Chemicals

Chemicals

Companies in the Chemicals industry transform organic and inorganic feedstocks into more than 70,000 diverse products with a range of industrial, pharmaceutical, agricultural, housing, automotive, and consumer applications. The industry is commonly segmented into basic (commodity) chemicals, agricultural chemicals, and specialty chemicals. Basic chemicals, the largest segment by volume produced, include bulk polymers, petrochemicals, inorganic chemicals, and other industrial chemicals. Agricultural chemicals include fertilizers, crop chemicals, and agricultural biotechnology. Specialty chemicals include paints and coatings, agrochemicals, sealants, adhesives, dyes, industrial gases, resins, and catalysts. Larger firms may produce basic, agricultural, and specialty chemicals, while most companies are specialized. Chemicals companies typically manufacture and sell products globally.

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Source: SASB

The chemical industry is facing a significant increase in global demand of 30% in 2050, with the majority of the production based in emerging markets and developing economies. The industry is responsible for significant emissions, accounting for 60% of all industrial energy consumption and almost 70% of CO2 emissions, along with the steel and cement industries. However, there are many solutions provided across the industry's various sectors that could reduce global emissions by 2.5 GtCO2 per year by 2030. To reduce emissions, the chemical industry can invest in new machinery to reduce water consumption and improve recycling, use eco-efficient raw materials, improve downstream performance, and offer new products and services. Hydrogen will also be fundamental in reducing CO2 emissions. As demand for chemicals increases, these investments will offer opportunities to reduce emissions and create a more sustainable industry.

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Industry Characteristics

• Overall, global demand for chemicals in 2050 will be 30% higher than today. Source: IEA
• Manufacturers in the chemical sector can be divided into five categories: (1) Commodity Chemicals; (2) Diversified Chemicals; (3) Fertilizers & Agricultural Chemicals; (4) Industrial Gases; (5) Specialty Chemicals. Source: WBCSD
• Chemical companies that improved their ESG combined score by more than five percentage points from 2016 to 2019 were, indeed, rewarded by capital markets. Source: McKinsey
• In 2030 the solutions provided by the chemical industry could reduce emissions by 2.5 GtCO2e per year – a reduction equivalent to total emissions from France, Germany, Italy and the UK combined. Source: WBCSD

Sustainability Impact

• Three heavy industries  –  chemicals,  steel  and cement  –  account for nearly  60%  of all industrial energy consumption and around 70% of CO2 emissions from the industry sector. Production is highly concentrated in  emerging markets and developing economies, which account for 70‐90% of the combined output of these commodities. Source: IEA
• Chemicals Production: In the NZE (Net Zero Emission), emissions from the chemicals sub‐sector fall from 1.3 Gt in 2020 to 1.2 Gt in 2030  and around 65 Mt in 2050. The share of fossil fuels in total energy use falls from 83% in 2020  (mostly oil and natural gas),  to 76% in 2030 and 61% in 2050. Oil remains the largest fuel used in primary chemical production by 2050 in the NZE, along with smaller quantities of gas and coal. Source: IEA
• Today, the chemicals industry creates significant Scopes 1 and 2 emissions and is central to the question of plastics waste. Source: McKinsey

Sustainability Investments to watch

• CCUS and hydrogen play an increasingly important role in reducing CO2 emissions, especially in heavy industries such as steel, cement and chemicals. Source: IEA
• Regulatory actions need to go hand-in-hand with increased investments in innovative technologies to address the presence of legacy substances in waste streams, which could, in turn, allow to recycle more waste. Source: European Commission
• Adopting Eco-efficient Processes. The products and services are the same, but production methods change to address sustainability concerns. New machinery, for example, might reduce water consumption or allow for recycling. In some cases, the changes don’t even need to involve the physical side of production; it may be enough to invest in better monitoring and assessment. Source: BCG
• Embracing Eco-efficient Raw Materials. Here the emphasis is on redesigning existing products to use new, more sustainable inputs—ones that generate less waste in production, for instance, or yield products that are easier to recycle at the end of their useful lives. Source: BCG
• Fielding New Offerings. Companies taking this approach focus on developing new products and services in response to the growing demand for sustainability. These can be true innovations or simply new services enabled by the company’s existing approach to sustainability. Source: BCG
• Improving Downstream Performance. Here the company’s own sustainability footprint is unchanged, but products are altered to provide such benefits as reduced waste or lower carbon emissions. For example, a product can be redesigned to increase its reusability or recyclability, thus diminishing the environmental footprint of its users. Demonstrating such benefits usually requires a comprehensive product life cycle assessment covering the activities of the chemical company, its customers, and end users. Source: BCG

• Manufacture of anhydrous ammonia
• Manufacture of batteries
• Manufacture of carbon black
• Manufacture of chlorine
• Manufacture of hydrogen
• Manufacture of nitric acid
• Manufacture of organic basic chemicals
• Manufacture of plastics in primary form
• Manufacture of soda ash