Business leaders in the chemical industry are confident about their companies’ prospects in the coming year. Just like their colleagues in other sectors, they are aware of uncertainty on the horizon with regard to trade disputes, protectionism and a volatile oil price. However, they also expect that changing needs, expectations and requirements in the field of sustainability will influence the sector even more than macroeconomic factors in the near term.
These conclusions are based on the results for the chemical sector of PwC’s global CEO Survey and are published in a separate publication entitled ‘Chemicals Trends 2019’. Ninety-two per cent of the interviewed CEOs from the chemical sector have indicated high business confidence for the coming year, the highest rate in five years. For the coming three-year period, however, the proportion of optimists falls to 85% – not a dramatic drop, but the lowest in five years.
PwC's sector specialist Jan-Willem Sanders is not surprised by the results and points out the differences among the companies in the sector. ‘The chemical sector is doing well, but it’s facing several major challenges. We are talking about very diverse companies based all over the world, ranging from manufacturers of bulk chemicals and suppliers of specialised products to service innovators. As such, they have very different prospects: a plastic producer may be concerned about how to bring more environmentally friendly substitutes to market quickly, while a supplier of parts for solar panels is all set for years to come’.
Chemicals Trends 2019 shows that CEOs in the chemical sector are expecting their companies to be strongly affected by issues such as product and raw material substitution, decarbonisation, energy efficiency and circular concepts, as well as the associated legislation. Sanders underlines that chemical companies always need to look at the long term given the large investments they are required to make, and which cannot be adjusted or replaced overnight. At the same time, he emphasises how important it is to continuously evaluate one’s portfolio, precisely because of the changing circumstances in which they operate. “They need to ask themselves: What is my global footprint? How and where can I produce in a cleaner and more economical way? How old are my assets?”
According to Sanders, pressure from governments on companies to deploy cleaner production methods, use more sustainable energy and help design solutions for things like new packaging materials is a source of unease, but also provides opportunities. He points out that it is worth taking a close look at the incentive measures that governments (in the Netherlands and the wider EU) offer in the context of sustainable production.
‘All developments in the field of sustainability relevant to the chemical sector are subject to the carrots and sticks of innovation and investment policy,” he says. “Companies must pay more attention to the negative effects of measures such as CO2 pricing while also being more actively involved in the use and/or development of subsidy schemes.’
Sanders also believes that sustainable production can provide a competitive advantage. ‘While environmental regulations are currently much stricter in Europe than in Africa or Asia, this topic will become more important elsewhere too over time. When that day comes, companies with experience in modern production methods will have a head start.’
'Companies must pay more attention to the negative effects of measures such as CO2 pricing while also being more actively involved in the use and/or development of subsidy schemes.'
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