The elephant dances while the dragon snores
For the last couple of years, the chemical industry in China has been undergoing a massive makeover. To shed its image of a big polluter, China is implementing a comprehensive sustainability action plan with its chemical industry at the center to turn this goal into reality. Its new environment-friendly laws which have clamped down on energy-heavy industries and incentivized green energy sectors are the main driving forces for sustainability.
The shift will result in improved value chains and more energy-efficient businesses. Chemical companies are being driven to generate cleaner materials, advanced polymers and safer specialty chemicals. The transition however, has come at the cost of growth. The soaring need for chemicals has outpaced the speed of implementation and as a result India has benefited from the unmet demand coming its way.
With the increased demand, India’s chemical industry is now one of the fastest-growing in the world. It constitutes a highly diversified and sizable industry that includes agrochemicals, commodities, polymers, specialty chemicals and a variety of other groups. The industry is expected to grow at around 9 percent per annum to reach USD 304 billion by FY25 according to estimates by think tanks.
Keeping the momentum going
But in order to truly leverage the opportunity offered by sustainability besides streamlining business costs, a mix of four key parameters needs to be considered. A combination of innovation, increasing stakeholder responsibility, sensitizing the supply chain and a close watch on measuring the impact of sustainability initiatives can be a game changing approach for chemical companies in India to achieve growth without breaking their stride.
The domestic chemical sector has continued its run of strong performance in FY19 with a favourable increase in volumes. The uptick in numbers is due to increasing competency of Indian players across the globe as the Chinese chemical market continues to reel under the effects of disruption. Indian chemical players stand to benefit from both strong commodity chemical prices and high demand volumes globally and the Indian chemical industry is well poised to grow rapidly in both capability and size.
The surging demand however also comes with its own set of challenges. India has a looming water scarcity problem. Companies are already being questioned for their environmental impact and for competing with local communities for scarce water resources in industrial areas. Fossil fuels are used for both feedstock and to supply energy for chemical production processes. The sector is a high energy user, with oil, gas and coal dominating feedstocks contributing significantly to emissions. The sector is also particularly vulnerable to growingly stricter emissions regulations, which could affect profits. Even the smallest taxes on greenhouse gas (GHG) emissions could impact profitability. Lastly, chemical companies are traditionally considered to have a negative impact on the environment. Despite attempts to change this perception, it still persists.
A more sustainable chemical industry is the need of the hour. Earlier, pursuing a sustainable agenda was viewed as more of a cost than a benefit, with companies trying to reduce their environmental impacts and achieving regulatory compliance through minor changes at the input stage, operations, and end products. Whereas now, sustainability has become a top business priority for most forward-thinking chemical firms.
Companies must realize that sustainability is not only a way to minimize their own environmental impact and carbon footprint, but it also provides opportunities to significantly cut costs, meet both customer and consumer aspirations. In short, to be a market leader, firms must focus on driving innovation and transforming the industry by embracing sustainability.
To go green, careful management of environmental impacts including emissions, energy utilization, and water use is required. Companies must realize that sustainability initiatives can contribute significant cost savings by reducing overheads for energy, water and feedstocks.
The very same initiatives can also help propagate the company’s reputation as an environmental steward. While reputational risk will continue to be a hindrance for chemical companies, affecting operations, planning, recruitment and other areas, companies that adapt to sustainability will be better positioned for changing markets and fluctuations in resource availability.
Chemical companies must also have a sustainability agenda driving their innovation and R&D. Sustainability not only provides the incentive to reduce carbon emissions and minimize use of inputs, but also to deliver products that will meet the needs of a growing population. Companies that commit significant spending in R&D in sustainability initiatives are in turn enhancing their technological capabilities while addressing global social and environmental forces such as energy supply, food security, human health, mobility, and access to freshwater.
The bottom line
Chemical companies must recognize that what is good for the masses and the planet can also be good for their own bottom line and shareholder value. Industry leaders need to understand the risks, analyze opportunities for improvement in their operations and make sustainability central to their business strategy. Forward-thinking companies will recognize the massive business advantage sustainability presents for the chemical industry – and that innovating to go green will be the key to success.
Every company small or big needs to look into its back yard – evaluate how work is actually being done and how it could be improvised. Green sustainability is not the work of only the large Companies – TO make it successful – each Company will have to contribute and do their bit.
About AVA Chemicals
AVA Chemicals is a globally renowned company engaged in formulation and supply of premium-grade chemicals to diverse industries such as Pharmaceutical & Lab Reagents, Agrochemicals, Home & Personal Care, Oil & Gas, Coatings, Water Treatment and many more. Over the last three decades, AVA Chemicals set-up three state-of-the-art Facilities (ISO and HALAL certified) in Badlapur, India, and a strong Clientele presence in over 40 countries. It aims to be known as an ethical company providing chemicals to companies who manufacture products that are used in day-to-day life, thus touching the lives of millions of people.