The need for greenhouse gas (GHG) reduction and decarbonization is creating an inflection point for the chemical industry. On one hand, it is bringing unprecedented opportunities for chemical companies to help customers reduce their GHG footprint. On the other hand, it is leading to unprecedented challenges as companies decarbonize their own operations. And navigating through it all could require a new role in senior management.

GHG reductions are being driven in part by regulations and government targets in many countries and regions. The EU, for example, is calling for a 55 percent1 reduction by 2030 and carbon neutrality by 2050,2 while Japan aims to be carbon neutral by 2050.3 Interest in GHG reductions is also being driven by end-user preferences, with 87 percent of consumers saying that they prefer environmentally friendly products and 50 percent saying they are willing to pay more for them.4 Other drivers include funding programs such as the EU Green Deal,5 GHG costing schemes such as the EU Emissions Trading System,6 audit and certification schemes, and customers’ requirements for information about the GHG footprint of chemical companies’ offerings.

Managing all these GHG-related factors can be complicated—and at the same time, the approach that companies take to achieve carbon reductions will have a substantial financial impact. For example, assuming a CO2 price of €50 per ton, the cost of 2 million tons of CO2 emissions amounts to €100 million; for 10 million tons, that figure is €500 million. (Figure 1)

Figure 1: Cashflow impact of commercial or technical abatement of CO2 emissions

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Click to enlarge Figure 1

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Decarbonization is not only a financial issue for chemical companies, but a business, technical and administrative challenge, as well. They need to address GHG reductions across direct emissions (Scope 1), indirect emissions (Scope 2) and other upstream and downstream emissions in the value chain (Scope 3) in an integrated, not fragmented, fashion. And they need to do so from a broad business perspective that enables them to detail required investments, identify and pursue customer opportunities, secure public funding, and respond to customer and investor requests associated with GHG.

In most chemical companies, these various activities are handled by a long list of different areas. Public funding is managed by government affairs; customer requests by marketing and sales; energy sourcing by procurement; business-specific decarbonization roadmaps by business units; in-plant GHG reduction programs by production; asset management by process technology and engineering; GHG emission footprints by the sustainability or environmental, health and safety department; and potential divestments of GHG-intensive businesses by M&A departments. With the many stakeholders involved, the fragmented responsibilities, and the diverse views of individual departments, managing it all from a company-wide perspective is a major challenge.

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A Chief Carbon Officer would serve as the dedicated executive to define and steer a chemical company’s carbon transformation journey across departments and business units.

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These realities prompt a key question: Should chemical companies consider an additional executive role—Chief Carbon Officer? Some might argue that there is already a long list of “Chief” roles at companies—why add another? Others might say no, this should be the responsibility of the Chief Sustainability Officer or other sustainability lead. From our perspective, the answer is YES.

Emission reductions and decarbonization are so complex and multifaceted that they will need to have someone at a senior level overseeing them—someone who can focus, prioritize and balance carbon-related efforts to reflect financial, business, compliance and customer needs across the company. Such a role would involve many tasks and areas of the company that simply do not currently fall under an existing role. (Figure 2)

Figure 2: The Chief Carbon Officer’s responsibilities

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For example, the Chief Carbon Officer, leading a carbon management office, would:

  • Create a fact base on GHG emissions across Scope 1, 2 and 3 efforts, assess GHG costs by business and set directions for action plans, business units and functions.
  • Develop and steer implementation of the GHG reduction roadmap.
  • Integrate GHG-reduction investments and going concern investments with long-term financial plans, funding options, technology roadmaps and M&A strategy.
  • Secure funding from GHG reduction programs such as the EU Green Deal.
  • Manage internal and external stakeholders such as employees, customers, communities and investors.
  • Set direction for capability-building and management systems related to business opportunities for GHG reductions.

The position would provide an owner for carbon transformation—someone with end-to-end responsibility and decision-making authority across various departments and business units. This executive could look at emissions and decarbonization efforts in light of the overall impact on the future of the company, from an enterprise-wide perspective.

The move toward GHG reductions provides a significant growth opportunity for the chemical industry. But it will also involve business challenges as chemical companies work to reduce their GHG footprints. Having a dedicated, high-level executive in place to define and steer this journey will be key to taking advantage of the opportunities without being overwhelmed by those challenges.

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Sources:

1 "Climate strategies & targets,” European Commission website, accessed August 20, 2021, https://ec.europa.eu/clima/policies/strategies_en.
2 Ibid.
3 Shinjiro, Koizumi. “Japan’s transition to become a decarbonized society,” January 19, 2021, World Economic Forum, https://www.weforum.org/agenda/2021/01/japan-climate-change-carbon-neutral-2050/.
4 Accenture Chemicals Global Consumer Sustainability Survey, 2019, https://www.slideshare.net/accenture/accenture-chemicals-global-consumer-sustainability-survey-2019.
5 “EU climate action and the European Green Deal,” European Commission website, accessed August 31, 2021, https://ec.europa.eu/clima/policies/eu-climate-action_en.

6 “EU Emissions Trading System (EU ETS),” European Commission website, accessed August 31, 2021, https://ec.europa.eu/clima/policies/ets_en.

Dr. Bernd Elser

Managing Director – Global Chemicals Lead and Europe Lead for Chemicals and Natural Resources

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