Navigating the Chemical Sector’s Challenges, Solutions, and Collaborative Pathways to Sustainability

As more and more industries work to expand and improve their sustainable practices, the chemical sector finds itself at a crossroads between needing to shift away from its deep-rooted dependence on raw materials derived from petroleum (petrochemical feedstock), although faced with supply limitations and technical restraints to stop their greenhouse gas emissions (GHGs). At the same time, there is a developing regulatory and litigious focus on the use of hazardous chemicals, particularly persistent chemicals, and their negative public health implications. The chemical and petrochemical industry accounts for about 40% of all industrial energy use and emissions in the U.S.; petrochemical feedstock accounts for 12% of global oil demand. It is also important to note that the hazards within the industry expand beyond the components of the chemicals to the way the chemicals are made, produced, and sold. In the following, we’ll delve into these two primary challenges the industry faces, particularly those due to the climate crisis and the pressing demand by consumers and government institutions for fossil-free, resource-efficient, and non-toxic alternatives.

To start, the chemical sector is comprised of specialty and commodity chemicals. Specialty chemicals cater to specific consumer and industrial needs and include anything from adhesives, additives in food, beverage, and cosmetics, coatings, paints, cleaners, flame retardants, and antioxidants, among others. In comparison, commodity chemicals are basic chemicals produced and sold in large volumes. They have historically been associated with creating significant pollution and, consequently, pose a challenge for ethical investors like Domini. In part, the sector struggles to align its manufacturing processes with environmental and social expectations, mainly due to the lack of uniformity in chemical regulation across the globe.

The Threat of Forever Chemicals: PFAS

Found across specialty and commodity chemicals are forever chemicals like per and poly-fluoroalkyl substances, otherwise known as PFAS. Notorious for their resistance to environmental (soil, water, and air) degradation, as well as bioaccumulation in organisms, these chemicals present a significant concern. A 2015 report by the Centers for Disease Control and Prevention, using data from the National Health and Nutrition Examination Survey (NHANES), found PFAS in the blood of 97% of Americans. These synthetic chemicals pervade everyday products, from bottled water to cosmetics, leading to severe health implications, including cancer, hormonal disruption, and birth defects. Chemical companies are compelled to seek alternatives, necessitating stringent regulations and innovative solutions to mitigate the contamination they cause by their widespread usage. Costs associated with class action lawsuits and cleanup from PFAS are expected to eclipse that of big tobacco.

Addressing Regulatory Differences Across Regions

Currently, differences in regulations across countries and regions create a maze and potential loopholes for chemical companies. For example, strict regulations in areas like the U.S. and the E.U. drive some companies to produce abroad, utilizing what would otherwise be banned substances, and circumventing local laws. To prevent this, several U.S. states have adopted policies that prohibit all uses of PFAS, and the European Commission has also proposed bans of all PFAS. The timely adoption of policies and proposals calls for transparency in phasing out these chemicals, emphasizing the need for rigorous disclosure and accountability to address concerns related to hazardous chemicals. As these legal mandates approach, companies must swiftly devise alternatives that phase out these chemicals to benefit their business operations.

Carbon Emissions and the Chemical Sector

When it comes to carbon emissions, where the chemical sector plays a substantial role, companies prioritize addressing Scope 1 and Scope 2 emissions. Scope 1 emissions, representing direct GHGs from sources under the company’s control, include processes like on-site combustion and chemical reactions. Indirect emissions from purchased energy, known as Scope 2 emissions, are also a focus, involving the energy-related emissions associated with purchased electricity, heat, or steam. Scope 3 emissions encompass a broader range of indirect emissions throughout the entire value chain of a company, including upstream emissions, such as the extraction and production of materials, and downstream emissions, such as the use and disposal of an item. Despite the challenge to quantify due to the extensive value chain, accounting for around 75% of total GHGs, meticulous reporting of Scope 3 is crucial for a comprehensive understanding of a company’s carbon footprint and developing effective strategies to reduce its environmental impact.

Domini’s Advocacy for Sustainable Practices

Within this sector, Domini advocates for switching to renewable energy, alternative feedstocks, and robust carbon accounting mechanisms to reduce fossil fuel use and associated emissions. Our engagement initiatives encourage companies to phase out hazardous substances, including PFAS, and adopt innovative, non-toxic alternatives while simultaneously prioritizing decarbonization.

We believe that chemical companies can begin to pave the way for a safer, more sustainable future by addressing environmental and public health challenges, supporting regulatory developments, and fostering transparency. Green hydrogen and methanol feedstocks, low-carbon and bio-based raw materials, and the electrification of manufacturing processes are at the forefront of these efforts. Adopting these pathways is necessary to help protect the environment and people’s health.

Domini also finds collaborative initiatives between governments, regulatory bodies, and corporations are important to help establish global standards, harmonize regulations, and responsibly phase out hazardous chemicals. In addition, public awareness campaigns are helping to encourage support for more sustainable practices and empower individuals to hold companies accountable.

A Shared Mission

In this transformative era, the chemical sector’s journey toward sustainability represents a shared mission. Time is critical, and responding to these issues cannot afford a delay. As a whole, the chemical sector represents a major use of energy a significant source of carbon emissions, while contributing to lasting environmental pollution and negative public health impacts. Together, through informed decisions, collective action, and innovative solutions, we can help accelerate this change by working towards making the chemical sector more sustainable.