6 minute read 22 Aug 2022
Chemical plant with solar power station at night

Why the chemical industry is prioritizing digitalization

By Frank Jenner

EY Global Chemicals & Advanced Materials Industry Leader and Global Advanced Manufacturing & Mobility Supply Chain Leader

Visionary in markets and business development for the chemical industry. Enjoys race boarding in the mountains. Enthusiastic golfer.

6 minute read 22 Aug 2022

Chemical industry leaders are increasingly implementing digitalization to achieve business growth and sustainability goals.

In brief
  • Digitalization has become the second-most prominent capital issue for chemical businesses — with 65% expecting it to impact their businesses significantly.
  • Businesses are increasing their focus on digital security as they accelerate the digitalization of their operations.
  • For four out of every 10 chemical businesses, the CEO is emphasizing digitalization to fulfill the company’s sustainability goals.

To invest or not to invest in digitalization for growth and efficiency is now a rhetorical question for chemical players. From R&D to customer interface, digital technology has become an integral part of the value chain. As the global industry emerges from the aftereffects of the COVID-19 pandemic, chemical players have accelerated their investment in digitalizing their operations. 

Impact of digitalization on companies

Post pandemic, the speed of digitalization has accelerated by


according to the EY DigiChem SurvEY 2022.

Digitalization in chemical sectors has never been more sought after

According to the EY CEO Outlook Survey 2022, digital transformation is the second-most prominent capital issue for chemical players across the globe.

The recent uncertainties due to the COVID-19 pandemic and geopolitical challenges have led to supply chain constraints and inflation in material and labor costs restraining the growth and profitability of chemical players. They have also driven chemical players to expedite digitalization across functions, with more than 40% of chemical players reporting a disruptive or revolutionary impact of digitalization in the past three years. 

Status of implementation of digitalization projects

This pace of digitalization is expected to continue as more than 65% of chemical players expect digitalization to impact their business in a more revolutionary or disruptive way.

Digitalization must be embedded across functional areas

As the need for an online model rose — for business operations as well as customer interaction — chemical players witnessed the maximum progress in digitalization of administrative functions and customer interface since 2020. Further, with technologies such as automated chemical synthesis, digital tools are expected to be increasingly leveraged for developing new products and services with 80% of chemical players leaning in that direction.

1. Digitalization to develop resilient supply chains

With the recent geopolitical disruption and fluctuating fuel prices, supply chain constraints have emerged as a key challenge for the global chemicals industry. Considering the volatility, it remains a key application area that reaps huge benefits from digitalization — almost 60% of respondents reported that digitalization has highly impacted their supply chain planning in the past three years, and more than two-thirds of survey respondents believe a similar impact would continue over the next three years. As the need for more resilient supply chain networks increased chemical players see value in leveraging digital tools for demand estimation, tracing raw material to sources, real-time tracking of orders, automation at warehouses and ports for sorting and safety and optimizing supply networks. 

Effects of digitalization on operational competitiveness
2. Digitalization for security

As companies digitalize their operations, the risk of cybercrime against the business becomes an inherent concern. As a result, digital or cybersecurity is one of the themes with maximum implementation across chemicals players, more so in the case of basic and petrochemical companies with their huge production plants.

Chemical players look to develop a robust digitalized business

The wide plethora of technologies enhances the efficiency of chemical functions beginning from R&D to the end of the value chain in customer service and support. In this dynamic environment, the preference and potential of any particular technology depend on the pressing needs and priorities of the organizations. In 2020, the perceived potential by chemical players was highly concentrated on improvement and integration of data analysis (42%), while it is more widely distributed according to the 2022 survey — decreased to 35% for data analysis and increased to 30% for digital security (from 26% in 2020). However, despite this decrease, improved data analysis (35%) and integration (30%) are among the high potential areas for chemical players, followed by digital security (30%) as chemical players face increasing challenges such as data theft and malware which can not only compromise confidential data but also halt operations.

What drives or hinders the success of digitalization in the chemicals industry?

At the beginning of Industry 4.0, cost reduction was perceived as one of the key benefits of digitalization. However, chemical players have moved on from this and benefited from digitalization not only through cost reduction but also through e-networking (53%) and customer centricity (51%) — a trait essential to developing a resilient business in tough times.

As chemical players explore the length and breadth of digital solutions for their business, new challenges emerge. Lack of qualified personnel was a key challenge in 2020 for 47% of survey respondents; however, in the current survey, a little more than one-third cited this as an issue. Currently, companies face challenges to develop a robust technical infrastructure (40%), meeting the investment requirement (38%) and developing secure systems (38%).

Three biggest barriers to digitalization

Only 37% of chemical players face a lack of qualified personnel for digitalization, compared with 47% in 2020. 

Digitalization for sustainability — the way forward

With changing customer preferences and increasingly stringent regulations, the move to a more sustainable business is crucial for chemical players. According to the EY CEO Outlook Survey, more than 80% of chemical players are placing as much importance on environmental, social and governance (ESG) and sustainability as on revenue growth. At such a time, digitalization can be a huge boon and help expedite the pursuit of sustainability. 

Extent of companies’ potential to use technology and digitalization for better implementation of sustainability goals

According to the EY DigiChem SurvEY 2022, more than


of respondents anticipate moderate to high savings from their move to sustainability.

Chemical and other manufacturing players are already leveraging technologies such as digital twin, Internet of Things (IoT) and automation to reduce resource and energy consumption. This, in turn, needs to be supported by an infrastructure for data collection and machinery for production and emission control.

Without a doubt, digitalization and sustainability are key priorities for companies, and hence, the CEO is driving digitalization for faster implementation of sustainability goals.

Chemical players across regions and segments need to be more explicit in their digitalization strategies considering the end-customer, available infrastructure and talent pool amid the evolving sustainability needs.

DigiChem SurvEY 2022

Digitalization is an important factor for the chemical industry — executed correctly, it can achieve long-term value creation.

Download full report


Supply chain constraints and rising inflation have accelerated the adoption of digitalization by chemical businesses. Digitalization is not only helping the chemical industry avail benefits, such as cost reduction, e-networking and customer-centricity, but it can also prove instrumental in achieving long-term sustainability goals.  

About this article

By Frank Jenner

EY Global Chemicals & Advanced Materials Industry Leader and Global Advanced Manufacturing & Mobility Supply Chain Leader

Visionary in markets and business development for the chemical industry. Enjoys race boarding in the mountains. Enthusiastic golfer.