Chemicals

Green hydrogen could help significantly reduce global carbon emissions. And developing a hydrogen-based economy will bring many new opportunities for the chemicals sector. However, sustainable hydrogen and hydrogen-based resources are not yet readily available in the near term.

Almost all of today’s hydrogen is ‘grey’ hydrogen produced using fossil fuels – natural gas, in particular. While green hydrogen production is possible, it often costs many times more than grey hydrogen.

By innovating green hydrogen production processes, the chemicals industry has an opportunity to reduce both its own carbon footprint and that of other hydrogen-using sectors across the supply chain. Chemical companies also have an opportunity to expand their capabilities in this area through cross-sector collaboration and acquisitions of innovative startups.

While chemical companies today continually pursue innovation through internal research initiatives, they have an opportunity to accelerate such efforts through industry and cross-industry collaboration.

Many governments around the world are providing financial support and other incentives to encourage these efforts, and companies should seek these out.

As they pursue net-zero goals, companies also need to be ready to work with competitors and customers to improve innovation across the industry and the global supply chain. Sustainability isn’t something that can be achieved by individual effort alone – it requires a wide range of resources and skills across industries and stakeholder groups.

Because its products are used by so many other industries, the chemicals sector is in a unique position to drive sustainability across the global supply chain. Significant opportunity lies in innovating new ways to reduce industry waste, replace traditional materials and processes with lower-carbon ones and enable greater product recovery and recycling.

Such innovations would not only help move many businesses and end consumers closer to net zero, but could deliver a range of other knock-on benefits: increased product durability, reduced need for repurchases and greater opportunities for reuse and repair. They could also make it easier for industries to comply with evolving regulations on carbon and waste, integrate sustainability performance into their reporting and lead the way on new trends and standards.

As global net zero efforts gain momentum, the chemicals sector has an opportunity to reshape its product portfolio accordingly through mergers, acquisitions and corporate venturing activity. So it needs to be looking at ways to rethink its approach to deals and partnerships.

New strategies will help chemical companies access new technologies and capabilities, expand into new business models and capture new opportunities for growth. Such approaches are needed to overcome current challenges such as stagnating growth and a lack of agility.

At the same time, the industry is also likely to see growing divestment of carbon-intensive assets. Companies that shed unsustainable lines of business can not only shrink their carbon emissions but can also reduce their exposure to climate and regulatory risks.

The Asia-Pacific region will play a dual role in the future of the chemicals industry. For multinationals, it’s a market with a large potential for growth. The region’s expanding number of market consolidators and low-cost players will also mean increasing competition for established companies.

As a leader in the industry’s growth over the past couple of decades, the Asia-Pacific region is expected to continue gaining increased influence on global trade. And the region’s growing demand for chemical products creates new opportunities for companies that can establish a foothold in local markets – whether through developing new products for those markets, partnering with Asian industry players or tailoring sales activities to local needs.

Doing business in Asia-Pacific – China in particular – also raises the potential for new industry opportunities and challenges. It will be important to stay abreast of potential risks that could arise from market volatility, local environmental hazards, regulatory updates and intellectual property rights considerations.