The Decision-to-Purchase Gap: Why Upstream Chemical Producers Consistently Create Value They Cannot Capture

Construction is changing in ways that should favor advanced chemistry. Energy renovation is accelerating. High-performance buildings are demanding better fire safety, air quality, and documented durability. Infrastructure owners are prioritizing whole-life cost over lowest unit price. The value of the right chemical solution has never been higher.

So why do so many upstream chemical producers struggle to translate that value into margin?

The answer is not a product problem. It is a structural one and understanding it is the first step toward addressing it.

The market is shifting, not shrinking

New-build construction is soft in parts of Europe. In markets like Germany and Sweden, new residential starts fell by as much as 10 to 15 percent between 2022 and 2024 as interest rates rose and material costs increased. But renovation held steady, growing roughly one to two percent annually during the same period. Renovation now accounts for more than half of total European construction output, the first time that threshold has been crossed in modern history.

This is not a temporary correction. It reflects structural forces: an aging building stock, mandatory energy performance upgrades under the EU Energy Performance of Buildings Directive, and a regulatory push for credible environmental documentation. The market is not shrinking. It is rebalancing toward segments where performance matters more than unit price.

Decarbonization is accelerating this shift. Building owners and regulators no longer accept vague performance claims. They require evidence: documented thermal performance, fire compartmentation, indoor air quality data, and environmental profiles that can withstand scrutiny. The question is not whether chemistry creates value in these applications. It clearly does. The question is who captures that value.

The gap that matters

Here is the structural problem upstream chemical producers face: the people who influence product choice are not the same as those who pay for it and neither group is necessarily the one who bears the risk of failure.

A specifier chooses a system. A contractor installs it. A building owner lives with the consequences. A downstream manufacturer assembles the final product. Somewhere upstream, a chemical producer supplied a critical component. But the upstream supplier had no seat at the specification table, no formal relationship with the installer, and no documentation ready when the compliance question arrived.

This is the Decision-to-Purchase Gap. Value is created upstream, in the lab, in the formulation, in the performance the chemistry enables. But selection is decided downstream, where systems are specified, approved, and installed. Margin follows selection.

The gap is not new. But decarbonization is making it more consequential. As requirements move to system level (airtightness, thermal continuity, fire compartmentation, durability over time) the specification process becomes more complex, more documentation-heavy, and more dependent on supplier relationships that many upstream producers have not built.

Why the current operating model falls short

Most upstream chemical producers sell into intermediate formulators, converters, or product manufacturers. That is a rational structure. The problem is the visibility it sacrifices.

When a building specification is written, when a procurement team requires an EPD or a fire test certificate, the upstream supplier often learns about it late, indirectly, or not at all. The result is a recurring pattern: a product performs as designed, the downstream manufacturer builds a strong system around it, the specifier approves it, the contractor installs it and the upstream supplier competes on price in the next contract cycle because no one required them specifically.

This is the cost of the Decision-to-Purchase Gap. Chemistry creates performance. Someone else captures the premium.

The strategic implication

The solution is not to abandon the intermediate model or vertically integrate. Those paths carry their own risks and rarely make economic sense for upstream producers.

The solution is to close the gap deliberately by building influence at the points where selection is actually made, and by providing the proof that makes specification preference stick.

That requires a deliberate shift in how upstream producers think about their role. Not as ingredient suppliers. As system enablers.

The companies that make this shift will find that decarbonization is not just a compliance pressure. It is a source of margin and competitive position for those who build the operating model to capture it.