Hear our experts discuss the true barriers hindering sustainable adoption, the key drivers pushing the industry toward a more circular economy, and the challenges small-to-medium size companies face to get there.
Featuring:
- Dr. Fikri Alemdaroglu, Business Group Director, Industrial Solutions | IMCD
- Katie Stiefermann, Global Marketing Manager & Sustainability Lead, Industrial Solutions | IMCD
Click above to watch our recent video or keep scrolling to read a summary.
Every day, we work with our customers to support their journey towards a more circular economy, and often we are faced with the same challenge in these conversations: material costs. But, new data proves that this might not be the main barrier to sustainable adoption.
So, what are the true barriers? And what drivers will help the industry power past them? We surveyed our industrial market segments to find out. Let’s unpack our new data.
Cost is not a true investment barrier
The transition toward a circular economy is complex. Few existing benchmarks are sufficient on their own to guide future actions, and even those companies with measurable sustainability goals often fail to measure evidence toward them. But time and time again, the issue of material cost rises to the forefront of the conversation. It’s certainly not a surprise that sustainable alternatives are significantly more expensive than their fossil-based counterparts. But because of this, we’ve seen somewhat limited progress to date due to budget constraints amid the last few years of financial turbulence.
We recently conducted a customer survey of our industrial markets, and we asked them how they felt about paying more for sustainable alternatives. And the results were quite surprising:
- 8% said they are not willing to pay more to use sustainable materials
- 27% are willing to pay more if their customer can absorb the end cost
- 57% claimed they are willing to pay more if they can prove value to their business and measure sustainable impact
This data tells a very different story than what we were led to believe. It shows that people are not afraid to invest, but rather they need to be able to find and prove the value of this investment. It also tells us that there isn’t an expectation for sustainable alternatives to be the same cost as their counterparts which opens quite a few doors when we think about the move towards a more circular economy.
Limitations and resources are slowing down adoption
So, if it isn’t higher costs alone, what are the true barriers slowing down a move towards a circular economy? Our survey found that the functionality and availability of sustainable alternatives are among the most significant and consistent challenges our customers face. In fact, many reported that even though they intend to start using sustainable alternatives in the next three years, there aren’t any good alternatives for their industries today. To add to this, even when respondents suspected that appropriate alternatives might exist, they commonly reported not knowing which ones to choose.
When it comes to sustainable materials, small and medium-sized companies often struggle with selection because:
- Sometimes introducing these sustainable alternatives isn’t a one-to-one swap. It’s far more complicated than this. There can be extensive research, testing and formulation required to ensure that the outcome maintains the properties that we originally set out to achieve and that the new approach is not counterintuitive for sustainability purposes.
- Smaller companies are often strapped for resources. This makes it much more challenging to implement new sustainable innovations.
- There is limited information and data on sustainability. This further complicates the sustainable introduction process, making it difficult to even know where to start.
Greenwashing is creating an industry scepticism
Beyond material selection, there is a clear hesitancy amongst all players in the chemical industry around sustainability. Despite seeing “green alternatives,” “green chemistry,” “sustainable future’ and many other similar statements plastered all over tradeshows, the industry remains cautious as to what constitutes greenwashing.
In fact, 26% reported being concerned that most of the sustainability initiatives they see are greenwashing. Another 54% said they think only some of the sustainable initiatives are legitimate but are still cautious. That suggests that four out of every five people in the industry have some level of concern about greenwashing.
With 80% reporting greenwashing concerns, further trust needs to be built within the chemical industry. The scepticism can be attributed to:
- New alternatives. While sustainability is not a new topic in the chemical industry, most of the alternatives are. That means that at this stage, many are not mature and/or competitive from a technical standpoint with their fossil counterparts.
- Limited data & transparency. Today, this is limited. But as we make strides in the development of data and documentation with tools like product carbon footprints and life cycle analysis, this will not only help to measure and assess progress but also create transparency in the industry that doesn’t fully exist today.
With both more maturity and transparency, credibility and trust will come.
Competitive differentiation & product innovation fueling progress
Despite these challenges, we see a lot of potential opportunities. Changes made in industrial sectors have the potential to reverberate sustainable progress across the value chain…and we do see that the industry is amid a transformation. Companies and countries around the globe have committed to an array of sustainability goals with target deadlines as early as 2030. Whether or not those 2030 goals are fully met, the chemical industry is sure to look quite different a decade from now than it does today.
Our survey confirmed that most small-to-medium-size companies are already working towards integrating sustainable solutions, or plan to in the next three years. Additionally, 92% believe sustainability is a competitive differentiator. This tells us, quite clearly, that competitive differentiation is fueling sustainability.
Yet, it begs the question: If everyone is doing it, will it continue to be a differentiator? Our answer is yes. We see differentiation being fueled by product innovation. It is known that innovations look different in every corner of the world. This is for two reasons: material availability and the need to stand out. Looking ahead, we expect the properties of the materials used in formulations to vary greatly, but with similar end functionality. Therefore, those with new approaches will continue to stand apart from their competition.
Companies and consumers are driven to make a positive environmental impact
Beyond competitive differentiation, there is another key driver with circularity: environmental impact. We found that environmental impact consistently ranked in the top three drivers of the use of different types of sustainable alternatives. This proves that many companies have committed to reducing their environmental impact, and many people are passionate about improving supply chains to better prioritise people and the planet.
First and foremost, regulations are creating a sense of urgency, pushing companies toward circularity sooner rather than later. In fact, 23% claimed regulations as the most influential driver of sustainability in their industries. It should be noted that for small and medium-sized companies, this can become a challenge. New regulations and standards are regularly rolled out around the world that keep us on our toes. This creates an almost constant need for innovation and evaluation of how we do things today
The second aspect to consider as a driver of environmental impact is consumer demand. 30% report customer and consumer demand as the most influential driver of sustainability in the chemical industry, and we know that this alone is resulting in a huge push towards circular initiatives.
Key takeaways
- The cost of materials is not a true barrier to a more circular future; rather, we need to prove the value sustainable adoption brings to business.
- Limited raw materials alternatives and greenwashing are significant barriers, but not ones that can’t be overcome with further data, transparency, and innovation.
- Competitive differentiation and environmental impact are clear drivers towards circularity and regulations and product innovation will keep the momentum going.
IMCD Industrial Solutions | Sustainable Solutions Program
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