Growth through innovation in a transforming world
This new Deloitte study in collaboration with VCI shows how the chemicals industry is undergoing a huge transformation, where digitalisation and the circular economy play a key role. The study also identified 30 trends which will be of importance to the chemical industry until 2030 with a focus on the key market in Germany.
Innovation champion. Strong exporter. The chemical industry in Germany is a strong sector. But can this be sustained?
The competitive environment in the chemical industry is in transition; producers in emerging and resource-rich countries are expanding their capacities and extending their focus to specialty chemicals which have previously often been supplied by German exports. Old growth engines like globalisation, specialisation and focusing on the core business have reached their vertex. Additionally, new technologies are changing everyday life and the competitive environment deeply. Digitalisation is increasing the pace of change in all industries and advances in biotechnology and additive manufacturing are changing the base of business in the chemical industry. Furthermore, the paradigm shift in demand structures and society´s objectives has long started. Increased demand for resource efficiency and environmental protection has had a tangible impact on customer preferences. The chemical industry faces fundamental challenges.
The study Chemistry 4.0 identifies 30 trends which will be important to the chemical and pharmaceutical industry until 2030 with a focus on the key market in Germany. The drivers of those trends were analysed and their expected impact on the chemical and pharmaceutical industry assessed. On the one hand, those trends will result in incremental innovation that improves already existing solutions. The success model of the established chemical players will continue to offer growth opportunities for those trends. On the other hand, a majority of these trends have a disruptive character for the process technologies, composition of product portfolios, and business models for the chemical industry. Those trends are more often catalysed by governmental targets and societal goals than they are driven by new technological possibilities.
The answers for those big strategic and structural challenges for the chemical industry lie in the digital transformation and circular economy, short in the era Chemistry 4.0. The experts of Deloitte explain the changes and outline the necessary transformation for the sector and for the companies.
The chemicals and pharmaceutical sectors in Germany are faced with strategic and structural challenges. Disruption in the chemical industry is intensifying as the world becomes digital and strives for sustainability. Products are digitally complemented, linear supply chains are becoming complex economic networks, the recycling of materials and molecules is becoming more important. The industry is entering a new phase with Chemistry 4.0., which requires new business models.
Digital business models
Digitalisation allows chemical companies to collect extensive data which can be evaluated and utilised to improve operational processes and build new business models. This digital transformation of the chemicals sector can be split into three categories:
- Transparency and digital processes. These involve the utilisation of the comprehensive process data available within the organisation to increase efficiency of the largely unchanged manufacturing processes and business models. Automation of manufacturing process is one area where such data is being used.
- Data based operating models. These models utilise operational big data, external data and advanced methods of analysis for better decision making and increasing efficiency. The chemicals industry is being driven by predictive maintenance, networked logistics and the application of concepts from virtual reality.
- Digital business models. These models replace the existing processes and business models and the products and services are digitally augmented to increase customer utility. Additive manufacturing in the field of agriculture is one example of such a business model.
The circular economy
With the change in customer preferences toward sustainable production and consumption, the need for a circular economy emerges, focusing more on application utility than on volume. The chemicals industry has an opportunity to take into account all aspects of the circular economy across the product lifecycle. The study details the seven circular economy levers that a chemicals business should consider:
- (Re)Design. When developing and designing a product (composition and product design), all aspects of the circular economy must be taken into account and optimised over the entire lifecycle of the product from production to application to potential recycling. Different aspects such as the "design-to-recycling" capability as well as the performance and lifetime of the chemical products in the customer's manufacturing process as well as in the application by the end customer ("design-to-performance") must be considered as a whole.
- Resource-efficient and climate-friendly production. The production of chemicals and materials with the efficient and climate-friendly use of resources while largely avoiding waste along the entire chemical value chain: from asset management through the optimisation of warehousing and transport to efficient waste and wastewater management.
- Redemption. The producers do not sell the chemicals, but take them back after use by the customer and prepare them in accordance with standards (chemical leasing). In this service-related, often value-based business model, chemical companies can actively contribute their material expertise and technical expertise to the optimisation of their customers' production processes.
- Recycling. Materials and chemicals can be recycled at the material or raw material level (chemical recycling). So they are either mechanically minced, cleaned and sorted or broken down into their organic raw materials, filtered and processed into new chemicals or materials.
- Recovery of energy. Another important component of the circular economy is the recovery of waste streams with the recovery of energy such as heat, steam or electricity. Energetically used waste replaces the fossil resources of gas and oil as energy carriers, which can instead be used as raw materials in chemical production.
- Cleaning and reducing environmental impact. The effects of chemicals released into the environment after intended use must be minimised. Here, the biological degradation potential is of crucial importance as well as the reduction of the residual amounts in the wastewater.
- Residue removal. Until collectively new, wearable solutions are found to avoid the buildup of residue, the controlled, proper disposal of unavoidable "residual industrial waste" is also an aspect of the circular economy.
The chemical businesses already have a high degree of network but are yet to explore digital economic networks. In order to develop new growth opportunities, it is essential for companies to identify the role they play in such structures—Followers, Partners or Orchestrators. The study also has strategic recommendations for companies and associations along with recommended political and regulatory conditions to build these new opportunities that digitalisation and circular economy can bring in to the chemical ecosystem.