Looking back over the 2020s, it is easy to see how forward-looking companies emerged as Winners in the race to decarbonise, as I discuss in my new analysis for ICIS Chemical Business.
“If we are going to hold the rise in the Earth’s temperature to 1.5 degrees, we must reduce emissions significantly between 2020 and 2030. This is the decade of decision.” That was John Kerry’s clarion call back in September 2021. So let’s look back from the vantage point of 2030 to see how the chemicals industry responded to his challenge.
The first thing to note is that business models have since been transformed. Inevitably, therefore, Winners and Losers have emerged over the decade. Some companies, sadly, stuck their heads in the sand, refusing to believe that ‘business as usual’ was no longer a viable strategy. But more encouragingly, most companies are still with us today – and are doing better than ever in terms of revenue and profit growth.
The key to the transformation was the need for boards to set, and meet, Net Zero targets. Helpfully, the International Energy Agency, the world’s energy watchdog, had provided a detailed transformation path in May 2021. It highlighted two critical points for industry:
- The Net Zero targets – limiting the rise in global temperature to 1.5⁰C, and reducing net CO₂ emissions to Net Zero by 2050 – were achievable
- But there was no time to lose, so companies and governments needed to move quickly to frontload their activity
Critically, the Winners also heard the CEO of Stellantis (the world’s 4th largest car company), argue in July 2021 that “The transformation period is a wonderful opportunity to reset the clock and start a new race”. And so they started to introduce Challenge Workshops for their key staff, to develop the new business models and strategies that would be required for success.
Looking back, it is clear that at this point, the chemical industry’s depth of knowledge and capabilities came into their own. No other industry had the functional expertise necessary to develop the pilot schemes that were required to take the concept forward, and to then ensure that they met their objectives. Investors, both public and private, were delighted that they were taking the lead and were happy to support them with the cash required.
As we now know, this new expertise also proved an ideal pathway for developing the more service-oriented portfolio that it has today. It enabled companies to move away from simply providing products – valuable though these were – and instead provide solutions to many of the pressing problems created by the need to move to Net Zero. A whole new portfolio was born. And companies can now look forward to decades of profitable growth, based on the provision of sustainable, affordable, products and services.
When we look back to 2021, the chemical industry can therefore feel a sense of justifiable pride in its achievements – not only for itself, but for society. The world would never have been in a position to meet the Net Zero targets by 2050 without this involvement. The only sadness is that more companies didn’t embark on the journey. There was room for all in the new markets we were creating, and we would have been able to move forward faster with their involvement.
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