Monetizing Circular and Sustainable Products in the Chemical Industry

In response to the growing pressure from customers who are increasingly concerned about the environment, companies have significantly changed their processes, often resulting in an increase in the "green premium". These costs, arising from changes in materials and production processes, are usually passed on to customers, especially when there are still untapped monetization opportunities. As a result, customer dissatisfaction increases, particularly in times of inflation, prompting companies to consider alternative approaches such as usage or subscription-based models. Now, this growing trend toward sustainability is transitioning into B2B sectors, most notably the chemical sector. It is evident that players in the chemical industry need to recognize the potential advantages of embracing circular economic principles to fully capture the underlying value of circularity.

Monetizing Circular Economy in the Chemical Industry 

Chemical companies play a critical role in circularity, as they are enablers and solution developers for many other industries. However, the shift to circularity requires chemical companies to invest in the development of new skills and transformative technologies for recovery and reuse of chemicals from both industrial processes and end-of-life products. In addition, chemicals such as adhesives, personal care products, agrochemicals, and coatings cannot be separated or recovered. Thus, the sustainability of these chemical components is a major challenge for chemical companies. The key to success in the circular economy is the effective monetization of circular practices. The most important asset lies in the realization of the “true value” of circular products, which ultimately refers to generating value for all involved stakeholders in a dynamic ecosystem.

Monetizing the “green premium”

1. Understanding the value chain and partnering opportunities
   Understanding and redefining the value chain is crucial, particularly when dealing with products derived from waste intended for reuse. Thus, a deep understanding of the value chain (circle) needs to be built. Partnering with other companies along the value chain is one solution to move towards a value circle. The types of partners go beyond traditional chemical customers and can include recycling companies, companies along the value chain, or even competitors to provide comprehensive solutions with greater circular value to the customer.
   
   
2. Deep dive into your customers’ buying behavior and customer segments
   In addition to identifying potential partners along the value chain, chemical companies need to put themselves in their customer’s shoes. In order to successfully monitize the green premium, it is necessary to take a deeper look at the customer’s current buying process. Knowing the customer and the current buying process including relevant purchasing criteria helps to better understand key stakeholders and how they currently make decisions.
   
   
3. Thinking bigger – beyond the traditional product-centric approach 
   To embark on a circular journey, chemical companies need to rethink their product and service offerings. Having a product-centric, feature-focused portfolio is no longer sufficient. In a circular environment, chemical players must provide solutions that go beyond the product itself.
   
   
4. Quantify and qualify your product
   Two elements need to be taken into consideration to successfully sell the green premium: the quantification of the product and its qualification towards the customers. The quantification of the product requires a shift in the pricing method. While most products are priced using a cost-based approach, a value-based approach is needed to justify the green premium. Its qualification towards the customers with a compelling and comprehensive story is crucial to successfully sell the product and the green premium.

In the Point of View (PoV), readers will learn how businesses can navigate not just process-related and technical challenges, but also effectively communicate the benefits of the circular economy to maximize value for both customers and the company. The document delves into how consumer-facing industries, under pressure from eco-conscious consumers, have adapted their processes, often leading to a rise in the "green premium." This shift is now emerging in the B2B sphere, notably in the chemical industry, where the focus is shifting from product modification and regulatory compliance to embracing innovative business models that capitalize on circular products and services. The PoV emphasizes the importance for chemical companies to adopt a customer-centric approach, transitioning from a linear value chain to a circular, partnership-based ecosystem. It highlights the necessity of integrated solutions and transparent pricing strategies that reflect the green premium, and offers insights into best practices for monetizing circular economy principles.

Download our PoV and find out more details about monetizing the circular economy.