Clariant had to navigate a particularly dynamic business environment this year. COVID-19 changed the business landscape for all chemical industry players, while enduring trends, such as the increasing industry focus on sustainability, continued to shape the business agenda. Clariant’s agile response to these major factors has been key to ensuring long-term success and creating value for all stakeholders.

1. Resilient response to COVID-19 challenges

Employee safety is paramount to Clariant, especially during the COVID-19 pandemic. Social distancing, work-from-home arrangements, which included measures such as splitting corporate functions into two teams, and travel bans governed by Clariant’s Global Emergency Management (GEM) organization kept infection cases low within the company. Clariant distributed face masks to all employees and contributed to community safety through channels such as its production of disinfectants in Gendorf, Germany.

While some specialty chemicals companies that are highly exposed to industries such as automotive or aviation have seen declines in topline and profitability during the pandemic, Clariant has been able to preserve its profitability due to its diverse portfolio, efficiency program, and stringent cash and cost management. This included ongoing, centrally run programs to optimize cash and reduce cost; capital expenditure cuts for non-strategic and non-safety-related projects; working capital optimization, especially related to inventory and close credit control; as well as spend avoidance, travel reduction, and operational flexibilization.

Clariant has also successfully upheld business continuity in the face of COVID-19. There were only minimal disruptions caused by temporary production site closures, and Clariant maintained close collaborations with customers and key suppliers. This resulted in only minor supply shortages for Clariant while the company continued to be a reliable supplier for its customers.

2. Positioned in an industry with great responsibility

Globally, the chemical industry is one of the largest consumers of energy, resulting in significant contributions to global greenhouse gas emissions. Chemical companies also use oil and gas as feedstock and handle many hazardous materials. While this confers great responsibility, it also creates opportunities for companies to become industry leaders in sustainable development, capturing competitive advantage in the process.

The chemical industry converts raw materials into more than 70 000 different products that are used in all sectors of the economy. Within the chemical industry value chain, Clariant is a major global player among specialty chemicals producers who provide high-value and often custom-manufactured materials with specific performance and functionality to their customers.

001 THE ROLE OF SPECIALTY CHEMICALS FIRMS IN THE CHEMICAL INDUSTRY VALUE CHAIN

1 Contribute to raw material feedstock availability

3. Raw material mix increasingly includes biomass

Raw materials the chemical industry typically uses include crude oil, natural gas, metals, and minerals. Increasingly, the industry also uses biomass as a renewable feedstock. Basic chemical companies convert these materials into products such as polymers, bulk petrochemicals, and intermediates in large quantities, often in single-product, continuous processing plants.

In many cases, new base chemical capacity came online, such as for ethylene and ethylene oxide, which are key raw materials for Clariant. This, combined with lower crude oil prices, led to lower prices. In addition, suppliers are increasingly offering more sustainable solutions such as lower-carbon footprint solvents, and Clariant is working with them to identify sustainable feedstock sources.

4. Greater agility through batch production

Specialty chemicals companies such as Clariant form an entrepreneurial, innovative, and customer-driven part of the chemical industry. Specialty chemicals are often manufactured by batch processes to achieve customers’ specific chemical performance or function requirements. This requires regular changes in raw materials, operating conditions, and equipment.

5. Focusing on sustainability and performance

Like Clariant, many specialty chemicals companies are divesting the parts of their business most impacted by commoditization and increasing their focus on sustainability. Where possible, unsustainable products are replaced or phased out, and low-carbon and circular-economy-compatible solutions are gaining traction. Clariant has paid close attention to balancing the need for cost control, which includes cost reduction measures as part of managing pandemic-related challenges, with the necessity to engage in long-term, strategically focused innovation to develop products that meet customers’ sustainability and performance needs.

6. Ongoing dialog is key to meet customer needs

Having open lines of communication with customers through personal meetings and seminars is critical for the collaboration to address emerging needs and trends in their business environment. During the pandemic, Clariant’s digital capabilities and channels, including e-commerce, increased in application and importance. Clariant was therefore able to continue working closely with customers, innovators, and other partners to develop more sustainable products in response to increased awareness of climate change, plastic waste, sustainable chemistry, and overall circular economy needs.

Customers’ increased interest in sustainable solutions is reflected in their corporate commitments to decreasing their environmental footprint in the future, which can include specific targets for using recycled plastics and reducing their carbon footprint. Customers looked to Clariant and other suppliers to support these commitments. Demand for innovative solutions for the materials needed for emerging sectors, such as electric vehicles or renewable energy, is aligned with meeting the customers’ efficiency goals.

7. Robust end-consumer demand for sustainability solutions, hygiene, and electronic products

Clariant customers include brand owners that manufacture the products end-consumers use in their daily lives, such as cosmetics, electronic gadgets, and home construction materials. In a recessionary environment, demand for these luxury items typically decreases while essentials come into sharper focus. But during the pandemic, demand for hygiene products and electronics for working from home has been robust, a trend that may endure in the future. At the same time, despite the pandemic recession, end-consumers’ interest in sustainable solutions is continuing to grow.

8. Operating an integrated business model to navigate dynamic markets

A rapidly shifting business environment implies both risks and opportunities. Companies can differentiate themselves by their agility in responding to change. In contrast, industries that are slow to evolve are prone to margin erosion and commoditization. Innovation, customer collaboration, and excellence in execution are central to Clariant’s integrated business model, providing a strong foundation for navigating the dynamic and challenging business conditions Clariant currently faces. Read more in Business Model