Study by Deloitte und VCI

Chemistry 4.0 – Growth through innovation in a transforming world

The chemical-pharmaceutical industry in Germany is undergoing change. The factors of digitalisation, sustainability and circular economy have a decisive role in this process. The study “Chemistry 4.0” is looking into the new development phase. It highlights the opportunities for growth that the chemical industry in Germany can realise in a transforming world by way of innovations, which new approaches are needed for this inside the companies, and how associations and politicians can accompany the further evolvement.

VCI-Deloitte-Study on Chemistry 4.0

Publication
112 Seiten / DIN A4

Zielgruppe:
Target groups: Broad public, politicians, member companies, academia

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Motivation and goal of the study

The chemical industry is an important growth driver for the currently strong performance of the German economy.

However, great efforts are needed for this effect to last in the long term. Like German industry overall, also the chemistry and pharma location is faced with elementary strategic and structural challenges.

Changes in societal environment
These challenges result on the one hand from an increasing importance of a sustainable economy and a sustainable consumption. On the other hand, digitalization in business and everyday life leads to major and rapid changes.

Competition in chemistry is intensifying
At the same time the whole competitive environment in the chemical industry is about to face a transformation by a further increase in competitive intensity.

Change processes in the chemical sector
As a result, the chemical industry in Germany is changing more strongly than in the past decades: In addition to continuous innovation and improvement processes ("incremental changes"), in the future the chemical industry will also be characterized by changes that have a very strong influence on product portfolios, value creation structures and business models ("disruptive changes").

These changes show that the chemical industry in Germany is in a transition to a new development phase. After industrialization and coal chemistry (Chemistry 1.0), the emergence of petrochemistry (Chemistry 2.0) and increasing globalization and specialization (Chemistry 3.0), the industry is entering the new phase of Chemistry 4.0 in which digitalization, sustainability and circular economy play key roles.

Structure and methodology

The study consists of three sections:

  • framework analysis, which describes the major development trends to 2030 and analyzes their impacts on the German chemical and pharma business,
  • detailed analysis of chances and risks of digitalization and circular economy,
  • deriving recommendations for companies and politicians, based on the above.

The analysis was made in a multi-stage process that included the expertise from VCI member companies, VCI experts, Deloitte, associations of suppliers and customer industries, and delegates from science and politics.

Digital transformation in the chemical industry

The developments, which are summarized under the term digitalization, are not only a trigger for fundamental changes in the chemical environment but offer, at the same time, the possibility of successfully shaping the change in the chemical industry and, most importantly, of opening up new business and service areas.

The different starting points of digitalization can be split into three categories which have different (technical) focuses and which are based on an increasing degree of digital ripeness of the companies:

Transparency and digital processes comprise the gathering and first use of digital data in operative processes inside chemical companies.

Data-baded business modelsintensively use mass data from business operations or decision-making and efficiency increases; where necessary, they areadditionally linked with external data.t.

Digital business modelsare value creation structures that fundamentally change existing processes, products or business models. Digital business models are characterized by digital additions to products and services in order to enhance customer benefit. Often, this does not happen in one single company but within digital networks where various suppliers provide joint solutions for customers..

The great importance of digital business models for future viability has been recognized. In the next 3 to 5 years, chemical companies are planning to invest over 1 billion euros in digitalization projects or new digital business models.

The chemical industry’s key role in the circular economy

Circular economy contributes not only to the achievement of ecological goals, but also offers growth potentials to chemistry. In this study, the circular economy concept encompasses all contributions toward saving resources and includes the following measures:

  • to improve resource efficiency at all levels of value creation (suppliers, chemical industry, customers),
  • to increase the lifespan of products and components and to reduce resource consumption in their application,
  • to close cycles to the extent possible, i.a. by way of reuse, recycling, material and energy recovery or biodegradation, and to use residual materials where this is possible.

It is a task, a challenge and an opportunity for chemical companies to take into account all the aspects of the circular economy throughout entire product life cycles. The chemical industry can support circular economy concepts, especially by optimizing the product design, increasing resource efficiency in its own processes and in its customers’ production processes, through feedstock and material recycling, and the reprocessing and cleaning of products.

Mutual enhancement between digitalization and circular economy

The interplay of digitalization and circular economy concepts opens up special potentials. Digitalization in the chemical industry and the related technical possibilities contribute in a variety of ways to making circular business models possible in the first place and to improving their profitability, thus supporting the achievement of the UN sustainability goals.

Results of the survey of medium-sized companies

The analyses were supplemented by a broad survey of medium-sized chemical and pharmaceutical companies. This shows: the chemical and pharmaceutical mid-sized sector is already feeling that the digital revolution and the transformation into a circular economy bring significant changes. Around 30 percent of the companies await significant disruptive changes in the chemical and pharmaceutical business. The relevance of the topics digitalization, sustainability and circular economy is also very clear.

Conclusions and recommendations

On the basis of the analyses, the study derives recommendations for businesses and politicians in order to successfully cope with the challenges associated with future changes.

Recommendations to companies and their associations

Digital and circular business models require technical and network competency. The chemical industry has a sound basis for this which, however, needs to be expanded and adapted in order to overcome the remaining obstacles and to fully exploit growth opportunities. This leads to the following recommendations:

  • Use the chances and set strategic goals
  • Enhance ressources
  • Transform corporate culture
  • Build up cooperations and platforms
  • Develop new participation concepts

Recommendations for political and framework conditions

Special aspects of the political regulatory framework of digitalization:

  • Drive forward digital education
  • Solve challenges in social partner style
  • Expand technical infrastructure
  • Further develop the institutional infrastructure
  • Allign personal data protection and innovation benefits
  • Make machine and company data usable while safeguarding IPR (intellectual property rights) and know-how protection:
  • Promote cooperation and a non-bureaucratic development of platforms
  • Dialogue on the necessity of and perspecdtive for digitalization
  • Openn borders in the digital world

Special aspects of the political regulatory framework of thecircular economy:

  • Understand circular economy as a holistic and open approach
  • Strive for sustainability
  • Better regulation
  • Review the existing regulatory framework as to obstacles to a circular economy
  • Create societal awareness for circular economy

Support by improving the general political framework conditions:

  • Expand support for innovation
  • Review the regulatory framework

Wrap-up

The study shows that digitalization and circular economy are the causes of fundamental changes. The chemical industry should scrutinize its current portfolio of products and services and adjust its business models. Political decision makers are called upon to support these efforts with adequate industrial policy and to create globally competitive framework conditions for the chemical industry.

Structure and content of the study:

  1. Foreword
  2. Executive Summary
  3. Motivation and goal of the study
  4. Methodology
  5. Framework analysis
    1. Energy & raw materials
    2. Business-to-Business
    3. Business-to-Consumer
    4. Agriculture
    5. Pharmaceuticals & healthcare
    6. Interim conclusion
  6. Digitalisation in the chemical industry
    1. Transparency & digital processes
    2. Data-based opterationg models
    3. Digital business models
  7. Circular economy and the chemical industry
  8. Interplay between digitalization and circular economy
  9. The role of the chemical industry in economic networks
  10. Conclusions and recommendations for actions
    1. Requirements to companies and associations
    2. Special aspects of the political regulatory framework of the circular economy
    3. Special aspects of the political regulatory framework of the circular economy
    4. Support by improving the general political framework conditions
  11. Glossary – Environment trends
  12. Sources

More information

For questions or suggestions, please feel free to contact us.

Contacts

Dipl.-Kfm. Johann-Peter Nickel

E-Mail: nickel@vci.de

Dr. Henrik Meincke

E-Mail: meincke@vci.de