Explore: understand your DIROs

Understand impacts, dependencies, risks, opportunities

1 Explore impacts
2 Plan actions
3 Choose metrics

Chemical Sector

The chemical sector, which underpins the production of everyday goods and materials across the global economy, relies on nature for many of its operations and innovations, including water, biomass, mineral resources, energy inputs and feedstocks. From electronics to vehicles, textiles to pharmaceuticals, more than 95% of all manufactured products and materials rely on industrial chemical processes.

The sector, while essential to the products and materials used across society, is also a contributor to nature loss. The sector’s complex value chain brings unique challenges in identifying and managing nature-related impacts and dependencies. For example, they occur across multiple value chain stages, from the extraction of fossil-based, mineral and bio-based feedstocks, through manufacturing and distribution, to the use, disposal and recycling of chemical products. These activities can contribute to pressures on nature, including pollution, freshwater use, greenhouse gas emissions, land-use change and resource depletion.

Advancing the nature-positive agenda offers a strategic opportunity for the sector. By integrating nature considerations into decision-making across value chains, chemical companies can drive innovation, reduce environmental impacts, strengthen resilience to emerging risks and expectations, and support the transition to a more sustainable and circular economy.

Chemical sector value chain

The chemical sector value chain encompasses a variety of processes. These range from inputs such as fossil-based and bio-based feedstocks, metals, minerals and recycled materials, through manufacturing and product development, to downstream processing, use and end-of-life treatment.

The value chain mapping aligns with WEF’s Nature Positive: Role of the Chemical Sector, Business for Nature’s overview Chemicals: Sector actions towards a nature positive future, and TNFD’s Additional Guidance by sector. It has also been refined through input from WBCSD working group members.

Dependencies, impacts, risks and opportunities

A sector level overview of dependencies, impacts, risks and opportunities (DIROs) provides a useful foundation for a company level materiality assessment because it highlights the typical DIROs relevant to companies operating in the same sector.

The DIROs capture how businesses in a sector interact with nature – relying on and impacting ecosystem services – and how these translate into risks and opportunities.

Companies should do a company-level materiality assessment – as recommended by the Natural Capital Protocol, SBTN and TNFD frameworks – to evaluate how the potential sector-level DIROs apply to the specific context of that company. The materiality assessment provides greater visibility into the company’s relationship with nature, enabling it to:

  • Identify and manage risks;
  • Uncover new business opportunities;
  • Respond effectively to evolving investor and regulatory expectations.

This ultimately helps future-proof the business.

Methodologies for company-level materiality assessments include the Taskforce on Nature-related Financial Disclosures Guidance on the identification and assessment of nature-related issues: the LEAP approach and Science Based Targets Network’s Step 1: Assess your impacts on nature. The screening helps prioritize a more granular assessment of your company’s DIROs.

Dependencies and impacts in the chemical sector

A system-level overview of dependencies and impacts provides a useful foundation for a company-level materiality screening. It highlights the typical dependencies and impacts relevant to companies operating in the same sector. Below are the top dependencies and impacts identified for the chemicals system.

Top 5 dependencies

Water purification

Chemical production processes have water quality thresholds that companies must meet before they can use the water. This means they depend on ecosystems to naturally filter and buffer pollutants from surface water and groundwater before it reaches their operations. Wetlands, soil and riparian vegetation also regulate river flows and replenish groundwater and lake levels, helping keep water available through dry periods. Where local water quality falls short, companies face added treatment costs and need to work closely with regulators to manage the impact.

Bio-based feedstock

The chemical sector increasingly relies on biomass and plant-based raw materials to produce bio-based feedstocks, biofuels and bioplastics. Companies depend on renewable inputs such as wood, vegetable oils, corn and sugarcane, alongside non-renewable feedstocks like petroleum, to manufacture ammonia, ethylene, propylene and thousands of other downstream products. As demand for lower-carbon alternatives grows, this dependence on biomass availability and sustainable sourcing will increase.

Climate regulation

The chemical sector relies on forestry and crop-growing activities to supply biomass and bio-based feedstocks. In turn, these upstream activities depend on vegetation and natural landscapes to regulate local temperatures and humidity. Stable local climate conditions support consistent growing conditions and reliable feedstock supply chains. Degraded or deforested land weakens this regulating capacity and can put feedstock supply reliability at risk.

Water supply

Water-intensive chemical production processes require freshwater as an essential input, from cooling and cleaning to acting as a raw material or solvent. When local water supplies become insufficient – whether from stress, scarcity or competing demand – facilities may need to relocate or redesign operating processes at significant cost. Freshwater availability will become an increasing constraint as demand for green hydrogen, which is also water-intensive to produce, grows.

Bioremediation

Bioremediation occurs when micro-organisms, algae, plants and animals break down or transform organic and inorganic waste materials, reducing their harmful effects. Upstream activities in the chemical value chain, such as forestry, crop growing and fossil fuel extraction, generate organic residues that these natural processes help absorb. In manufacturing, some production waste also depends on natural breakdown before or alongside engineered treatment. Therefore, healthy surrounding ecosystems reduce pressure on formal waste systems.

Top 5 impacts

Water pollution

The manufacturing, downstream use and end-of-life treatment of chemical products can release persistent chemicals, emerging pollutants such as PFAS, microplastics and nutrients into surface water and groundwater. Depending on the pollutant, these releases can drive eutrophication from nitrogen and phosphorus, acidification and broader chemical pollution, disturbing aquatic ecosystems and threatening biodiversity.

Soil pollution

Chemical activities can cause soil pollution through the release or deposit of persistent chemicals, nutrients, PFAS, microplastics and other pollutants during manufacturing, downstream use and end-of-life treatment. Pollutant accumulation can drive soil acidification and broader chemical pollution, disrupting natural ecological processes and creating risks for biodiversity.

Water use

Chemical production processes are water-intensive and high levels of freshwater withdrawal can contribute to water scarcity and stress. This affects water quantity and quality, ecosystem health and water access for the organization and surrounding communities. Improved water management, including recycling and reduced consumption, can ease this pressure.

Greenhouse gas (GHG) emissions

The chemical sector is a major industrial energy consumer and one of the largest industry sources of direct CO₂ emissions. In primary chemical production, ammonia accounts for the largest share of emissions (45%), followed by methanol (28%) and high-value chemicals such as ethylene and propylene (27%). Shifting to green hydrogen, lower-carbon raw materials and improved energy efficiency can help reduce these impacts.

Land-use change

Moving from petrochemical feedstock to bio-based feedstock requires large areas of land for agricultural and forestry production. Where these feedstocks are not sustainably sourced, this land-use change can drive soil degradation, deforestation and biodiversity loss – echoing the same feedstock dependencies the sector relies on upstream.

The tables provide a complete list of potential nature-related impacts and dependencies, where they are likely to occur in the chemical value chain and their potential materialities. The list is the result of a generalized assessment and will require further risk and opportunity evaluation before companies use it to inform the development of actions to halt and reverse nature loss and targets. The materiality ratings in the diagrams are based on the 2024 version of the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) database.

Key nature-related impacts identified for the chemical value chain

Key nature-related dependencies identified for the chemical value chain

Risks & opportunities

Nature-related issues can affect every part of a business –from physical and operational disruptions to transition pressures like new regulations, litigation and reputational risk, and even systemic threats as ecosystems start to fail. Companies that respond proactively by transforming business models, products, services and investments can leverage those same forces. They can gain a competitive edge, strengthen investor and stakeholder confidence, and build the operational resilience needed to thrive in a changing world. The table below outlines examples of key risks and opportunities for the chemical sector, based on the TNFD framework.

Risk table

Opportunity table

Further reading

For more technical details, refer to the Methodology page.

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