Europe’s chemical industry is undergoing an unprecedented transformation, marked by a surge in divestitures and plant closures. This challenging environment, driven by weak demand, persistently high energy costs, lingering overcapacity, and geopolitical pressures, highlights the sector’s declining competitiveness.
Indeed, a recent Cefic study revealed that in 2023 and 2024 alone, chemical companies announced the closure of over 11 million metric tons per year of production capacity across 21 major European sites. As one chemical industry executive recently noted to the Financial Times, “Europe’s chem parks are like Jenga towers, and everybody is right now taking bricks away. Everybody knows that at one point, the game ends.”
Despite these considerable headwinds, the European Union is simultaneously pushing ahead with a significant overhaul of its chemical regulation landscape. The Chemicals Strategy for Sustainability (CSS), a core component of its broader “Green Deal” initiative, represents a fundamental shift. It’s designed to enhance human health and environmental protection. It demands that businesses proactively adapt to a new era of compliance and innovation. This is true even as they grapple with immense economic pressures..
The Chemicals Strategy for Sustainability: An overview
The CSS, introduced in 2020, outlines 85 actions. These aim to combat chemical pollution and safeguard human and environmental health. The CSS also seeks to foster innovation and competitiveness within the chemicals sector.
While progress has been made, the EU has left several crucial actions unfulfilled. It still needs to revise the Classification, Labelling and Packaging (CLP) Regulation and the Industrial Emissions Directive (IED). Most notably, it has delayed the REACH Regulation revision. The EU has also failed to ban exports of hazardous chemicals it prohibits within its own borders.
Key changes and their implications
The CSS introduces major changes to the regulatory landscape, with most revisions anticipated to take effect starting in 2025. These changes will integrate new classifications, directly address per- and polyfluoroalkyl substances (PFAS), and fundamentally alter how chemicals are regulated.
New classifications and the generic approach to risk management
The CSS explicitly integrates new classifications, such as endocrine disruptors (EDs), into multiple legislations like REACH and CLP. New hazard classes for Persistent, Bioaccumulative, and Toxic (PBT) substances are also being introduced or amended.
A notable shift in EU chemical regulation is the move towards a generic approach for risk management. This new method replaces the previous case-by-case regulation for chemicals found in consumer products. Consequently, authorities may now regulate certain hazardous chemicals—such as those causing cancer, gene mutations, or affecting reproductive or endocrine systems—as groups rather than individually. This approach also extends to other harmful chemicals in consumer products. These include substances affecting the immune, neurological, or respiratory systems, as well as those toxic to specific organs.
Direct address of PFAS
PFAS are a top priority for phasing out under the CSS, explicitly targeted due to their persistence in the environment and widespread presence. The strategy aims to phase out the entire group of thousands of PFAS substances. While alternatives exist for applications like firefighting foams, their selection is highly dependent on the end use. Furthermore, the transition can involve substantial costs for destroying existing stock and decontaminating equipment. Scientific research consistently highlights the health risks associated with persistent substances like PFAS, linking them to chronic illnesses, ecosystem degradation, and substantial economic losses. The widespread presence of these “forever chemicals” in Europe’s water bodies poses a significant challenge. This directly impacts the EU’s ambitious goal of achieving a toxic-free environment.
Consideration of combined effects (cocktail effect)
The CSS legislation emphasizes considering the combined effects of chemical mixtures. This will apply to chemicals in water, food contact materials, food additives, toys, detergents, and cosmetics. This is a crucial development, as scientists highlight that even if each compound is present at levels deemed safe on its own, the combined effects of a large number of chemicals will pose a risk.
“Essential use” concept
The CSS introduces the concept of “essential use” as a potential exemption from regulation. However, the definition of “essential use” is still under development by regulators. Industry stakeholders frequently highlight medical applications as a strong contender for this exemption, particularly where no suitable alternatives exist. From ADI Analytics’ recent work on regulatory analysis of chemical substances in the European Union for various chemical companies, we noted this crucial concept and its potential to prevent a substance from being regulated, especially where no suitable alternatives are available for critical applications.
Sustainability by design
The CSS expects alternatives to regulated substances to be “sustainable by design.” This means they should be environmentally friendly, compatible with recycling efforts, and promote circularity.
Challenges and considerations for industry
This evolving framework presents several key challenges and considerations for the chemical and petrochemical industries, adding another layer of complexity to the existing economic pressures:
Defining “essential use”
Monitoring the clarification of this definition will be vital, as it could significantly impact the continued use of certain substances.
The challenge of alternatives
A significant hurdle is that most available alternatives are not “drop-in” substitutes; their suitability varies widely depending on the specific end-user application. Businesses must thoroughly assess the application and circularity of a product before considering a substitute. Furthermore, many alternatives often come with significantly higher price tags compared to the original substances.
For example, while “BPA-free” products are common, the most effective substitutes for Bisphenol A (BPA), such as polyphenylsulfone, are often considerably more expensive. More affordable options like polyethylene or polypropylene exist but may compromise on durability. Similarly, while alternatives for flame retardants like Dechlorane Plus are available and sufficient in volume, some of the best substitutes, like chlorendic anhydride, carry substantially higher price tags.
These insights, gleaned from extensive primary research with regulatory decision-makers and experts from leading chemical companies and consumer brands, highlight a critical balance. Companies must navigate cost, performance, and regulatory compliance.
Regulatory delays and fragmented implementation
Regulatory delays and fragmented implementation undermine efforts to manage chemical risks. For example, the REACH Regulation’s revision, initially slated for 2022, is now anticipated on the Commission’s agenda for late 2025. The failure to ban exports of hazardous chemicals prohibited within the EU also represents a significant gap in CSS implementation.
Overlapping strategies and coordination
Newly launched or forthcoming initiatives like the Clean Industrial Deal, the competitiveness compass, and the chemicals industry package reflect the EU’s continued commitment to sustainable chemicals policy. However, without clear alignment with existing long-term strategies like the CSS and the transition pathway for the chemicals industry, and without proper coordination, these overlapping strategies risk duplicating efforts and creating confusion.
Outlook and future directions
The EU’s commitment to addressing chemical pollution is crucial. Chemical pollution continues to threaten human health, ecosystems, and economic stability. For example, it decreases worker productivity, declines crop yields, and raises health damage costs by about 5% of global GDP. Scientific and epidemiological studies consistently highlight the widespread presence of harmful chemicals and their adverse effects. Despite progress under the CSS, significant implementation gaps remain (see Exhibit 1), notably the delayed revision of the REACH Regulation and the issue of hazardous chemicals exports. The Commission’s failure to meet those commitments underlines the necessity for a renewed focus and a strategic reassessment to fulfill them. There is also an ongoing discussion about maintaining the level of ambition on PFAS. Furthermore, scientists are pressing the European Commission to implement stronger regulations on chemical mixtures in the upcoming REACH revision. They specifically recommend incorporating a mixture assessment factor to achieve this.
Exhibit 1. A summary of the status of various European Union initiatives related to chemicals
For companies operating in or with the EU, proactively monitoring legislative developments, evaluating chemical portfolios, and investing in sustainable alternatives and product designs are no longer optional, but strategic imperatives. The regulatory process generally offers ample time to identify alternatives and workarounds to navigate planned restrictions. European chemical companies already heavily rely on the published lists and procedures of the European Chemicals Agency (ECHA) and the European Commission for long-range planning.
Our recent work included a project for a Japanese chemical company. We screened the European Commission’s (EC) roadmap list of 33 chemical groups. We then narrowed this down to 12 specialty chemicals. These were relevant to the client’s interests, spanning electronics, life sciences, healthcare, food, and agriculture.
A key finding was the prioritization of PFAS as the highest priority for regulation by the European Commission. This is particularly true under the CSS legislation. This proactive approach helps companies understand how substances react with each other. It also helps identify potential substitutes for priority substances. This includes details on pricing, suppliers, and their fit as alternatives, all well before regulations take effect.
– Uday Turaga
About ADI Analytics
ADI is a prestigious, boutique consulting firm specializing in oil and gas, energy transition, and chemicals since 2009. We bring deep expertise in a broad range of markets where we support Fortune 500, mid-sized and early-stage companies, and investors with consulting services, research reports, and data and analytics, with the goal of delivering actionable outcomes to help our clients achieve tangible results.
We also host the ADI Forum that brings c-suite executives together for meaningful dialogue and strategic insights across the oil & gas, energy transition, and chemicals value chains. Learn more about the ADI Forum.
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