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5. Sustainability and trust: Data and digitalization can improve brand transparency and trust

Trust is important to brand competitiveness, but some events in impacted trust levels in the chemical industry. These concerns were exacerbated when a US Geological Survey study found that at least 45% of tap water in the United States could contain one or more per- and polyfluoroalkyl substances (PFAS).48

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But, while PFAS are top of mind for many policymakers, the issue is emblematic of a larger shift toward increased scrutiny of products, operations, and supply chains as stakeholders increasingly demand that companies work to minimize the negative impacts on health, safety, environment, and society. Chemical companies have been taking steps to minimize these impacts for years. Still, even more now, companies are expected to differentiate their products and brands by increasing transparency and improving collaboration with stakeholders.

Response to PFAS

In response to the PFAS concerns, several brands announced intentions to eliminate PFAS from their product offerings.49 Meanwhile, regulators in the United States and Europe have proposed new rules. As part of the Green Deal announced in , the European Commission committed to ban thousands of &#;nonessential&#; hazardous chemicals by , including PFAS.50 That has not happened yet, but movement toward increased regulation is likely. In the United States, the Environmental Protection Agency has proposed to designate some PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act, which would increase transparency around releases of these chemicals.51 And more than 20 US states have also announced bans or restrictions on certain PFAS uses, such as firefighting foam, cosmetics, and food packaging.52

However, not all PFAS have the same physical, chemical, environmental, or toxicological properties. For instance, the two most studied PFAS, perfluorooctanoic acid and perfluorooctanesulfonic acid, were mostly phased out by due to their toxicity, mobility, and bioaccumulation potential.53 However, many in the industry consider fluoropolymers to be polymers of low concern under the Organization for Economic Cooperation and Development criteria.54 To complicate matters, there are currently no alternatives for fluoropolymers in some uses, such as solar panels, green hydrogen, and lithium-ion batteries.55 As the industry waits to see whether regulators will differentiate between PFAS compounds in upcoming rules, some companies have announced they will phase out the manufacturing and use of PFAS, and some organizations are engaged in innovating for alternatives.56

Differentiating through transparency and collaboration

Increased transparency and collaboration can go a long way in helping chemical companies build trust and differentiate their brand. Stakeholders typically expect access to information about the products they use, the brands they buy from, and the assets that operate in their neighborhoods. As digitalization leads to the ability to collect data across R&D, operations, and supply chains, stakeholders are asking companies to be more transparent and make responsible decisions.

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For instance, the ability of companies to trace the origin of inputs and track the emissions of products seems to be becoming more important for customers. Earlier this year, one chemical company introduced its end-to-end traceability technology that features blockchain-enabled services; this technology allows buyers to precisely trace the origin of ingredients in their products.57 Another chemical company launched a pilot blockchain project for emissions tracking that signifies a critical step toward reducing emissions throughout value chains.58

More companies are realizing transparency and collaboration are important to differentiating their brand. Highly trusted companies tend to outperform less-trusted companies by as much as four times in market value,59 as highly trusted companies develop stronger brand loyalty with customers and employees. Deloitte&#;s qualitative and quantitative TrustID&#;60 research reveals that brand trust is dependent on four factors: reliability, capability, transparency, and humanity. Chemical companies score relatively highly in reliability and capability, with the gap between high and low performers being relatively small. However, the gap between high and low performers for humanity and transparency is considerably wide, which provides chemical companies with significant opportunities to differentiate themselves in the market (figure 6).

Sustainability is a key driver of change

Several big trends are driving change in the chemicals sector, especially the rising importance of environmental, social and governance (ESG) considerations. Delivering sustained outcomes and maintaining trust will require smarter, more efficient ways of working.

Such a transformation will help the sector shift to lower-carbon processes and operations. It will also make it easier to manage the ongoing convergence that will see chemicals businesses work increasingly closely with the energy and utilities industry.

Other factors reshaping the sector include digitisation, new mergers and acquisitions, changing consumer demands and black swan events. All this will require companies to re-examine their business models, find new ways to create value for customers and upskill their workforces for the future.

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