Chemical industry digitalization: The chemical sector needs to go online

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  Quantumrun Foresight
• May 15, 2023

Chemistry plays an essential role in society and has a disproportionately large role in addressing humanity’s environmental pollution and climate crises. To move toward a sustainable future, chemical companies must transform how chemistry is designed, developed, and used. 

Chemical industry digitalization context

In only two years, the COVID-19 pandemic has caused an accelerated increase in digitization globally. According to Ernst & Young (EY) ’s DigiChem SurvEY 2022, which surveyed 637 executives from 35 countries, more than half of respondents indicated that digital transformation has rapidly developed in the chemical sector since 2020. However, according to the EY CEO Outlook Survey 2022, digitalization is a capital concern for most chemical firms. More than 40 percent of chemical companies have fast-tracked digitalization across functions since 2020. Additionally, more than 65 percent of respondents reported that digitalization will continue to disrupt their businesses by 2025.

Sustainability and supply chain planning are two areas of interest many chemical firm executives believe will be digitized by 2025. According to the DigiChem SurvEY, supply chain planning has the highest digitalization rate among respondents (59 percent). Whereas the sustainability sector is one of the least digitally integrated; however, it is expected to grow significantly with digital initiatives. As of 2022, digitalization is affecting supply chain planning, and this trend will continue as companies strive to improve their operational competitiveness and save money.

Disruptive impact

The surging demand for digitization since 2020 has led chemical firms to digitalize their administrative functions and customer interface. Moreover, chemical firms also saw value in developing fail-proof supply chain networks. These online systems would help them estimate demand, trace raw material sources, track orders in real-time, automate warehouses and ports for sorting and safety purposes, and optimize supply networks overall. 

However, according to the 2022 DigiChem SurEY, firms face new challenges while digitalizing, which differ per region. For example, Europe’s chemical industry is much more developed and has had years to implement complex processes. However, executives report that European chemical companies suffer from a lack of qualified personnel (47 percent). Respondents in the Middle East and Africa said that their biggest challenge is technical infrastructure (49 percent). The Asia-Pacific region has experienced a growing number of cyberattacks, so security concerns are its main barrier to advancement (41%).

A note of caution: this increasing digitalization has also drawn the unwanted attention of cyber criminals. As a result, chemical companies are also investing aggressively in digital and cybersecurity measures, especially in petrochemical industries with huge production plants. 

Implications of chemical industry digitalization

Wider implications of chemical industry digitalization may include: 

• Chemical companies transitioning to green technologies and systems to improve their environmental, social, and governance ratings.
• Large chemical firms transitioning to cloud-based systems or hybrid cloud solutions to improve cybersecurity and data analytics.
• Growth in Industry 4.0 resulting in more investments in Internet of Things (IoT) devices, private 5G networks, and robotics.
• The increasing virtualization in the chemical production process, including digital twins for quality control and enhanced employee safety.

Questions to comment on

• How else might the digitalization of the chemical industry create opportunities for cyber attacks?
• What are the other benefits of digitalization of the chemical industry?