The global chemical sector faces an acute strategic inflection point as the industry attempts to align its operations, capital deployment, and governance structures with the demands of a net-zero economy.
Companies responsible for materials underpinning every major value chain are increasingly under scrutiny for the credibility of their transition plans, yet wide disparities remain between stated ambition and measurable progress.
A report by Planet Tracker provides a comparative evaluation of eight major chemical producers and highlights systemic challenges that continue to impede sector-wide alignment.
The assessment offers a cross-company analysis of climate strategies, risk exposure, governance frameworks, and capital allocation patterns, enabling a detailed examination of which firms are advancing transition plans and which are failing to keep pace with emerging expectations.
REGIONAL LANDSCAPE & CLIMATE ALIGNMENT
The analysis groups the eight companies into three climate-alignment tiers based on the credibility of their 2030 targets, delivery record, and disclosure quality.
Dyno Nobel stands alone as the only producer assessed as 1.5 deg C-aligned, while LyondellBasell is the strongest performer among the firms clustered around the 2 deg C and below-2 deg C categories.
At the opposite end, Dow and a major Middle East chemicals producers remain on 3 deg C trajectories shaped by limited ambition, absent Scope 3 targets.
Dyno Nobel’s position as the sole 1.5 deg C-aligned producer reflects its 39 per cent reduction in operational emissions versus a restated 2020 baseline, surpassing its 2030 targets years ahead of schedule.
Key abatement gains stem from the Moranbah and LOMO nitrous oxide abatement projects, which together delivered around 750 kilotonnes of CO2-equivalent annual reductions.
The company’s governance structure reinforces its progress, integrating climate KPIs into both short-term and long-term incentive frameworks, each weighted at 10 per cent.
LyondellBasell has set the sector’s most ambitious combined target, committing to a 42 per cent absolute reduction in Scopes 1 and 2 emissions and 30 per cent in Scope 3 by 2030.
However, the credibility of this pathway is challenged by an 8 per cent rise in its total emissions between 2020 and 2024, driven primarily by Scope 3 growth linked to rising production volumes.
Achieving its 2030 targets will require a 46 per cent emissions cut from 2024 levels.
Despite these execution pressures, the company has committed $1 billion to transition projects since 2023, secured 1,820 MW of renewable power capacity through PPAs, and advanced its MoReTec-1 chemical recycling project, though the link between these investments and quantifiable emissions abatement remains undeclared.
The four companies falling within the 2 deg C cluster, including Air Liquide, BASF, Bayer, and Toray, demonstrate operational progress but face structural constraints, particularly around Scope 3 emissions and investment-to-outcome transparency.
Air Liquide reduced Scopes 1 and 2 emissions by 11 per cent since 2020 and directed over 40 per cent of its EUR16 billion ($18.63 billion) in industrial investments for 2022-2025 to energy transition initiatives.
It has also earmarked $9.3 billion for low-carbon hydrogen by 2035 and issued three $582 million green bonds.
Nevertheless, upstream Scope 3 emissions surged by 67 per cent over the same period, limiting total emissions reduction to just 3 per cent, and the company still lacks a quantified Scope 3 target.
BASF has achieved 72 per cent of its 2030 Scopes 1 and 2 target, cutting operating emissions by 17 per cent since 2020.
However, much of this progress reflects an 11 per cent decline in sales volumes rather than active decarbonisation.
Its annual transition capex of roughly $262 million remains substantially below what would be needed for an aligned transition.
Its Scope 3 target, a 15 per cent intensity reduction limited to upstream materials, covers only 52 per cent of its total Scope 3 footprint, and the company acknowledges that volume growth could offset any intensity gains.
Bayer has reduced total emissions by 9 per cent since 2020 despite annual revenue rising 3 per cent.
Its 42 per cent Scopes 1 and 2 reduction target by 2029 is among the more ambitious within the peer group.
However, its exclusion of Category 11 emissions (use of sold products) from Scope 3 disclosures significantly understates its total footprint, particularly given the carbon intensity associated with its agricultural inputs.
Its $582-million decarbonisation commitment through 2029 represents only 1.5 per cent of annual capex, and none of this spending is aligned with the EU Taxonomy.
Toray’s progress is dominated by intensity-based reporting rather than absolute reductions.
Its 43 per cent reduction in emissions intensity since FY2013 largely reflects revenue growth and yen depreciation effects, with only around one-quarter attributable to genuine abatement.
Absolute Scopes 1 and 2 emissions fell by approximately 10 per cent over FY2013-FY2024, and its FY2030 intensity target could be met even if absolute emissions rise.
Toray has not set absolute Scope 3 targets, and sustainability metrics are not embedded in executive remuneration.
At the lower end of the spectrum, Dow illustrate sthe structural challenges constraining parts of the sector.
Dow has achieved its 2030 Scopes 1 and 2 target, a 15 per cent reduction, but its target is modest compared to peers’ commitments of 25 per cent to 42 per cent.
The company has rejected SBTi validation on the grounds that guidance “does not accurately and scientifically reflect the realities of the chemical sector”.
Delay to its Path2Zero project, which would have decarbonised 20 per cent of its ethylene capacity, adds further execution risk.
Its Scope 3 emissions, which represent 73 per cent of its total footprint, remain untargeted.
PROJECT ACTIVITY & SCOPE 3 STRATEGY
Scope 3 emissions remain the sector’s most significant challenge, representing between 70 per cent and 84 per cent of total emissions for seven of the eight companies assessed.
Air Liquide is the only exception, with Scope 3 accounting for 40 per cent of its footprint.
The range of ambition across Scope 3 strategies is wide. LyondellBasell leads with a 30 per cent absolute Scope 3 reduction target, though its upstream Scope 3 emissions have risen 13 per cent since 2020.
Dyno Nobel has introduced business-unit Scope 3 targets following corporate restructuring, signalling the sector’s first attempt to cascade value-chain targets into operational decision-making.
BASF’s intensity-only target creates structural loopholes where absolute emissions could rise with increasing production, while Dow, SABIC, and Toray remain without quantified Scope 3 commitments.
Across all eight companies, a universal disclosure gap persists: none publishes quantified emissions reductions attributable to supplier or customer engagement programmes.
While supplier coverage is often reported (Dow assesses 3,727 suppliers, BASF 1,900, and LyondellBasell 840) the tonnes of CO2-equivalent expected to be reduced through supplier engagement remain undisclosed, limiting verification of influence across value chains.
DECISION DRIVERS: GOVERNANCE, INCENTIVES, CAPITAL & RISK
Governance and incentives are central to transition credibility, yet the report finds that climate-linked executive remuneration remains immaterial across most companies.
Dyno Nobel is the only firm to embed climate KPIs into both STI and LTI schemes at a balanced 10 per cent weighting each.
In contrast, incentive structures at Dow (200 per cent total cap) and Bayer (250 per cent cap) can allow financial outperformance to overwhelm climate metrics.
Risk exposure varies, with regulatory and physical risk disclosures highly inconsistent.
Dow estimates its EU ETS exposure at $112-168 million annually by 2030, potentially rising above $200 million, while LyondellBasell estimates up to $162 million.
Physical-risk disclosure is most developed at Air Liquide, which has screened 670 assets across 10 peril types under two IPCC scenarios, and at Dow, which has identified $315 million to $1.3 billion in potential drought-related impacts at its Freeport, Texas site.
Policy-alignment challenges remain significant. Several companies maintain memberships in trade associations with lobbying positions inconsistent with their public support for the Paris Agreement.
Dow retains seven memberships rated “Misaligned” or worse by InfluenceMap, while LyondellBasell retains memberships in associations that have actively lobbied against EU and US climate initiatives.
Bayer presents detailed association-alignment reporting but simultaneously endorsed the Antwerp Declaration, which criticised prescriptive environmental regulation, creating tension with its climate messaging.
Toray demonstrates general support for energy transition through Japanese industry groups, but with no evidence of advocacy for stronger regulation.
FORWARD-LOOKING IMPLICATIONS FOR THE SECTOR
The report highlights five cross-cutting themes shaping investor engagement. Scope 3 remains the primary litmus test for aligning climate ambition with real-world emissions outcomes.
Intensity-based metrics risk concealing stagnation, particularly where revenue or production growth can mask rising absolute emissions.
Capital-to-carbon traceability remains absent, leaving investors unable to evaluate whether transition spending is sufficient or efficient.
Incentive-design gaps undermine accountability, and regression in transparency signals elevated transition risk.
Across the sector, the transition is underway but insufficient in pace and depth.
Only one company aligns with a 1.5 deg C pathway, and even the strongest performers face structural barriers in Scope 3 strategy, capital deployment, and governance alignment.
Meanwhile, the bulk of the sector remains constrained by under-developed value-chain strategies, inconsistent risk disclosure, and capital allocation patterns that lack demonstrable abatement impact.