INSIGHT: Focus on raw materials carbon footprint to reduce Scope 3 emissions

NEW YORK (ICIS)–Chemical companies are sharpening their focus on the carbon footprint of raw materials in a bid to not only reduce their own Scope 3 emissions but those of their customers.

When it comes to measuring and reducing Scope 3 emissions for chemical companies, increasingly the focus is on upstream – on the raw materials they buy.

That’s because downstream emissions resulting from the use of chemicals is exceedingly difficult to measure as they typically go into so many different applications, explained Richard Haldimann, chief technology and sustainability officer at Switzerland-based Clariant.

“When we set a Scope 3 target, we decided we would focus on the parts we have the biggest chance of influencing, and that’s upstream. We actually set a target for Scope 3, Category 1 which is purchased raw materials,” said Haldimann in an interview with ICIS.

“That we can influence by decisions on what kinds of raw materials we buy to make our products,” he added.

Scope 3 emissions comprise over 60% of Clariant’s total GHG emissions.

For its raw material purchases, the company is working on several levers. One is a drop-in of the same raw material but from a source that has a significantly lower carbon footprint.

“Depending on the regions you’re buying raw materials from, companies have a very different carbon profile. Some suppliers are going to have products that are made completely differently, and that’s actually a significant portion of the savings we identified,” said Haldimann.

For example, Clariant uses nitric acid as a raw material, the production of which generates nitrous oxide (N2O) – a powerful greenhouse gas with about 300 times the global warming intensity of CO2.

“You can identify the companies that have N2O abatement systems and can switch suppliers to buy nitric acid that has a much lower carbon footprint,” said Haldimann.

Clariant works with suppliers to calculate the carbon footprints of the raw materials it purchases as well as consulting databases that calculate supplier-specific carbon footprints based on certain process technologies used.

Clariant is also part of the working group in Together for Sustainability (TfS), a chemical procurement organisation which has come out with a criteria catalogue for calculating product carbon footprints, he noted.

With Scope 3 in mind, US-based Trinseo sees a big opportunity in using green ammonia – not as a hydrogen energy source (which would be Scope 2), but as a raw material. The production of traditional ammonia is highly energy and carbon intensive.

“One of the most exciting parts is sourcing green ammonia and what this means for the carbon footprint of our products. We see lots of opportunities on the horizon,” said Trinseo CEO Frank Bozich in an interview with ICIS.

Green ammonia is produced from the electrolysis of water to make hydrogen using renewable energy such as wind or solar. The green hydrogen is reacted with nitrogen separated from air to make green ammonia.

Trinseo uses ammonia as a feedstock for methyl methacrylate (MMA) production, which it then uses to produce polymethyl methacrylate (PMMA) polymer. It sources acetone and ammonia feedstocks for MMA production primarily from two suppliers in Italy, according to its 10-K annual report filing with the US Securities and Exchange Commission (SEC).

Customers in automotive and consumer products in particular have been much more proactive in looking for sustainable solutions, Bozich noted.

Trinseo is targeting a 35% reduction in Scope 1 and 2 GHG emissions intensity by 2035 from a 2017 base, and plans to begin reporting and tracking Scope 3 emissions by 2025. The company is also focusing its mergers and acquisitions (M&A) strategy on low carbon intensity businesses.

DISTRIBUTORS SHARPEN FOCUS
For chemical distributors, whose key role is to source and transport products, their Scope 3 emissions footprint looms large. The carbon footprints of the products they source and distribute are not only part of their own Scope 3 emissions but become part of their customers’ Scope 3.

Univar has mapped out Scope 3 emissions for its entire supply chain for the very first time, with results disclosed in its 2021 ESG report released in June 2022.

Of its 10.1m tonnes of CO2 equivalent Scope 3 emissions in 2021, 9.9m tonnes, or 98%, came from purchased goods and services, using a life cycle analysis approach. For Univar to reduce its Scope 3 emissions, collaborating with suppliers will be key.

“I don’t think there’s any getting away from the fact that with 98% coming from products, it will be largely working with the supply chain, much in the way we do with our Supplier Code of Conduct,” said McCarroll from Univar Solutions.

Univar Solutions’ Supplier Code of Conduct stipulates that suppliers “actively pursue reduction of direct and indirect greenhouse gas (GHG) emissions in line with recognised standards”, among a number of other requirements.

Univar itself aims to reduce Scope 1 and 2 emissions by 20% by 2025, 40% by 2030 and achieve net zero direct emissions by 2050. While no target for Scope 3 emissions has been announced, it is clearly an area of focus.

“Ultimately, we need to meet our customers’ needs, so as we move forward it will be a mixed method approach of working with suppliers to get the most accurate data possible… but also looking at specific product families and product groups where that data is not currently available,” said McCarroll.

More and more customers are asking for carbon footprints, driving the momentum for suppliers to not only reduce carbon intensity but disclose this critical information.

REGULATORY PRESSURE RAMPS UP
Regulatory pressure is ramping up as well. The European Commission in April 2021 released a proposal for a Corporate Sustainability Reporting Directive (CSRD) which envisions the adoption of EU sustainability reporting standards. This would require all large and public companies to disclose Scope 3 emissions among other items.

The first set of standards would be adopted by October 2022, according to the proposal.

In the US, the Securities and Exchange Commission (SEC) has proposed a new rule that would require publicly traded companies to disclose GHG emissions, including Scope 3, along with climate-related risks and targets to achieve net zero emissions.

Companies would be required to disclose Scope 3 emissions if they are material or if the company has set a GHG emissions reduction target that includes Scope 3, according to the proposed rule.

“Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognise that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” said SEC chair Gary Gensler in March when the rule was proposed.

The American Chemistry Council (ACC) expressed concerns about the proposed SEC rule, especially regarding Scope 3 emissions.

“The proposal’s heavy emphasis on Scope 3 emissions reporting raises particular concerns for ACC members… Public companies and their suppliers, customers, and end users may be subject to intense pressure to conduct onerous Scope 3 emissions analyses regardless of materiality,” said the ACC in a June statement.

“Scope 3 reporting should focus on qualitative assessments of investment risks and should not require quantitative reporting at this time,” the ACC added.

Yet companies have to prepare for detailed Scope 3 emissions disclosures, as that’s where the regulatory winds are blowing.

LOWER CARBON FOOTPRINT WITH RECYCLED MATERIALS
So what can companies do to actually shrink the carbon footprint of their products and overall Scope 3 emissions?

One option is to source more recycled raw materials which typically have lower carbon footprints.

With recycled material, the end-of-life of the waste material is the starting point. Thus the carbon footprint of originally making that material is skipped, noted Clariant’s Haldimann.

“An example is that we’re using recycled copper instead of virgin copper for some of our catalysts. We’re making sure the metals we’re using are coming from a recycled stream,” he said.

Recycling technology company Agilyx is measuring the carbon footprint of recycled plastics using its technology for consumers seeking to reduce their Scope 3 emissions.

Recycled polystyrene (PS) produced from Agilyx’s technology has 75% less carbon emissions than virgin PS, according to a life cycle analysis (LCA) conducted by @SCS4Circularity released in July 2021.

Reactors using Agilyx’s technology can also be electrically heated, which means they can run on 100% renewable energy, according to the company.

“Because we’re licensing technology, we’re providing a piece of their overall picture, and also working to provide more services in the area of understanding how that fits in, and how that can be used to calculate and drive down their overall emissions,” said Tim Stedman, CEO of Agilyx, in an interview with ICIS.

BIO-BASED RAW MATERIALS IN DEMAND
Another major lever on the raw materials side to reduce carbon footprint is the use of bio-based materials.

“We look to source bio-based materials that are coming primarily from waste streams or side streams so we’re not food competing. Here you have a lower carbon footprint to start out with,” said Haldimann.

For example, Clariant is using rice bran wax – a wax that comes out of the rice bran oil making process – to produce a range of coatings (for cans, fertilizer, paper), replacing petroleum-based wax raw material, he noted.

In addressing Scope 3 emissions, Covestro plans to source increasing volumes of bio-based toluene and benzene feedstock.

Covestro aims to ramp up production of renewable methylene diphenyl diisocyanate (MDI), toluene diisocyanate (TDI) and polycarbonate (PC). The renewable MDI and PC are characterised as climate neutral while the TDI is low carbon. It announced the launch of renewable TDI in March, renewable MDI in February and renewable PC in December.

Renewable TDI is being produced in Dormagen, Germany, and Caojing, China.

In February, Covestro announced the first delivery of 1,500 tonnes of mass balanced phenol from Mitsui Chemicals to Covestro in Shanghai, China, with a later supply of acetone planned to be delivered to Map Ta Phut, Thailand. The raw materials will be used for Covestro’s PC production at those sites.

“It is still relatively small quantities, but several thousand tonnes produced and sold. We want to get this flywheel spinning, so we need more feedstock, green energy and to convince more customers to go for it. There is pressure from retail and an entire movement towards circular products,” said Covestro’s Toepfer.

Demonstrating the value of low and zero carbon products, Covestro is selling renewable MDI, TDI and PC at a “significant premium”, he added.

In January, Covestro and Genomatica announced the first production of significant volumes of bio-based hexamethylene diamine (HMDA), a raw material for Covestro’s coatings and adhesives. HMDA is also a key precursor for nylon 6,6.

For more information on Supplier Carbon Footprints launched by ICIS in partnership with Carbon Minds, visit here

Insight article by Joseph Chang