
Can Carbon Help Decarbonize Chemicals?
Carbon transformation, or CO2 to X, is rapidly emerging as an economically viable alternative to fossil fuel-based chemicals production. Big companies need to engage.
Although commodity and specialty chemical producers face different issues, they share a common imperative: responding to growing cost pressures and customer expectations. BCG’s chemical consulting team helps companies find innovative ways to meet these challenges.
Economic conditions, stiffer regulations, and concerns about the environment affect all corners of the $4 trillion global chemical industry—but not in the same way. Chemical distribution companies are faring better in certain regions than others, suppliers of specialty chemicals are outperforming commodity chemical industry purveyors, and oil prices continue to make chemical production companies less competitive.
Regardless of specialty or circumstance, chemical companies are united by a need to innovate in order to improve the blends that go into final products, get products to market faster, and better meet customers’ requirements.
BCG’s chemical consulting practice covers the breadth of the global chemical industry, whether it’s working with upstream producers of petrochemicals to optimize their assets’ deployment or helping downstream players with a personalization of their nutrition ingredients. We also help chemical companies deal with commoditization and develop unique offerings with defendable margins.
BCG’s comprehensive approach combines deep knowledge of dozens of chemical industry subsectors and end-user industries with global coverage of key business topics. The breadth of our experience and work gives us the perspective and ability to advise multinationals looking for effective chemical strategies in multiple subsectors, including in petrochemicals and commodity chemicals, along with niche players in specialty chemicals, differentiated chemicals, chemical distribution, and chemical equipment manufacturing.
BCG’s chemical consulting work encompasses:
BCG has proven experience helping chemical companies in five key areas:
Growth Strategy. A major Southeast Asian petrochemical company wanted to explore opportunities in specialty chemicals to counter the cyclical nature of its commodity-based business. BCG helped the client establish an M&A arm and update its business model to successfully integrate and derive value from new endeavors.
Post-Merger Integration. A European chemical conglomerate needed help with the integration of an acquired specialty chemical company. BCG helped the client streamline and maximize cost synergies for support functions and implement best practices to ensure high top-line synergies for all business activities. These synergies resulted in 11% of target sales—several percentage points above historical transactions.
Sales and Operations Planning. Poor planning at a batch-process chemical client created enterprise-wide problems that hurt market opportunities, sales, production, and working capital. With BCG’s assistance, the company streamlined sales and operations processes, which improved coordination between sales and production and resulted in a 30% increase in throughput and a 25% increase in on-time delivery.
Commercial Excellence. A lack of customer segmentation and a uniform pricing strategy hobbled a European chemical distributor’s go-to-market approach and disincentivized its salesforce. BCG worked with the client to roll out a commercial excellence plan that saved millions of euros and included tools to flag transactions with repricing potential and to support account managers’ build quotes. The plan also included price-tracking KPIs and related training and documentation.
Digital Transformation. A Middle Eastern petrochemical client wanted to expand a digital transformation program in its operations to cover the entire enterprise. BCG helped the client create a three-year plan that encompassed several dozen digital initiatives for multiple business units. The plan included a detailed assessment of costs, enablers, and risks, among other factors.
Carbon transformation, or CO2 to X, is rapidly emerging as an economically viable alternative to fossil fuel-based chemicals production. Big companies need to engage.
By applying levers that reduce both carbon emissions and costs, industrial companies can generate savings to invest in further decarbonization initiatives.
Our annual assessment of chemical companies’ TSR shows steady growth from 2017 to 2021, daunting turbulence so far in 2022, and viable strategies for recovering.
Chemical companies are shifting to a new, multifunctional, more collaborative form of R&D, where growth depends on their ability to engage with the outside world.