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The chemicals industry and sustainability:
an explosive mixture 

oekom research presents the results of its sustainability analysis of 101 chemicals companies

Munich, 11 October 2012 - The chemicals industry is often seen as having a key role to play in the achievement of a sustainable economy. oekom research's latest industry rating shows that chemicals companies have so far fulfilled their responsibilities in this area only in a piecemeal fashion. Advances in climate protection and plant safety are countered by shortcomings in chemical and product safety and in the use and procurement of sustainable raw materials. Only 21 of the total of 101 chemicals companies from 25 countries which were analysed (21 per cent) fulfilled the requirements to qualify for a detailed rating, while only five (4.9 per cent) demonstrated sufficient commitment to sustainable development to be awarded oekom Prime Status. Prime Status is awarded to companies which meet the minimum standards for sustainability management defined by oekom research. On a scale ranging from A+ (maximum score) to D-, the German industrial gas and engineering company Linde achieved the highest rating, with a score of B. It was followed by Akzo Nobel (NL) and BASF (DE), both of which scored B-.

Motorists and homeowners are not alone in facing the challenge posed by rising oil and petrol prices; the chemicals industry, many of whose products are based on crude oil, is also searching for alternatives. Renewable raw materials, for example starches, sugar and cellulose, are increasingly being used in the manufacture of plastics. Overall, the global market share of chemical primary products based on renewable raw materials stands at just eight per cent, and action taken by companies in this area remains very sporadic. This is also true of measures being taken by companies to procure only sustainably-produced renewable raw materials. The problems with conventional raw materials – such as illegal logging of rainforests for palm oil production and the negative impact of monocultures on species diversity and the water balance – have been known about for years. “Only a small number of the chemicals companies analysed, for example the Brazilian company Braskem as well as Akzo Nobel and Symrise, have started integrating social and environmental criteria into their procurement systems,” is how Oliver Rüter, analyst with responsibility for this sector at oekom research, describes the current situation.

Power generation for the often energy-intensive production processes in the chemicals industry is generally based on oil or other fossil fuels. The chemicals industry is one of the main emitters of greenhouse gases such as CO2. Around 22 per cent of industry emissions are accounted for by chemicals and petrochemicals. The chemicals industry as a whole has made progress in reducing emissions by increasing energy efficiency. “Many of the large chemical corporations, in particular, have introduced comprehensive climate protection strategies. These contain clear reduction targets and extensive measures to achieve them,” says Rüter.  However, in many cases there is still a need for improvement in the way in which the business risks that could arise as a result of climate change are analysed and presented. This information is very important, particularly to investors.

oekom research has also noticed progress in the areas of plant and workplace safety. Almost all the companies have in place comprehensive management systems for complying with and promoting safety in the workplace, at least in the industrialised countries. In many companies, this has led to a fall in the number of accidents at work. Nonetheless, it is often unclear whether the measures described by companies are valid only for factories in industrialised countries or whether they also apply to the companies’ own production facilities and to suppliers’ factories in emerging countries.  Recent serious accidents, at Bayer in the USA and DSM in Taiwan, for example, also show that efforts to improve plant and transportation safety need to be sustained.

The situation regarding chemical and product safety presents a less positive picture. The chemicals industry brings large numbers of new chemical compounds and products onto the market every year. Only a small proportion of the chemicals available on the market have been comprehensively analysed to determine the risks associated with them.  “We believe that companies have a responsibility to record and evaluate the impact of their products over the entire lifecycle,” says Rüter. Besides the production and use of products, this also covers the procurement of raw materials as well as disposal. Even though the majority of the companies analysed report that they carry out risk assessments and toxicity tests, there is little transparency about the content and precise scope of these. Finding substitutes for particularly hazardous substances in existing products and designing new products to be environmentally sustainable are further challenges that the industry is largely only just beginning to address. It is particularly important here that substances which are carcinogenic, mutagenic or toxic to reproduction, as well as other problematic substances such as phthalates and bisphenol A should be looked at.  

Overall, oekom research considers that there will be increasing pressure on the chemicals industry to take greater account of social and environmental aspects in production processes and products than it has done in the past. Oliver Rüter says, “The chemicals companies’ industrial customers will in future increasingly be seeking to avoid adversely affecting their own environmental footprints and carbon balances by purchasing chemical products which are problematic in this respect.”  

 

 Summary of the sector analysis

 

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oekom research - the rating agency
oekom research is one of the world’s leading rating agencies in the field of sustainable investment. The agency analyses companies and countries with regard to their environmental and social performance. oekom research has extensive experience as a partner to institutional investors and financial service providers, identifying issuers of securities and bonds, which are distinguished by their responsible management of social and environmental issues. More than 75 asset managers and asset owners routinely draw on the rating agency’s research in their investment decision-making. oekom research’s analyses therefore currently influence the management of assets valued at over 140 billion euros.

Further information can be obtained from:
oekom research AG, Rolf D. Häßler, Head of Corporate Communications
Goethestraße 28, 80336 Munich
Fon: +49-89-544184-57, Fax: -99, rolf.haessler@oekom-research.com

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