Moving Toward Sustainability in the Chemical Industry
Concerns from consumers and investors are driving the push for companies to go green, the business case for sustainability in the chemical industry remains stronger than ever. Green chemistry has already emerged as a robust, multi-billion dollar market. Many conventional companies, on the other hand, face the risk of shrinking or outright disappearing markets.
The industry's sustainability agenda isn't only about keeping up with today's market. It's a strategy for meeting the needs of the market of the future.
Seizing opportunities and rewards
Adopting green practices can lead to a range of benefits for companies. Sustainability can help companies remain competitive in the long run. Capturing the rising demand for green products can lead to improvements in revenue and margins, possibly outweighing the costs of switching to green production. Environmental stewardship may demonstrate good will and strengthen brand loyalty among the increasing number of customers who want to spend their money according to their values.
Retailers have jumped into the game. More stores are refusing to carry products made by known environmental offenders or with ingredients that have been particularly disparaged in the market. Some popular chains offer a shopping experience with only products from only eco-friendly companies on the shelves. With many chemical companies' potential customers making the switch to green products, meeting the need is good business practice.
Chemical companies that strive for greener operations may also do better in attracting capital. A growing number of investors—institutional and private investors—think that businesses that endanger natural resources may face potential risks to income and cash flow. Governments around the world have stepped up their requirements for environmental protection. Sustainability practices can mitigate the threat of regulatory scrutiny, lawsuits and reputational damage.
Chemical companies are evaluating a variety of opportunities for green transformation, but the industry attention has focused on three core areas—the use of materials, production processes and product functionality.
As consumers ultimately drive business growth, eco-friendliness and sustainability in the chemical industry can ultimately be a customer-focused endeavor.
Taking calculated risks
For companies of any size, there are short- and long-term costs for making the switch to sustainability in the chemical industry. Rearranging your supply chain to procure more eco-friendly options may increase costs for materials and shipping. More efficient machinery or increased automation can make operations less wasteful.
However, can your business access the required capital? Perhaps updating your organizational structure might impact sustainability outcomes for your company. Where might your company find the time and expertise to optimize talent—in your company and in the hiring market?
Whether your company chooses an incremental path or an extensive and rapid transformation, remember effective change is strategic. Explore the difficult questions as well as the low-hanging fruit to find opportunities that make sense for your business. Areas to begin might include:
- Supply chain management
- Life cycle analysis
- Carbon footprint and energy-efficiency management
- Corporate social responsibility programs
- Green building certification
- Sustainable packaging solutions
Do the work to first understand how proposed changes align with your company's long-term business goals and objectives.
Don't forget to take advantage of expertise when considering ideas. It may be tough to fully realize the value of becoming sustainable if your plans can't balance the financial implications.
Few internal stakeholders, whether in the C-suite or on the plant floor, have the bandwidth necessary to manage all the moving components of major sustainability agendas. Finding a trusted partner with experience in helping chemical companies invest in sustainable practices can help ease the transition and help you integrate the effort with your broader business goals.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.