Listen: Is the chemical industry progressing towards its climate goals?

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Jameson Croteau:
Currently, only 29 companies in our Net Zero Tracker have 2030 targets that are greater than 42%.
Vincent Valk:
Hi, and welcome to the Chemical Week Podcast. I'm Vincent Valk. Our guest today is Jameson Croteau, one of my colleagues on Chemical Week's editorial team and the person in charge of putting together our Net Zero Tracker for the chemical industry, which was a major feature in the April 29th print issue of Chemical Week. And he's joining us today to talk a little bit about Chemical Week's Net Zero Tracker.
I know we've been putting this Net Zero Tracker together for the past two or three years and it's certainly become one of our key data features. So before we get into some of the questions about what you found for this year's Net Zero Tracker, wanted to ask if you could just tell us a little bit about the tracker, what you're looking into and how long we've been publishing it.
Jameson Croteau:
Sure. Yeah. This is the tracker's third year. Mainly, it just takes the top 100 publicly owned chemical companies, ranks them by revenue, and we look at their Scope 1, Scope 2 and Scope 3 emission goals, and also if they have a net-zero target date in mind and basically we look at their interim goals to get to that net-zero target and then see how it ranks year to year region by region.
Vincent Valk:
So doing some data analysis on the targets. And the data set in terms of the companies has taken from our Billion-Dollar Club, which is the ranking I think that you referenced, of the top 100 or so chemical companies by revenue.
Jameson Croteau:
Correct. Yep.
Vincent Valk:
So this year the Net Zero Tracker found that about 78% of the Billion-Dollar Club companies had carbon-neutral or net-zero goals by 2050. Has there been any change in that figure since last year?
Jameson Croteau:
Yeah, this year sort of plateaued a bit. Last year we were about 76% of the companies had a net-zero goal by 2050 or before, and then the year prior had 69% of companies. So it was a steady jump between 2022 and 2023. We're sort of seeing it plateau now and I can expect to see it continue to be steady and plateau for the next few years going forward. I will say that you might see some percentage changes as the Billion-Dollar Club is known to shake up here and there between years as companies drop off and companies gain and are added to.
Vincent Valk:
Yeah, sure. There's a little bit of churn especially towards the bottom of the list in the Billion-Dollar Club every year. I mean, I head up the Billion-Dollar Club, so I understand how that works. But if anyone listening there does tend to be a little bit of churn towards the bottom of the list especially.
So what differences can you see among the Billion-Dollar Club's net-zero or carbon neutrality commitments by region? Or if you look more at the companies involved in commodity versus specialty chemicals, can you tease out any trends in terms of what their goals are, the progress they're making toward their goals, how they define those goals?
Jameson Croteau:
So I'm going to throw a lot of percentages at you now. So the region that leads in commitments would be Europe, Middle East and Africa. They have about 97% of their companies that are in the Billion-Dollar Club. They have commitments for 2050 net-zero goal or before. They have a hundred percent of their companies with 2030 interim goals to get to that net-zero.
And so new this year, we just started really looking in at Scope 3, looking at what companies disclose their Scope 3 and which ones are looking at interim targets to get Scope 3 down to net-zero. And EMEA has 91% of their companies tracking and disclosing their Scope 3 data and about 68% of those companies have interim targets set up for Scope 3.
Next you have the Americas region, which has 70% of their companies committed to a 2050 net-zero target date or before. A hundred percent of the America companies in Americas has a interim goal. And then if you look at their Scope 3 data, 63% are disclosing that and about 40% of the Americas region has some sort of interim goal for that.
And then if you bump down to Asia Pacific, they're slightly behind the Americas with about 67% of their companies having a net-zero target date of 2050 or before. They have 72% of their companies looking at a 2030 interim goal and then 61% disclose Scope 3 and about 11% have interim commitments.
One key thing to note is if you exclude the 11 mainland Chinese companies, Asia Pacific leapfrogs ahead of Americas in many of their categories, with 88% of their companies having a 2050 net-zero goal or before and then 92% of their companies hitting that interim 2030 goal.
We want to look at commodity versus specialty chemicals. I think it's interesting to note that a lot of the bigger commodity chemical companies, they're signed into a net-zero target goal. They're signed into 2030 goals. They're starting to disclose their Scope 3 goals, and a few of them are starting to build a pathway to getting to net-zero Scope 3.
What's interesting though is if you look at some of the spec companies, smaller spec companies, they have pretty robust Scope 1 and Scope 2 reduction goals in the interim, but they haven't quite signed on to a net-zero target date. I think PPG Industries is a great example. They have a pretty strong 50% Scope 2 or Scope 1 and Scope 2 emission reduction goal for 2030. They also have a 30% Scope 3 emission reduction goal for 2030, but they have yet to sign, or ink, I should say an official net-zero goal.
Vincent Valk:
So they haven't released a full net-zero goal for 2040, 2050 or beyond?
Jameson Croteau:
Yeah, specialty companies. So when I looked at the releases, they do a lot of science-based target milestones. So they want to make incremental reductions and hit what they can see in front of them and what they know is manageable and what they can achieve. So the 2030s is only five, six years out, and they're more committed to that goal because they know they can achieve it. I think there's some speculation about how hard it's going to get down to net-zero.
Vincent Valk:
A company getting its arms around Scope 3 emissions I imagine has to be quite an undertaking. So what are companies doing to tackle those Scope 3 emissions, to track their Scope 3 emissions, to wrap their arms around what exactly that even looks like?
Jameson Croteau:
Yeah, that's the real issue right now is I think roughly 70% to 80% of all emissions emitted by chemical companies are from Scope 3 emissions. And talking to the top 10 performers, transparency really is the key, especially when there's this fear of double counting and getting closer to net-zero. You have to really work up and down your value chain to really see where the emissions are coming from and how to curb that going forward.
If you take a big company like BSAF, for example, they started a program in 2021 to quantify their product carbon footprints of the materials they source. So since 2021, they've asked 1600 suppliers, which accounts for about 70% of the raw materials related to the products they produce. And they've come up with a carbon footprint for about 800 of those products that they source. And then of course, Jay just recently set a 15% reduction goal for Scope 3 for 2030.
And I think just to look at that timeframe, it's taken two to three years to really only quantify about 70% of the raw materials they source. This is a massive process that takes extremely long time just to even wrap your head around. And then from there, you have to make these reduction goals. And so it's this huge process to quantify how much emissions you're using, and then it's an even bigger process to work with all your suppliers, work with your downstream customers to see how everyone in the chain can limit their Scope 3 emissions.
And really Scope 3 is broken down into 15 subcategories, but the three main ones are emissions from the production of goods and services, which is essentially raw materials needed to produce. Then there's emissions from the use of your products, and then there's the emissions from the end-life treatment of a chemical company's products. So it's really up and down the entire value chain that needs to have less opaqueness, more transparency, and that's obviously a challenge. It's time-consuming, especially as we're entering 2030 where most of these interim goals are stated. So I think it'll be a tough endeavor to conquer, quantify.
Vincent Valk:
And I guess too, in terms of actually tackling the Scope 3 emissions. So is that really, and I thought what you said about BASF there was interesting, is that really sort of a matter of communicating an actionable plan to your suppliers and your customers? And I guess also just validating that plan and making sure that it is something that is actually scientifically, practically, et cetera, achievable?
Jameson Croteau:
Yeah, a few years ago, there's a lot of talk of, "Oh, if the chemical companies just take care of their Scope 1 and Scope 2 emissions, everything will even itself out and everything down the line will eventually trickle down. But I think we're starting to see now that the upstream value chain is extremely important when you're getting rid of emissions.
I think what these companies are really looking forward to is a credible scientific and reliable framework to quantify their Scope 3 emissions without double counting, without taking these huge time-consuming processes to go through their own suppliers, go through their customers and work out with every specific raw material source, how every product, how much that emits. I think there is this real big cry for something that's more simplified, especially for these huge diversified companies.
Vincent Valk:
Just a method that they can use that they know is reliable and will give kind of apples to apples comparisons?
Jameson Croteau:
Yes. Yeah. A good framework.
Vincent Valk:
And just a couple more. Are companies tying executive pay to carbon neutrality and reduction commitments, and if so, how?
Jameson Croteau:
Yeah, so there was a report a few weeks ago out from Deloitte that said about 55% of CEOs in the S&P 500 companies have upped their compensation tie-ins to climate metrics up from 25% in 2021. So now a little more than half of CEOs have some sort of tie-in with either climate goals or reduction goals.
I think interestingly enough for the US, a lot of the CEOs don't get that specific tie in. It's more of the other members of the C-suite, either like a chief sustainability officer or something more specified towards the climate that has this compensation tie in.
Vincent Valk:
So in the U.S. it's more sort of within the remit of the chief sustainability officer or someone with a title like that as opposed to the CEO per se?
Jameson Croteau:
Yeah, correct. It's far more rare, I think for a US CEO than let's say a European CEO to have climate metric tie-ins.
Vincent Valk:
Yeah, I guess that fits in with, I think Europe tends to be a step or two ahead of the US in taking a lot of this stuff seriously. The piece that we put out again in the April 29th issue with the magazine, our 2024 version of the Net Zero Tracker makes the case that implementation is lagging behind goal setting. And as you reported the story, did you get a sense of what industry is doing or could be doing to close these gaps?
Jameson Croteau:
If we look at the chemical industry, it's huge. It's behind only the steel and cement industries for emitting. They emit 6% of the global emissions, but it's a huge industry that's necessary for mobility, for energy, for cement and steel to get the reductions down. I think of the chemical industry like this huge ship, it's heavy. It takes a long time for it to tack, for it to get wind to get moving down towards net-zero.
So even if we look at what the climate landscape is right now, that since 1990 the US has only cut emissions by 1%. The entire world is not really moving fast enough it seems. S&P Global Client Insights just put out a Discord scenario for the climate stating that if things continue as they are, there'll be a temperature increase of 2.4 degrees Celsius by 2100, which is almost a whole degree above the Paris Agreement's soft cap at 1.5 degree increase.
I think it's important to note that, while some of these goals seem sort of far away and aspirational, 2030 is only six years away. The American Chemistry Council in 2022 reported that since 2017, its members reduced carbon greenhouse gas intensity by only 12%. And then the Intergovernmental Panel on Climate Change says that to limit global warming to that 1.5 degrees goal at the bare minimum, greenhouse gas emissions must be reduced by 43%.
Currently, only 29 companies in our Net Zero Tracker have 2030 targets that are greater than 42%. And if you really think about it, there are a lot of projects that are coming online, but if we look at one of the biggest ones, which is Dow's Alberta Net-zero Cracker, it's going to be the first of its kind to do a clean ethylene and it was announced in 2021, hit its FID in late 2023, and it will open its second phase in operation in 2029. That's a whole decade for just this one big project. And if you trace that out, it's going to be tough to see how we're going to hit the 2050.
And what the chemical companies really are looking for to get down to net-zero with help is they really want relevant, predictable legislature. I think it is going to be interesting to look at November this year in the US because former President Trump's, one of his first actions in the White House was to back out of the Paris Agreement. I think the chemical companies are looking for the technology to scale up, especially in carbon capture and sequestration. And I think it's important to note that nothing will happen unless it's economically and competitively sound.
So I feel like a lot of chemical companies are asking for and looking for a carbon tax. They think that will help with a transparent revenue neutral and market-based carbon price will help equal the playing field. And what's important to note is that the premiums for these green products, as we get down to net-zero, it will end up on the consumer's shoulders, I think most foremost.
Vincent Valk:
I mean, people don't really want to pay a green premium for the most part, and certainly don't want to have any sort of performance drawbacks, I think with regard to green-enhanced products. And I also think your point of the Alberta Net-zero Cracker was sound in the sense of that's just one project and it's a big project, but you have to iterate that multiple times across the industry to really get to some of these goals. And just realistically, that's probably not going to happen on a larger scale for several more years at best.
So thanks very much for coming on the podcast Jameson, and this is Vincent Valk signing off for Chemical Week.