Green technology and the importance of environmentally friendly products have begun to pervade even deep tech industries, influencing the outlooks and strategic development goals of chemicals CEOs, according to a global survey conducted by PWC. The increased importance of green perspectives may lead to changes in how chemical deal advisors evaluate buyout targets and formulate chemical industry advisory approaches to M&A strategies. The impact of basic consumers coming to value environmental responsibility from their purchases’ producers, and the implications of global alliances’ and domestic governments’ increased emphasis on climate change responsibility should change the value of capital, inputs, and innovation schemes in ways that will alter what chemical financial advisors prioritize in rating the advisability of a deal.
48 percent of CEOs polled for the PWC survey said that developing greener products and services is an important part of their innovation strategy. Furthermore, 83 percent confirmed that sustainability is a major priority. Part of this may stem from worry about access to natural resources and the impact of dwindling traditional fuel sources on energy prices – 75 percent of those polled said energy costs are a concern compared with 40 percent of CEOs overall. Obviously, if natural forces and energy costs make environmentally responsible and sustainable practices more economically efficient than other courses of action and strategies, everyone who can will attempt to move in this direction. And based on increasingly undeniable data about not just global climate change but also global warming, as well as initiatives and incentives to encourage this type of behavior, it is reasonable to expect chemical deal advisors to view firms and targets that fall behind on this metric as less desirable.
Part of the pressure to become greener comes from simple, if often criticized, goals like the reduced carbon emissions standards produced by the Copenhagen accords. Though recent climate summits such as the follow up meeting in Mexico in 2010 may not have made much headway in laying out specific, industry-based emission standards based on global climate goals, there is more momentum in that direction every quarter. It won’t be long until most governments have some sort of emissions cap that is agrees to and will pass on to companies in some form or another. Chemicals companies may have a more direct impact on a wider array of pollution channels than many other sectors do. When these become a reality, polluting will be expensive and those chem. Companies that don’t have strategies in place to meet those restrictions will immediately lose value.
Of course, downstream effects like manufactures’ and retailers’ ability to capitalize on peoples’ increasing willingness to pay more for products that come from environmentally responsible companies will also impact many players’ bottom lines. Chemical deal advisors with their fingers on the slow pulse of change in this regard will be increasingly incorporating the short- and long-term impact of environmentally responsible developments into their deal valuations and changing the mixture of factors that matter.
Great article!