28 ANALYSIS
Global megatrends to impact the chemical industry
n Allison Koontz, Anthony Schiavo – Lux Research, US
Over the next 20 years, the chemicals and materials industries will face fundamental changes, forcing them to adopt new skills and develop new goals. These changes will have a major impact on the flow of both materials and information. In the new report “The Chemicals and Materials Company of 2040,” Lux Research outlines the factors impacting these industries and how they will cause large-scale change.
A century and a half in the making The modern materials and chemicals industry began to emerge around 150 years ago, with many companies starting in the 19th century with a single or few products and steadily broadening activities through research and acquisition to encompass a diverse range of chemicals. Throughout this history, chemicals companies have continuously honed a handful of core skills (R&D, operations, sales, and acquisition) to achieve two basic goals – increase sales volumes and increase profits. The industry has become quite skilled both at moving and transforming materials, and at marshaling the necessary information to successfully manage vast global operations, to achieve these goals – leading both its suppliers and customers on total shareholder returns for much of the 21st century so far. However, megatrends that are now
confronting the chemicals industry are not just forcing it to adopt new skills but also to develop new goals, both beyond and in tension with volume growth and profits. Concerns about, and the impacts of, climate change and other environmental issues like plastic waste are forcing the industry to rethink the flows of materials, while consumer attitudes and the rising economic importance of digital technologies are changing how it needs to approach flows of information. In the new report “The Chemicals and Materials Company of 2040,” we break down the forces pushing change in the chemicals industry, and provide guidance in terms of how specific subsectors will need to respond – and consider how these forces
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will challenge the core goals and philosophies of the industry.
The four megatrends There are four megatrends currently shaping the chemicals and materials industries: feedstock and resource transformation, sustainability, change in consumer demand, and digital transformation. The first two will impact the flow of materials, while the last two will impact the flow of information. Feedstock and resource transformation: The
chemicals and materials industry will be transformed as external pressures, and changes in adjacent industries like oil & gas, shift the nature of the feedstocks and processes it will use, and as resources like water and energy present new challenges. Sustainability: The chemicals and materials
industry must solve key end-of-life issues such as plastic waste while addressing CO2 emissions & feedstock sustainability. Firms need to implement sustainability-driven changes in their own operations and deliver products that enable sustainability for their customers. Changing consumers: Rising demand from consumers for products with greater
personalization, cleaner ingredients, more functionality, and better sustainability drives material innovations. Firms with consumer facing brands and those supplying them must be ready to meet these fast-changing demands. Digital transformation: Digital design and
manufacturing tools can accelerate commercialization timelines and create new digital business models for materials. Successful firms will use these digital technologies to improve their operations, business models, and markets. “The future companies of the chemicals
industry will look drastically different from today,” says Lux Research Senior Analyst and lead author of the report, Anthony Schiavo. “Companies that do not evolve and invest in sustainability initiatives and digital transformation will not survive the change. The impacts will vary by business sector – for many in the commodity space, sustainability should be their first priority despite the hype around digital transformation.” Sustainability pressure will manifest in
multiple forms: Changing demand for energy driven by the growth of electrified mobility will alter the economics of gas and petroleum feedstocks, while the need to
October 2020
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