Summary

Curtigran Ltda is a 13-employee leather tannery situated in the metropolitan district of Bogotá. When 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. In 1994, Curtigran began participation in a pilot project developed by the association for small and medium eco-efficient enterprises in Latin America (PROPEL-- Promoción de la Pequeña Empresa Eco-Eficiente Latinoaméricana). PROPEL worked in co-operation with the local tanner’s association (ASOCUR-- Associacion Curtiembres) and conducted a comprehensive sectoral study before choosing Curtigran as one of the pilot companies. A cost system and an environmental impact assessment were first implemented in Curtigran. Then with the help of external consultants, expert tanners and a training programme, clean and efficient technologies were developed in-company. 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 in tanners across Colombia. The eco-efficiency approach is also now being applied to other sectors such as floriculture and foundries.

Country context

Colombia is a developing country currently undergoing a rapid rate of industrialization. The current unstable political situation in Colombia has affected the economy, and many investments in the economy have been put on hold until the situation has stabilized. The most important sectors of the economy are manufacturing, agriculture and the financial sector which respectively represent 22 per cent, 20 per cent and 10 per cent of the GDP. The chemical and food industries are the two most important manufacturing sectors.

In 1994 industrial exportation increased by 10.7 per cent in comparison with 1993. In the same year industrial importation increased by 18 per cent, a considerably low figure given that in 1993 imports had increased by 54 per cent. The overall export of manufactured goods was to the value of USD 8.4 billion, while imports were to the value of USD 11.8 billion. These figures show that the economy has reacted positively to the liberal policy of deregulation which the former government began to introduce in the early 1990s.

Eighty-five per cent of Colombian industries are SMEs, and their number is growing at a annual rate of ten per cent. In order to improve on their competitiveness, many large enterprises subcontract services and secondary processes to SMEs which are becoming increasingly specialized. In recent years, environmental policies have been developed on a national level. In general, big industry has adapted to requirements of environmental policy and legislation, but small enterprises and their supporting organizations have failed to notice 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 industrialized 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 labor and 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 has been 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 small enterprises. These tanneries differ in their production capacity and levels of technology. Enterprise size is directly related to the number of processed skins. In general large tanneries produce over 20,000 skins per month, medium tanneries between 8,000 and 15,000 skins per month, and small tanneries less than 8,000 per month.

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.

The main buyer of Colombian leather products is the United States, but this market is presently being invaded by cheaper Chinese products. The Caribbean, where the main buyers are tourists, is a small but steady market for Colombian leather products. The Central American market is also small but steady. The European market holds little prospect for Colombia as the leather products are of high quality and competitively priced, and the market is already dominated by Italy, with an increasing demand for Spanish and Portuguese leather. At the ”Pacto Andino” level, the economic crisis in Venezuela led to a decrease in business for the Colombian tanners, and also caused losses due to delay of payments and in some cases non-payment. The sector is therefore currently at a stage where its future markets and strategies must be carefully considered to ensure survival.

The tanning industry is known to be very polluting. The emissions resulting from the tanning process are gaseous, liquid and solid, and not only degrade the environment but also have a negative effect on human health. The effluents are high in dissolved and suspended organic and inorganic solids, accompanied by propensities for high oxygen demand and containing potentially toxic metal salt residues. Disagreeable odor emanating from decomposition of protein solid and the presence of hydrogen sulfide, 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. These developments can be summarized as follows:

• General regulatory developments;
• Need for environmental permits;
• Pressure on suppliers to improve environmental performance from multinational companies and environmental organizations; and,
• Competitive prices of leather imported from countries more advanced in environmental management, such as Brazil and Argentina, leading to a decrease in the price of leather goods in Colombia.

In 1993 the Colombian Environment Ministry was created by the passing of Law 99. The ministry is responsible for establishing effective and efficient environmental protection mechanisms. In 1995 the ministry proceeded to close a number of environmentally notorious enterprises. Currently the ministry is working on developing new rules of the game, which will be enforced in the coming years.

There are many forces shaping the way for cleaner production in the Colombian tannery sector, but these are counterbalanced by economic and social factors such as:

• Guerrilla warfare;
• Smuggling;
• Competition in the USA from China, and in the European market domination by Italy, Spain and Portugal;
• High level of late or non-payments by customers e.g. Venezuela; and,
• Problems in obtaining financing especially for small tanners, in particular as they are classified by banks as credit users of high risk.

Company description

Curtigran Ltda, is a 13-employee tanner, one of the 238 tanners of the San Benito zone, situated southwest of Bogotá in a residential neighborhood. The majority of the local inhabitants are employed by the tanners in the San Benito area. The company, established in 1974, is family-owned, has a capital of USD 25,000. Curtigran is one of the smaller tanners in the San Benito area, and has 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 zone, which finish off 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 was influenced by a number of factors on both the economic and the environmental level. As a tannery, classified in a high environmental impact sector, the company was under pressure to comply with the new environmental legislation. In addition, the local authorities were threatening to shut down tanneries which were not in compliance with the law. Companies which participated in clean technology programmes were allowed five years within which 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 local press had furthermore been publishing informative articles condemning the relatively high pollution of tanning activities. The tanners in 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.

The company was experiencing loss of competition due to inefficiency. Raw materials were also being wasted through inefficient processing. Loss of markets meant that the company was operating at 60% of total capacity, and thus had experienced a fall in profits. New markets were needed, and existing foreign markets, more advanced in the field of environmental management, were beginning to exert pressure on the tanners in the San Benito area. Curtigran and the other San Benito tanners were also under pressure from the community to improve their environmental performance. Curtigran was faced with a question of simply surviving. José Casallas, Curtigran’s production manager and the Curtigran team realized 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 improve profit levels. Curtigran, however, could not undertake this strategy for survival alone.

PROPEL is a non-profit environmental management organization which was established in 1991 as an initiative of the Swiss Foundation for Sustainable Development (FUNDES-Switzerland, Foundation for Sustainable Development in Latin America). PROPEL has been a member of the International Network for Environmental Management since 1993. PROPEL’s mission is to contribute to the sustainable development of Latin America by promoting eco-efficient management and technical solutions for SMEs in this region. Its activities are based on the principle that there is a positive relationship between sound environmental practices and business success. PROPEL defines eco-efficiency as ”an increase in productivity and competition, accompanied by a decrease in the consumption of resources and energy, and a reduction in waste and emissions”.

Curtigran became involved in a pilot project co-ordinated by PROPEL in 1994. This project was the first of PROPEL’s eco-efficiency projects, which focus on a specific industry sector. The project began with an agreement with the San Benito leather tanners’ association, (ASOCUR). ASOCUR is an employers association which represents 30 per cent of the tanners in the San Benito region. Curtigran is not a member of ASOCUR. Following this agreement, a comprehensive sectoral assessment was conducted by PROPEL, in close co-operation with ASOCUR.

The assessment covered the technical aspects of the production process, business management practices and environmental impact of the leather tannery sector, identified areas for improvement on the sectoral level, and led to the selection of appropriate management and technical solutions. Once the sectoral assessment had been completed, PROPEL and ASOCUR selected ten enterprises to participate in a pilot project. Curtigran was one of the enterprises selected. Curtigran would not have been able to implement any environmental measures had it not been for the PROPEL programme.

Goals

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

• to minimize 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 5-year period for environmental compliance allowed to companies which participate in clean technology programmes;
• to avoid tax burdens for polluting companies;
• to improve its image within its local community and;
• to survive!

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 following areas:

Production

Production was not programmed in relation to established orders;
Lack of consistent quality control by employees during the production process;
Lack of stock control.

Merchandising and purchasing

No purchasing policy;
No business plan for existing customers;
Payment periods were not respected by customers;
No pricing policy and calculation of prices on sight rather than on the basis of aggregate value;
No promotion or marketing strategy.

Finance and accounting

No formal accounting system, no cash flow or budget;
Shortage of working capital;
No dealings with any banks.

The ways in which these problems have manifested themselves are:

• Overload of responsibilities on the production manager;
• Cashflow problems;
• Delays on payments to suppliers and sometimes even payroll, until customer’s payments are received;
• Late delivery of orders, high level of product returns because of poor product quality, leading to loss of customers and business;
• Low level of 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 overall management. Once the general problem areas were identified eco-efficiency solutions could then be applied. The sectoral assessment carried out at the beginning of the project had allowed PROPEL to define the main environmental problems of tanning activities. Therefore measurements of Curtigran’s specific impact and emissions took place during the implementation stage.

Implementation of environmental measures

The solutions developed with Curtigran and the other pilot enterprises in San Benito were based on awareness-creation and the provision of information which would lead to pollution prevention, as opposed to corrective, end-of-pipe solutions. Two main tools were used to allow Curtigran to improve both its economic and environmental performance.

Cost system

Firstly, a cost system was implemented. This cost system developed by PROPEL, is a specific management tool which allowed Curtigran’s managers to make quick decisions, with greater security, regarding the future running of their business. It also enabled basic information to be handled in a simple way. The following are some of the questions answered by this system:

• What effect would an increase in the cost of inputs have on the cost of the final leather product?
• What effect would an increase in the number of employees have on company spending?
• What would be the effect of a sales price increase or decrease on profit margins?
• What is the best product range?
• What is the current level of net profit?

Clean technology

The second element of the eco-efficiency strategy, which allowed improvements to be made in the areas identified by the cost system, was the implementation of clean technology. PROPEL’s engineers worked with Curtigran on the following areas:

• Evaluation of the technological choices;
• Planning of cleaner technologies improvements;
• Analysis of emissions and effluents;
• Evaluation of final product quality;
• Cost analysis.

Clean technologies were introduced in three areas of operations; un-hairing, de-liming, and pickling and tanning. The complete implementation of the technology, including the sectoral study and environmental impact assessment took 27 months.

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. In addition, PROPEL provided a strategic managerial perspective, which was seriously lacking in Curtigran.

Resources invested

PROPEL provided 95 per cent of the total investment required for the tannery pilot project, which represents an amount of over USD 150,000. This investment covered the following areas:

• Initial sectoral study;
• Services provided by PROPEL engineers;
• Services of expert tanners;
• Development of the cost system;
• Purchase of raw materials
• Analyses of emissions;
• Physical tests;
• Support materials.

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 for SMEs. Curtigran provided their 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.

Obstacles to implementation

In achieving its goals, Curtigran was faced with several problems:

• 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
• Fear of change and difficulties in moving on from the traditional manufacturing processes.

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. At each step of the implementation process the employees were informed of what was going to be done and they expressed their opinion of what was more convenient for them and what could be carried out better. Responsibility for the implementation of the changes was delegated among the company employees, in particular the production manager, external consultants, subcontracted laboratories, and PROPEL’s engineers. Employees and managers, from Curtigran and the other pilot enterprises, participated in a training programme organized by PROPEL. ASOCUR co-operated with PROPEL by providing manpower 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 leadership skills by the general and production managers;
• Use of the cost system for accountants and managers;
• Production and productivity;
• Administration and management models;
• Stock control;
• 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 specialized in costs, administration and production. Following the training programme PROPEL also developed a video for both promotional use and further training programmes.

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 achieved its goals in participating in the PROPEL project. Environmental impact has been reduced. Efficiency, productivity and product quality have been improved. Curtigran’s monthly income has increased by USD 2,000 per month. This is due to a better utilization of raw material with a greater yield of final product. Tables 1 and 2 present an overview of the main results of the implementation of eco-efficiency in Curtigran.

The future

Curtigran has continued on from the work begun with the pilot project and has made new improvements following on from its own initiatives. It has experienced for itself the advantages of eco-efficiency and hopes to act as a model for other tanners. 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 united efforts to convince the community of the need for a collective treatment plant. In 1995 the San Benito Ecological Association (COESA, Corporacion Ecologica de San Benito) was established. COESA is presently trying to raise financing for this project, in order to begin installation as soon as possible. However, it is still not clear how the maintenance of the treatment plant will be financed, nor how the remaining sludge and wastes will be disposed of. Both the San Benito tanners and the local community believe that the government should be responsible for the provision of facilities for the disposal of the remaining sludge.

PROPEL is presently contacting other tanneries in Colombia, with a view to developing the pilot project. It is organizing company visits bringing along expert tanners. It was discovered through the pilot project that the tanners and industry associations are not always representative of the sector and therefore may not always be the ideal contact. As a result the programme is now offered directly to the companies through personal visits. All those that do not show receptiveness or disposition to change are eliminated as potential clients. PROPEL can offer technology which has already been tried and tested, and project financing for companies of 50 per cent. The major advantage is that now the pilot project has been completed the time for project implementation has been reduced from 27 months to 3 months. To enter the programme an inscription fee has been set for each company of USD 3,000. Tanneries participating in the programme must sign a special agreement. In 1996, PROPEL will be signing several agreements with Colombian tanners. PROPEL is waiting for tanneries with the foresight which Curtigran had, to further eco-efficiency in the Colombian leather tanning industry.

PROPEL is also developing pilot projects, based on the tannery experiences, in the plantain/banana production, foundry, electroplating, furniture and floriculture sectors. To continue financing for the programme PROPEL still has the support of its original project partners, and is also working in the United States of America to develop the project in American tanneries.

Table 1: Clean Technology Results

 

Sulfides Kg/day
Clean Tech.	Traditional Tech.	% Reduce
1.16	11.6	90
0.1	2.6	96
4.8	9.1	47

Table 2. Overall Results

Project duplicability

Sectoral assessment

It is essential to carry out a comprehensive assessment of a sector’s difficulties, before undertaking direct action, in particular regarding the following areas:

• Social and cultural characteristics of the company managers;
• Existing level of awareness of health, safety and environmental issues;
• Deficiencies of a sector’s infrastructure;
• Working conditions;
• Sector competitiveness;
• Structure of sector associations and potential for development of this structure.

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.

Need for information

PROPEL has also identified a link between Latin American SME’s productivity and environmental problems, and the limited availability and/or accessibility of information about the range of business solutions needed to achieve eco-efficiency. Often when the information is available on the national level, it is not readily accessible to the entrepreneur, either because he/she does not know of its existence or because it is in a form that he/she cannot understand or interpret. To overcome this obstacle, PROPEL is developing the capacity to manage eco-efficiency information by:

• creating the Eco-Efficiency Documentation Centre in co-operation with the Colombian Business Council for Sustainable Development;
• launching a publication series to disseminate successful case studies and other information relevant to small enterprises of the 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.

Partnerships

It was also found that it is useful to co-ordinate project design and execution with other organizations involved in a particular sector. This allows information exchange and the benefit of previous experience, and avoids the duplication of effort. In a context of co-operation with different stakeholders confidentiality must be assured. This is particularly important for the company.

Financial support

From the company point of view, there is an urgent need for greater financial advice, incentives and support for SMEs. The capital problem presents one of the greatest barriers for SMEs. More financial incentives, for example, tax relief for clean-producing companies, to counterbalance the increasing tax burdens on polluting companies. The financial problems typically encountered by SMEs or SME projects represent the main obstacle to the duplication of even successful past programmes.

Government approach

In developing countries, waste and water treatment plants are urgently needed. Many heavily-polluting industries which were becoming economically unviable shifted from OECD countries to developing countries. However, in general, developing countries do not have either the infrastructure or the money to deal with pollution. This raises a question of responsibility for OECD countries. To a certain extent, they have been able to reduce pollution and environmental impact in their own countries, but the real problems have not been solved, only transferred to countries less able to cope with the problems. In San Benito despite the collective efforts of the tanners, they are facing serious difficulty in treating their waste. While the regulatory bodies are imposing stricter conditions on the tanners, there are no federal government incentive programmes to provide them with the positive motivation, support and facilities necessary to meet the stricter conditions. Greater support from local authorities and government is essential for SMEs, in helping them to comply. The Colombian environment ministry is currently working on sectoral agreements which include a combination of command-and-control instruments with economic instruments. PROPEL is working closely with the ministry to ensure adequate and intelligent rules of the game, and in particular in relation to the tannery sector.

For further information contact

Mr. Jose Casallas
General Manager, Curtigran
cr. 18a #58-16s
Santafe de Bogota DC, Colombia
tel: 57-1-205-4239 fax: 57-1-760-6708