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July 28, 2016
Reigniting growth in European chemicals: Sustainability and collaboration
By: Karin Walczyk and Paul Bjacek

Only a decade ago Europe represented the leading chemical region, with about one third of global chemicals production. Today, Europe is facing stagnating sales and its global market share has dropped almost twofold from 31 percent in 2004 to 17 percent in 2014, according to the latest figures from CEFIC (European Chemical Industry Council).1 Of course, this is mainly driven by rapidly rising chemicals production in Asia—especially China and the rapid growth of demand in these regions.

However, at the same time, North America managed a somewhat subdued drop from 25 percent market share to 16 percent.2 CEFIC has forecast 2016 to be a weak growth year, with only a 1 percent rise in chemicals production across Europe due to poor domestic and international demand.Today European chemical’s growth and margins are mainly driven by the weak euro, making exports more attractive, and low oil prices, helping chemical companies to reduce their cost of goods sold (COGS).

Can Europe reignite growth? Yes, however it will take significant changes in the industry’s approach to R&D, including the exploitation of digital technologies.

China taking innovation share
In the past decade, European chemicals shifted towards specialties and higher value-added products. However, petrochemicals and polymers still account for 47 percent of European chemical sales, while specialties and consumer chemicals represent about 40 percent.4

Chemicals Figure 1
Polymers (International Patent Classification IPC C08) have been the heart of European chemical industry innovation. In reviewing patent data from the past decade, we discovered that polymer research is featured prominently, referenced by over 20 percent of all filed European priority patents (European Patent Office and local European country filings).5 However, we also noted that China is catching up in the number of patents and patent quality (indicated by citation figures). While Europe dominated after the US in past years’ analyses, today’s data shows China surpassing Europe for the first time, as indicated in Figure 1 for polymers. The data indicates that research competency is no longer just for mature regions but also resides with the developing region of China, joining its production leadership.6

Innovating to disrupt European stagnation

Hot segments
Our examination of Europe’s patent filing focus reveals four core research activities for European chemicals companies. Research on polymers like polypropylene (PP), polyethylene (PE) and polyester composites are driving patent filings. While filings in polyurethane (PU), which were strong in the past, are now reduced. We also observed rising numbers of recycling patents in Europe, supporting the sustainability megatrend (see more on megatrends
here). No other matured region stands out in this field. However, one of the most cited patent areas of the past five years are in polysaccharides (typically from natural sources; they have a variety of possible sustainability-related uses), but European chemicals companies are less represented there.

Our examination also indicates that traditional research approaches are likely to change.7 To reach high growth levels, companies need to be more agile and disruptive in R&D, emphasizing connectedness to a variety of external entities such as customers, universities, government bodies, other research institutions and independent experts.8 So far, patent filings reveal instances of collaboration centering on the automotive and electronics industries, as seen in Figure 2.

Chemicals Figure 2

It is interesting to note that recycling/recyclable material and other sustainability themes are well represented. Alongside the highly focused collaboration in the automotive sector, we observed collaboration to increase economies of scale for product commercialization. For instance, Newlight Technologies—a CO2 based thermoplastics producer—made collaboration agreements with Ikea and Body Shop recently.9 There is a similar agreement with Ford and Novomer (US start-up), who in the next five years will start substituting petroleum-based plastic foams with CO2 based plastics.10 Also, a small electronic device producer, SEB, is collaborating with Veolia to further extend its circular model for recycled plastics in electrical/electronic applications. The latest results include the water tank of a steam iron based on recycled PP.11

The future: Outcome oriented business models
In many segments, especially in specialties, the chemical industry has already been migrating from a product-centered selling model to a value-added services model. In the future, there may be even greater value by including information technologies and hardware to sell outcomes.

For instance, a water-treatment chemicals company, instead of selling chemicals, can employ sensors and analytical software to sell a certain quantity of guaranteed clean water. Another example may be a tire manufacturer selling tire mileage/reliability/safety instead of tires, where sensors can monitor tire performance.

An area of particular opportunity may be in packaging technology that can indicate food freshness (via means of chemical change, like thermochromics compounds, or the employment of electronic chips) and allow a shift to selling a certain food shelf life. This would particularly play well in emerging markets where there is not only high food consumption growth, but high levels of food contamination as well (see past blog). In this case, chemical companies may have the opportunity to use their brand on food packaging and establish a reputation for food safety, from which they can achieve further value-added growth.

The sleeping giant needs to awake
The European chemical industry has been stagnating over the past decade. However, innovation has been, and still is, a core competency of the European chemicals industry. With domestic customers being in world class industries (see past
blog) like engineering, automotive and construction, European chemicals have unique value growth opportunities. For instance, they could sell paint and adhesive outcomes around durability and performance in automotive and construction markets.

Europe chemical companies need to strengthen collaboration and open innovation to link to the growth of competitive and innovative downstream European markets.12,13 There is a huge opportunity for Europe to revitalize its large, but stagnating markets by combining the right molecules with the right partners and digital technologies to build high value outcome-oriented business models.

1“The European Chemical Industry: Facts & Figures 2016,” CEFIC, 2016,
3“Chemical Production Outlook 2016 – 2017,” CEFIC, May 2016,
5Accenture Research analysis of DWPI from Thomson Innovation (© Thomson Reuters 2016).

6Further reading: “The Future of Chemical Multinational Corporations in China,” AICM, 2016.
7"Accenture Chemical Industry Vision 2016: New Realities, New Opportunities," Accenture, 2016,
8“Digital Disruption in the Lab: The R&D of Tomorrow,” Accenture, 2015,
9“Newlight Signs Supply, Collaboration, And Technology License Agreement With IKEA,” PR Newswire, March 1, 2016,
10“Ford to Make Cars from CO2?,” Servicing Stop FORD, July 6, 2016. Factiva, Inc. All Rights Reserved.
11“Groupe SEB, Veolia and Eco-systemes create the first industrial partnership for small household appliance recycling in France,” ENP Newswire, February 8, 2016. Factiva, Inc. All Rights Reserved.
12Bjacek, Paul. “How to succeed in the EU chemicals marketplace,” Accenture, 06 November 2014,
13Bjacek, Paul. “Chemicals in transition: Using technology to conquer megatrend challenges,” Accenture, 08 January 2014,

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