A new report from ChemSec titled A Profitable Detox: Why Safer Chemistry Makes Financial Sense highlights increasing pressure from investors on the chemical industry to adopt safer practices. Released in 2024, the report urges global chemical manufacturers to enhance transparency, phase out persistent chemicals, and develop safer alternatives. This call comes as major institutional investors with over $12 trillion in assets back the recommendations, signaling that the future profitability of the sector relies on sustainability and regulatory compliance.
Investors Sound the Alarm on Chemical Industry Risks
According to A Profitable Detox, chemical manufacturers are facing mounting financial risks due to the production of hazardous chemicals. These chemicals, linked to environmental pollution and health risks, are under increasing scrutiny from regulators and stakeholders. The report points to the urgent need for change, driven by three main investor asks:
- Increase transparency about the use of hazardous chemicals.
- Implement a time-bound plan to phase out persistent chemicals.
- Ramp up research and development into safer chemical alternatives.
Institutional Backing
The report is backed by the Investor Initiative on Hazardous Chemicals (IIHC), a collective of over 60 institutional investors managing assets exceeding $12 trillion. These investors are calling for more stringent measures in chemical production to safeguard their long-term profits and minimize exposure to legal, regulatory, and reputational risks.
Regulatory and Financial Incentives
The report outlines several incentives for chemical companies to make these changes. These include staying ahead of evolving regulations, avoiding costly litigation linked to environmental contamination, and enhancing operational efficiency. The case studies presented in A Profitable Detox show companies like Sabic and Johnson Matthey already embracing transparency and safer alternatives to hazardous chemicals.
Rising Pressure from Stakeholders
The report emphasizes that continued inaction on hazardous chemicals poses systemic risks to both the environment and the economy. According to the report, chemical pollution, driven by persistent chemicals like PFAS, is contributing to widespread environmental degradation, with significant costs expected for future remediation.
“The writing is on the wall for companies that continue to rely on hazardous chemicals. Consumers, regulators, and now investors, are demanding safer alternatives. Those that don't act risk losing market share and facing substantial financial penalties,” states ChemSec’s report.
Future Outlook
As the chemical industry prepares for tightening regulations, the report stresses that companies have a window of opportunity to position themselves as industry leaders by taking proactive steps. The investors behind the IIHC initiative are poised to reward companies that prioritize sustainability and transparency.
