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Considering the evolving regulatory environment surrounding climate change, investors are increasingly demanding transparency on climate-related risks and opportunities from industries and corporations. The chemical industry is one of the highest emitting industries in the global economy and its dependence on fossil fuels for feedstock makes it a hard-to-abate sector. Within the sector, more than three-fourths of the chemical industry’s total Scope 1, 2, and 3 emissions come from Scope 3 categories. Despite the high contribution of greenhouse gas emissions from the industry, research on climate-reporting by the chemical industry is currently lacking. This paper studies the current practices adopted by 30 publicly listed European chemical companies in their climate-related corporate disclosures through content analysis and measures their compliance to the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) using a Climate Compliance Index (CCI). The numerical index measures compliance to the key areas of TCFD reporting: governance, strategy, risk management, and metrics and targets. This paper also analyses the Scope 3 disclosures and studies the different Scope 3 categories reported by chemical companies. It is seen that compliance is lacking when it comes to the reporting on the strategy pillar. On the other hand, European chemical companies are highly compliant to the metrics and targets pillar. Few companies report on Scope 3 Category 11, “Use of sold products,” which contributes to 14% of total Scope 1, 2, and 3 emissions. The findings of this paper indicate that chemical companies in Europe need to improve their scenario analysis to properly assess their businesses’ resilience to climate-related risks to avoid losses in the coming decades. There is also a need for chemical companies to engage with their upstream suppliers and downstream users in order to systematically calculate and report on their Scope 3 emissions.
Key words: climate change, chemical industry, climate-related risk, climate disclosure, TCFD recommendations.
