Sustainability at Dow Chemical: How an Industrial Giant Builds Green Cred
You might think being one of the world’s largest chemical companies presents an obstacle to sustainable business. Truth be told, the Dow Chemical Co. has had its environmental ups and downs over the decades. But like everything else it undertakes, Dow views sustainability as a challenge that can be met by clear goal-setting, fastidious measurement and effective management.
Apparent in its 2011 sustainability report, the company takes a positive view of sustainability challenges, seeing “these economic and ecological imperatives as opportunities” that “should be approached with urgency and ingenuity — but not with negativity.” The situation, Dow asserts, “requires sweeping innovation that reconsiders and reengineers how we source, process, produce and distribute our energy, food, water and all the goods that make life healthy and productive.” The company hopes to apply its capabilities and those of its people to make a positive contribution.
Sustainability reporting is “very integral” to Dow’s sustainability strategy, according to Neil C. Hawkins, the company’s vice president for sustainability and environment, health and safety. In an interview, Hawkins says, “Our strategy, which has been in place for more than a decade, is to set very ambitious sustainability goals for the company and then do reporting versus those goals.”
Dow’s intent, he tells me, is “to be completely transparent around our performance and our priorities and how we’re taking science and technology and applying them to solve world challenges.” Transparent, in-depth reporting assures that the public, as well as the entire Dow enterprise, is aware of the company’s goals and priorities.
An aggressive regime of measurement keeps sustainability performance top of mind for Dow’s employees. For example, says Hawkins, “all employees within the company really care about our safety performance. We track that almost daily as part of our dashboard. Doing reporting helps support alignment of all our employees. It allows them to look at their own personal activity and decide where they can help contribute.”
Dow is a Global Reporting Initiative (GRI) reporting company. GRI has become an influential framework and disclosure system for sustainability reporting. Hawkins says GRI “is the best standard for reporting in the world” and is used by the most environmentally responsible global firms. “GRI creates confidence that the report you’re looking at is accurate,” he asserts.
Dow’s 2011 report received an A+ rating from GRI. The rating means Dow adheres to GRI’s highest application standard, and the added “+” means that the company opted to have its report externally reviewed. The additonal “+” rating adds credibility, Hawkins says. “We’ve made a very conscious decision to do transparent reporting,” he tells me. “The third-party validation is something our stakeholders want.”
Focus on Materiality
GRI identifies “materiality” as one of the key guiding principles for setting sustainability goals. Materiality is an accounting term that refers to whether a detail being examined is “material,” i.e., important or significant. GRI encourages reporting companies to consider materiality in determining which goals to set and pursue. Companies are urged to focus on areas that truly impact the business and are of concern to stakeholders.
Dow’s report contains the materiality matrix shown below. Areas of focus are placed on the grid according to the extent of which they are important to stakeholders (Y axis) and to the size of their impacts (X axis). While focus areas in the medium-medium to high-high ranges are obvious winners, it’s interesting that Dow has also chosen to place priority on a focus that appears in the low-low range.
That is because the topic, “Breakthroughs to World Challenges,” refers to challenges articulated in the UN Millennium Development Goals. These are long-term concerns that might not have great impacts today but promise to have impacts on future generations. Given its long-range importance, it should be given priority, Dow feels, in the company’s goal-setting now.
As with most companies, greenhouse gas emissions are a key sustainability metric. Dow’s report says that in 2011 the company reevaluated the effectiveness of its approach to tracking and reporting progress. It decided to expand its emissions goal to include limiting global GHG emissions to the level it experienced in 2006.
Product life cycle analysis (LCA) is a complex process but is key to a company’s understanding of its big-picture environmental impacts. LCA involves accounting for the environmental effects of a product throughout the entire supply chain, from manufacturing through disposal, even if some of those steps actually take place under the roof of a supplier or customer.
Dow is instituting “Impact Tool” for LCA. For example, Dow’s sustainability report says even though its Styrofoam product produces GHG emissions during manufacture and installation, the benefit ratio throughout the life of the product line is seven times greater than the produced emissions because it makes homes and buildings more energy-efficient.
The business case for sustainability is often made by pointing out the value of energy savings. Dow has been tracking its energy savings since 1990, and its 2011 sustainability report provides striking evidence of the value of measuring and reporting. The company finds that since that baseline year of 1990, it has saved 5,200 BTUs of energy, worth $24 billion.
A Long History of Measuring Health and Safety Performance
How can a large traditional chemical company be so advanced in its sustainability reporting — and in its management of sustainability issues? One important reason is that Dow, as with manufacturing and industrial firms in general, has for decades tracked its performance on health and safety issues.
It is no surprise, then, that the Dow sustainability report covers health and safety improvements. The 2011 report shows a 9 percent improvement in the company’s injury and illness rate, a 46 percent improvement in days away from work cases, 27 percent improvement in leaks at manufacturing plants, 43 percent improvement in hazardous leaks during transportation and 49 percent improvement in process safety incidents.
“We’re a very metric-driven and performance-driven company,” Hawkins says. “Once Dow says, ‘We’re going to do this,’ people know we’re going to implement it. Our employees don’t wonder whether we’re going to try to get out of doing it in five years.” A strong reporting system, he stresses, is key to bringing about internal alignment over sustainability goals. “Everyone knows that the whole company is going to be judged on how we’re doing versus our goals.”