Methodology
Overview of Methodology
This original New Normal methodology is designed to provide insight into the absolute and relative progress being made by petrochemical players in their decarbonization journey, taking into account Scope 1, 2 and 3 emissions, and circularity.
Company disclosures are highly individual and generally complex. Consistency in non-financial reporting is still developing. Meanwhile, a myriad of ratings systems have been launched, seeking to boil down a company’s performance to a single score. New Normal sees limited value in such systems. Our analysis seeks to provide fair and balanced insights into how petrochemicals players are facing up to the challenges. Our analysis provides a snapshot of the current situation, in an area that is evolving relatively fast. Whilst the methodology includes an element of scoring, the aim is to highlight how companies are approaching their decarbonization pathway and where their challenges lay, rather than to simplistically rate them. The level of transparency around GHG emissions disclosure varies widely. However, all these companies are large and sophisticated, and have access to high-quality resources, so it is reasonable to equate lack of transparency with lack of commitment and achievement. The level and quality of disclosure for many companies has evolved significantly over the past two years and continues to do so. Trends are difficult to pick out for some due to re-statement of emissions and changes in process. This is hopefully a sign of corporate learning and not obfuscation!
Landscape Chart
Site Targets and Implementation
Numerical Average score for Targets and Implementation
- Company has long, medium and short-term targets to achieve Net Zero 2050 for own operations, feedstock and products, which are applicable to the cracker site.
- Program to generate or purchase renewable power at the site.
- The company is developing or has access to technologies to achieve decarbonization.
- Relevant partnerships are being formed, and new technologies are being piloted and scaled across the portfolio.
- Projects are in development or in progress at the site.
- Focus on Scope 1, 2 and 3.
Enablers
Numerical average score for Enablers
- Corporate Governance is strong and supports decarbonization, circularity and reporting transparency.
- Crackers are economically robust with scale, secure feedstock supply, good logistics, limited exposure to merchant market and polyolefins for packaging.
- External country location factors are favourable: the country petrochemicals industry is material to the economy, low carbon energy sector is growing and municipal waste recycling has traction.
Analysis of Cracker Site
9 Indicators, each scored out of 10 and shown on radar chart. Each indicator comprises up to 6 measures
Proof points for each measure are drawn from publicly available company reports, data and announcements.
Sites are scored for each measure either on a numerical scale or New Normal interpretation of proof points
Site Targets and Implementation
Considers the extent to which the company has targets for decarbonization and circularity that impact the cracker site, whether the company has access to technologies that can be deployed at the site, and whether projects are being implemented, or have been announced for implementation, at the site. Takes into account the materiality of these developments to the overall carbon footprint.
- Operations Scope 1, 2
- Feedstock – Scope 3 supply side (for refinery integrated companies this may be considered Scope 1, 2)
- Product side – Scope 3 downstream and circularity
Enablers
Considers the starting point for the cracker site, and the extent to which the indicators below are favourable and supportive to decarbonization and circularity.
- Corporate strategy & governance.
- Economic robustness of cracker site.
- External location factors in country.
Progress in Emissions Reduction
Disclosure of GHG emissions data is immature for many sites. For this reason, we have included data that is publicly available in site overviews but excluded from the landscape chart. Where data is available only at global business or corporate level, scoring has been discounted. This approach recognises the intent and direction of travel of the company, while acknowledging that it is not possible to interpret meaningfully for the site.
- Carbon intensity
- Scope 1, 2
- Scope 3
Measures
Targets and Implementation
Operations at Site
- Net Zero pathway defined for 2050 or sooner.
- Medium-term reduction target (up to 2030).
- Short-term targets (up to 2025).
- Access to technologies through development/partnership, with potential to scale including CCS.
- Projects and programmes announced or in operation at site, including renewable fuel programmes and plant closures.
Feedstocks
- Net Zero Pathway defined for 2050 or sooner.
- Medium term reduction target (up to 2030).
- Short term targets (up to 2025).
- Scope 3 strategy for suppliers (in particular feedstocks, may include other purchased goods & services) communicated and being implemented.
- Access to technology – refinery and/or chemical (advanced) recycling – through development or partnership with potential to scale.
- Announced projects in development or implementation at site.
Products
- Net Zero Pathway defined for 2050 or sooner.
- Medium term reduction target (up to 2030).
- Short term targets (up to 2025).
- Access to technology with potential to scale and forming partnerships for mechanical recycling.
- Announced projects in development or implementation. Grades with recycled content developed and produced at site.
Enablers
Corporate Strategy and Governance
- Integration of decarbonization of portfolio including cracker sites in corporate strategy.
- Transparency of emissions data (published in annual report/sustainability report using recognised measures (GRI/TCFD) and/or at least B grade submission to CDP in its “Climate Change” report.
- Disclosure of scope 3 emissions with granularity below corporate level.
- Visible ownership of sustainability/decarbonization at across executive and supervisory boards.
- Long-term incentive plans (3-5 year) include decarbonization targets with specific deliverables within the LTIP timeframe.
- Addresses petrochemicals decarbonisation (specifically or as part of business segment) in principle risks and articulates mitigation.
Economic Robustness of Cracker
- Cost and security of current feedstock through transition, including inbound logistics.
- Cracker(s) have economy of scale.
- Relatively low exposure to merchant market.
- Relatively low exposure to polyolefins used extensively for packaging.
- Access to market: outbound logistics including pipeline connectivity and lower dependence on water levels.
External Location Factors
- Legislative framework promotes decarbonization of chemicals. For EU countries, those highlighted in EU monitoring of implementation of relevant regulations, receive a lower score.
- Chemical industry is a significant employer in the country (Cefic).
- Chemical industry turnover in country is relatively high compared with GDP.
- Local electricity infrastructure moving to low carbon (IEA reporting).
- In country, overall municipal waste recycling has traction through population sorting its waste for separate collection (EU data).
- In country, post-consumer plastics packaging recycling has traction (EU data).
Progress
Carbon Intensity
- Reduction in carbon intensity (tCO2/t product) at site from base line over 3 years.
- Score discounted if at higher level than site.
Scope 1, 2
- Reduction in absolute emissions at site from baseline over 3 years.
- Score discounted if at higher level than site.
Scope 3
- Reduction in absolute emissions related to production at site from baseline over 3 years.
- Score discounted if at higher level than site.