The chemicals sector is one of the largest and most economically important industries in the world, employing 15 million people directly and over 60 million people indirectly. Chemical products are found in every aspect of modern life – in the energy systems powering our cities, in the fertilisers and pesticides used in modern agriculture, in pharmaceutical development, in construction, and in most of the consumer goods we use on a day to day basis.
There is no doubt that chemicals will remain vital for the global economy well into the future, including here in the GCC, which has seen its share of global production capacity double between 2000 and 2017 to reach 6.6%. However, what is being increasingly questioned is whether the sector can continue to operate as it has in the past. The chemicals industry has had significant adverse impacts on the environment and is a major contributor to the greenhouse emissions that are responsible for climate change. And these impacts have been felt across the entire value chain.
The chemical industry’s final energy consumption is the highest of any industrial sector; its operations cause substantial runoff of pollutants into the local environment, air and waterways; and many chemical sector products – plastics and fertilisers are two notable examples – are also causing serious environmental harm. At the global level, the sector is mobilising to address these issues, with a range of regulatory action and industry-led and initiatives to incentivise more sustainable business models.
Leading chemical companies have been making ambitious net zero targets, to align their business models to the Paris Agreement goals, and it is increasingly apparent that this will be the industry standard for the chemical sector in the near future. Actualising ambitious sustainability goals, however, poses several challenges, not least for the chemicals industry in the GCC, which has historically been subject to less onerous environmental regulatory oversight.
This HSBC EY Sustainable Transition of the Chemical Sector report lays out a multi-disciplinary approach to address these challenges, where various stakeholders including regulators and policymakers, financial institutions, consumers and others have a part to play in supporting the chemicals sector as it transitions to a low carbon future.