If there’s one thing to celebrate in the chemical manufacturing industry, it’s the fact that we’ve finally – after centuries of obscure practices – begun to make an important shift towards safer and less harmful products and processes, with the general mindset of companies being aimed at reducing waste and creating a better effect within society.

Yet, there is still a long road ahead of us if we want to make bigger and more decisive steps into accomplishing sustainability in manufacturing, as well as protecting society from harmful chemistries. After all, it is a well-known problem that popular chemicals that have been deemed toxic or carcinogenic, such as Bisphenol A and Cocamide DEA, have been replaced with equally dangerous substitutes (Cocamide MEA, Bisphenol S).

Thankfully, the financial world is evolving alongside manufacturing: for investors, high returns, and attractive balance sheets are no longer the main priority when supplying valuable funds to manufacturers. Named ESG criteria, these are environmental, social, and governance standards which must be fulfilled by companies if they wish to receive funding.

In other words, it is up to companies to steer their business towards more environmentally and socially conscious methods, especially if they wish to attract this type of impact investors.

However, ESG is an interesting science within itself, and there is a doubt that many companies face when directing resources to one effort or another – which factors weigh more heavily in the race towards sustainability?

ESG – a necessary concept in the modern era of manufacturing

The ideas behind ESG investment were born as an argument against the “self-interest” ideals of traditional finance and the Friedman Doctrine, which claims that a company’s greatest responsibility lies with its shareholders, and not with society, meaning that it should always aim to maximize revenues to increase shareholder returns.

Starting in the early years of the 21st century among a group of investment and consulting bodies in the city of London, a number of leaders, lawyers and NGOs began to quantify the effects of environmental and social standards on financial performance within companies in diverse fields. Until that point in time, it was a given assumption that ethically driven investments, such as philanthropy, were detrimental to financial returns and implicated additional expenses to the company.

Since then, the ideas behind ESG have combined with the practices behind SRI (socially responsible investing) and are considered to have evolved from philanthropy towards a question of practicality. For example, ESG encapsulates crucial issues within a company, such as its water management systems, health and safety policies, and its response towards climate change.

The acceptance towards the concept of ESG have allowed for the development of a fresh outlook from the industry towards the concepts of sustainable business, and have been catalysts for the creation of the Sustainable Stock Exchange Initiative (SSEI) and the UN’s Principles for Responsible Investment initiative, which is a body that manages over $70 trillion in assets across all continents.

And yet, there is still the obvious question: how has ESG investment affected the world since its inception? Are companies truly taking care in being environmentally friendly and socially responsible, or is it just a positive idea that most organizations ignore?

The rewards of sustainable practices… and risks of disregarding them

As with any other new concept, there will always be resistance to the notion of doing things differently, and of redirecting investments to appease the expectations of environmental bodies. Such has happened with the petrochemical industry, for example, which is known for environmentally destructive oil spills and its significant contribution to the emissions leading to climate change.

In recent decades, many oil and gas companies have failed to hit the environmental milestones that were expected of them; in other cases where regulations have failed, the use of toxic raw materials or byproducts has not ceased, causing untold damage to populations of varied ages (in other words, social damage).

After a century of watching this multi-billionaire and practically untouchable oil and gas industry operate (and pollute) freely, it wouldn’t be far-fetched to believe that the aforementioned companies have managed to get away with these acts, perhaps only having to pay insignificant fines… however, this could not be further from the truth.

Investors have certainly reacted against harmful companies in numerous ways, but mostly by pulling the plug on vital funding. Giants such as BP, Shell, Chevron, ExxonMobil, and Rosneft, just to name a few, have found their values dropping over the past three years as shareholders grew weary of witnessing a general lack of interest in renewable energy options and decided to put their shares up for sale.

A growing number of investor firms are embracing ESG as climate change looms menacingly over the world, and financial results have been pushed back to a secondary level. Now, even the biggest and most established companies in manufacturing are being forced to accept that environmental and social change are the only way to move forward if we want to give the planet a chance.

However, it’s not all bad news: the trend has been reversed in countries in northwestern Europe, such as Denmark and Norway: Danish government and pension funds promised to invest over $53 million in renewable energy infrastructure across the industry, and Norway’s government has proposed 2025 as a realistic deadline for the replacement of all fossil cars for electric vehicles, after having set an expansive plan for the next decade in terms of reducing carbon emissions to an almost neutral level.

Companies across the United States can similarly expect to receive funding in the billions if they can successfully replace carbon-based energy sources: in 2019, ESG investments quadrupled the rate of inflows the year before (2018), reaching a record $21 billion poured into socially responsible investment funds, and the number will continue to grow as the fight against climate change becomes more fierce.

But is this plausible for the chemical manufacturing industry?

How ESG investment will help the chemical manufacturing industry grow

Whether small, medium or large, a company in the manufacturing space should be prepared to work on generating beneficial social or environmental impact alongside their financial returns – a chemical company, especially, has a lot to gain from adopting these philosophies.

As mentioned earlier in the article, many chemicals created for daily use have proven to cause detrimental effects on human health, but more importantly, are often silent killers that can bide their time for decades before cancer or congenital diseases are developed.

Furthermore, the processes required for the creation of chemistries (whether toxic or not) can often be more damaging than the effects of the chemicals themselves: waste products enter sources of water, irreparably destroying ecosystems, and can reach the human food chain through agricultural activities.

In this sense, it is important for companies to respect the standards of ESG and socially responsible investment (SRI), seeking to make significant shifts towards sources of renewable energy, favoring bio-based products over petrochemicals, and focusing efforts on waste prevention and the principles behind a circular economy.

“Being advocates for better practices in the chemical manufacturing space and doing the right thing, regardless of financial return, is rewarding in its own sense.

However, knowing that investors will expect you to do the same is an added bonus - we are working not only for the planet and the people but also appeasing our shareholders.

Everybody wins with ESG investment.”

— Ryan Esner, Environmental Fluids CEO

Environmental Fluids is a company that has been making investment efforts into sustainable manufacturing and green chemistry, with our fundamental business principles built around ESG and SRI criteria.

We believe that every company can make a difference in mitigating the causes and effects of climate change, whether big or small and are working with clients to reduce their environmental and health/safety footprints.

For us, the long-term consequences of positive environmental, social, and governance investment efforts far outweigh any financial gain that a company could hope for. It is a crucial moment in time, and we are happy to work with likeminded companies in achieving the vision of a sustainable economy in the U.S and the world.

The manufacturing industry is waking up to the reality – every effort counts in the race against climate change, and the potential for transformation is entirely in our hands.

If you are a company or investment firm that has successfully adopted ESG philosophies or would like to know more, we would love to hear from you.

Contact us here today – we can work together to build a sustainable industry.