Chemical companies can weather the storm and become stronger

Novel coronavirus pneumonia is not only a distraction from the ESG agenda, but there is already a lot of evidence that chemical companies and upstream and downstream industries are increasing their investment in ESG and embedding relevant themes in the core of the new crown post pneumonia strategy. Particular areas of focus are the transition from energy supply to renewable energy; access to sustainable financing to replace existing debt; and continuing to focus research and development on products that support the reduction of carbon dioxide emissions and the elimination of plastic waste.

Those of us in the chemical industry know that for many years, the chemical industry has been pushing the agenda for sustainable development – Chemicals save far more carbon dioxide downstream of the supply chain than their production processes consume. However, more needs to be done to effectively publicize these efforts and to explain the key role that the industry will play in closing the industrial supply chain cycle – both to attract the next generation of the best talent; and to ensure that the government provides adequate support for the large amount of research and development needed to achieve this goal.

What we learned from the great financial crisis of 2008 / 9 is that a company’s good performance before and after the crisis has little to do with it. However, after coming out of the recession, those companies that adopt both “stay in” cost control and investment growth strategies perform significantly better than those that adopt only one strategy or the other.

So it’s time to take decisive action to improve performance. Every reduction in revenue, cost, operation and capital leverage from profitability and return on capital must be thoroughly reviewed and action taken. EBITDA and economic profit level customer profitability (including the cost of working capital) must drive decisions and actions, rather than traditional material or gross profit margin profitability indicators. These tough moves provide flexibility to cope with a longer recovery period and provide flexibility for investment growth.

Companies looking to the future will also take decisive and opportunistic actions to surpass their competitors in this disruptive period. They will seek to strengthen customer relationships through services, innovate through new products and technical cooperation, establish new market capabilities or channels, grow internally and / or adapt to the approaches described in this paper. These initiatives, together with improved performance, should make chemical companies stronger.

Many companies have established business continuity plans, and chemical companies have survived major storms, trade wars, political turmoil, market downturn and other disasters. But the scale and complexity of today’s crisis require us to act now to withstand the storm and to think in a new way how chemical companies do business, not just now but in the years to come. The crisis will not disappear tomorrow. The road to recovery will be long and difficult. The concept of “business as usual” will have to be changed. The novel coronavirus pneumonia that will be able to build resilience and adapt to the new reality will best catch the market opportunity brought by the new crown pneumonia epidemic recovery.