Understand Sustainability Compliance in Chemical Manufacturing
Revolutionize chemical manufacturing and simplify sustainability reporting.
Several obstacles pose a threat to becoming more sustainable:
- Pandemic-era supply chain issues and the rising cost of raw materials.
- An inflationary operating environment and the high cost of raising capital.
- The high cost of investing in technology and transitioning to more sustainable operations.
- Complex regulatory requirements that require tailoring of sustainability initiatives.
- The high degree of fragmentation within the industry and niche operating conditions.
Our Advice
Critical Insight
Sustainability initiatives must be technology-led along three dimensions:
- Becoming operationally more sustainable by transforming your value chain.
- Complying with regulations.
- Enabling effective and auditable ESG disclosures.
Impact and Result
Failure to define and meet sustainability goals will mean:
- Significant reputational damage in addition to fines and legal action.
- The inability to remain competitive in an evolving marketplace.
- Being a less attractive option for investors, customers, and employees.
Understand Sustainability Compliance in Chemical Manufacturing
Revolutionize chemical manufacturing and simplify sustainability reporting.
Analyst Perspective
Revolutionize chemical manufacturing and simplify sustainability reporting.
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In March 2023, the United Nations (UN) released their Intergovernmental Panel on Climate Change Synthesis Report. This report warns of catastrophic consequences if greenhouse gas emissions are not rapidly reduced. The report outlines a timeline for action, including reducing emissions to net-zero by 2050 and halving emissions by 2030, as well as highlighting the need for urgent and coordinated global efforts to address the crisis. The chemical industry is responding to this crisis with a sense of urgency. The industry has reduced its carbon emissions by over 60% since 1990 and is committed to achieving carbon neutrality. Innovations include the use of renewable energy, carbon capture and utilization, and sustainable materials as well as transparency and communication with stakeholders to build trust and credibility. Today, the chemical industry is well positioned for growth, driven by innovation, demand for sustainable products, and digital transformation while continuing to face challenges, including supply chain disruptions, inflation, and regulatory changes. To remain competitive, companies should focus on investing in new and innovative technologies to move away from the traditional linear model of production toward a circular economy, where materials are reused, and waste is minimized. Technology can also empower chemical companies to analyze the financial implication of their sustainability initiatives and report on them effectively to connect with their customers and investors. This research outlines circularity use cases that technology can enable to promote sustainable operations and the benefits of using sustainability management systems. Shreyas Shukla |
Executive Summary
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Your Challenge |
Common Obstacles |
Info-Tech’s Approach |
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Chemical manufacturing companies have to deal with a complex landscape of regulations designed for sustainability. Additionally, there is increasing scrutiny from stakeholders toward the way environment, social, and governance (ESG) initiatives and metrics are disclosed. Failure to build an effective sustainability strategy and comply with regulations means:
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Businesses will have to adopt a multipronged approach in their race to become more sustainable. Several obstacles pose a threat to becoming more sustainable.
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Businesses have realized the benefits of technology-led circularity and the potential of providing credible, verifiable, and comparable ESG metrics. Choosing the right technology will help accelerate progress on sustainability. Info-Tech will provide:
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Sustainability initiatives must be technology-led along three dimensions: becoming operationally more sustainable by transforming your value chain, complying with regulations, and going beyond mandatory requirements by enabling effective and auditable ESG disclosures.
Chemical manufacturers are facing headwinds
The chemical industry is in a state of transformation. The chemical industry has performed exceedingly well financially in the past two years. However, there are several macroeconomic indicators of uncertain times ahead. While pandemic-era disruption has made it necessary for chemical manufacturing companies to retool their supply chains, focusing more on localization and exploring technology-led innovation, changing consumer preferences, government scrutiny, and a focus on environmental sustainability are driving the circular economy, decarbonization, and sustainability initiatives in the near term.
“Decarbonization will be expensive. But unchecked climate change will cost billions of dollars more. Current estimates suggest that climate change could cost the US economy as much as 10 percent of GDP by the end of the century and destabilize the world’s food supply.”
– Kahn, et al., National Bureau of Economic Research, 2019, p. 222
Climate change has become a crisis due to global emissions
Four countries and the European Union (EU) account for over 50% of annual global greenhouse gas emissions.
China is the largest emitter of greenhouse gases followed by the United States (US), India, EU, and Russia. China's emissions from manufacturing alone (4,006 MtCO2e) are greater than the total emissions from India, the EU, and Russia individually.
MtCO2e – Metric tons of carbon dioxide equivalent
US (6,001.3 MtCO2e)
- Electricity
- Transport
- Building
EU (3,383.5 MtCO2e)
- Electricity
- Transport
- Building
Russia (2,476.9 MtCO2e)
- Electricity
- Manufacturing
- Transport
India (3,394.9 MtCO2e)
- Electricity
- Agriculture
- Manufacturing
China (12,705.1 MtCO2e)
- Electricity
- Manufacturing
- Transport
Canada has the highest per capita greenhouse gas emissions at 19.6 MtCO2e per person, followed by the US, while India has the lowest.
Source: World Resources Institute, 2023
Manufacturing accounts for 22% of global emissions. The top five sectors in descending order of emissions are:
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Electricity Generation & Heat Production |
28% |
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Transportation |
28% |
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Manufacturing |
22% |
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Commercial & Residential Buildings |
11% |
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Agriculture |
9% |
Source: The Co2nsensus Blog, 2021
The chemical and petrochemical sectors contribute 8.8% of emissions annually, of which 3.6% comes from energy used by these industrial sectors.
Source: "Climate Watch," World Resources Institute, 2020
Technology is leading sustainability transformation
The top trends for the near term clearly indicate the important role technology-led innovation will play in transforming the chemical manufacturing industry.
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More than 90% of industry emissions can be eliminated by the application of emerging technologies that exist today. |
Chemical manufacturing companies have shifted their focus from mergers and acquisitions to focus on new growth avenues driven by sustainable technology and services. |
Supply chain agility and resilience have taken center stage. There is a renewed focus on performance management and efficiency. |
Digital technology is being considered strategic toward creating value, driving supply chain improvements, and enabling a more sustainable chemical industry. |
Source: Deloitte, 2023
“The chemical industry is the hidden climate hero, as it can act as a key enabler for the decarbonization of many other industries.”
– Jan Secher, CEO at Perstorp, in Politico, 2022
Sustainability has begun driving consumer decisions
Consumers today are prioritizing social responsibility and sustainability. Historically, consumers have leaned more toward affordability. Consumers are increasingly preferring sustainable products, paying a premium for them and consciously trying to reduce their negative impact on the environment. Companies must address this trend.
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Consumer Viewpoint |
Investor Viewpoint |
Employee Viewpoint |
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84% of global consumers consider sustainability important when choosing a brand. 62% of global consumers are willing to change their purchasing behavior to reduce negative impacts on the environment. 72% of global consumers are willing to pay more for recycled products or packaging or use in manufacture. |
83% of personal investors say they will act based on sustainability factors. 92% of investors feel that sustainability initiatives at a company impacts their financial risk. 48% of investors say they trust statements that companies make on sustainability initiatives. |
68% of potential employees would like to work for a company they consider to be sustainable. 69% of potential employees are more likely to accept an offer from a company they consider to be sustainable. 48% of potential employees will accept a lower salary to work at a sustainable company. |
Source: The IBM Institute for Business Value, 2021
“This is the decade we must make decisions that will avoid the worst consequences in the climate crisis.”
– US President Joe Biden, Earth Day 2021 Summit
Chemical manufacturing companies define sustainability along three dimensions
Statements made by chemical manufacturing companies in their annual report reflect their commitment to sustainability and reporting transparency.
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*Sample statements extracted from annual reports |
Operations Focus |
Customer Focus |
Investor Focus |
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Defined as part of Business Strategy |
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Defined specifically in relation to Environment |
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Source: Sagentia Innovation, 2022
Half of chemical manufacturing companies view sustainability as extremely urgent and important, 39% view it as urgent, and only 11% consider it not urgent.
“Over the next decade, the chemical industry will be transformed as new technologies mature and regulation and social attitudes force a shift in the entire economy.”
– Sagentia Innovation
Regulations accelerate the focus on sustainability
Corporate sustainability reporting standards are made up of complex regulatory frameworks and voluntary compliance guidelines. In the last five years, regulatory bodies and industry influencers such as the UN have taken action to define disclosure standards in relation to ESG performance. Large organizations are providing an annual report on sustainability.
Chemical manufacturers are becoming more sustainable
Most chemical companies agree that they are affected by sustainability issues and changes. Chief experience officers (CXOs) see the potential that emerging technology brings toward dealing with these issues and regulatory requirements. In response, these companies have accelerated digitalization initiatives in pursuit of sustainability objectives.
75% of companies feel they are affected by sustainability issues and changes
67% of companies expect moderate to high savings through sustainability activities
70% of companies see the potential of technology in the faster implementation of their sustainability goals
39% of companies have CEOs driving digitalization toward implementing their sustainability goals
56% of companies have accelerated the speed of digitalization post COVID-19
Source: "Why the chemical industry is prioritizing digitalization," EY, 2022
This is where CXOs see the biggest potential to use technology to meet their sustainability objectives:
“Our ambition is to deliver what’s best for our people, our customers, our communities, and our planet. It’s indeed a strategy focused on what’s best for all.”
– Dave Burritt, President and CEO of U.S. Steel, 2022, in McKinsey & Company
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