Moving Toward Sustainability in the Chemical Industry

Concerns from consumers and investors are driving the push for companies to go green, making the business case for sustainability in the chemical industry stronger than ever. Green chemistry has already emerged as a robust, multi-billion-dollar market.

The industry's sustainability agenda isn't only about keeping up with today's market. It's also a strategy for meeting the needs of the market of the future.

Challenges of sustainability

To succeed in your sustainability efforts, it's important to understand some of the challenges you may face.

• The definition: There's currently no universally accepted definition of sustainability or a standardized measurement system. This ambiguity can make it difficult to determine whether sustainability efforts are helpful or detrimental.
• Life cycle assessments: Life cycle assessments take into consideration the impact of a product or service throughout its entire life cycle. They're increasingly used in policymaking decisions, but their limitations—including lack of access to quality data and temporal and regional aspects that could alter the sustainability profile—mean they shouldn't be the sole basis for decision-making.
• Questions around data: Collecting data around sustainability is difficult due to several factors. Sustainability issues are vast in scope, complex and interconnected. Good sustainability practices in one culture or society may not be considered good in another region. While quantitative data is easier to access, qualitative data can be hard to find. And quantifying ethical considerations is subjective.
• Risks, tradeoffs and misleading realities: Sustainability comes with a series of tradeoffs, but this fact is often overlooked in today's conversations about sustainability. Companies must be willing to compromise and make difficult choices about priorities to successfully achieve a sustainable future.

With these challenges in mind, there are still several steps your company can take to prioritize sustainability.

Seizing opportunities and rewards

Adopting green practices can lead to a range of benefits for companies. Sustainability can help you remain competitive in the long run. Capturing the rising demand for green products can lead to improvements in revenue and margins, possibly outweighing the costs of switching to green production. Environmental stewardship may demonstrate good will and strengthen brand loyalty among the increasing number of customers who want to spend their money according to their values.

Retailers have jumped into the game. More stores are refusing to carry products made by known environmental offenders or with ingredients that have been particularly disparaged in the market. Some popular chains offer a shopping experience with only products from only eco-friendly companies on the shelves. With many chemical companies' potential customers making the switch to green products, meeting the need is good business practice.

Chemical companies that strive for greener operations may also do better in attracting capital. A growing number of both institutional and private investors believe that businesses that endanger natural resources may face potential risks to income and cash flow. Governments around the world have stepped up their requirements for environmental protection. Sustainability practices can mitigate the threat of regulatory scrutiny, lawsuits and reputational damage.

Chemical companies are evaluating a variety of opportunities for green transformation, but the industry attention has focused on three core areas—the use of materials, production processes and product functionality.

As consumers ultimately drive business growth, eco-friendliness and sustainability in the chemical industry can ultimately be a customer-focused endeavor.

Taking calculated risks

For companies of any size, there are short- and long-term costs for making the switch to sustainability in the chemical industry. Rearranging your supply chain to procure more eco-friendly options may increase costs for materials and shipping. More efficient machinery or increased automation can make operations less wasteful.

However, can your business access the required capital? Perhaps updating your organizational structure might impact sustainability outcomes for your company. Where might your company find the time and expertise to optimize talent—in your company and in the hiring market?

Whether your company chooses an incremental path or an extensive and rapid transformation, remember that effective change is strategic. Explore the difficult questions as well as the low-hanging fruit to find opportunities that make sense for your business. You must pace your initiatives and investments with shareholder expectations for returns.

Trends that are shaping the chemical industry during the next 5 to 10 years include:

• Energy and resource transitions
• Changes in consumer buying habits
• Changing needs for and from agriculture
• Post-globalization changes in trade flows
• Changes in the consumption of consumer and healthcare products
• Digital-enabled business models that change how chemical products are bought and sold

Do the work to first understand how proposed changes align with your company's long-term business goals and objectives.

Don't forget to take advantage of expertise when considering ideas. It may be tough to fully realize the value of becoming sustainable if your plans can't balance the financial implications.

The bottom line

Few internal stakeholders, whether in the C-suite or on the plant floor, have the bandwidth necessary to manage all of the moving components of major sustainability agendas. Finding a trusted partner with experience helping chemical companies invest in sustainable practices can help ease the transition and help you integrate the effort with your broader business goals.