Good chemistry: How chemical businesses can work together to reduce emissions

The chemical industry is a major source of greenhouse gas emissions. If its businesses and logistics providers really want to reduce their impact on the environment, they will have to find ways to work together.

Many chemical companies are committed to confronting the scale of their greenhouse gas (GHG) emissions and have implemented plans to reduce them. But as the World Economic Forum puts it: “While recognising these efforts, more needs to be done.”

Research by Maersk and FT Longitude shows that chemical companies and their suppliers are overlooking an opportunity to do more, faster, by working together.

When we surveyed 500 chemical companies worldwide to find out how the industry is rising to the challenge of climate change, we found that it is only just starting to consider more collaborative approaches to reduce emissions. We also learned that there are significant obstacles in the way of a more collegiate approach.

Chemical logistics leads the way

The chemical businesses in our research estimate that ‘scope 3’ – the GHG emissions from their broader supply chain for which they are indirectly responsible – account for, on average, 63% of their overall GHG footprint. And they say that almost a quarter of these (23%) come from upstream logistics, transportation, and storage activities.

This puts logistics services providers (LSPs) in a strong position to support chemical companies in their efforts to reduce emissions.

For example, Maersk recently agreed a groundbreaking new US–Europe shipping route with one of its chemicals industry customers, Syngenta Crop Protection. Using Maersk Eco Delivery, this will help Syngenta reducing its shipping-related carbon impact.

And like other LSPs Maersk are increasing the availability of intermodal freight switching – offering customers the chance to shift to cleaner forms of transport wherever the delivery schedules allow it. Shipping by sea, for instance, may produce up to 145 times fewer emissions per tonne of cargo than air transport, and rail is another less-polluting option.

LSPs are also creating solutions for route and load optimisation – that is, devising shipping schedules that reduce emissions. And emerging technologies, including artificial intelligence, are enabling the logistics sector to do this with more and more sophistication.

Some chemical companies are already taking advantage of these options: 29% of the businesses in the survey have shifted at least some of their logistics to less-polluting forms of transport. And while only 8% are using zero-emissions warehouses, 21% are planning to make the switch.

But chemical businesses and LSPs can both go further. The chemical industry certainly expects more from logistics: only 38% of the businesses in our research think their LSPs have the right capabilities to help them reduce scope 3 emissions. So LSPs that expand their range and availability of greener solutions will find willing customers.

Collaboration in logistics

There is also a huge opportunity for chemical companies to work together. For instance, two businesses shipping products between the same regions could share logistics capacity in order to reduce their aggregate GHG emissions. And why not share logistics hubs to reduce emissions further – particularly since chemicals production facilities are often located close to one another?

Some businesses are moving in this direction. But in our research only 17% are collaborating with their peers on load optimisation to minimise empty miles. A similar proportion are working with LSPs that have sufficient scale to improve industry coordination.

There are reasons for this. Many chemical companies are concerned about giving their competitors granular information about the customers and markets they are serving and in what quantities. It is no surprise, then, that only 14% of chemicals business in our research are sharing data with one another to reduce emissions.

“In the digital era [when] data is abundant, it's really all about security and privacy,” says Peter Crowe, Global Head of Logistics at Syngenta Crop Protection. But there are ways to get past this. New technologies, for example, can enable data sharing while protecting sensitive commercial information – if the data is in the right hands. “It’s important to consider who would be best positioned to govern and responsibly handle that data,” says Crowe.

Third parties, including LSPs themselves, could play a central role as trusted convenors of increased collaboration.

There are already alliances happening, which show that collaboration is possible. In India, for example, chemical companies share the details of more than 200,000 trips each year in the Nicer Globe Initiative. A technology platform provides insights and helps set benchmarks without compromising commercially sensitive data.

Logistics collaboration in supply chains: standardize to move forward

None of this is easy and tackling scope 3 emissions is especially difficult. The Science Based Targets initiative acknowledges that the industry has “one of the most complex and diverse value chains of all sectors in the global economy”.

Standardising data and reporting formats would help. It would enable the industry to speak a common language – and communicate more effectively. Work such as the European Chemical Industry Council’s Product Carbon Footprint Guideline for the Chemical Industry will be useful.

Collaboration – with LSPs and other third parties, but also between chemical companies – has the potential to reduce the industry’s emissions. It is time for the industry to overcome concerns and start implementing this vision on a larger scale.

For more information on this topic:

• How can the chemical and logistics industries collaborate for decarbonisation? | Maersk
• Listen to the latest episode of “Beyond the Box” on how to tackle supply chain emissions in the chemicals industry.
• Supply chain management in chemical industry - Insights | Maersk

About FT Longitude

FT Longitude is a specialist thought leadership agency, owned by the Financial Times, working with a wide range of the world’s most prestigious B2B brands across Europe, the US and Asia-Pacific. FT Longitude’s 80+ clients are concentrated in the professional services, financial services, and technology sectors, but also stretch into energy, infrastructure, manufacturing and other industries. Headquartered in London, the company was founded in 2011 and was selected as one of Chief Marketer 200, Top Marketing Agencies of 2020, an Inc. 5000 Europe in 2018, an FT 1000 company in 2017, and a 2016 Leap 100 high growth UK company by City A.M. and Mishcon de Reya. It is led by founders Rob Mitchell (CEO), James Watson (COO) and Gareth Lofthouse (Chief Revenue Officer). For more information: visit longitude.ft.com.