// . //  //  The Chemical Industry's Key Role In A Nature-Positive Future

Today, the resources being consumed by humans are equivalent to 1.75 times the Earth’s capacity to regenerate them. This unsustainable level of resource consumption has led to the exceeding seven out of eight globally quantified safe and just Earth system boundaries, putting us at risk of crossing irreversible tipping points.

The chemical industry is a $4 trillion global sector that plays a vital role in our daily lives, providing essential materials for 95% of all manufactured goods worldwide. However, it is also the largest industrial energy consumer and the third largest emitter of direct carbon dioxide emissions. Therefore, it is crucial for the chemical sector to contribute to a nature-positive and net-zero future while operating within the Earth's safe boundaries.

The need for a transition to a “nature positive” approach has never been more urgent. In 2022, 196 parties signed up to the Kunming-Montreal Global Biodiversity Framework (GBF), committing to halt and reverse nature loss by 2030 and achieve full recovery by 2050. Meanwhile, regulators are moving towards requiring companies to disclose their nature-related impacts. Embracing a nature-positive transition aligns with companies’ net-zero commitments and can contribute up to 37% of the emissions reductions required by 2030 to keep the global temperature increase below 2 degrees Celsius.

Accordingly, companies need solutions to address climate change and nature loss together. Iris Herrmann, a partner in our Energy and Natural Resources Practice discusses the unique opportunities for companies in the chemical sector, and explores the ways in which they can embrace nature as part of their sustainability journey.

Why is the chemical industry crucial to nature?

The chemical sector plays a crucial role in our daily lives, providing essential ingredients for a wide range of products worldwide. In fact, approximately 95% of consumer goods, mobility services, and fertilizers are reliant on chemical processing in their upstream production.

When discussing climate change, and its impact on nature, it is impossible to overlook the role of chemicals. This industry is not only energy-intensive but it also has significant implications for emissions, pollution, land use, and water resources. It is important to address these challenges to minimize the sector's environmental footprint.

However, it’s worth noting that the impact of the chemical industry extends beyond its own operations. By enabling sustainable solutions in downstream industries, it plays a pivotal role in driving positive change across various sectors. For instance, the development of electric vehicles heavily relies on chemical materials for their batteries, highlighting the sector's importance in advancing sustainable transportation.

The chemical industry presents a unique opportunity for innovation and collaboration to address environmental concerns. By embracing sustainable practices and investing in research and development, the sector can contribute to a more nature-positive future.

How are chemical companies navigating risks and opportunities in greening their supply chains?

The chemical sector relies heavily on nature and the ecosystem services it provides. Water is essential for processing and cooling, while fossil resources like oil and gas serve as crucial feedstocks. Additionally, minerals, metals, and biomass are mined or utilized within the industry. However, these dependencies also pose significant risks to the supply chain.

Environmental factors, such as natural disasters, flooding, and storms, can disrupt the supply chain and create vulnerabilities. Moreover, changing consumer behaviors, capital allocation decisions, investor expectations, employee demands, and public perception exert pressure on the sector to prioritize sustainability.

There is also a growing trend towards mandatory disclosure requirements, making the operating environment even more challenging. However, amidst these challenges lies an opportunity for proactive action. By effectively managing supply chain risks, building resilience, and transforming business models, the sector can not only mitigate negative impacts but also contribute positively to nature and climate.

Embracing sustainability practices and seizing opportunities to make a positive impact on the environment can position the chemical sector as a leader in the transition towards a more sustainable future. By taking proactive measures, the industry can navigate the evolving landscape and contribute to a nature-positive and climate-friendly economy.

What are some of the factors that make the chemical sector highly dependent on nature and ecosystem services, and how do these factors also pose significant supply chain risks?

The most mature initiatives in the chemical sector are those that prioritize resource efficiency, as they often have a tangible cost impact. These initiatives focus on recovering heat and utilizing it for new processes, saving energy, and reducing material consumption. The positive impact on both the environment and the business case makes resource efficiency practices increasingly common among chemical companies. Continuous improvement in this area has made these practices almost business as usual.

However, the transition towards sustainable sourcing presents a more complex challenge. Efforts are being made to shift towards bio-based or waste-based feedstocks, utilizing renewable materials. The key challenge lies in accessing these materials at a large scale and ensuring cost competitiveness and supply availability. Additionally, when it comes to biomass, there are trade-offs to consider. Scaling up biomass usage raises concerns about monocultures, competition with food production, and potential adverse effects on nature. Striking a balance between the interest in renewable feedstocks and these considerations requires further technological advancements and careful evaluation of these factors.

The dynamics in sustainable sourcing are evolving, and there is a need for greater technology maturity and a thoughtful balancing of various factors. Chemical companies are actively exploring solutions and working towards finding the right approach that aligns with their sustainability goals while minimizing potential negative impacts. By addressing these challenges, the sector can continue to progress towards a more sustainable and nature-positive future.

How do chemical companies contribute to addressing problems of waste?

The field of sustainable chemistry is dynamic. Chemical companies have numerous opportunities to make a positive impact, not only in the supply chain and product design but also in managing new value chains. Plastic circularity serves as an example, as plastic waste has become a significant societal challenge. The journey towards circularity begins with product design that facilitates easy recycling, disassembly, decomposition, or cleaning once collected. Additionally, designing products for durability extends their lifespan, reducing their contribution to waste.

Technological innovation plays a crucial role in achieving circularity. Chemical recycling, for instance, holds promise in transforming waste back into valuable raw materials. While there are ongoing pilots demonstrating its feasibility, scaling up remains a challenge. Ensuring sufficient access to waste materials and cost efficiency in the conversion process are key considerations.

What makes this field particularly intriguing is that chemical companies no longer work in isolation. They actively seek alliances and partnerships to drive value creation. Collaboration across industries and sectors is crucial in tackling the complexities of sustainability and achieving meaningful progress towards a circular economy.

By embracing innovation, fostering partnerships, and addressing the challenges at hand, chemical companies can play a pivotal role in advancing circularity and creating a more sustainable future.