Navigating challenges and embracing digitalisation in the chemical industry

The chemical industry, a cornerstone of global manufacturing, is undergoing a transformative period marked by numerous challenges and opportunities. Delving into the complexities and key issues facing the sector, it’s evident that a multifaceted approach is essential for sustained growth and resilience, including embracing digitalisation.

The Chemical Industries Association (CIA) has noted over the last twelve months that the industry has faced extremely challenging times. The key issues are acknowledged as follows:

  • Energy Prices. The industry, known for its energy-intensive processes, is grappling with the impact of rising gas prices and geopolitical conflicts, especially in Ukraine. These factors have escalated energy bills, posing challenges to the profitability of chemical companies.
  • Raw Material Costs and Shortages. Global supply chain disruptions stemming from the pandemic, trade wars, and geopolitical tensions have created a ripple effect, affecting the availability and affordability of raw materials. Consequently, chemical companies face production delays, increased prices, and compromised product quality.
  • Labour Costs. A skills gap and a shortage of qualified workers, coupled with the aftermath of Brexit and changes in immigration policies, have led to increased labour costs. The industry is tackling challenges in talent acquisition and retention.
  • Sustainability and Regulation. Under mounting pressure to align with environmental goals, the industry must invest in greener technologies with a focus on circular economy practices, bio-based materials, and hydrogen. Regulatory challenges, including the UK’s departure from the EU’s REACH system and the US’s Inflation Reduction Act, further add complexity.

The Chemical Business Association (CBA), representing the UK chemical supply chain, sheds further light on key issues confronting the industry:

  • Brexit and UK REACH. CBA advocates for a pragmatic approach to the UK’s departure from the EU’s REACH system. The government’s alternative transitional registration model (ATRm) aims to ease compliance burdens for UK chemical businesses.
  • Covid-19 and Supply Chain Disruptions. CBA is actively supporting its members in addressing challenges posed by the Covid-19 pandemic, including staff retention, health and safety concerns, and supply chain disruptions, such as raw material shortages and transport delays.
  • Sustainability and Innovation. CBA champions the role of the chemical industry in achieving sustainability through investments in innovation and technologies like bio-based materials, hydrogen, and circular economy practices.

How is Process Safety Management (PSM) affected in terms of navigating these challenges?

As effective Process Safety Management remains essential for safe and sustainable operation, requiring the application of sound management principles to prevent and mitigate major incidents, key issues under discussion include the challenges and opportunities of digitalisation and innovation.

While the adoption of innovative technologies offers opportunities for sustainability and efficiency, challenges such as investment, adaptation, and regulation must be addressed. Digitalisation can help chemical companies accelerate their innovation and growth, by using digital tools, such as cloud computing, big data, and machine learning, to generate and evaluate new ideas, products, and solutions. Digitalisation can also help chemical companies foster collaboration and knowledge sharing, by using digital platforms to build ecosystems and communities, to connect and exchange ideas and experiences with partners, customers, and stakeholders.

However, Digitalisation, while enhancing performance, introduces risks such as cyberattacks and data breaches, so these elements must be considered and the risks mitigated by choosing the right partners who understand these issues.

Amidst these challenges, digitalisation emerges as a key enabler for change in the chemical industry:

  1. Functional Excellence:  Digitalisation optimises business processes, including manufacturing, marketing, and R&D, by leveraging data and analytics to enhance performance, reduce costs, and improve quality.
  2. Demand Patterns:  Digitalisation transforms demand patterns in end markets, presenting both opportunities and challenges. For example, additive manufacturing creates new material needs while reducing reliance on traditional chemicals.
  3. Business Models:  Enabling chemical companies to offer new value through digital services, solutions, and platforms such as track-and-trace, predictive maintenance, and crowdsourcing.
  4. Energy and Resource Efficiency: Using digital technologies to reduce environmental impact and comply with sustainability goals.
  5. Supply Chain Management: Addressing disruptions through blockchain, IoT, and AI for improved visibility, traceability, and resilience.
  6. Innovation and Collaboration: Accelerating growth through cloud computing, big data, and machine learning, fostering collaboration and knowledge sharing.

In conclusion, the chemical industry stands at the crossroads of challenges and opportunities, from navigating geopolitical uncertainties to embracing digitalisation for a sustainable and innovative future. As the industry evolves, collaboration, innovation, and strategic adaptation will be pivotal in ensuring its continued success.