Deloitte and VCI report studies the forces shaping the Chemical and Pharmaceutical industry until 2030
Embracing digitalization, circular economy and sustainability will allow the chemical industry to differentiate and capture new business opportunities
NEW YORK, NY, USA, 9 November 2017 — Chemistry 4.0 marks the beginning of the fourth development stage of the chemical-pharmaceutical industry, which will be shaped by digitalization, circular economy, and sustainability in the coming decades. These are the findings of a new study, "Chemistry 4.0 – growth through innovation in a transforming world," which was prepared by the German Chemical Industry Association (VCI) and Deloitte. The study examines the influences that will shape the chemical and pharmaceutical industry through 2030.
“Digitalization and a circular economy are two elements that will fundamentally shift the way work is done in the industry,” said Wolfgang Falter, Deloitte Global Chemicals & Specialty Materials Sector Lead. “Research and development, manufacturing and business models will be transformed presenting both challenges and new growth opportunities for the industry.”
“By leveraging digital mass data, our industry can expand its role in the value chain and develop new business models. Furthermore, we have future-oriented solutions to drive the circular economy,” said Kurt Bock, President of VCI and CEO of BASF, on the potential of Chemistry 4.0 for the development of companies.
Digitalization: Increasing efficiency and developing new business models
Although many companies have already automated their plants and use digital processes for plant control, the use of digital mass data leads to greater innovation. Not only does it allow for efficiency gains in production, through means such as predictive maintenance, but also leads to more innovation through the use of virtual reality and advanced simulations in research and product development among other examples. The coupling of digital services with products from the chemical and pharmaceutical industry is the key to further value creation. For example:
- In Precision Farming (Digital Farming), the chemical industry’s support for the farmer is no longer solely in the form of fertilizers and pesticides. Apps can help identify diseases and pests in the field and find the optimal dosage for the treatment of the cultures. Additional modules, for instance for the analysis of plant and soil conditions plus weather and market forecasts, complement the data-based model with which the farmer can control his farm. This can be used to improve business and environmental factors by reducing the amount of fertilizers and pesticides at the same time
- Perspectives in medical technology include new products using 3D or, in the future, even 4D printing materials produced using 4D printing have a shape memory as an additional “dimension,” which can be activated at a predefined point in time. This, for example, allows for medical implants to be produced in an easy-to-process form, which then take on their stored form in the desired location in the body.
Circular Economy: Chemistry options for more resource efficiency
The change in public preferences towards sustainable production and consumption requires the development of new products and business models. In a circular economy, the chemical sector can utilize growth potentials through efforts such as supporting clients in reaching their sustainability targets or extending their core business with new circular business models, such as chemical leasing.
The chemical industry and some adjacent companies have already established various industrial return systems in the market, such as the recycling of window profiles, agricultural films, and chemical pallets.
However, since the concept of a circular economy goes beyond classical recycling and includes all measures that increase resource efficiency, the concept will influence product portfolios and business models of the chemical and pharmaceutical industry.
Respective technologies and procedures are reaching market readiness, but the road towards a comprehensive circular economy requires a lot of staying power from organizations as they navigate how to make these solutions and models more economically viable.
Business models in the circular economy will typically consist of networks of partners from different sectors and digitalization will facilitate cross-company cooperation in such economic networks. Companies that want to be successful in such an environment have to combine both technical skills and network competencies. Chemical companies, due to their experience with complex production processes, can play a central role in these networks.
Transformation requires tailwind from all stakeholders
The change to Chemistry 4.0 presents a multitude of requirements for the chemical industry. Companies should scrutinize their current portfolio of products and services as well as adjust their business models and continue to accelerate the transformation process that has begun, both on a sector and company level. The industry must set new strategic goals that take the developing digital and circular opportunities into account. In addition, the chemical companies need to build their technical and network capabilities and invest in education, physical assets and software. Furthermore, companies must incorporate transparency and openness, agility and failure-tolerance, and communication and cooperation into their corporate cultures in order to be able to adapt their products and business models to the shortening of innovation cycles. Such a culture also enables chemical companies to seize opportunities in emerging economic networks within the chemical industry and across sectors.
The paradigm shift also needs to be supported by industrial policy measures. The study identifies amongst others, three political priorities for further development of digitalization by the public sector: expand the technical infrastructure and promote digital literacy as well as improve data security
Download the short version of the study to learn more here: www.deloitte.com/chemistryinnovation
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VCI advocates the economic interests of around 1.700 German chemical and pharmaceutical companies as well as German subsidiaries of international corporations when speaking to governments, authorities, other sectors, academia, or media. The VCI stands for more than 90% of the chemical industry in Germany which totals to 185 bn. EUR sales and 447.000 employees.