Chemicals industry faces challenges in greening its operations

13 May 2024 3 min. read

Many chemical companies are pushing sustainability forward and implementing circular business models in order to cut back on harmful emissions, according to a new report from EFESO Management Consultants.

Leaders in the chemicals industry are forming initiatives to establish circular business models, driven by clear benefits and concerns about technology availability and recycling infrastructure. In order to be successful with circularity, businesses need to understand market demand, costs, and potential solutions.

A total of 61% of respondents said the biggest challenge is having a clear benefit case and investments. 52% said getting a better hold on technology and processes – like, for example, recycling – was the biggest obstacle to overcome.

What are the top three challenges for creating a circular supply chain in your industry?

Source: Logichem, Sustainability through collaboration report

One of the chemical industry’s main targets for reducing carbon emissions is the transportation side of the supply chain. Alternative feedstocks and hydrogen trucks are seen as promising but currently expensive, with an estimated transition period of around 10 years.

Data as an enabler

Data has emerged as a key challenge for chemical companies to overcome in achieving cuts to harmful emissions and staying in line with regulations. Data silos, privacy concerns, and a lack of standardisation are the top data-related concerns for business leaders, said the report from EFESO Management Consultants.

What are the top three challenges of sharing

Source: Logichem, Sustainability through collaboration report

“An important lever in becoming more sustainable lies in collaborating with up- and downstream partners as organisations move towards a circular business model,” said Fernando Cruzado, Vice President at EFESO Management Consultants. “Such ambitions can only be achieved with transparency and openness to share data. Developing ecosystems beyond company barriers, with or without third-party platforms will be essential for future business models.”

Despite these challenges, 78% of respondents said they have witnessed an improvement in their organisation’s ability to collect, analyse, and share accurate ESG data. No respondents said that it had worsened, though 23% reported it staying the same.

Alongside driving better ESG-related decision-making internally, data is also key from an external perspective, with the number of requirements for ESG reporting increasing. Large companies in the chemicals sector will need to comply with the CSRD for example.

How has your organisation’s ability to collect, analyse and share accurate ESG data changed over the past three years?

Source: Logichem, Sustainability through collaboration report

“Transparency in ESG continues to be a key priority for all chemical companies. Although the situation has improved in recent years, it remains difficult to find common ground and standardization on the how and what. We expect further streamlining of assumptions in the years to come to facilitate ESG reporting across the industry,” said Jörn Grosse-Wilde, Vice President at EFESO Management Consultants.

According to data from the OECD, the chemical industry is responsible for about 5% of global CO2 emissions, and is therefore key to achieving net-zero targets. Decarbonizing the industry, nevertheless, faces particular challenges given the widespread use of carbon-rich raw materials, the need for high-temperature heat, and the complex global value chains.