How digital infrastructure can help the chemical industry meet net zero targets

Chemicals and petrochemicals are the third-largest industrial subsector in terms of direct CO₂ emissions, accounting for an estimated 920m tonnes of CO₂ equivalent emissions each year. Together, they are responsible for around 3.6% of global greenhouse gas (GHG) emissions through energy used in production, and a further 2.2% from the use of fossil fuels as raw materials, or as a by-product of chemical processes.

The legislative response to climate change has been the imposition of increasingly robust reporting requirements. The EU’s recently enacted Corporate Sustainability Reporting Directive (CSRD) will mandate the reporting of Scope 3 emissions from across the supply chain, including many non-EU companies that until now have only reported on Scope 1 and 2. The SEC in the US is currently debating the introduction of more stringent requirements on climate-related reporting, including indirect and value-chain GHG emissions. And in the UK, requirements aligned with the Taskforce on Climate-related Financial Disclosures are now mandatory for larger companies and financial institutions.

The trading environment is changing too, and climate change and brand reputation are becoming inextricably linked. This is particularly relevant in the chemical industry, which is involved in the production of over 95% of manufactured goods. In a survey across seven major industrial nations in 2021, more than 80% of respondents said they regarded it as important or very important for corporations to commit to reducing their carbon emissions and achieving carbon neutrality.¹  In addition, investor-led groups such as Climate Action 100+ have called for companies to publish their 2030 interim net zero goals.

With an increased need for reporting across the full chemicals value chain, the ability to provide accurate emissions data is fast becoming a business imperative. Being open to dialogue with trading partners on carbon reduction strengthens trading relationships and ultimately translates into higher revenues.

BASF for example, the largest global chemicals producer, has positioned itself at the forefront of the carbon reduction agenda by harnessing digital infrastructure. In 2021 it became the first chemical company to provide a carbon footprint for each of its 45,000 sales products, noting that  its products “help GM to meet key sustainability targets such as a smaller carbon footprint and water and energy savings, at two of its plants.” BASF now regularly appears in the Forbes Top 100 of Global Sustainable companies.

With longer-term trends favouring lower carbon-intensive products, chemical producers need accurate emissions data to inform their modelling before investing in new plants and technology catering for demand up to 30 years from now.

¹ (Oliver Wyman Forum, April 2021)

All polypropylene (PP) may look identical, but the carbon footprint of the finished product will differ significantly according to the method and feedstock employed in its production.

Chinese PP has an average carbon footprint of 4kg CO₂ equivalent per kilo of PP (compared with, say, 1kg for South American PP). But China is home to some of the world’s most, and least emissions-intensive PP producers. There are, in fact, very few Chinese producers with an actual carbon footprint of 4kg CO₂ equivalent per kilo of PP. The highest emitting PP producer has a carbon footprint 11 times that of the lowest.

For instance, Manufacturer A’s method of gas-phase polymerisation using crude oil and gas oil as feedstock, and steam-cracked naphtha will produce PP with an extremely low carbon footprint. Whereas manufacturer B’s suspension method, using coal and gasification as feedstock, and methanol-derived propylene will produce PP with a significantly higher carbon footprint. In reality, there are hundreds of ways to produce PP, employing different processes and raw materials.

Additionally, information on a producer’s feedstock and production method only tells half of the story. Three categories of data are required to compile an accurate picture:

1. Market intelligence revealing the location of all the plants globally that produce a particular chemical; the type of technology they employ; their capacity and current output;
2. Technical data on the patent used at each plant, to be able to assess the inputs/outputs and direct emissions from the production process;
3. Trade data, to reveal the likely source of the raw material used, depending on territory/market.

The chemical industry needs to be able to meet net zero targets. In order to be held accountable, these targets must be transparent, realistic and measurable. This is only achievable with accurate, end-to-end market data.

The benefits of doing so range from enhanced brand reputation and increased customer loyalty in the short-term, to an improved ability to plan and invest strategically for the longer term to capitalise on customer demand for lower carbon-intensive products.

While the scale of the challenge might seem daunting, digital infrastructure and the opportunities it affords, already offer a solution.