Global chemicals industry must brace itself for higher water prices
Chemicals companies will be increasingly hit by rising water costs as water scarcity pressures intensify, especially in Asia and the Middle East.
Analysis carried out by audit firm KPMG into global mega forces affecting the chemicals sector has found that regions expected to see the most demand growth for chemicals - South Asia, East Asia, and the Middle East - are also likely to face severe physical and economic water scarcity.
Companies competing with local communities for scarce water resources are at risk of losing their license to operate unless they can adapt their operations accordingly, KPMG has warned.
It suggests that these firms develop comprehensive sustainability strategies that incorporate the upstream and downstream social, environmental, and economic impacts of their industrials operations.
The chemicals sector also remains a high energy use, with oil and gas the dominant feedstocks, along with coal which is being used more widely, particularly in China. This could give rise to energy and fuel volatility going forward.
However on the flipside, there is a huge opportunity for innovation with leading chemical companies investing in research and development and finding new markets based on social and environmental responsibility.
For instance, KPMG believes the chemical sector can play a significant role in developing solutions for a cradle-to-cradle, zero waste economy by supporting the production of recyclable tyres.