Petrochemical Industry ESG Thematic Report, 2023

Environmental, Social, and Governance (ESG) in the Petrochemical Industry

The counting in of diverse parameters concerning Environmental, Social, and Governance (ESG) along with the financial reporting aids in the investment and decision-making processes that leads to responsible investing. Since 2013, the investments in ESG have escalated. Meanwhile, the industry as a niche industry can have significant implications on ESG parameters.

Prominent leaders in the petrochemical sector recognize the use of petrochemicals as a crucial component for various industrial processes and methods, resulting in the enhanced demand for downstream products and services from multiple industries like pharmaceuticals, construction, and automotive. Thus, This industry is a backbone of an industrial economy. 

In 2020, the industry faced a mixed impact due to the COVID-19 outbreak and stagnant economies, affecting the supply chain of raw materials like ethylene, methanol, and other chemicals. Further, the industry was also primarily affected by volatility in the prices of crude oil hence creating their production process expensive, resulting in multiple stakeholders reassessing their manufacturing processes concerning both environmental and economic parameters for their existence in the market.

ESG Trends

The ‘E’ in the ESG – the environmental criteria, is a crucial factor that has a significant negative impact on this sector. Companies in the petrochemical industry have various harmful products that lead to the degradation of the environment along with the health of humans. Concerning the environment, the breakdown of microplastics is a major factor contributing to plastic pollution. The rise in the microplastic content has not only degraded the quality of oceans but has also resulted in the ingestion by aquatic animals, leading to increased amounts of plastic particles in our food chain.

Leading companies and start-ups in the petrochemical space are associating with governments and international organizations to establish criteria and methodologies for evaluating the environmental impacts of the petrochemical products throughout their entire life cycle. Further, the industry has adopted firm health and environmental regulations restricting hazardous products to remain competitive in the continuously evolving business landscape. 

The impact of the petrochemical sector can also be contextualized in line with achieving the United Nations - Sustainable Development Goals (UN – SDGs). Some of the major SDGs that gain attention are Good Health and well-being, Sustainable cities and communities, Responsible Consumption and Production, Life Below Water, and Life on Land. Consumer sentiments toward more sustainability options have helped ensure business continuity through policies such as going green, the use of paraben-free and vegan chemicals, help organizations reduce penalties concerning various laws and regulations.

Further, the increasing demand for petrochemicals in diverse applications like packaging, medical equipment, automobiles, and household goods is a crucial factor enhancing the producers operating in this space to escalate their manufacturing capacity across worldwide.

ESG Challenges

The growth of the petrochemical Industry is hindered due to the stagnant growth of maturing economies along with its harmful effects on the environment and health. While considering the GDP growth rate of the supreme Chinese market has decelerated and may continue to be the same. Simultaneously, in China, per capita, chemical consumption stands in a position where it will result in slower growth as compared to the country’s GDP growth rate. Moreover, the harmful effects caused by hazardous products in this industry have led to a shift in consumer sentiments towards more environmental-friendly approaches across the globe.

According to International Agency for Research on Cancer (IARC), some petrochemicals like benzene are not only harmful to the environment but have also resulted in being carcinogenic to humans and depending on the duration of exposure to these chemicals can cause severe effects on the human body. For example, short-term exposure could result in eye and skin irritation, and narcosis while long-term exposure could result in lowered immunity, anemia, and cancer. Further, another major challenge faced by the industry is its greater contribution to plastic pollution, especially due to the release of microplastics that not only contaminates the oceans but are also ingested by aquatic organisms, thereby, leading to increased plastic components entering our food chain.

Growth of the Petrochemical Market

In 2021, the global Petrochemical market size was valued at USD 556.09 billion and is expected to expand at a compound annual growth rate (CAGR) of 6.2% from 2022 to 2030. In 2021, the region of Asia Pacific dominated this sector with a major revenue share of over 50.0%, due to an increase of majorly two factors which are the growing chemicals industry and the enhancement in polymer consumption. Further, the Europe region is predicted to account for a revenue based CAGR of 5.7% over the given period. In Western Europe, the market witnessed static growth resulting in market saturation. The key countries such as Germany, The U.K., and France, due to increasing ethylene production in these areas have escalated demand for petrochemicals from producers to manufacture diverse industrial chemicals.

Key Companies In This Theme

    • BASF SE

    • Chevron Corporation

    • China National Petroleum Corporation (CNPC)

    • China Petrochemical Corporation

    • ExxonMobil Corporation

    • INEOS Group Ltd.

    • LyondellBasell Industries Holdings B.V.

    • Royal Dutch Shell PLC.

Scope of the Petrochemical Industry ESG Thematic Report:

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Benefits of the Petrochemical Industry ESG Thematic Report:

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the petrochemical Sector, globally

    • Key insights into Infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment