Summary

PERION is a medium-sized company operating in Hungary, which has been producing chemical batteries since 1893. The company became owned by employees and management after the change from a socialist to a free market economy in 1989, following a dramatic reduction of the number of employees. Environmental problems resulting from untreated hazardous waste, heavy waste water discharges and gaseous emissions were becoming serious, and the company was subject to increasing environmental fines. Market competition also motivated the company to produce in a cleaner way.

PERION has started to manage health, safety and environmental issues in an integrated way. Hazardous waste reserves have been eliminated, a patented technology has been developed to recycle manufacturing waste, and a complex waste minimization programme has been implemented to tackle waste water problems. Emissions have been reduced below the legal limits with the help of modern filters and pollution prevention measures. Investments, which were partly financed through preferential loans, have already been amortized. PERION now has the opportunity of dealing with a significant portion of used car-battery recycling in Hungary, through building a new plant and utilizing its patented technological process.

Country context

Hungary was the first of the Eastern bloc countries that started to tear down the iron curtain. The first signs of a market economy could be seen prior to the 1989 system change. The rapid multiplication of private enterprises provides evidence of this early move to a market economy. The first free elections were held in Hungary in 1989. The new governing party promised well-developed measures to tackle environmental problems. After four years a new coalition came into power. It took the first four years of the transition period to establish the basic laws and conditions for the market economy, and to begin the privatization of state-owned companies. Foreign investors became active. Many companies established production units in Hungary and now virtually all important multinational firms have at least a liaison office there. These companies were attracted by the access to the Central and Eastern European (CEE) market, and later on to the European Union market. In addition the Hungarian government was offering substantial tax allowances to foreign companies.

Manufacturing is the most important sector in the Hungarian economy. In the secondary sector, the chemical, food and drinks, and energy production sectors are the most important. Since 1989, following privatization, the number of large companies has decreased. SMEs are becoming increasingly important in the Hungarian industrial structure.

The population looked forward to the change to a free market economy with great enthusiasm. This soon turned into disappointment. The society became polarized. The former free services of the strong welfare system were cut back. Foreign debt increased dramatically, and the country faced rapidly increasing rates of inflation and unemployment, not least because of the streamlining, division and liquidating of former state-owned companies. The country has become very centralized around Budapest since World War I. Presently every fifth citizen lives in the capital city, and this tendency of centralization is continuing. At the same time economic and social degradation have started in the Eastern region of the country. People ”only remembered the good” of the old system. In light of all these factors the strongest socialist party won the 1993 elections.

Nevertheless the government elected in 1993 started to streamline the welfare system and increase the tax burden in a drastic way in order to reach one central goal: to reduce Hungary's indebtedness and maintain its creditworthiness. The current situation of the country provokes many different responses. Foreign financial and political observers agree and honor the measures taken by the Hungarian government, while at the same time students and state employees hold strikes on a daily basis. The number of poor has reached 33 to 40 per cent in contrast with 5 per cent in 1989, according to a recent World Bank report.

Sector overview

While heavy industry was very important, automobile production did not exist within the former socialist allocation of industrial activities in Hungary. Now three international automobile factories have set up in Hungary. Increasing market competition and the sudden collapse of the former COMECON market, which used to absorb large quantities of products of poor quality, was a great shock for heavy industry in Hungary. Only innovative companies could survive, given the diminishing demand for products from an industry using large volumes of raw materials. Rapidly changing industrial and environmental regulation and legislation has increased the need for innovative companies.

The replacement of the obsolete basic act on environmental protection of 1976 had been on the agenda since 1989. In 1995, the new act was finally enacted by parliament. On the basis of the new law on the general principles of environmental protection, the parliament put forward a legislation programme to be introduced over a period of four years. Laws on water management and environmental charges on products such as car batteries are only two significant examples of the programme, which have a direct impact on heavy industry in Hungary. The government is also planning to develop proposals on waste materials, environmental load fees, emergency plans, and hazardous materials, to name but a few.

Company description

PERION is a medium-sized company, with approximately 500 employees. The legal predecessor of PERION Battery Factory Ltd. has been producing batteries since 1893. Currently the factory manufactures and markets products in five major groups:

• Automotive batteries
• Traction cells
• Stand-by batteries
• Dry cells
• Ni-Cd batteries

The company is almost exclusively owned by the employees (50.5 per cent) and managers (45.7 per cent). The remaining portion, which is the land, is owned by the local government. Annual turnover is expected to reach USD 20 million in 1995. In the same year approximately 10 per cent of annual turnover was exported. Major target markets are the neighboring countries and countries of the European Union. The after-tax profit for 1995 is expected to be USD 2.1 million. PERION's headquarters are located in Budapest, in an area of the city which was previously an industrial zone only. As the city began to expand, residential houses, a school and a children's hospital were built in the neighborhood. The company has three other plants in Kaposvár, Kunszentmiklós and Monok. The last is used as a temporary warehouse.

Driving forces

In accordance with environmental legislation introduced after 1989, the land of Budapest was divided into six categories depending on the level of environmental sensitivity. The centre of PERION is located on land of the second most sensitive category in Budapest. As the majority of raw materials used in car-battery manufacture are poisonous PERION was in a particularly serious situation. The company was paying up to USD 70,000 in environmental fines per year. The company was also faced with an increase in environmental and safety regulation. Protecting the health of employees and assuring safe working conditions combined with the regulatory pressure in motivating the company to operate in a cleaner way.

International market tendencies of the sector could also not be neglected. Battery manufacturing factories of industrialized countries give a central place to environmental management in their operations. Reprocessing of used car batteries offered an attractive market opportunity. The recycling of secondary materials, in general, is also developing into a profitable activity.

In 1992, PERION's management set the goals of:

• managing health, safety and environmental issues through an integrated system, and;
• pursuing a constant improvement of company performance.

Problem definition

PERION’s main environmental problems can be mmarized as follows:

• Handling of hazardous waste materials: Up to 1990, PERION had simply rented a warehouse in which sixty different kinds of hazardous waste products were ”temporarily” stored. Batteries also create hazardous waste problems in the post-consumption phase. Environmentally-sound disposal of car batteries was not guaranteed in Hungary and many discarded batteries could be found in city parks and in the open countryside.
• Waste water: waste water is normally discharged to the public sewage system. The lead and cadmium content of waste water produced by the company exceeded the legal limits.
• Air pollution: In district 13 of Budapest air quality was a major problem and solutions were urgently needed, in particular given the growth of residential areas and hospitals around the industry zone.

Implementation of environmental measures

Hazardous wastes

PERION’s most important task was to reduce the accumulated reserves of hazardous waste. The wastes which before had been temporarily stored are now partly incinerated in Dorog or partly landfilled in Aszód, which is the biggest hazardous waste disposal plant in Hungary. The plant at Aszód was built before 1989. PERION has also built a temporary storing place, this time having obtained the proper permits from the local authority. Internal manufacturing waste is now treated and reused in PERION’s manufacturing processes. The company now deals with recycling of manufacturing waste as an issue of central importance.

The reprocessing of manufacturing waste also provided opportunities for a new activity: the recycling of car batteries that are returned within the guarantee period or after depletion. In the traditional recycling process, batteries are drained and melted, and only the lead is reutilised from the resulting waste. PERION developed a process in which the car batteries are first disassembled and the different materials are reprocessed separately. This thermochemical process has good environmental characteristics and PERION has already patented this process.

On this basis and on the basis of the introduction of stricter environmental regulation, the company is starting to collect and recycle car batteries on the national level. The collection of used batteries is presently arranged via PERION’s own distribution system (100 stores nation-wide). 2,000 tons of the collected car batteries can be recycled in the manufacturing process with the above-mentioned thermochemical process. The company has obtained export permission for another 3,000 tons. These batteries are reprocessed in Slovenia through a melting process. This is, however, a less environmental and economical process, in comparison with that developed by PERION, as only the lead content is utilized. Another 1,000 tons can be stored in PERION’s temporary storing place for reprocessing at a later date.

Water management

The second major task for PERION was to establish proper water management and to reduce water consumption. Water cycles have been closed within PERION’s manufacturing processes. As a result water consumption has been reduced to one third of the previous level.

More lead-polluted waste waters were channeled to the company’s central industrial waste water treatment plant (laboratory, foundry area, outdoor yard area). Three second-stage settlers of 100m3 capacity were installed and supplemented with a storage tank. Waste water output was reduced, filtering efficiency was improved, and the recycling of treated waste water has been solved in a number of locations. Recycled cooling water was reconducted to the three second-stage storage settlers, avoiding chemical treatment and filtering. To avoid bottlenecks, a second pump and a parallel pipeline were constructed at the central recipient. In this way overflow and untreated waste water outflow is prevented. Maintenance and cleaning of the waste water treatment plant is carried out on a continuous basis. The World Environment Centre played a central role in the project execution. Three American consultants contributed their expertise to the waste minimization programme. The WEC also provided analyzing equipment.

Air pollution

The biggest progress made in solving the problem of air pollution was to cease the operation of the company’s old boiler house. With this measure, emissions of SO2, CO and CO2 have been totally eliminated. While other emissions have remained under the specified limit values, PERION has worked to further decrease these levels with the use of modern separating systems.

Resources invested

The main investments made by both PERION and its partners are as follows:

• Total expenditure for the waste water treatment project was USD 276,000. WEC contribution was USD 172,000. The remaining investment was provided directly by PERION.
• Investment expenses for the development of the battery recycling system were USD 760,000. PERION provided USD 277,000, and the remaining investment of USD 483,000 was obtained through a preferential loan.
• To deal with its waste problems, significant investments were required, amounting to USD 520,000. One third of this investment was covered directly by the company. For the remaining investment a preferential loan was obtained. This loan was provided by the Hungarian Foundation for Industry.

Partnerships

The fact that the majority of stocks are in the hands of the employees guarantees actual participation in company decision-making processes.

Putting environmental protection measures into practice was also greatly facilitated by the developed total quality management system. Environmental processes have been regulated, and operational and inspection rules have been established in the framework of the existing quality assurance system. Employees are involved in process control and development activity, which is already in the planning phase. A recording and communication system has been established and responsibilities have been designated. The total quality management system was audited at PERION in December 1995, the company was certified by the German Technical Control Board (TÜV CERT).

At the time of implementation of the above-mentioned environmental measures, the most difficult changes had already taken place at PERION. The company employed 1,400 people in the previous economic system. However, foreign competitors appeared on the market after the export-import liberalization in 1989. PERION protected its market position with improved product quality, moderated prices and radical reduction of manufacturing costs. Between 1989 and 1993, a massive reduction of employees (50 per cent) was carried out. Following this painful operation, the interests of the management and the employees were already common. For this reason no real conflict of interest was encountered during the implementation of the environmental programme.

Results

Overall environmental performance

Load on the environment has been cut by 50 per cent as a result of the environmental management measures implemented at PERION. The waste minimization programme which was conducted is one of the model projects of the Hungarian Pollution Prevention Information Centre, which was created by WEC.

Financial benefits

The most important financial result was that environmental penalty has been reduced by 98 per cent. The waste water pollution penalty has dropped from USD 70,000 to USD 1,380. Fresh water consumption has also been reduced. Fees for use of the public sewage system have decreased. Recycling of lead-containing car batteries also brings PERION an additional income of HUF 30 million per annum. The activity is profitable, so the company is able to pay approximately USD 1.00 for used car batteries.

Employee survey

PERION contracted an external market research firm to survey employees' opinion about health, safety and environmental conditions. A positive response was unanimous.

External communication

PERION is seeking wider publicity in external communication. Successful development projects, such as those of PERION, have been presented in Hungarian and international conferences. Significant interest has been generated within professional circles. PERION was also a founding member of KÖVET, the Hungarian member association of INEM. This organization was established in October 1995, through co-operation between Hungarian companies, large and small, the Hungarian Foundation of Industry, non-profit organizations and educational institutes. The aims of PERION’s (and the other founding members) involvement with KÖVET are:

• to be in a better position to receive and exchange information on ways to improve environmental performance;
• to develop ways of using environmental management as a competitive advantage;
• to promote environmentally-aware business management within Hungarian industry; and,
• to use KÖVET as a channel for external communication and promotion of its efforts.

The future

The company is planning a new car battery reprocessing facility with a capacity of 18,000 to 20,000 tons. This would be a giant step towards solving the used car battery dilemma in Hungary. The plans for the new plant can be realized within three to four years. Provided that future investment in the new plant enables environmentally sound reprocessing of used car batteries and that a nation-wide collecting system (e.g. by fuel stations) is established, a great opportunity would be created for the population, to act in an environmentally conscious way in daily practice.

Sourcing the investment required for the new plant is not the only obstacle which PERION will have to overcome. A potential protest by the population against building the battery reprocessing plant might also cause problems. Such actions are often rather based on emotions than on rationally-evaluated risks. The chapter on environmental impact assessment in the new environmental protection act has regulated this issue in a positive way: community protest may only stop the creation of a waste reprocessing plant, in the case that it is based on well-founded arguments.

The new environmental protection act also specifies a social co-ordination phase of legislation. The exact mechanisms which will allow the different stakeholders to contribute to the development of legislation have yet to be defined. However many sectoral, industrial and non-governmental organizations already take part in informal processes with the government. Policy is moving towards a mix of control-and-command and market instruments. A good example of this is the product fee law. This fee has to be paid in four to five product categories. (e.g. packaging materials), based on weight. If more than a certain proportion of the product is recycled the company does not have to pay the product fee.

Following on from its initial success in developing cleaner production and an integrated system of quality, environment and health and safety management, PERION is planning to establish a formal environmental management system based on the British environmental management systems standard BS 7750 in 1996.

KÖVET plans to publish further case studies of the work of their members, in an effort to motivate companies and provide them with a good channel of external communication. In addition KÖVET plans develop an information system, become a focal point for environmental standards in Hungary, and help companies in Hungary to develop their communication strategies.

The major positive lesson learned from the case of PERION is that consciously undertaken environmental measures serve the company's interest both in the short and the long term. Avoiding fines and reducing material consumption can produce significant cost-saving potential. If companies are fortunate investment can be covered by preferential loans. However there are no established systems through which SMEs in Hungary can obtain financial support for environmental protection measures. This is one area in which SMEs in heavy industry in Hungary will need to perceive greater possibilities, in order for nation-wide progress to be made.

For further information contact

Mr. Lásló Solti
Environment, Health and Safety Manager, Perion
Váci út. 135-139
H-1138 Budapest, Hungary
tel: 36-1-270-0811 fax: 36-1-120-2279