The Indian chemical industry is now actively adopting circular economy principles, signalling a major shift towards sustainability. In response to growing environmental concerns and stricter global regulations, companies are prioritizing green chemistry, resource efficiency, waste reduction, and the use of renewable inputs. 

A key development in the pursuit of sustainability has been the adoption of circular economy models that emphasize reducing resource consumption and reusing materials through closed-loop systems. Leading Indian chemical firms are investing in technologies that enable recycling of industrial effluents, recovery of solvents, and reprocessing of byproducts into value-added chemicals. For example, companies like UPL, Aarti Industries, and Atul have made significant strides in implementing zero-liquid discharge (ZLD) systems and improving water-use efficiency, with some reporting up to 80-90 per cent wastewater recycling rates. Moreover, the Indian government’s support for green hydrogen and bio-based chemicals under the National Green Hydrogen Mission and the Biomass Conversion Program is further catalyzing a shift toward cleaner inputs in chemical manufacturing.

India’s plastic waste crisis, generating over 3.5 million tonnes annually, has accelerated efforts within the chemical and petrochemical sector to innovate in polymer recycling and biodegradable materials. Reliance Industries and Indian Oil Corporation have committed to scaling up chemical recycling plants, with projected capacities of over 25,000 tonnes per annum in the next few years. Additionally, specialty chemical producers are exploring sustainable surfactants, green solvents, and bio-based additives, aligning their product portfolios with global ESG expectations. The demand for green-certified products from export markets, especially Europe and North America, is also propelling this transition.

Energy efficiency and carbon reduction are critical pillars of the sustainability agenda in the Indian chemical sector. According to the Department of Chemicals and Petrochemicals, the industry accounts for around 13 per cent of total industrial energy consumption and approximately 6 per cent of India’s total greenhouse gas emissions. To mitigate this, companies are adopting cleaner fuels, electrification of processes, and carbon capture technologies. Gujarat and Maharashtra-based chemical clusters are witnessing significant investments in captive renewable energy generation, with solar and wind installations supporting decarbonization goals. Firms like Deepak Nitrite and SRF have disclosed plans to reduce carbon intensity by over 20 per cent in the next five years through such measures.

The circular economy approach is evident in increased resource efficiency and recycling initiatives. Indian chemical firms are investing in plastic recycling and reprocessing technologies, with Reliance Industries, for example, targeting 5 billion PET bottles for recycling annually by 2025 through its ‘Circular Economy Initiative’. Additionally, Indian Oil Corporation is setting up a chemical recycling plant with an initial capacity of 20,000 tonnes per annum to convert waste plastics into fuel and chemicals. On the specialty chemicals front, manufacturers are developing green solvents, biodegradable surfactants, and bio-based polymers, with the green chemicals market in India estimated to grow at a CAGR of over 10 per cent and projected to surpass US$ 15 billion by 2027.

Policy support is accelerating adoption through fiscal incentives and regulatory mandates. Under India’s Production Linked Incentive (PLI) scheme for the chemical sector, several projects qualifying for incentives are aligned with green chemistry and low-carbon technologies. The Ministry of Environment, Forest and Climate Change (MoEFCC) has tightened norms around hazardous chemical management and waste disposal, prompting a shift toward safer and recyclable inputs. The government’s push for Extended Producer Responsibility (EPR) in the plastics and packaging industry has further incentivized chemical companies to rethink design and end-of-life reuse of their products.

Innovation at Core 

In recent years, significant R&D investments have been directed toward developing low-carbon production techniques, green solvents, bio-based polymers, and recyclable specialty chemicals. Leading companies like UPL, PI Industries, and Aarti Industries have set up dedicated innovation centers focused on sustainable product development and process optimization. UPL, for instance, has introduced nature-based solutions and regenerative agricultural inputs as part of its sustainability agenda. Similarly, Atul and SRF are investing in R&D to replace fossil-derived raw materials with renewable alternatives, reducing dependency on non-renewable resources while aligning with global sustainability goals.

The shift toward circular economy models is also being accelerated by technological innovations such as chemical recycling, carbon capture and utilization (CCU), and solvent recovery systems. In Gujarat and Maharashtra, pilot plants have been commissioned to convert plastic waste into high-value chemicals through depolymerization and pyrolysis technologies. These solutions not only help in waste reduction but also enable the recovery of valuable feedstocks, closing the loop in industrial resource use. Advanced oxidation processes (AOPs) and membrane bioreactor systems are also being implemented to achieve zero liquid discharge, particularly in high-pollution industrial clusters.

Digital technologies are playing a pivotal role in optimizing sustainable operations. The adoption of IoT-based emission monitoring, AI-enabled predictive maintenance, and blockchain for traceability in raw material sourcing is gaining momentum. Such digital integration helps companies ensure compliance, reduce resource wastage, and create transparent, sustainable supply chains.

Government and academic collaborations are further fueling R&D in this domain. Institutions like the National Chemical Laboratory (NCL), IITs, and CSIR labs are partnering with industry to co-develop eco-friendly formulations, enzymatic catalysts, and biodegradable surfactants. The Department of Chemicals and Petrochemicals has initiated support programs for technology incubation and commercialization of green innovations under the Chemicals Promotion and Development Scheme (CPDS).

Despite progress, the scale of R&D adoption varies across the industry, with large corporations leading the way while small and medium enterprises often face challenges due to limited technical and financial capacity. Nevertheless, the broader ecosystem is gradually aligning, with sustainability-linked loans, ESG-focused investors, and global supply chain requirements incentivizing innovation at every level.

Challenges

As the industry strives to align with global environmental benchmarks and India's own net-zero targets by 2070, the path toward greener operations is fraught with financial, infrastructural, and regulatory hurdles, particularly for small and mid-sized enterprises. The Indian chemical sector, which contributes around 3 per cent to the global chemical industry and was valued at approximately USD 220 billion in 2024, is undergoing a gradual transition toward sustainable production models. However, the scale and complexity of the transformation present formidable roadblocks.

One of the most critical barriers is the high capital expenditure associated with implementing sustainable technologies. Zero Liquid Discharge (ZLD) systems, solvent recovery units, green hydrogen generation, and effluent treatment plants require upfront investments ranging from Rs. 50 crore to over Rs. 200 crore for medium- to large-scale setups. For example, while big companies have invested collectively in sustainable infrastructure, many small and medium-sized manufacturers in clusters like Ankleshwar, Vapi, and Ludhiana lack the financial bandwidth to follow suit. This disparity creates a fragmented adoption landscape, where sustainability remains concentrated among larger corporates.

Technological and knowledge gaps also hamper progress, particularly in the development and deployment of circular solutions such as chemical recycling, biodegradable polymers, and process integration. Many players lack access to global best practices or advanced R&D capabilities, leading to slower innovation cycles. The mid-sized companies have inadequate in-house expertise to evaluate or implement circular economy frameworks effectively. Furthermore, the ecosystem for industrial symbiosis, where one firm’s waste serves as another’s input, is still nascent in India, owing to poor logistical linkages and lack of digital traceability platforms.

Infrastructural limitations remain a serious impediment. India’s hazardous waste treatment and recycling facilities are still underdeveloped in many industrial regions. The chemical industry generates a large volume of hazardous byproducts, and without adequate centralized facilities, companies are often forced to incur high transportation and treatment costs or face compliance violations. In 2024, the Central Pollution Control Board reported that only about 40 per cent of hazardous waste in chemical manufacturing clusters was being scientifically treated or co-processed, highlighting the pressing need for more robust waste management systems.

The supply chain also presents a bottleneck, especially in sourcing sustainable raw materials and packaging. The availability of bio-based feedstocks, green solvents, and recyclable inputs is still limited and often costlier than conventional alternatives. Imported green intermediates attract higher duties, and domestic production remains insufficient to meet demand, leading to higher operational costs for companies trying to switch to sustainable alternatives.

Way Forward

The future outlook for the adoption of sustainability and circular economy within the Indian chemical industry is increasingly optimistic, underpinned by a combination of regulatory pressure, investor expectations, evolving consumer preferences, and industry-led innovation. As India moves toward its net-zero emissions target by 2070 and global markets continue to demand greener supply chains, the chemical sector—valued at over USD 220 billion—is poised to play a pivotal role in enabling sustainable industrial growth.

In the coming years, the adoption of green manufacturing processes, waste minimization strategies, and closed-loop production systems is expected to accelerate, particularly among large and export-oriented players. Companies will increasingly invest in renewable energy, zero-liquid discharge (ZLD) infrastructure, and advanced effluent treatment technologies to meet both compliance requirements and ESG commitments. The green chemicals market, including bio-based solvents, biodegradable polymers, and specialty ingredients, is projected to grow at a CAGR of over 10 per cent, crossing US$ 15 billion by 2027.

Circular economy principles are set to become more deeply embedded in product design, supply chain integration, and end-of-life resource recovery. Industry leaders are likely to develop industrial ecosystems where waste from one process becomes input for another, while digital traceability, blockchain, and AI-powered material tracking will enable real-time monitoring of sustainability performance. As Extended Producer Responsibility (EPR) and plastic recycling mandates tighten, both chemical and downstream industries will innovate in packaging and waste management.

Government policies are expected to be more targeted and supportive, with fiscal incentives, public-private R&D initiatives, and stricter enforcement of environmental norms acting as key enablers. Meanwhile, small and medium enterprises—currently lagging in adoption—will increasingly benefit from shared infrastructure, technology transfer hubs, and green financing tools designed to bridge capability gaps.

The Indian chemical industry’s shift toward sustainability and circularity is not just a regulatory response but an emerging business imperative. By 2030, a substantial portion of the sector is expected to operate on circular principles, with decarbonization, resource efficiency, and ecosystem stewardship at the core of its growth strategy, positioning India as a regional leader in sustainable chemical manufacturing.

Commitment to Sustainable Manufacturing