it topped its “controversially” index – the issues that were most underestimated and most overestimated. It scored highly for both lists.

To me this underlines why a proper independent review is so desperately needed.

Furthermore, a major review would signal to businesses that their future success matters to the UK and that the government is committed to supporting a healthy, vibrant manufacturing base in the long-term.

Much has been made of the UK’s position as the sixth largest producer and provider of low-carbon goods and services in the world. But there are signs that the UK is faltering. Manufacturing, which accounts for the largest slice of activity in the sector, actually contracted in 2010/11 – by one percentage point on the previous year. While the UK stagnates, China, the States and others are experiencing rapid growth in this sector.

Yet there remains a real opportunity for UK plc. Real opportunities for UK manufacturers. We are especially well positioned to proper in sectors relating to energy technology where the opportunity could be as much as £189.5-877.5bn by 2050.  In our latest report, Tech for Growth: delivering green growth through technology we outline the steps we think government must take to realise the potential of low-carbon manufacturing and unlock investments in breakthrough technologies to help manufacturers decarbonise.

Here’s our seven-point plan for driving growth in the low-carbon economy:

1. Establish a clear vision for manufacturing in a low-carbon economy.
   In the recent past, the language of government had often been disparaging about the role of certain manufacturing sectors in a low-carbon economy. This has undermined confidence in investing and has manifested itself in a confusing regulatory environment.  While the language of government has changed, the climate change regulatory environment has not. Government must outline a clear vision of the role of manufacturers in achieving its climate goals and this in turn should drive a coherent set of policies.
2. Fulfil our innovation potential.
   There are elements of our innovation landscape that is strong but we still struggle to develop and commercialise innovative ideas. The system could benefit from more aggressive funding at this stage of the innovation process. Furthermore, compared to our competitors, we are spending less of our R&D budgets on energy and environment. This gap needs to close. We also want to see clearer signposting of who is leading on what in low-carbon innovation and clear communication from government confirming where we, as a country, will focus our innovation effort on. We don’t have the resources to concentrate on everything, so let’s set out the portfolio of technologies which offers the most opportunity.
3. Address our eroding skills base.
   To innovate we need access to highly skilled workers. Half of all our members are expecting demand for staff with R&D skills to increase. Yet our sector is on the brink of a skills crisis with the sector experiencing real difficulties in recruiting skilled workers. We have long called for a demand-led approach to skills. We want to see more young people taking up higher-level apprenticeships.  We also want better career guidance. We know lots of young people are motivated by the environment. Do they really appreciate the key role that manufacturers play in delivering green growth?
4. Reduce regulatory complexity; establish stability.
   Interviews with our members reveal how the complex interaction of incentives, feed-in-tariffs, regulation and carbon pricing makes it incredibly complex and time consuming to calculate a compelling business case for investing in low-carbon technology. We need to make it as easy as possible for people and businesses to see the benefits of investment. Furthermore, instability in this policy area is also undermining confidence in investing. Government needs to strike a delicate balance between policy credibility, longevity and recognise that constant changes effects investments.
5. Bridge the finance gap.
   As with many sectors of society, many manufacturers are currently facing financial constraints and challenges. In the climate change area these are even more pronounced. Most manufacturers have already implemented technologies that deliver paybacks within the normal investment horizons. The low-hanging fruit has been plucked. Yet with continued expectations to continue to cut emissions, we now face having to make bigger investments on increasingly slimmer returns. This is likely to get increasingly acute as carbon budgets tighten.  We had hoped the Green Investment Bank may have been able to help manufacturers bridge this gap by unlocking investments in a new suite of technologies that payback beyond typical business investment horizons. But we are concerned it won’t address this market failure. We also need a proper review of the Capital Allowance system, including Enhanced Capital Allowances, to ensure it matches the economic reality of investment in modern machinery and is properly targeted. At the moment, we doubt it is working to its full potential.
6. Make electricity competitive.
   EEF has long argued that the cost of decarbonising our energy system must be central when designing our energy policy for the future. We have argued that without doing this we risk making the UK uncompetitive, put certain manufacturing sectors at risk and furthermore, risk isolating the public in activity to decarbonise. There is a further strand of concern. The government’s Carbon Plan anticipates that during the 2020s manufacturers will electrify more and more of their processes, in turn cutting emissions relating to the sector. This simply won’t happen unless electricity costs are competitive with alternative fuels. Again, we renew our calls to place affordability centre stage in energy deliberations.
7. Address our hard-to-treat sectors.
   Some manufacturing sectors are facing unique technical challenges in their efforts to decarbonise. This particularly affects those sectors which emit greenhouse gases as a result of their processes rather than their energy use. These sectors require very specific technological breakthrough solutions. The market won’t deliver this innovation because of the lack of scale and, in some cases, the high-capital costs involved. So far we have largely side-stepped how we deal with these “hard-to-treat” sectors. But this is clearly increasingly untenable. We need to understand what is expected of these sectors in the long-term and have a clear plan on how to address the challenges these sectors present. Clearly the UK , many cases, doesn’t have sufficient scale to justify intervention, so we need international collaboration. Let’s signpost much more clearly funding opportunities in the EU and make those funds more accessible for these sectors to explore technological, low-carbon alternatives. For trade-exposed, energy intensive sectors the EU emissions trading system will not deliver the decarbonisation that policy makers are looking for and an alternative model must be found. We need fresh thinking and we are committed to working with government to help explore credible alternatives.

After months of delay and procrastination, yesterday the European Commission published its long-awaited 5-year review of REACH, the EU’s flagship Regulation on the registration, evaluation and authorisation of chemicals.

We’ve been concerned about REACH for a while. There are some significant business risks associated with REACH and we’ve been trying to get the message out to our members that this is something they need to be monitoring closely. We are starting to see companies getting caught out because they have not been planning for the changes that REACH is ushering in. And when companies get caught out they could see certain business activities being stopped or run into serious operational issues. Monitoring and planning can minimise risks.  Read my earlier blog to find out more about the potential implications for manufacturers.

As well as manufacturers being more proactive, we have been arguing that there are things the Commission could do to minimise risks and improve the efficiency and functioning of REACH, from a downstream user’s perspective. We’ve been working hard over the last year to raise these issues with government and the Commission. So to what extent have our concerns been acted on?

In line with expectations, the Commission has shied away from recommending or proposing any changes to the text itself and instead has outlined a range of non-legislative measures to support more effective implementation. You can read the full review here - a short general report and a longer, more detailed staff working document. But here’s our quick stock-take of key issues for manufacturers

Positives

Issue: SMEs
EEF position: the cost and complexity of REACH presents unique challenges for SMEs. We need better targeted guidance, reduced costs and better support for our smaller companies.
Commission response: this proved to be one of the areas the Commission has acted most decisively with commitments to improve guidance, reduce costs and monitor potential impacts.

Issue: awareness of REACH amongst professional and commercial users of chemicals
EEF position: downstream users have poor awareness that REACH applies to them. EEF surveys have shown 20% of manufacturers think it didn’t apply to them and a further 30% said it wasn’t a significant issue for their business.
Commission response: the Commission recognised that awareness is low, particularly amongst SMEs and has made a commitment to do more to raise awareness of REACH.

Issue: guidance
EEF position: we need better guidance on cost-sharing within industry consortia and clearer guidance on the use of business sensitive information within REACH.
Commission response: the Commission has agreed and has asked the European Chemicals Agency to bridge this gap.

Issue: poor quality extended Safety Data Sheets
EEF position: the quality of eSDS needs to be urgently improved
Commission response: the Commission has outlined a number of recommendations to ECHA to improve eSDS clarity and consistency.

Negatives

Issue: authorisation
EEF position: there are significant risks faced by manufacturers as a result of the authorisation process. We need greater clarity of what is expected by applicants including transparency over the criteria that will be used to judge authorisation applications.
Commission response:  the Commission has not really addressed this, partly because in its view it is too early to judge the authorisation process. It made only a commitment to “facilitate the understanding of the authorisation process amongst all actors, including downstream users.”

Issue: impact on competitiveness and innovation
EEF position:  we have called on the Commission to properly consider the impact of REACH on the competitiveness of professional and commercial users of chemicals, inward investment and on innovation activity.
Commission response: focus of analysis predominately on the chemicals industry. However there is a commitment to monitor the situation for downstream users in future.

Issue: treatment of nanomaterials
EEF position: we want clarity on how nanomaterials are to be treated under REACH
Commission response: some REACH annexes will be amended – but we don’t know which and to what end.

In conclusion, there has been some progress by the Commission to make REACH more workable. But there remain some enormous challenges. We will have to closely monitor the situation with our members and relay the experience from the ground back to policy makers and regulators. We will need to ensure that guidance is fit for purpose and meets the needs of the business community and we need to carefully ensure that our competitiveness, and our ability to innovation, isn’t being detrimentally eroded.

If you are not monitoring REACH you could make a good start by signing up to our free substance alert service. You may even consider REACH training or a compliance audit by one of our consultants.

What would happen to your business if a chemical in your production process suddenly disappears?  Or a chemical in your product that makes it work the way it does is withdrawn from the market?  Maybe the first response would be blind panic or heated discussions into the night with your engineers about possible alternatives. I think we can assume the last response would be calls to your customers say that, sorry, you are not able to fulfil their orders or that the products they receive won’t be exactly as they had originally expected.

Unfortunately this scenario is not entirely unforeseeable. We’ve been blogging and writing about REACH, the EU’s chemical regulation, for quite some time. I’ll be frank: it doesn’t lend itself to good reading. It is long, technical and complex (so I’ll forgive you for not taking the trouble to read some of our previous blogs).

We’ve been concerned that the very nature of the legislation, and the fact that many of the early implementation deadlines were directed at the chemical industry, meant that wider businesses, particularly manufacturing, had switched off. In short, we were concerned that many manufacturers simply did not think it was an issue for them.

To test this hypothesis we commissioned a short survey in 2012 to assess awareness amongst our members and delve a little deeper into the activities that REACH was prompting. Our results confirm our worst fears. The survey shows 20% of companies still believe REACH is not applicable to them while a further 30% say it isn’t important to their business. The figures rises for the smallest companies with just under a third of companies with turnover below £2m per annum unaware of how they will be affected.

Why is this important? Well, REACH is a rapidly changing area with a number of direct legal obligations falling on manufacturers . Potentially it could affect any manufacturer. And at least once a year new substances will be targeted for bans so it’s a moving beast. We believe it is important that all of our members monitor developments so that they can plan for future changes by searching for substitutes, changing production processes or if there are simply no immediate alternatives, by readying  to apply for permission for continued use. While in some cases there may be easily available alternatives, in others, searching for substitutes will be a more involved process. Companies may need to purposely target innovation effort and work closely with their supply chain to make this work.

Furthermore, substances could disappear from the market as a result of a separate process under REACH – registration. This year marks the second major deadline for registration. On the 1 June 2013, companies that place substances on the market in quantities between 1,000 and 100 tonnes a year are required to register them. The registration dossiers assess the potential impacts of those substances on human health and the environment and sets out risk management measures to enable their safe use. Preparing this dossier can be expensive and in some cases companies may decide not to register a substance and, instead, withdraw it from the market (this may be particularly true for speciality chemical produced in low volumes). Critically, if a substance isn't registered you can not use it within the EU. In a recent survey for the European Commission , 37% of firms said they had experienced a withdrawal of a substance as a result of the first round of registrations in 2010. Around 30% were expecting it to happen again. I’m surprised it’s not more.

Armed with the right information, however, it is clear that manufacturers are responding to REACH in the way the regulators had intended. Our survey confirms that once companies are aware of REACH, they are reacting:

• 80% of large companies that are aware are considering substituting substances or have already done so. Only marginally less small and medium sized companies are doing the same.
• Of those that were aware, half were changing work practices and redesigning processes, regardless of business size.
• One in five companies said managing chemicals is a key business priority

There does remain an issue for small companies, however. Even when aware, half are not monitoring developments. This compares to 72% of large companies and 83% of medium sized who are monitoring REACH closely. This is despite concern about substance bans being most acutely felt by our smallest companies.

What does this mean? Well, we need to make REACH easy to comply with. We might not be able to make the detail more interesting but we can better communicate the changes that are occurring. This must include clearer explanations of the potential impact of these changes. And we need stronger guidance from European regulators and legislators which is easy to understand and follow.

Importantly, we all have a role to ensure that the manufacturing community has a grasp that this is an issue for us all. If you are not monitoring REACH you could make a good start by signing up to our free Substance Alert Service. You may even consider REACH training or an audit by one of our consultants.

What will a material constrained future look like? And what does this mean for manufacturing? As we have previously reported accessing and securing raw materials has risen quickly up the manufacturing agenda. Earlier this year we surveyed executives to find out what they perceived as the biggest threats to growth. The Eurozone crisis? Access to finance?

Accessing the right skills? Perhaps surprisingly 80% of respondents said access to raw materials was a risk to growth. One in three said it was their top risk.

Material prices have since stabilised and in some cases dropped. But for how long? With rapid development in emerging economies, three billion people are expected to join the ranks of the world’s middle class within the next 20 years. I’m not a gambling woman but I’m willing to bet that this is going to put significant upward pressure on material prices in future. The government’s Resource Security Action Plan, published in March, attempts to address some of these concerns. But we don’t think it goes far enough. We were not alone in this thinking.

Since March we have been speaking to NGOs, business groups and professional institutes - including the Aerospace, Defence and Security Association, Friends of the Earth, the Confederation of Paper Industries, the British Plastics Federation, the Packaging Federation, British Glass, the Institute of Environmental Management and Assessment, the Resource Association, UK Steel, the Metal Packaging Manufacturers Association, the North East Sustainable Resource Board and the University of Cambridge's Professor Steve Evans (Institute of Manufacturing) - to find out what they thought.

What we have found is widespread concern about the environmental degradation associated with our material consumption, concern about future access to the materials that a vibrant manufacturing base will require and a healthy willingness to examine where we can go from here. We all agree the Action Plan needs to be bolder, wider and more visionary.

Together we have written to government calling for greater leadership and a more ambitious, informed vision for a resource efficient economy. We believe this is not only vital from an environmental perspective, but also vital to ensure the integrity of future UK manufacturing. Without a wider Action Plan which has greater ambition we are concerned that it leaves our economy open to significant, future resource shocks.

Among our initial policy proposals we ask government to establish an Office for Resource Management to coordinate activity across Whitehall departments. To educate and engage the entire supply chain and those that influence it – including politicians, designers, producers, retailers and consumers. To extend the scope of the Plan to cover a wider range of materials. Commit to gathering and utilising better data on material and waste flows in our economy.

Realign material targets to focus on quality as well as quantity. Consider restricting key materials from energy-from-waste plants as well as landfill. Help deliver a level playing field for UK manufacturers and domestic reprocessors of waste by reviewing the PRN/PERN system. Finally we want government to explore resource efficiency incentives and review producer responsibility regimes.

This is really just the beginning of our thinking in this area. We are committed to working with government and others to test, examine and develop these ideas whilst considering whether more needs to be done. Expect more debate. More ideas. Not least around the concept of a circular economy. A McKinsey infographic neatly explains the concept if you aren’t familiar with it. EEF research suggests that these business models can add healthy profits and shield companies from resource shocks. Watch this space for more on this soon.

Lots of anger reported today at the government’s delay at arriving at a decision on mandatory greenhouse gas reporting. Industry is reported as “blasting” the government for the “unacceptable” delays. At EEF, however, we are very pleased that the government has taken the bold moving of not rushing the decision.

Just to recap. You may recall that under the Climate Change Act the Secretary of State must make regulations to mandate greenhouse gas reporting or lay before Parliament a report explaining why such regulations have not been made. Defra opted for the latter. The report, presented to Parliament yesterday, says that Defra is still considering the analysis of responses to last year’s public consultation. It adds that evidence gathering has taken a lot longer than anticipated. No timeframe for a decision to be made was put forward.

We hope this means that the government is minded to take a more strategic approach. Particularly given the announcement in last week’s budget that CRC might not be around for much longer.  Climate change policies do not work in isolation (something our members know too often, many are subject to three different regimes – CRC, Climate Change Agreements and the EU ETS). We have been campaigning hard for the government to take a step back and take a more strategic view of the policy landscape. Our call for one carbon reduction scheme for manufacturers was set out in last year’s Green and Growth report.

While we believe that greenhouse gas reporting can play a role to play in enabling companies to identify, manage and reduce their emissions. However set against the existing complex policy framework it has the potential for creating a compliance headache for manufacturers which does little to help us meet our climate goals.

The government now needs to look at the potential for greenhouse gas reporting as part of a wider review of existing policies and schemes – which must also consider whether the CRC has a future role to play.

Defra’s Resource Security Action Plan, published last week, comes as the issue of accessing and securing raw materials rises quickly up the manufacturing agenda. Earlier this year we surveyed executives to find out what they perceived as the biggest threats to growth. The Eurozone crisis? Access to finance? Accessing the right skills? Perhaps surprisingly 80% of respondents said access to raw materials was a risk to growth. One in three said it was their top risk.

Why? Well there are probably a number of reasons for this emerging as a critical risk. For one, the chemical’s legislation REACH means that supply (and use of) certain chemicals which are deemed to be “of high concern” is uncertain. In addition, 2013 sees the next tranche of registrations of chemicals. This time chemical manufacturers are required to register dossiers for all chemicals placed on the market between 10 and 1000 tonnes. For some the costs of pulling together the dossier might outweigh its market value. We certainly saw some substances being withdrawn from the market during the previous registration round. There’s a good chance we will see the same again in 2013.

There is also increasing competition and demand for certain materials. A lot of attention has been paid to rare earths whose supply is risky due as worldwide production is concentrated in a few countries, demand is expected to grow rapidly, they are not widely recovered nor are they easy to substitute. The US Department of Energy said in its latest critical materials strategy that a number of rare earth materials were heading for critical levels in short-term supply and predicted there could be problems in the supply chain imminently. Many of these materials will play a crucial role in the very type of manufacturing the government is keen on growing – high value manufacturing as well as low carbon and green technology.

But supply risks are not just limited to rare earths. Material price fluctuations in part reflect growing demand from the emerging markets. A recent analysis by FTSE350 profit warnings in 2011 found nearly a third was attributed to rising resource prices. Rising demand is creating other impacts. I heard of one manufacturer whose supply of titanium oxide, a substance which is used as a white pigment in plastics, stopped completely as everything was now being sent to China. Equally, manufacturers are growing wary of having to source raw material from the Far East. One member highlighted how it was sourcing recovered plastics from China as it could not find the quality it needed in the UK. Relying on this supply was making the company nervous.

So it was welcome news to hear that the Defra was developing a Resource Security Action Plan. Certainly it is something our international competitors are taking extremely seriously. Japan is treating recycling as a key strategy for bridging the gap between demand for rare earths and their supply and has earmarked Y42 billion (roughly $550 million) for the development of rare earth recycling. It has also earmarked $65m to help manufacturers reduce their reliance and consumption of these materials. This month, Germany has forged a rare earth and technology swap with Kazakhstan – a strategic partnership worth some €3 billion. It has already signed a similar deal with Mongolia. In the US, some $31.6m has been invested into 14 research projects to study ways to reduce or eliminate use of rare earth elements. At least a dozen bills have been introduced into Congress supporting the development of a domestic rare-earth industry. China, meanwhile, which holds most of the world’s operational rare earth mines, has been taking steps to limit exports and enhancing domestic consumption.

It is against the responses by our international competitors that it is best to view the outcome of the government’s action plan. The new actions which the government has committed to include:

-          An innovation challenge to fund closed loop economy projects in the next financial year. To be coordinated between the Technology Strategy Board through the Small Business Research Initiative.

-          Government will explore the feasibility of applying the principle of Individual Producer Responsibility to waste electronic and electrical equipment (WEEE).

-          Government will look to expand on the data it collects on WEEE treatment and recycling

-          A new critical materials dashboard will be launched to better provide companies with the information they need to manage resource risks to their operations. This will be launched by January 2013.

-          Material flow analysis will be developed, looking initially at WEEE ‘hot spots’

-          WRAP will conduct demonstration trials of critical material recovery through WEEE treatment

-          A new industry consortium, convened by Green Alliance, will address resource opportunities and concerns, disseminate leadership thinking and provide a forum for policy innovation.

This is a reasonable first step. But there are some serious drawbacks. For one, the funding through the innovation challenge is just £200k. While some might think that we should be thankful for that in today’s economic climate it is worth noting, as one waste pundit highlighted this week, that Eric Pickles has been given £200 million to persuade local councils to return to weekly household waste collections. The amount dedicated to support industry is paltry compared to commitments in Japan and the US. The other is that it is seriously WEEE-focused. At the moment we collect and treat just 16% of small WEEE. We need to recycle many more of these products to get a critical amount of material to make more sophisticated recycling technologies to be viable.

We would like government to take a much broader view of resources. We need a resource strategy that looks to extract all the valuable, reusable materials contained in the products and materials we throw away and to minimise what we produce in the first instance. It needs to consider all the materials needed to create a healthy, vibrant manufacturing industry and consider how these materials flow through the economy. At the heart of these considerations must be resource security, resource quality and incentives to encourage more resource efficiency.