The Indian chemical industry stands at a pivotal juncture, poised to embrace sustainability and integrate circular economy principles into its operations. At the forefront of this transformation is the need to mitigate the environmental impact of chemical manufacturing processes. Historically, the industry has been associated with high energy consumption, water usage, and waste generation. To address these challenges, Indian chemical companies are increasingly adopting cleaner production techniques, optimizing resource utilization, and investing in green technologies. Initiatives such as energy-efficient manufacturing processes, water recycling systems, and waste-to-energy projects are becoming integral to sustainable chemical production. 

As per International Energy Agency (IEA), the chemical industry is a significant producer of scope 1 and scope 2 emissions and plastic waste. The industry also consumes significant volumes of natural resources such as fossil fuels and coal, which generates undesirable effluents and pollutes the environment if not treated properly. With the ratification of the 2016 Paris Agreement, the governments of many countries have drawn stringent regulations that mandate global chemical companies to set ambitious targets such as net-zero emissions by 2050 and step into a sustainability-focused ecosystem. 

As one of the key contributors to the country's economic growth, the chemical sector holds immense potential to drive innovation, foster environmental stewardship, and spearhead the transition towards a greener future. However, achieving sustainability goals in this industry requires a concerted effort from all stakeholders, including government, businesses, and consumers. 

Pivoting towards Sustainability 

The global market for green chemicals was estimated to be US$ 1.7 billion in 2022 and is anticipated to reach US$ 3.3 billion by 2030 with a CAGR of 8%-10%. Asia-Pacific is anticipated to be the fastest growing market while Europe currently holds the maximum market share ~36%. China and India are emerging as manufacturing hubs of key market players and are expected to lead the manufacturing of sustainable chemicals. Europe and the U.S. continue to focus on R&D related activities for green chemicals and will lead the way for a more sustainable ecosystem of chemicals. Chemical companies are also producing green specialty chemicals, bio-based chemicals, organic chemicals and other such chemicals as per their product stewardship strategy.

Green hydrogen will be yet another cornerstone of the chemical industry’s shift away from fossil fuels. Its active role in ammonia and methanol production could prove to be a starting point in enabling the decarbonization of the chemical industry. By 2030, the cost of green hydrogen production is expected to decline by 60% from the current US$ 4–5.5 per kg. The main factors behind this would be cost-effective electrolyzer technologies, the decreasing cost of renewable electricity, and increasing levels of utilization fuelled by centralization of production, design optimization and a better mix of renewables.

Several global chemical companies have proactively committed to long-term reductions in Greenhouse Gases (GHG) emissions and eventual net-zero aspirations. Sixteen of the top 20 global chemical companies have pledged to cut a percentage of their GHG emissions by 2030, and nine committed to achieve net-zero carbon emissions by 2050. BASF has cut its GHG emissions by almost 50 per cent over the last three decades, despite doubling production volumes. It achieved this using patented catalysts to lower carbon dioxide emissions and increase efficiency at its plants. In comparison, Indian chemical companies are lagging. Only five of the top 20 Indian chemical companies have set GHG reduction targets until 2030, and none have declared a target year to achieve net-zero emissions.

The chemicals industry can improve its environmental, social and governance (ESG) performance overall, as demonstrated by several chemical companies. Defining an ESG strategy to embrace sustainable practices, implementing necessary changes in energy-intensive operations and using enablers to execute said strategies could help transform this dynamic industry into a clean energy hub that serves as an example for the rest of the world.

Key Ingredients for Circularity

By promoting the reuse, recycling, and recovery of resources, companies can minimize waste generation and maximize resource efficiency. Closed-loop systems, where by-products and waste streams are recycled or repurposed, offer promising avenues for reducing environmental footprint and conserving valuable resources. Additionally, the implementation of extended producer responsibility (EPR) frameworks encourages chemical manufacturers to take responsibility for the entire lifecycle of their products, from production to disposal. 

Innovation plays a crucial role in driving sustainability within the chemical industry. By leveraging advancements in biotechnology, nanotechnology, and process optimization, the industry can reduce its reliance on fossil fuels, minimize toxic emissions, and develop sustainable alternatives to conventional chemicals. Moreover, collaboration across the value chain is essential for fostering a circular economy in the chemical sector. Partnerships between manufacturers, suppliers, and consumers can facilitate the exchange of resources, promote closed-loop systems, and drive innovation in product design and recycling technologies.

Acting in tandem with Policy Shift 

The chemical industry contributes significantly to the nation’s GDP and is anticipated to reach approximately US$ 304 billion in demand terms by 2025. Cognizant of the potential of the industry, the Government of India has taken multiple measures to promote the sector such as 100% FDI to boost investments, creation of Petroleum, Chemical and Petrochemical Investment Regions (PCPIRs), PLI schemes, and the National Green Hydrogen Policy. The pace of the country’s energy transition in line with the 2070 net zero announcement will be exciting to witness. Industries will need to align themselves with the national agenda on sustainability as they plan for further growth, and the chemical industry will play a vital role in achieving this transition. 

The chemical players that will move faster on sustainability and find solutions will have a clear edge over others. These companies can actively leverage growth opportunities than jeopardizing their operational licenses. To reach net zero, the chemical industry will need to innovate across all value-chain segments. This means that companies will have to develop new processes that are either carbon neutral or low carbon, which will involve leveraging greener energy sources and sourcing sustainable raw materials. 

Perks of Adopting Sustainability 

In a competitive capital market with a constant demand for high returns, sustainability is being perceived as a differentiator. Therefore, companies focusing on sustainability have a lower cost of capital and better chance of being prioritized by investors. The shift towards sustainability requires the adoption of circular business models, use of renewable feedstocks, and reuse and recycling of end-of-life products.  

Companies leveraging such opportunities will have considerable growth prospects and the option to re-position themselves in new business ecosystems. Moreover, companies that explore digital technology solutions to increase resource productivity will have the upper hand in the competitive market. Companies with ingrained sustainability principles have a well-defined environment and health and safety management policies that are aligned with profit goals. Over that, the regulatory compliance ensures lower risk for any bad reputation. 

Way Forward 

The Indian chemical industry has a unique opportunity to lead the transition towards sustainability and circularity. Players need to integrate sustainability values in their long-term business strategies, business policies, and operational processes. This will shape and prepare them to address changing behavior and expectations of the internal and external stakeholders, also improve competition and profitability. By embracing cleaner production methods, promoting resource efficiency, and fostering collaboration across the value chain, chemical companies can drive positive environmental and social impact while ensuring long-term economic viability.  

As the industry evolves, sustainability and circular economy principles will guide its trajectory towards a greener, more resilient future.