Colombian Leather Tannery Eco-efficiency.

University Degree Business and Administrative studies

Colombian Leather Tannery Eco-efficiency

Abstract

Curtigran Ltda is situated in the metropolitan district of Bogotá. Faced with increasing environmental legislation, waste water treatment problems, and decreasing productivity and product quality, the company saw eco-efficiency as a strategy which could ensure its survival.

Working in co-operation with the local San Benito Leather Tanners' Association (ASOCUR), the Association for Small and Medium Eco-efficient Enterprises in Latin America (PROPEL) conducted a comprehensive sectoral study before selecting Curtigran to participate in its pilot programme in 1994. A cost system was first implemented in Curtigran, and an environmental impact assessment was conducted. Then, clean and efficient technologies were developed in-company with the help of external consultants, expert tanners and a training programme. The company has since reduced its pollution by 50 per cent, improved the quality of its products, and increased its product yield.

Curtigran has become a local champion and its success will be used by PROPEL to promote eco-efficiency to tanners across Colombia. The eco-efficiency approach is now being applied in other industry sectors in Colombia.

Country Overview

Colombia is a developing country currently undergoing a rapid rate of industrialisation. The current unstable political situation in Colombia has had a negative impact on the economy; many investments have been put on hold until it stabilises. The most important sectors of the economy are manufacturing, agriculture and financial services, which respectively represent 22, 20 and 10 per cent of GDP. The chemical and food industries are the two most important manufacturing sectors. Small and medium-sized enterprises (SMEs) comprise 85 per cent of Colombian companies, and the number of SMEs is growing at an annual rate of 10 per cent. In order to improve competitiveness many large enterprises subcontract services and secondary processes to SMEs, which as result are becoming increasingly specialised. In recent years environmental policies have been developed on the national level. In general, large industry has adapted to the requirements of environmental policy and legislation, but small enterprises and the organisations which support them have not joined this trend.

Sector Overview

Leather tannery is the world's largest industry based on a by-product. There was a substantial relocation of leather production from industrialised to developing countries between the 1960s and 1980s. This also led to the relocation of the most highly-polluting part of the process away from OECD countries, under pressure of increasing costs of labour, effluent treatment installations and operations. Increasing levels of technology are used in leather processing. However, even in the most sophisticated tannery, technology remains to a certain extent a mixture of craft and science. The tannery industry in Colombia is renowned for excellence, as processes and skills have been handed down through the generations. In 1995 there were 573 tanneries in Colombia, the majority of these being SMEs. These tanneries differ in their production capacity and levels of technology.

In more recent years there has been a 40 per cent reduction in the tannery sector's turnover in Colombia. However, while there has been a reduction in the overall number of processed skins per year and in sectoral productivity, SME's turnover has increased from 57 per cent to 68 per cent of total turnover.

Table 1: Turnover of Colombian Tanneries in 1993

Source: Calculation from Fedesarrollo based on DANE 1991, 1992 and 1993, estimated by ANIF.

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Table 1: Turnover of Colombian Tanneries in 1993

Source: Calculation from Fedesarrollo based on DANE 1991, 1992 and 1993, estimated by ANIF.

The tanning industry is very polluting. Emissions are gaseous, liquid and solid, and not only degrade the environment but also have a negative impact on human health. Effluents are high in dissolved and suspended organic and inorganic solids, accompanied by propensities for high oxygen demand and contain potentially toxic metal salt residues. Disagreeable odour emanating from the decomposition of protein solids and the presence of hydrogen sulphide, ammonia and volatile organic compounds are normally associated with the tanning activities. The tannery industry is classified as a high impact sector. As a result, it has been particularly effected by the recent developments in the market, environmental legislation and regulations. The Colombian Environment Ministry, which is responsible for establishing effective and efficient environmental protection mechanisms, proceeded to close a number of environmentally notorious enterprises in 1995. Currently the Ministry is developing new rules of the game, which will be enforced in the coming years.

Company Description

Curtigran Ltda is a 13-employee tanner, one of the 238 tanners of the San Benito zone, situated south-west of Bogotá in a residential neighbourhood. The majority of the local inhabitants are employed by tanners in the San Benito area. Established in 1974, the family-owned company has capital of US$ 25,000.

Curtigran is one of the smaller tanners in the San Benito area with a monthly output of 2,000 hides. The tanners of San Benito concentrate on different areas of the tanning process. Curtigran's main activity is skin-tanning until the state of crust. The crusted hides are then supplied to other tanneries in the San Benito area, which finish the tanning process. Curtigran's customers are tanners in the San Benito area dealing with leather from the state of crust, and leather footwear producers. The company does not export, as it only has the capacity to serve the local market.

Driving Forces

Curtigran's implementation of the principle of eco-efficiency began in 1994. The company, as a tannery, is classified in a high environmental impact sector and was under pressure to comply with new environmental legislation. The local authorities were threatening to shut down tanneries which were not in compliance with the law. Companies which participated in clean technology programmes, however, were allowed five years to meet the new regulatory requirements, as opposed to the normal period of one year. Legislation in Colombia was also moving toward the taxation of polluting industries. The tanners of San Benito were unable to treat their waste end-of-pipe, as they did not have, even collectively, either the capital or the infrastructure necessary to install treatment facilities.

Curtigran was experiencing loss of competitiveness due to inefficiency. Raw materials were also being wasted through inefficient processing. Loss of markets meant that the company was operating at 60 per cent of total capacity, and thus had experienced a fall in profits. Curtigran was faced with a question of simply surviving. Production Manager JoséCasallas and the Curtigran team realised that the only way for their company to survive was to assess all areas of their operations and to substantially reduce pollution, and in so doing, to increase efficiency and profit levels. Curtigran, however, had neither the resources nor the expertise to undertake this survival strategy alone.

Curtigran joined the PROPEL eco-efficiency pilot project targeting the tannery sector in 1994. PROPEL, in close co-operation with ASOCUR, had conducted a comprehensive assessment of the tannery sector. Once the sectoral assessment was completed, PROPEL and ASOCUR selected 10 enterprises to participate in a pilot project.

Curtigran's main goals in participating in the PROPEL project were:

to minimise waste and effluents, in order to reduce operating costs and improve competitiveness;
to attain optimal use of raw materials, and reduce the amount of inputs ending up in the waste streams;
to obtain a five-year grace period for environmental compliance allowed to companies which participate in clean technology programmes, and;
to improve its image within the local community.

Problem Definition

The first step of the project involved an assessment of all areas of Curtigran's operations. The assessment was carried out by a PROPEL consultant and allowed the company to identify the main areas which needed to be improved. The problems were identified in the areas of production, merchandising and purchasing, finance and accounting. Examples of the ways in which these problems manifested themselves are:

delays on payments to suppliers, and in some cases, delays on payment of employee salaries until customers' payments are received;
late delivery of orders and a high level of product returns because of poor product quality, leading to loss of customers and business;
low productivity;
low employee morale, and;
waste of raw materials.

The cost system allowed PROPEL and Curtigran to identify the areas in which improvements most needed to be made in the overall management system. The sectoral assessment carried out at the beginning of the project had allowed PROPEL to define the main environmental problems of tanning activities.

Fig. 1: Environmental Impact of Curtigran's Operations

Implementation

The solutions developed with Curtigran and the other pilot enterprises in San Benito were based on awareness-creation and the provision of information that would lead to pollution prevention, as opposed to corrective, end-of-pipe solutions. Two main instruments were used to help Curtigran improve both its economic and environmental performance: a cost system and clean technology.

Firstly, a cost system was implemented. This cost system, developed by PROPEL, is a management tool which allowed Curtigran's managers to make quick decisions, with greater security, regarding the future operation of their business. It also enabled basic information to be handled in a simple way.

The second element of the eco-efficiency strategy, which allowed improvements to be made in the areas identified by the cost system, was the introduction of clean technologies in three areas of operations; dehairing, deliming, and pickling and tanning. Complete implementation, including the sectoral study and environmental impact assessment took 27 months.

Fig. 2: Implementation of Clean Technologies at Curtigran

PROPEL's support in terms of management know-how, technical expertise, training and financial investment was essential to Curtigran's introduction of eco-efficiency. PROPEL guided Curtigran step-by-step through the processes of problem identification and the implementation of solutions, and also provided resources to which the company otherwise would not have had access.

Curtigran faced several obstacles in implementing the programme:

lack of capital;
lack of trained personnel;
poor internal communication system;
as Curtigran is situated in a residential area it was difficult to make modifications in the company layout due to lack of space, and;
fear of change and difficulties in moving on from the traditional manufacturing processes.

Resources Invested

PROPEL provided 95 per cent of the total investment required for the tannery pilot project, which represents an amount of over US$ 150,000. The project investment was supported by the Swiss Development Corporation, the Business Council for Sustainable Development of Latin America, the Tinker Foundation and the FES Foundation, an American and a Colombian foundation, both of which work with SMEs. Curtigran provided its human resources, equipment, machinery, the main raw material and the hides. As Curtigran was a pilot case, PROPEL did not charge them for the implementation or the environmental impact measurements.

Partnerships

The involvement of employees in the changes underway in the company was essential to the success of the eco-efficiency strategy in Curtigran. The 13 employees were involved in all the cleaner production choices. Employees and managers, from Curtigran and the other pilot enterprises, participated in a training programme organised by PROPEL. ASOCUR co-operated with PROPEL by providing staffing and the infrastructure necessary to ensure the success of the training programme. The training covered the following areas:

improving team work between employees and supervisors;
development of management's leadership skills;
use of the cost system for the accountants and managers;
production and productivity;
administration and management models;
stock control, and;
cost management.

The training course was also carried out in co-operation with the Training Department of FUNDES Colombia. The trainers were engineers from PROPEL and external consultants specialised in cost systems, administration and production. Following the training programme, PROPEL developed a video for both promotional and training. The video is available in both Spanish and English.

Results

The pilot project tanners in San Benito reduced their overall operating costs by 11 per cent, and pollution by 50 per cent. Curtigran was one of the most successful of the pilot companies. It has reduced its environmental impact and improved its efficiency, productivity and product quality. Curtigran's monthly income has increased by US$ 2,000 per month. The latter is due to a better utilisation of raw materials with a greater yield of final product.

Table 2: Results of Clean Technology

Table 3: Overall Results of Eco-efficiency Programme

The Future

The next major step for Curtigran and the San Benito tanners is to finance and install a waste treatment plant. ASOCUR and the sector's co-operative have combined efforts to convince the community of the need for a collective treatment plant. The San Benito Ecological Association (COESA), which was established in 1995, is presently trying to raise financing for this project in order to begin installation as soon as possible.

PROPEL is presently contacting other tanneries in Colombia with a view to expanding the project. PROPEL can offer technology which has already been tried and tested, and project financing for companies of up to 50 per cent. As the pilot project has been completed, the timeframe for project implementation has been reduced from 27 months to three months. To participate in the programme an inscription fee of US$ 3,000 has been set for each company. In 1996 PROPEL will be signing several agreements with Colombian tanners. Based on the tannery experiences, PROPEL is also developing pilot projects in the plantain/banana production, foundry, electro-plating, furniture and floriculture sectors.

Implications

PROPEL's experience has been that it is essential to carry out a comprehensive assessment of a sector's difficulties before undertaking direct action, in particular, regarding such areas as the social and cultural characteristics of the company managers and deficiencies of a sector's infrastructure. Such analysis also helps to identify the internal and external structural factors which affect the company's functioning, for example, the level of employee qualification and training.

PROPEL has also identified a link between the productivity of Latin American SMEs and environmental problems, and the lack or inaccessibility of information on strategies and techniques which can help companies become eco-efficient. To overcome these obstacles, PROPEL is developing the capacity to manage eco-efficiency information by:

creating an Eco-Efficiency Documentation Centre;
launching a publication series to disseminate successful case studies and other information relevant to SMEs of sectors in which PROPEL is active, and;
making the information available electronically through the Internet to PROPEL's affiliates, associates and collaborators both inside and outside Colombia.

The Colombian Ministry of the Environment is currently working on sectoral agreements which include a combination of command-and-control instruments and economic instruments. PROPEL is working closely with the ministry to ensure adequate and intelligent rules of the game, in particular in relation to the tannery sector. Greater support from local authorities and government is essential for helping SMEs to comply with environmental regulations.