The change of consumer sentiment is affecting large enterprises rethinking business processes from the perspective of environment, society and Governance (ESG). The chemical industry is no exception. Thankfully, supplier financing can help identify opportunities for sustainable development investment.
Consumer demand helps drive new business priorities
Modern consumers can be highly aware of the impact of their purchasing power on the global environment. Consumers seem to increasingly need "green" products that can be recycled, degraded and compostable. According to a study by Accenture in 2019, 81 percent of respondents are expected to buy more environmental products over the next five years, and 50 percent say they are willing to pay more for products designed to be reused or recycled. This change in consumer sentiment is affecting large businesses rethinking business processes from an environmental, social and Governance (ESG) perspective. McKinsey points out that there is little sign of slowing, and the scale of global sustainable investment, which is now more than $30trillion, suggests that ESG is more than a fashion. In an industry that is usually associated with fossil fuel consumption, air pollution and water pollution, chemical manufacturer may be under the greatest pressure of this phenomenon. Mark Costa, chief executive of Eastman chemicals, said it was good: "sustainability is not just a good product attribute. This is a requirement. Consumers need it, and our customers look forward to it. "
Many chemical companies are taking action
As part of the annual sustainability survey conducted by BCG, 85 percent of chemical companies report on corporate sustainability strategies - more than any other industry. A common component of these strategies is to assess supply chains to identify opportunities for investment in sustainable development. Mosaic, the main producer of phosphate and potash, is a typical example. In 2016, a third-party assessment of more than 3500 suppliers found that the main environmental impact of its supply chain was greenhouse gases emitted during ammonia production. Their corresponding goal of reducing greenhouse gas emissions has led upstream ammonia producers to adopt new energy-saving technologies. For example, CF industries, the leader in the nitrogen and agricultural fertilizer industry, has invested a lot of money in technology and equipment to improve the thermodynamic efficiency of its ammonia plants, which has reduced the carbon dioxide emissions of scope 1 by about 1 million tons between 2017 and 2018.
The sustainable development requirements of the chemical enterprises are not only from the industry. Many chemical manufacturers in the early stage of the value chain also face the same expectation that customers outside the chemical industry should invest in sustainable development. In the food and beverage market, Coca Cola assessed carbon dioxide emissions from its supply chain and determined that recycling consumer plastic into new packaging materials could accelerate the removal of disposable plastics and reduce its overall carbon footprint. 9 to put vision into action, the global brand has publicly committed to packaging at least 50 per cent of recycled materials by 2030.0. 9 this commitment is driving the development of strong recycling capacity for plastic resin and raw material suppliers. Indorama ventures is the world's largest pet resin (a polymer usually molded into plastic bottles), and then invests in the most advanced technology to transform the consumer pet waste into unprocessed and food grade pets to meet the needs of customers for more environmentally friendly packaging.
Further progress requires more investment
While progress towards sustainable chemical manufacturing has undoubtedly been made, a major obstacle to faster innovation is the rapid increase in capital expenditure needed to develop new technologies. In 2018, PwC estimated a 10 per cent increase in global revenue, but the proportion of operating cash flow and capital expenditure to sales declined - indicating that companies are managing cash levels by limiting investment. To make up for the widening gap caused by the decline in cash flow without affecting leverage, chemical manufacturers need other sources of funding to finance further sustainable development investments.
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