Transition Pathways: Industrials and Chemicals

The industrials and chemicals sector faces a long and complex transition with different challenges ahead for companies at every step along the value chain, from the extraction of raw materials to the manufacturing of finished goods. Decarbonising the industrial sector will require collaboration and commitment across the entire ecosystem and the support of industry leaders, policymakers, and financiers.

The fourth instalment of HSBC's Transition Pathways series looks at how companies across the real economy - metals, cement, chemicals, plastics, pulp, paper, glass and manufacturing – is approaching the journey towards net zero emissions, and what it will take to accelerate their progress. These industry insights are intended to help corporate leaders develop and act on their transition plans.

These sectors are at the heart of building, moving and connecting the real economy – and they drive global energy demand. So, reducing emissions and fossil fuel reliance in these sectors is key to accelerating the energy transition.

Transition plans demonstrate action and practical steps against ambition and show regulators, financiers, investors, and customers how an organisation intends to reach net zero across its operations and value chains.

Our net zero ambition means aligning financed emissions – the greenhouse gas emissions of our clients – to net zero by 2050. To do this, we have set 2030 targets for certain industrial sectors: in cement, we aim to reduce on-balance sheet financed emissions intensity from our 2019 baseline 0.64 tonnes of carbon dioxide equivalent per ton of cement (tCO2) to 0.46 by 2030, and reduce emissions intensity per ton of steel / aluminium from our 2019 baseline 1.8tCO2 to 1.05 by 2030.

By setting intensity-based targets, we can enable climate-positive investment in these sectors, to support green technologies and transition solutions.

How is the sector transitioning?

How are companies in the industrials sector approaching the transition to net zero? What is accelerating their decarbonisation, and what is holding them back? We worked with Kantar to ask 375 companies across 22 markets what the transition means for their business. (Methodology available below).

Commercially important

98%

of companies in the sector say transitioning to net zero is commercially important to their business

Reporting on emissions

82%

are reporting currently on scope 1 and 2 emissions, and almost half (46%) are reporting on emissions in their value chain

Capex is rising

35%

are spending at least 10% of their capex on the net zero transition, and 54% expect to do so in 2-3 years’ time

The long-term decarbonisation of the industrials and chemicals sector is critical to global efforts to mitigate the worst impacts of climate change. We can see that companies are stepping up their investment in climate-aligned initiatives, and we look forward to helping them overcome obstacles in their transition.
Sophie Lu | Global Head of Heavy Industry Decarbonisation, HSBC

Material progress: How are companies in the sector approaching the low-carbon transition?

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Survey methodology

For HSBC’s Transition Pathways survey, HSBC has worked with Kantar, a data, insights and consulting company. The survey is not wholly-representative of HSBC’s customer base and covers respondents across 375 key financial decision makers from businesses operating in the chemicals and industrials sector, comprising Discovery and Extraction (138 businesses), Processing (166 businesses) and Manufacturing (71 businesses). Key sub-sectors that were further identified were Chemicals and Plastics (74), Construction and Building Materials (68), Paper, Forestry and Glass (65), Steel (54) and other metals and minerals (43). Businesses were located in Europe (91), Asia (102), the Middle East (67) and North/Central America (115). Overall, 71 (19%) had a turnover below $50m, 87 (23%) had a turnover between $50 and $499m, 84 (22%) had a turnover between $500m and $2.5bn and 133 (36%) turnover in excess of $2.5bn. 110 (27%) had been established for less than 10 years and 265 (73%) for more than 10 years. Data was collected through an online questionnaire and the survey ran from 14 July to 1 August 2023.

In preparing this survey, HSBC has relied upon available data, information and responses given at the time of writing. This report should not form the basis of any third party’s decision to undertake, or otherwise engage in, any activity and third parties do not have any right to rely on it. Neither HSBC nor Kantar accept any duty of care, responsibility or liability in relation to this research or its application or interpretation, including as to the accuracy, completeness or sufficiency of it or any outcomes arising from the same.

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