Energy Transition

Compound benefits: Why a shared vision is key to a more sustainable chemicals industry

Collaboration, disruption and innovation can put the chemicals industry on a sustainable path.

Collaboration, disruption and innovation can put the chemicals industry on a sustainable path. Image: Shutterstock

Jade Rodysill
Principal, Downstream Energy, Chemicals & Materials Industry Leader, Ernst & Young
Charlie Tan
Chief Executive Officer, Global Impact Coalition
This article is part of: Centre for Energy and Materials
  • The chemicals industry, a major energy consumer and emitter of 6% of the world’s greenhouse gas emissions, must innovate to meet net-zero emissions goals amid rising demand.
  • Achieving a sustainable future in the chemicals sector requires collaboration, technological innovation and a shift toward a circular economy.
  • Digitalization and AI provide an opportunity for the chemicals industry to move towards a cleaner future.

The chemicals industry stands at a pivotal juncture, tasked with reconciling its essential role in the global economy with the pressing demands of environmental sustainability.

The industry contributes around 6% of global greenhouse gas (GHG) emissions, with a reliance on fossil fuels for energy and feedstock. With the world seeking a greener future, the sector’s carbon footprint is coming into sharp focus. Embracing sustainable practices is not merely a choice, but an imperative for continued innovation and leadership in an increasingly challenging market.

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According to the International Energy Agency, to meet global emissions reduction targets and reach net zero by 2050, the chemicals sector needs to reduce emissions by 18% by 2030, a challenge given the sector’s growth. To achieve this goal, the industry must reorganize its operations, aiming for swift decarbonization this decade.

The chemicals industry is actively transforming, aiming for a sustainable future with net-zero carbon emissions. The path is complex, yet significant strides are being made, with breakthroughs such as electrifying the steam cracker used by chemical companies to convert naphtha or natural gas liquids into basic building blocks and advancing technologies to improve the recycling of plastics with a lower carbon footprint. These advancements are pivotal in curtailing the industry’s carbon footprint and historical dependence on fossil fuels.

Despite these gains, the urgency to further reduce the industry’s environmental impact remains. Industry leaders are responding by forging new alliances dedicated to cultivating innovative business models and state-of-the-art technologies. Such collaborative projects are not only reducing emissions, but paving the way for the industry to solidify its sustainability commitments. As the chemicals sector embraces these changes, it sets a powerful example for other traditional industries, demonstrating how to evolve and thrive amid the growing demands for environmental responsibility.

A culture of collaboration

Key collaborative efforts, such as the Global Impact Coalition (GIC) working with Ernst & Young LLP (EY US), are aiming to advance sustainability through innovation. Incubated by the World Economic Forum, the GIC emerged with its foundation rooted in the collaboration of prominent chemical companies. It serves as a collective space to develop new business models and technologies, with the goal of net-zero emissions in the chemicals industry. The EY organization, leveraging its global network and sector-specific knowledge, supports the GIC’s objectives by contributing to the necessary dialogue for advancing sustainability.

EY US and the GIC seek to encourage a culture of collaboration and the sharing of knowledge within the chemicals sector and its related supply chains. For example, the GIC’s Automotive Plastics Circularity (APC-24) project was launched to improve the recycling rate of end-of-life vehicle plastics, which is currently around 20%. EY US provides a platform for industry leaders to engage in discussions about the practical challenges and potential opportunities for implementing new technologies and incorporating sustainable practices into business models.

The power of disruption

In the chemicals industry, leveraging disruption is critical for unlocking innovation and growth. Platforms for knowledge-sharing and joint creation are vital, enabling companies to exchange insights, celebrate successes and tackle sustainable transformation challenges together. As the sector progresses, it must enhance its societal and environmental contributions, manage supply chain shifts and demand changes and integrate operations with nature.

Innovation is paramount, with digitalization and artificial intelligence (AI) offering new avenues for increased productivity and profitability. AI applications range from optimizing manufacturing efficiency to accelerating R&D and enabling chemicals compliance. As AI evolves, companies must team together to harness its potential while navigating risks and regulatory compliance and pooling resources to achieve sustainability goals more swiftly. While AI usage may increase emissions, the focus is on balancing this with the emission reductions AI enables, turning disruption into a strategic advantage.

Innovate towards the future

The chemicals sector has already made strides in energy efficiency, but the next phase of emissions reduction and “defossilization” (moving away from virgin fossil materials) will be more challenging. To meet these challenges, the sector is turning to innovation, exploring bio-based materials, recycled plastics and captured carbon dioxide as alternative feedstocks. Upgrading systems and plants for sustainability is also crucial.

Collaborative innovation is the linchpin of this transformation. By pooling knowledge and resources, the chemicals industry can fast-track the development and adoption of groundbreaking technologies to significantly cut emissions from chemical production and recycling. This requires a shift toward a culture of perpetual learning and evolution.

Pioneering methods like chemical recycling and pyrolysis demonstrate the power of joint efforts to find actionable sustainability solutions. Chemical recycling, for instance, converts plastic waste back into valuable raw materials, lessening the dependency on fossil fuels. Unlike mechanical recycling, which reshapes plastics, chemical recycling deconstructs them to their chemical components, providing a fresh feedstock for new chemicals.

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In the chemicals sector, where companies are interconnected as competitors, suppliers and customers, collaboration is crucial. By embracing a shared vision, the sector can leverage its collective strength to drive innovation and transition toward a net-zero future. This collaborative approach mitigates risks, unlocks economic opportunities and ensures the industry’s role in a sustainable world.

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