Over the last few years, a confluence of global challenges has highlighted and exacerbated industry wide change. Among them, the energy transition. The world is pivoting to a low-carbon future, and the demand for more sustainable businesses, greater transparency on carbon-emissions, and climate change is mounting.
The momentum to decarbonise across sectors is there, as evidenced by both countries and companies committing to meeting net-zero targets by mid-century. In 2021, as part of their contribution to Saudi Arabia’s national target to reach net-zero by 2060, Aramco and SABIC both announced targets to achieve operational net-zero by 2050. ADNOC and QatarEnergy also announced carbon reduction targets by 2030.
However, the reality of getting to net-zero will require tremendous change and an acceleration of investment. The first step is access to accurate data around emissions produced.
Throughout its supply chain, the chemical industry is one of the biggest producers of carbon emissions but, unlike many other industries, there is no easy way for it to move away from fossil fuels. The awareness and targets around climate change also mean financial institutions are aligning their mission objectives with the investments they make.
This means that investments in chemical projects are now going to sit with the bank’s footprint, resulting in a reassessment of capital allocation. Institutions are going to be held to certain standards on what capital they use and emissions will impact which industry they invest in. This change is significant for chemical companies, and the levels of Scope 1, 2, and 3 emissions are now critically important to secure investment.
While Scope 1 and 2 emissions are relatively straightforward to measure and monitor, the lack of reliable and accurate data around Scope 3 emissions, which covers all indirect emissions across a company’s value chain, has hindered the industry’s progress in reaching decarbonisation targets.
Scope 3 emissions account for the bulk of overall emissions in the chemical industry but, without detailed reports and access to data about these emissions, companies can neither create realistic emissions targets nor measure improvements.
However, a new Supplier Carbon Footprint (SCF) tool, produced by ICIS, chemical data specialists, in partnership with Carbon Minds, environmental impact experts, now gives visibility into Scope 3 emissions from a large proportion of chemical supply chains. The tool covers 71 bulk chemicals and plastics used to produce a wide variety of materials that are present in most manufactured goods and includes data from over 18,000 production plants.
Visibility of Scope 3 emissions will reduce carbon footprints
The scale of Scope 3 emissions data capturing makes them the most challenging to report on and remains the area with the biggest opportunity to contribute to net-zero targets. Scope 3 emissions vary widely across different companies and regions.
Understanding these differences means chemical companies can either choose to change supplier or engage with current suppliers to find ways to reduce emissions. As an example, for polypropylene there is a 91-per cent reduction in carbon footprint between the supplier with the highest carbon footprint and the supplier with the lowest carbon footprint, and a 56-per cent reduction between an average carbon footprint and the supplier with the lowest.
Ultimately, this new spotlight into Scope 3 emissions means chemical companies can better understand their carbon footprint, take immediate action to deliver significant reductions in carbon emissions, and place themselves in stronger positions to secure investment.
[The writer is the Middle East Regional Director for ICIS, a commodities intelligence firm for the global energy, petrochemical and fertiliser industries. Email: [email protected]]
