Sustainability regulations are a make-or-break moment for the industry. However, instead of treating regulation as a cost center, what if chemical firms could use digital tools to turn sustainability into a growth driver, says Stephen Reynolds, Industry Principal, Chemicals, AVEVA.
The chemicals industry is the engine of sustainability. It enables new business models such as creating green energy and is integral to producing greener materials like lithium compounds and carbon fibers for use in batteries and electric vehicles. In recycling, where broad efforts have focused on mechanical sorting and reusing materials, chemical process innovation shows how we can take used materials back to their basic models – closing the circularity loop.
But increasingly, attention is turning to how these industrial and economic catalysts are produced, as well as countless other everyday items from detergents and household cleaners to polymers and so on.
Regulatory scrutiny is growing. Europe’s Corporate Sustainability Due Diligence (CSDD) requires deeper disclosures than many companies were prepared for. Its Carbon Border Adjustment Mechanism (CBAM) has raised the stakes for emissions-heavy exports. Asian governments are likewise increasingly seeking more information on toxicity and environmental emissions. Shareholders and public health groups in the US want better environmental stewardship. And because of our interconnected world, regulations in one market can affect operations elsewhere.
Wherever you are, regulatory compliance is simply a question of when, not if. Each new policy will add another layer of administrative friction. But if firms are willing to act shrewdly, these constraints can be turned into competitive muscle. Don’t see these rules as traps but view them as invitations – albeit stern ones – to reimagine operations through digital lenses.
Turn regulations to your advantage
Embracing constraints and barriers can serve to free up innovation and creativity, research shows. Instead of seeing regulations as a box-ticking drag on profit, it’s helpful to reframe them as a springboard for research and development. By leveraging industrial digital technologies like the Internet of Things (IoT) and artificial intelligence (AI), chemical firms can transform these constraints into opportunities to design more sustainable business models and unlock new growth paths towards a low-carbon future.
Just look at Aker Carbon Capture, which is scaling its sustainability-first business of collecting greenhouse gas emissions before they are released into the atmosphere.
Levelling up is hard enough, but when your teams sit in different parts of the world, they must collaborate in radically new ways.
Unifying design and engineering in the cloud has achieved just that. Teams in Norway, India and elsewhere can work together around a 3D model in real time, speeding up template and P&ID design. Not only do they make fewer errors and reduce the need for rework, but FEED times have been cut by 20%. It’s a repeatable, cost-efficient process that not only reduces waste but boosts project delivery speed.
Similar gains arise from process innovation, as Covestro has seen. Although plastics and polymer products aren’t yet fully covered by the 2024 European Union’s Ecodesign rules, the global manufacturer is committed to net-zero scope 1 and 2 emissions by 2035. So, its designing revolutionary green polymers that use renewable, biology-based raw materials, as well as by boosting energy and materials efficiency across production cycles.
AI-infused process simulation software has been indispensable to achieving those aims, enabling Covestro to model new processes across the value chain: to predict the behaviour of their revolutionary green polymer, to understand the best way to produce sustainable products at scale, and to suggest faster, lower-energy manufacturing methods.
Exporting these processes into a digital twin of its operations has unlocked further gains for the manufacturer of polyurethane and polycarbonate raw materials. With a single, easy-to-use platform that unites different operating units, Covestro has improved process transparency and traceability, while reducing energy use by 30% and emissions by 39%.
Compliance becomes a byproduct of efficiency, not a bureaucratic burden.
Go digital to unlock innovation
As we see from Covestro, digital transformation helps align regulatory readiness with market differentiation. Investing in digital platforms and technologies such as IoT and AI supports real-time optimisation of heat integration, batch sequencing and throughput control.
This means chemicals businesses can operate more sustainably, cutting resource use by doing more with less – even as they contend with challenges such as geopolitical tensions and workforce shortages. It’s a double bottom line: an integrated digital ecosystem not only ensures regulatory compliance but also drives efficiency gains, innovation, and ultimately business value.
The majority of chemicals leaders (89%) agree their organisation must harness the power of digital technologies before they can accelerate their sustainability agendas, according to the AVEVA Industrial Intelligence Index 2024 report.
A separate survey by Deloitte identifies the top action areas for AI and other digital technologies: accelerating research and development (R&D) for sustainable products, predicting how one changes to one area of production affect other processes, and gaining insights from data tracked through the entire value chain.
But there’s a caveat: Technology isn’t a silver bullet. For digital tools to meaningfully shift the industry toward sustainable growth, they must be backed by serious capital investment, skilled talent pipelines, and active policy engagement. Only alongside robust policy dialogue and financial investments can industry turn regulatory challenges into growth opportunities.
As policymakers tighten the noose on industrial emissions, and investors demand proof of impact, the firms that invest in digital capacity today will be best equipped to compete in tomorrow’s carbon-accountable markets. Forward-looking firms won’t wait for a mandate to act.
