The chemical industry is notoriously secretive, shrouding its inner workings in a veil of mystery and obscurity. A highly competitive and cutthroat sector which jealously guards its proprietary formulas, manufacturing processes, and technological innovations, treating them as closely guarded trade secrets.

Chemical companies invest vast sums into research and development, yet they are loath to divulge even the slightest details about their latest breakthroughs, fearing that such information could be exploited by rival firms. This pervasive culture of secrecy extends far beyond the products themselves, as chemical producers also zealously protect data on their production volumes, profit margins, and business strategies. But is this really the best policy?

The common narrative is that chemical production is a competitive secret. If it was well known what was being produced, in what volumes, and at what price, then industrial formulas could be copied putting the firm out of business.

However, in some chemical companies, the level of secrecy is almost paranoid. As a recent report by the chemical industry critics at ChemSec notes, “DuPont – [is an] American chemical company that has gone to such lengths to hide what the heck it is conjuring up in its plants that it now calls everything, down to the Twinkies in the employee cafeteria, Confidential Business Information (CBI).”

Yet in many ways this doesn’t make much sense. As Dr. Greg Porta, the Corporate Product Stewardship Director at Sabic, recently noted. “We know what our competition does, we know their facilities, we know where they’re producing products, we know their volumes. So, to me calling that information CBI doesn’t have a lot of weight in my mind because we know!”

While it could be argued that the secrecy is necessary, there are three key areas where not being open about information can actually be detrimental to a chemical company’s health.

Investment

One of the most important groups to be honest with are investors, as lying or deceiving them is simply bad business and immoral. Being secretive with people who are looking to put their money into safe hands is not a wise policy and is likely to cause lawsuits or fraud trials.

Investors deserve a clear, comprehensive view into a company's operations, risks, and growth potential in order to make informed decisions about where to allocate their capital. By being more open and transparent, chemical companies can build trust with the investment community, demonstrate the strength and resilience of their business models, and ultimately attract a wider pool of investors willing to provide the funding needed for future expansion and innovation.

Certainly, not everything should be out in the open, as this would put all industrial secrets into the public domain. However, those who invest in a business, an idea, or a product should surely be given a significant deal of information – they are, after all, something akin to co-owners.

Given the level of secrecy conducted by many chemical companies, are they really being fair to investors?

Research

While it is understandable that a chemical company which has spent millions in creating a new chemical product would wish to keep its formula secret, it is well-known that most research leads to a dead-end. In these instance, it makes no sense to keep schtum about the results of the experiments that were conducted.

As Samantha Ratnayake, a senior electrochemist at Cavendish Renewable Technology in Australia, notes, “I have seen invaluable research knowledge go in the dumpster too many times, not because the results had no novelty, but only because it had no commercial viability. It was always heartbreaking for me to see all that human effort and capital investment making no impact whatsoever.”

Beyond the waste of time and money, nothing has been achieved other than hoping that a competitor will also waste their time and money researching the same dead-end. For the greater good of humanity, isn’t chemical industry secrecy taking things too far?

As Ratnayake observes, “The corporate mentality of hindering competitors by keeping information under lock and key is well understood, yet in the case of research outcomes with no commercial viability, the industry must try to curb their fears and instead communicate the science for the greater good. Such a practice might help keep each other away from deep rabbit holes and can go a long way in improving the productivity of commercial R&D activities.” Although she does of course acknowledge that, “… any benefits to the industry sector overall will only be measurable after years of practice and if multiple organisations participate.”

Pricing

Alongside chemical product formulas (which can hold great risk to consumers and the environment), perhaps the most secretive part of the chemical industry is pricing.

In some respects, this makes sense, as bulk chemical prices are not the same for every customer and are also variable dependent upon input costs. As Deloitte’s report, ‘Pricing in the Chemical Industry; Boost your pricing power’, advises, “In times of volatile raw material costs, chemical companies need to better understand their customers’ buying behaviour and how their business units price products.”

However, in many ways, pricing secrecy can actually hold a chemical company back.

“Compared with other industries, chemical companies are among the least confident in their pricing decisions and the least likely to raise prices regularly,” a recent report by chemical industry consultants at Bain & Co. notes. Adding that, “Looking ahead, chemical companies will need to learn to exercise their pricing muscles again simply to maintain margins, as several pressures converge. First, the costs of raw materials, crude oil in particular, have risen steadily. Freight costs are also rising as requirements for electronic logs in the US take capacity off of the road. In addition, uncertainty over tariff increases on petrochemicals, specialty chemicals and plastics also raises the pressure on chemical producers to improve their pricing capabilities.”

Currently, there is often a lack of clarity and a sense of opacity surrounding the pricing structures used by major chemical manufacturers which can lead to suspicion, mistrust, and the perception of unfairly inflated prices.

By being more open about their pricing methodologies, chemical firms can help alleviate these concerns and demonstrate that their pricing is based on legitimate factors, such as raw material costs, production expenses, or supply and demand dynamics.

Furthermore, sharing details on how different variables impact final pricing could give buyers a better appreciation for the complexities involved and the rationale behind the numbers and would build greater trust, accountability, and understanding between chemical companies and their customers.

Navigating the opaque chemical industry can be extremely challenging, as even basic facts about chemical compositions and supply chains are fiercely safeguarded. Driven by the pursuit of commercial advantage, the chemical industry has constructed an impenetrable fortress around its most sensitive information.

Unfortunately, this can leave even the most savvy chemical industry experts wildly speculating and wondering about the true nature of this deeply secretive business. But as even the kindergarten child knows, “Sharing is caring.”

Photo credit: Wayhomestudio, stockking on Freepik, jcomp, Freepik, Freepik, & Freepik