ESG in the Chemical Industry

Companies are rapidly accelerating the use of Environmental, Social, and Governance (ESG) as a methodology to set sustainability goals and communicate progress to various stakeholders. The pace of adopting a wide range of sustainability-related metrics continues to evolve, which has a particular interest and consequence in the chemical industry supporting investments in safer, non-fossil carbon chemicals. The graphic below, from the recent report in The Economist1 on ESG investing, clearly demonstrates this trend with the exponential increase of companies in the S&P 500 including ESG in their investor reports in the past 3-4 years.

Historically, chemicals have been involved in detrimental impacts on our planet, including acute damage to terrestrial and air resources. Compounds such as polyfluoroalkyl substances (PFAS), benzene, asbestos, polychlorinated biphenyls (PCB), and lead are all known to have long-lasting deleterious effects. The chemical industry is responding, with many leading chemical manufacturers making bold statements and corresponding investments to mitigate the impact of chemicals.

While improvements in ESG-related issues benefit society, it is also important to realize that not all these issues are directly related to the sustainability of chemicals. Stakeholders hear about actions such as diversity, labor relations, and privacy (all critical topics for any organization). However, there may not be meaningful advances in critical environmental factors that companies can address with the transition from fossil-based to biobased carbon. The table below identifies key ESG issues specific to the chemical industry. Targeted investments in biobased chemistry are needed to develop new technologies whose impacts directly affect factors such as reducing greenhouse gas emissions and ensuring chemicals have a safe end-of-life composition through natural biodegradation.

Aggressive action is urgently needed to mitigate additional damage to our environment resulting from the production and use of chemicals. Our fragile environment is at a tipping point, and it’s incumbent upon the chemical industry to demonstrate leadership and vision toward solving some of the world's biggest problems.

Governments are also stepping in. The White House recently unveiled a strategy to grow the US bioeconomy1. The White House recently announced an Executive Order2 creating a National Biotechnology and Biomanufacturing Initiative to support this rapidly growing industry. The Biden Administration seeks to strengthen supply chains and address public health and climate challenges through this Executive Order. It calls for strategic federal investments in biotechnology, enhanced domestic biomanufacturing, and the formation of a sustainable workforce that can generate safe and secure biobased innovations across the country.

Other countries, including Germany and the United Kingdom, are among the leading nations to develop national technology and commercial roadmaps for their bioeconomy. Not surprisingly, China has also begun to invest into its high growth biotech sector. These countries and others have, for years, witnessed dramatic growth in their local economies. From innovative cell-based medicines to greener fertilizers, the global biotech sector has delivered products that improve lives and protect our environment and will continue to do so for years to come.

1 ESG Investing, The Economist Special Report, July 23, 2022

2Executive Order on Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe, and Secure American Bioeconomy, September 12, 2022