The Great Disruptor
Global forces at play
The chemical industry has a complicated relationship with sustainability. According to Eurostat, 70% of European chemicals are hazardous for both human health and the environment. The exhaustion of mineral and organic raw materials, the release of toxic waste into waters, the planet’s inundation with plastics, all play against the industry’s reputation. But chemistry is also at the heart of responding to the environmental issues that the world faces, from feeding the growing global population, to finding alternatives to fossils-fuels in transportation, energy, or plastics.
As a result of this conundrum, chemical companies can start seeing themselves as part of the solution to a more sustainable future, rather than just part of the problem. Players in this sector have taken greater ownership of their responsibility as carbon emitters and responded by greenifying their value chains, showing greater carbon-consciousness through both reactive measures like shifting to alternative energy sources, and proactive ones, like better monitoring water use or the sources of their raw materials. The second dimension sees chemical companies as solution providers in the greenification of their partner downstream industries.
“We are at a significant juncture where we have the opportunity to put sustainability at the core of our recovery plans and policies and change the way we produce and consume.”
Keynote Address by Grace Fu, Minister for Sustainability and the Environment, at the 7th Singapore Dialogue on Sustainable World Resources,
4 November 2020
Over the last two decades, the notion of sustainability has changed significantly; from a periphery after-thought associated with left-wing politics and cheque-writing for charities, sustainability is currently framed as one of the biggest disruptors of the century. As the world is reaching a point of irreversible climate change and resource depletion, sustainability is finally recognized as how the UN Brundtland Commission first defined in 1987: “A development that meets the needs of the present, without compromising the ability of future generations to meet their needs.”
Landmark inter-governmental initiatives have brought official recognition of climate change challenges, putting scientific data about global warming on the tables of national leaders. From the UN Global Compact signed more than 20 years ago under the leadership of former UN Secretary-General Kofi Annan, initiatives like the Paris Agreement and the UN Development Goals have created a broad framework for governments and industries to align themselves with sustainability goals. In the chemical industry specifically, REACH (Registration, Evaluation, and Authorization of Chemicals) or the voluntary Responsible Care initiative have helped standardize sustainability indices. Besides chemicals-specific regulations, the industry is also shaped by the environmental regulations of its partner industries, such as the automotive sector, which has been subject to growing environmental pressures.
However, these broad, long-term policy directives are translated inconsistently in different countries and, without direct clear implementation systems, they cannot be effective on their own. “Governmental and regulatory drivers for ESG and particularly climate change mitigation can sometimes be mild and there is a general lack of accountability for the Paris Agreement signatories,” said Paul Kau, EHS technical director for Asia at Golder.
The financial sector has added another muscle to the sustainability agenda, even though, as Kau reminded GBR, we are still far from reaching the quantum of green investment needed to curb climate change.
The pandemic has brought some fresh impetus in this sense. On the governments’ side, The Bank of America announced an impressive US$1.5 trillion in sustainable finance by 2030. In the world’s second-largest economy, the Chinese Development Bank issued 200 billion RMB green bonds for the country to achieve carbon neutrality. Keeping up with this trend, the Monetary Authority of Singapore (MAS) set up a US$2 billion green investments program. In the private space, even before the pandemic, global ESG investments – that is investments made with a sustainability goal – surged to US$30 trillion in 2019, according to the Global Sustainable Investment Alliance.
This heightened interest can be explained by greater regulation in the financial space, demanding more transparency and favoring investments that can prove long-term value. Self-imposed regulation like the TCFD (Taskforce on Climate Related Financial Disclosure) is very prominent in the financial space, but external requirements are also becoming more standard. Coming into force in 2020, the EU Sustainable Finance Disclosure Regulation (SFDR) asks financial market participants to disclose product information related to ESG and categorize products into three classes: mainstream; products promoting environmental or social characteristics; and products with sustainable investment objectives. By making these distinctions the new law sees sustainability reporting not just as a risk-mitigating mechanism but also as an incentive for ESG-minded investments by recognizing the complexity of “sustainable” products across three tiers.
Indeed, companies that have a higher sustainability focus appear to perform better in the stock market, as a Harvard Business School discovered after analysing 180 companies. Gabriele Unger, general manager of Together for Sustainability (TfS) initiative, told GBR that the pandemic has not pushed back the sustainability focus, but quite on the contrary: “I believe this lends support to the theory that sustainable companies tend to be more resilient in times of crisis and better equipped to go past that crisis,” she said.
Reputation and competition
Despite the various regulations and potentially vaster investors’ interest, the chemical industry lacks a standardized and inclusive carbon monitoring system that could serve both as a method to check in with sustainability practices, but also as a platform to create peer pressure and a “reward” system whereby good practice is recognized. Without such a system in place, fine chemicals company DIC Corporation took matters into its own hands, creating the DIC Sustainability Index, essentially a matrix to evaluate a product’s societal value in balance with its economic value: “We use the Index as a grading system when developing new products, calculating projections about the overall carbon footprint, energy and water use, and the impact on society,” said Paul Koek, regional managing director at DIC Asia Pacific.
Not every chemical company will create internal sustainability indexes, but it has become more common for these companies to publish periodic sustainability reports, showing greater accountability and outlining actionable targets; for instance, CMC Materials published its first such report in 2020 and Infineum in 2021.
Though not prescribing in effect, popular lists like the Dow Jones Sustainability Index also create an opportunity for chemical companies to compete on a sustainability level. Lanxess, for instance, is at the top of this Index in Europe for its category and second place globally. The company is keen to maintain its leadership, driving various actions to become carbon neutral by 2040, and adapting its business priorities to opportunities in sustainable water management, where it would like to be present by 2023. Another highly regarded certification is EcoVadis. Nouryon, for instance, is proudly showing its silver EcoVadis rating for 2020 on the back of measurable improvements including reducing carbon emissions by 29% since 2009, with a further target to drive these down by 25% by 2025.
“Committing to cut down CO2 emissions by 36% by 2030 against 2005 levels, the government gives both carrots and a stick to motivate manufacturers towards reducing emissions. These initiatives create a ‘peg’ for manufacturers to engage with tech providers.”
Joseph Lee Ching Hua, Head of Co-Innovation Centre & General Manager of Development Centre, Yokogawa Southeast Asia
Singapore’s sustainability manifesto
Former Prime Minister of Singapore Goh Chok Tong once remarked that Singapore was probably the only country whose cabinet spent time reading gardening reports. Though a small country like Singapore has a negligible CO2 footprint compared to other nations, the city-state is keen to become a trailblazer for sustainable development – and its ambitions closely involve the chemical industry.
Singapore took bold steps to flag its presence on the global scene in terms of sustainability, becoming one of only 25 countries to institute a carbon tax: “The carbon tax approach is not a revenue-generating initiative as we are reinvesting the collected tax back into the industry. We have committed S$20 million into energy-efficient and carbon abatement projects and we have a healthy pipeline for 2021. If all of these projects are realized in 2021, we are looking at eliminating CO2 emissions equivalent to halving the car population and their tailpipe emissions in Singapore,” shared Ow Kai Onn, vice president & head, chemical and materials at EDB.
The carbon tax principally affects Jurong Island players, who are pressured to ramp up decarbonization efforts.
Zero-waste wannabe Singapore also set aside S$25 million for waste-to-energy (WTE) R&D programs, working towards a circularity model that replaces the “take, use, throw” model with a “use and reuse” one. The country wants to be known as a knowledge center for both mechanical and chemical plastics recycling. Last year, the Singaporean German Chamber of Commerce (SGC) presented to the Minister for Sustainability and the Environment the Grün Book (“Green Book”), together with the objective to establish a Centre of Excellence for Plastics Recycling (PRCOE) and a PET bottle-to-bottle recycling plant in the country. Companies including SABIC, Mitsui Chemicals, Honeywell, Clariant, Braskem, Covestro, Veolia, Shell, SUEZ, ExxonMobil and Veolia are all members of the Alliance to End Plastic Waste, which is headquartered in Singapore.
As part of Singapore’s Sustainable Singapore Blueprint the country aims to achieve an overall 70% recycling rate. Singapore’s recycling ambitions are encouraged by the success in NEWater, through which the water-poor country managed to overcome its dependency on water imports by reclaiming wastewater. 40% of Singapore’s water needs are met through its five NEWater plants using microfiltration, reverse osmosis and ultraviolet disinfection technology.
Singapore is also making important strides to shift to renewable energies and already ranks first in Asia for its progress in transitioning to cleaner energy, according to the World Economic Forum’s Energy Transition Index in 2020. Currently, one of the world’s largest floating solar energy systems is being built in Singapore by Sunseap Group.
Image courtesy of A*STAR