Sustainability for the Chemical Industry

If you have been watching or reading the news recently, it will have been impossible to miss angry farmers hitting back at the EU Green Deal, which they claim “...forces them to abandon productive lands, to drastically reduce pesticides and fertilisers, and is an attack on meat consumption”.

2024 is a big year for elections, including the EU, which will hold Parliamentary elections between 06 ~ 09 June 2024. The European Commission this week appeared to indefinitely shelve a promised revision of its REACH regulation on chemical safety, refusing to give Parliament a clear indication of when the proposal will be tabled, if at all.

Nowhere is Europe’s struggle for industrial competitiveness more palpable than in the chemical industry supercluster of the mega-ports of Antwerp and Rotterdam, at which the chemicals that feature in everything from wind turbines to electronic devices are manufactured. European chemical companies are in direct competition with their Chinese counterparts while being subject to much more stringent environmental regulations.

Investment Opportunities

The real story does not reside with politicians but with investors. BASF, the world's largest chemical company, made the unfortunate statement "...that it would 'permanently' scale back its operations in Europe due to rising energy costs and concerns over green regulations." BASF, like many other multinational chemical companies, prefer to operate in a less stringent regulatory environment. This is not to suggest that BASF or chemical multinationals lack environmental regulatory oversight. It may be more of an excuse to position itself in a region that offers the most economic growth.

The International Chemical Secretariat (ChemSec), an independent non-profit organisation that advocates for the substitution of toxic chemicals for safer alternatives, publishes the ChemSec Report , an annual rating of the 50 largest chemical companies based on revenue. And ranks their performance in four different categories: (1) the toxicity of their product portfolio, (2) research and development of non-toxic chemicals, (3) management and transparency, and (4) the number and scope of controversies and scandals that the company has been involved in.

In 2023, SABIC ranked No. 1 with a B rating, BASF ranked 25 with a C- and last on the list was DuPont with an F rating. The competitive advantage for the chemical industry does not relate to size but rather a deep and implicit acceptance that chemicals for sustainability (including internal operations and products) are the only future the chemical industry has.

And herein lies the opportunity for Asian domestic chemical companies. The chemicals industry is the third-largest source of global industrial greenhouse gas emissions, and almost 95% of all manufactured products use chemicals as inputs, underscoring the significance of its impact.?There is a vast amount of investment opportunity for start-ups that are laser-focused on green chemicals.

Ronald Haddock, Vice-President, Strategic Planning and Transactions for LyondellBasell wrote in a recent article, "The chemical industry cannot change its image without a deliberate and significant sustainability transformation. This agenda must be both broad and deep. The magnitude of investments required to become more sustainable is daunting and the challenge is to pace initiatives and investments that balance progress on sustainability objectives with shareholder expectations for acceptable returns."

The biggest barrier to Asia's green chemical future is not the potential of the market but the visibility for startups and entrepreneurs to ascertain the size of the prize. It will not matter how much money Asian governments are seen to be offering incentives for domestic companies or startups, the lack of excitement for change and acknowledgement as to how serious the trifecta of climate change, biodiversity loss and resource scarcity will impact Asian economies is just not there.

**************************

Ms Adrienna Zsakay is the founder and CEO of Circular Economy Asia Inc. , and this article presents her opinions on the circular economy. Circular World? Video of the Week is brought to you by Circular World? Media — a brand owned by Circular Economy Asia Inc.

References

How the EU is politically structured:

• The European Parliament - Represents the people and comprises 705 directly elected Members of the European Parliament (MEPs) from the 27 EU countries.
• European Council - Institution of the 27-member European Union, composed of representatives of the 27 EU member states. Defines the general political direction and priorities of the EU.
• Council of the European Union - Represents the governments of EU countries. The Council of the EU is where national ministers from each government meet to adopt laws and coordinate policies. Ministers meet in different configurations depending on the topic to be discussed. The Council of the EU makes decisions on European laws jointly with the European Parliament.
• European Commission - Is the EU's?politically independent executive arm. It is alone responsible for drawing up proposals for new European legislation, and it implements the decisions of the?European Parliament?and the?Council of the EU.
• REACH - Is the EU regulation governing the manufacture and import of chemical substances. REACH is an acronym for the “registration, evaluation and authorization of chemicals” and has been in force in all EU Member States since June 1, 2007. It also applies in Iceland, Lichtenstein, and Norway.

‘Symbol of Polarisation’: EU Scraps Plans to Halve Use of Pesticides ', written by Jon Henley, Sam Jones and Lorenzo Tondo, published by The Guardian, 06 February 2024.

'Do Not Get Confused ', published by the Council of Europe

'EU Quietly Shelves REACH Regulation on Toxic Chemicals ' by Frédéric Simon, published by Euractiv, 07 October 2023 and updated 16 February 2024.

'The Chemical Industry: What Investments Need To Be Made To Get to Net Zero? ' by Ronald Haddock, published by Barrons, 25 January 2024.