INSIGHT by the Planet Tracker
The chemical industry, generating USD 5.7 trillion in annual revenues (2022) and directly employing over 15 million people, plays a pivotal role in the global economy. Its products are integral to various sectors, making chemical components essential for 96% of all manufactured goods.
The journey towards sustainability in this sector, especially in producing key chemicals like ammonia, methanol and ethylene, is critical for the broader transition to a global Net Zero economy.
Supported by the Climate Works Foundation, Planet Tracker’s report, Tomorrow’s Chemistry, presents a comparative analysis of the Climate Transition Assessments (CTAs) of seven leading chemical companies, shedding light on their commitments, strategies and readiness to align with the Paris Agreement and achieve Net Zero emissions by 2050. At the same time, it allows readers to identify industry leaders and laggards in climate transition implementation.
All seven companies, Air Liquide (AI), BASF (BAS), Bayer (BAY), Dow (DOW), Incitec Pivot (IPL), LyondellBasell (LYB), and Toray Industries (3402), are members of the Climate Action 100+.
Key findings from the report include:
〉Ambition vs. Implementation Gap: While all the analysed companies have expressed ambitions toward a Net Zero transition, there is a substantial gap between their stated goals and the presence of actionable, robust strategies to achieve these targets.
〉Critical Role of Scope 3 Emissions: Addressing Scope 3 emissions is paramount due to their substantial share, accounting for an average of 68% of the total emissions of these companies. Effective strategies targeting Scope 3 emissions, particularly through supplier and customer engagement, are essential for a credible transition.
〉Transparency and Accountability: Enhanced transparency in how climate strategies contribute to emission reductions and their alignment with science-based targets is needed for a clear understanding of companies’ efforts and their feasibility. Examples would include clear disclosure of progress towards targets, impacts of initiatives, and capital expenditure assigned to these initiatives.
〉Executive Compensation Alignment: Aligning executive compensation with sustainability key performance indicators (KPIs), also incentivises the leadership to achieve climate goals and shows a more comprehensive corporate strategy
〉Trade Association Alignments: Companies are urged to assess and address their involvement with trade associations to ensure consistency between advocacy positions and climate commitments, reducing risks to the credibility and overall integrity of corporate messaging on sustainability. Also see ‘Climate Transition Mismatch’.
〉Planet Tracker’s Ranking: Air Liquide (AI) emerges as the clear leader in the analysis, demonstrating a robust strategy and execution across various aspects of its climate transition. Conversely, BASF sits at the bottom of the ranking, displaying significant gaps in its climate transition strategy.
Planet Tracker’s comparative analysis aims to drive positive change by providing stakeholders with valuable insights, including existing best practice, to motivate chemical companies toward more sustainable operations. Ion Visinovschi, Senior Research Analyst at Planet Tracker concludes that “financial institutions, the companies themselves, and the public will benefit from a deeper understanding of these companies’ roles and capabilities in advancing an industry-wide transformation”.
Read the Report here
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