The chemical industry is an essential pillar industry in China's national economy, categorized as a high-energy-consumption and high-emission sector, making it one of the major sources of greenhouse gas emissions in the industrial field. Carbon emissions in the chemical industry exhibit characteristics such as "prominent intensity", "complex industrial chain", and "significant impact on other industries". Meanwhile, China is a major exporter of chemical products, ranking among the top three globally in terms of export value [1]. With the rise of international trade green barriers, regulations like CBAM (Carbon Border Adjustment Mechanism) will have profound impacts on chemical export enterprises. Given the diversity of chemical products and the complexity of the industry chain, enhancing data transparency and accuracy at the product level is crucial for driving emissions reduction along the value chain.

This article explores how the chemical industry can achieve supply chain emissions reduction from the perspective of Zibo Luhua Hongjin New Material Group Co., Ltd., a midstream chemical enterprise.

Characteristics of carbon emissions and challenges in carbon management in China's chemical industry

The chemical industry is a traditional high-energy-consumption and high-carbon-emission industry in China, representing one of the major sources of greenhouse gas emissions in the industrial field. Globally, the carbon emissions from the chemical industry account for 5.8% of the total emissions [2], including 3.6% from industrial energy emissions and 2.2% from direct industrial emissions. In China, the carbon emissions from the chemical industry contribute approximately 5.3% to the national total emissions [3]. While this percentage is lower than that of coal-fired power plants, steel production, and cement production, the industry exhibits a relatively high carbon emission intensity per unit of GDP.

Global Greenhouse Gas Emissions by Sector (Our World Data)

Carbon management in the chemical industry is more challenging compared to other sectors but is crucial for industrial carbon reduction.

Firstly, the chemical industry has a lengthy industrial chain, a wide variety of products, and a complex supply chain network. The complexity and diversity of chemical reactions to some extent reflect the length of the chemical industry chain. With a multitude of SKUs (Stock Keeping Units) for chemical products, even minor adjustments in raw materials, proportions, or processes can result in an entirely new product. Additionally, the numerous segmented markets upstream and downstream in the industry contribute to a highly intricate chemical supply chain network. Consequently, carbon emissions accounting faces high difficulty, and there is poor comparability of existing data.

Thirdly, the carbon footprint of the chemical industry is highly interconnected with that of other industries. Ninety-five percent of industrial products require chemical products as raw materials, making the chemical industry a significant factor influencing the emissions of other industries. However, precisely because of this interdependence, the chemical industry can play a crucial role in helping other industries reduce emissions by implementing its own emission reduction measures.

As global awareness of climate change impacts becomes clearer, actions to address climate change are increasing. With the introduction of international green trade regulations and the implementation of domestic dual-carbon policies, carbon management requirements are becoming more stringent, and audits are becoming more comprehensive.

作为化工产品出口大国，2021年我国化工出口排名全球第三，占全球化工品出口总额的9.48%，仅次于德国和美国1。随着CBAM的实施，化肥和氢已纳入征收范围，预计化工行业的更多产品品类将被纳入适用范围。行业/联盟倡议也正在为应对气候变化作出努力，“TfS倡议”（共同可持续发展倡议，Together for Sustainability）便是化工行业影响力最大的倡议之一。TfS由巴斯夫等六家化工巨头企业所提出，要求其供应商完成可持续发展采购审核，所供产品碳足迹便是其中的必填项。化工行业作为环境部门的重点监管行业，其环境信息披露的真实性和透明度要求也不断提升。在绿色转型发展的浪潮下，中国化工企业将迎来更大的挑战和机遇。As a major exporter of chemical products, China ranked third in global chemical exports in 2021, accounting for 9.48% of the total global chemical exports, following Germany and the United States [1]. With the implementation of the CBAM, fertilizers and hydrogen have already been included in the scope of taxation, and it is anticipated that more product categories from the chemical industry will be brought into the applicable scope. Industry/coalition initiatives are also making efforts to address climate change, with the "Together for Sustainability" (TfS) initiative being one of the most influential in the chemical industry. Proposed by six chemical giants, including BASF, TfS requires its suppliers to undergo sustainable procurement audits, with the carbon footprint of supplied products being a mandatory criterion. As a key industry under environmental regulation, the chemical sector faces increasing demands for the authenticity and transparency of environmental information disclosure. Amidst the wave of green transformation, Chinese chemical enterprises will encounter both greater challenges and opportunities.

Zibo Luhua Hongjin New Material Group Co.,Ltd.

Luhua Hongjin is a high-tech enterprise specializing in the research, development, production and sales of new polymer materials. It is committed to the comprehensive processing and utilization of C5 and C9, the by-products of cracking ethylene, and continues to extend the industrial chain and continue to develop in line with the market. New products and new materials in demand. After years of development, the company has formed a product range ranging from C5 and C9 separation products (isoprene, piperylene, dicyclopentadiene, etc.) to synthetic material products (C5 resin, C9 resin, hydrogenated resin, isoprene, etc.). Pentaethylene rubber, etc.) has a relatively complete industrial chain layout for the comprehensive utilization of C5 and C9 resources. Related products are widely used in downstream products such as adhesives, rubber additives, rubber products, road marking paint, inks, and coatings, as well as sanitary products, pharmaceutical materials, Packaging materials, automotive decorative materials and other terminal application fields.

Source：Luhua Hongjin New Material Group Co.,Ltd

Luhua Hongjin is one of the leading companies in the comprehensive utilization of C5 and C9 resources in my country, one of the leading domestic manufacturers of tert-butylamine products related to the C4 industry, and a leading full-spectrum raw material supplier in the field of adhesives. Currently, the company has five production bases, located in Zibo, Shandong, Wuhan, Hubei, Tianjin, Panjin, Liaoning, and Gulei, Fujian. Relying on its industry-leading comprehensive competitiveness, the company has cooperated with major upstream suppliers such as Qilu Petrochemical, Maoming Petrochemical, Wuhan Petrochemical, etc., and downstream suppliers such as Henkel, Michelin, Fuller, Bostik, Giti Tire, Zhongce Rubber, etc. High-quality customers have established long-term and stable cooperative relationships.

Simplifying complexity through Luhua Hongjin's Solution-Oriented Approach, starting from the product

Enterprise pain points and needs

• "Carbon neutral" goals for downstream customers: Many of the customers that Luhua Hongjin supplies products to have participated in the TfS sustainability initiative. One of its customers, a Fortune 500 group, has set a carbon neutral goal, promising to reduce the carbon footprint in the production process by 65% ​​by 2025 (the base year is 2010), and committing to working with partners to achieve 100% responsibility procurement and conduct business responsibly in all aspects of the supply chain. Therefore, the group requires its suppliers to complete the TfS sustainable procurement audit, and companies that fail will not be able to continue as its suppliers.

• The mission of midstream enterprises to promote collaborative carbon reduction: Due to the complexity of the chemical industry chain and chemical products, there are still many difficulties in promoting the overall green and low-carbon development of the upstream and downstream industries. As a midstream company, Luhua Hongjin supplies products to downstream companies and also needs to purchase raw materials from upstream companies for production. Therefore, it is not only necessary to provide downstream customers with carbon footprint information of the products they supply, but also to clarify their own carbon emissions to clarify their carbon reduction responsibilities in the supply chain, and to assist other industries in reducing emissions through their own emissions reductions. In industrial emission reductions play a key role.

• Lack of upstream data: Calculating product carbon footprints requires upstream purchasing companies to provide relevant data and parameters. However, some upstream companies lack complete, detailed, third-party recognized, and publicly available supporting data, thus affecting the product carbon footprint results. Reliability has an impact.

Solutions

Even though the chemical industry has a long supply chain, diverse product categories, and a complex supply network, the product remains the most crucial unit in the industry/supply chain. Simplifying complexity, starting from the product level, and conducting product carbon footprint accounting, we can bridge the carbon data information gap in the industry chain, enhance the transparency of "Scope 3" greenhouse gas emission data for upstream and downstream enterprises, and ultimately achieve emission reduction across the entire chemical industry.

Through the product carbon footprint accounting certification service provided by CarbonNewture and using the CarbonNewture digital carbon management platform, Luhua Hongjin completed the carbon footprint accounting of more than ten core products (from "cradle to gate", including raw material production and acquisition stage and product processing and production stage) and completed carbon footprint certification for some of its products. While submitting compliant carbon footprint data to downstream customers, Luhua Hongjin further improved its sustainable development performance.

cradle-to-gate boundary

Highlights of the solution

• Compliance: The calculation and reporting of the product carbon footprint are based on the international and chemical industry-recognized standards, including ISO 14067:2018 "Greenhouse gases — Carbon footprint of products — Requirements and guidelines for quantification," TfS_PCF_guidelines_2022 "The Product Carbon Footprint Guideline for the Chemical Industry", and ISO 14044:2006 "Environmental management — Life cycle assessment — Requirements and guidelines".

• Reliability: In the process of collecting data needed for calculating the product carbon footprint, when some upstream companies were unable to provide relevant data for the supplied raw materials, Carbon Newture's expert team assisted Luhua Hongjin in thorough research to obtain credible substitute data, ensuring the reliability of the calculation results.

• Efficiency: After Luhua Hongjin completed all submissions, Carbon Newture utilized the digital carbon management platform to complete the carbon footprint calculation for over ten products within two weeks. This streamlined process helped Luhua Hongjin establish compliance data for downstream customer supply chain carbon emissions.

• Security: In terms of carbon emission data traceability and verification, Carbon Newture employs a decentralized and tamper-proof blockchain technology. This not only assists upstream companies in meeting downstream group customers' compliance requirements for carbon emission data but also ensures the confidentiality of suppliers' original production and chemical formula data.

Luhua Hongjin’s Carbon Footprint Certification Certificate

References：

[1] //stats.wto.org/

[2] //ourworldindata.org/ghg-emissions-by-sector

[3] 2020年中国细分行业碳排放数据