ESG in the chemicals industry: reporting challenges

Plagued by high-profile incidents, the chemicals industry has long been under the fiercest scrutiny for its high exposure to environmental risks. With ambitions like zero-pollution and a toxic-free environment part of the European Green Deal, transitioning to sustainable chemicals is more urgent than ever. 

Water, value chain, and asset-level data 

Similar to the energy industry, chemicals - especially petrochemicals - are dependent on fossil fuels and GHG-intensive materials. They, therefore, play a key role in the realisation of a climate-neutral EU by the year 2050 target. Transition planning is one of the biggest challenges facing the chemicals industry. The transition pathway hinges on the ability to produce safe, sustainable and purposeful chemicals.

Waste management is a critical disclosure for this industry for obvious reasons. The environmental risks of the chemicals industry create associated social risks.

Chemical traces that contaminate our air, water and soil systems are also found in everyday household items which endanger human health. ESG management of product safety and hazardous substances must serve two main purposes:

• It has to protect the environment,
• it has to protect the people.

Two other emerging issues that are increasingly coming into focus due to shifting awareness are animal testing and circularity. The industry can expect to receive more pressure to disclose their management of these issues as ethical concerns. Chemical reuse and recycling also become possible targets of policy instruments.

The quality of disclosures will depend entirely on a company’s understanding of these issues and reporting guidance. Due to incidents of pollution and toxic poisoning, a range of chemical policies regulate the industry already. Compliance with regulations is a governance challenge that will continue the more we learn about the impact of substances and new technologies.

Water risk is a top material factor in the water-intense chemicals industry. But the level and quality of water-related disclosures are nowhere near the level of emissions disclosure. Most companies report water risk as a single metric, either consumption metrics such as withdrawal and recycling or water use efficiency with little context to the hydrological basin and even less information on water stewardship.  

Current water-related reporting is frequently inadequate to capture the complexities of water-related issues such as location-based water stress and scarcity, asset-level data, and value chain water materiality. These pieces of information lend context to numbers. The challenge of data collection from the chemicals value chain and at the asset level further complicates things. Then there is also the lack of standardised temporal and spatial comparisons of water basins which will allow for comparability.  

What can companies do? 

Take the time to develop expertise in the water-related issues surrounding your business. These issues can be highly technical and specific to different locations. More context and understanding of the multi-dimensional parameters surrounding water risk can improve reporting accuracy and clarity while demonstrating that your business is fully aware of its material risks.

ESG reporting frameworks that include water as a material topic such as CDP’s water questionnaire are a good place to start. These often recommend reporting on various water-related indicators beyond the obvious consumption metrics. Still, they are by no means as comprehensive as water reporting could be. As water footprint sustainability assessments or frameworks for the chemicals industry are being developed, companies can use these existing frameworks to develop their reporting approach to water.

How we help you 

• We help you determine the water-related data relevant to your business in order to meet reporting requirements and standards. 
• We help you make sense of asset-level data and water risk indicators in your value chain. 
• We simplify the collection of ESG data in your organisation by offering one central platform to automate data collection with integrations into ERP, HRM, CRM, EMS, etc. 
• We facilitate data collection from your suppliers and contractors, ensuring relevant information arrives in a complete and accurate manner. We will handle the burden of information exchange with multiple stakeholders. 
• We conduct risk assessments of your value chain and set up a grievance mechanism that will automate the flow of data to our analytics platform.