1. MGT 9380
Environmentally Sustainable
Behavior In Organizations
Final Assignment:
Sustainability Report for Dow Chemical Company
Tuesday, December 15, 2016
Associate Professor: Stephan Dilchert
Team Members:
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Mourti Nefeli Noyes Henry
Executive Summary
The following report focuses on Dow Chemical Company and the way they report on
their sustainability initiatives. Our objective is to understand how the company prioritizes its
environment and society related practices, whether their reporting method provides
meaningful information and where the company is lacking in terms of sustainability.
For each area for improvement that has been identified through this research, a
recommendation is provided on how to improve. Recommendations range from specific
initiatives to overall online presence.
Overall, Dow claims to be a leader in sustainability by employing innovation in its design
and production process and leveraging partnerships with non-profit organizations. However, in
its 178-page 2014 Sustainability Report, we see the company falling in the same “trap” as many
other large organizations; the need to promote an overly positive image of the company and its
operations by continuously repeating the same flattering statements.
Given the recent announcement of the merger between Dow and DuPont, our report
has been modified to incorporate the potential of the new entity, DowDuPont, when it comes
to Sustainability, given the financial resources, human capital and technical capabilities.
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Introduction
On Friday, December 11th,, 2015, Dow Chemical Co. officially announced its decision to
merge with DuPont Co. The merger, which has been discussed on Wall Street Journal before its
official announcement, will create DowDuPont, which will then be split into three separate
entities.1 After hearing this news, it’s easy to imagine the environmental impact and the power
that these companies can have onto new sustainability initiatives. This will affect not only the
chemicals and plastics industry, but will have a widespread influence into agriculture and
manufacturing as well. The two companies’ combined worth is $129 billion2 and they have
annual combined revenues of approximately $83 billion3.
Examining the sustainability report of Dow, as well as that of DuPont, from 2014 helps
us understand what this new company could achieve for the environment and sustainability.
Dow and DuPont both report on their sustainability, economic, and social performance using
the GRI G3/G4 reporting framework. DuPont provides a Sustainability Progress Report that
gives an overview on how the company is doing environmentally while Dow publishes quarterly
updates. Dow and DuPont both have websites set up and a sustainability section on their
websites that announces goals for the company and the progress of those goals. DuPont only
lists Sustainability Progress Reports for 2013, 2014, 2015 and Global Reporting Initiatives for
1 Wall Street Journal,“Dow ChemicalLong PursuedDuPont”,http://www.wsj.com/articles/dow-long-pursued-dupont-
1449709386?cb=logged0.28936826069806665
2 Wall Street Journal,“DuPont,Dow Chemical Set For Record Sessions After Deal News”, http://blogs.wsj.com/moneybeat/2015/12/09/dupont-
dow-chemical-set-for-record-sessions-after-deal-news/
3 Reuters, “$130b mega-merger: Dow, DuPont toform world's largest agrochemical entity”, https://www.rt.com/usa/325668-dow-dupont-
merger-chemical/
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2014 and 2015. Dow lists annual Sustainability Reports from 2006 and includes separate
Sustainability Highlights as well as quarterly updates that focus on any initiatives that have
shown progress in the past few months. Even though this follows the standard for companies
of this size in any industry, both Dow and DuPont claimto integrate sustainability into their
core business and given their pasts (both companies have had tremendous scandals with
harmful products for the environment and people), they could increase their transparency by
making it much easier to find their reports and to show the changes from year to year.
Dow & DuPont – Sustainability Report Quick Overview
The sustainability reports of each company contain a message from the CEO and a letter
from the CSO. DuPont and Dow talk about the business segments and the geographic segments
that they operate in and a revenue breakdown for all segments. Dow also talks about the
workforce breakdown, showing how many full-time and part-time employees are male or
female while providing a breakdown of contract employees by male and female. As of 2014,
Dow is predominantly male at 70% on average for employees and uses twice as many male
contractors as female contractors. DuPont doesn’t make any mention of employment
breakdown.
The reports also summarize the economic impact of Sustainability for the companies.
With both companies already following the GRI G4 reporting framework, there are very few
differences in the structure of the report. The Dow report is roughly 178 pages compared to 69
pages for DuPont. The length of the reports differs partly due to the difference in size of the
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companies themselves; Dow is a bit larger and operates in more business segments than
DuPont.
Focus on Dow’s Sustainability Report
We wanted to take a closer look at Dow, the initial subject of our research, and provide
a breakdown of their sustainability initiatives that would help us understand where the
company is lacking and where they actually set the standard, if applicable.
There is no doubt that Dow shows significant achievements in its report and especially
in terms of its 2025 Sustainability Goals, an initiative that started back in 1995 and is renewed
every ten years. (Let us remind you here that DuPont has its 2020 Sustainability Goals, which
started in 1990). For anyone reading Dow’s 2014 Sustainability Report, the company’s intention
and efforts in reducing the impact of its operations, introducing more sustainable products for
its clients and connecting with local communities in order to improve the quality of life in their
respective areas, are evident.
While analyzing the aforementioned activities towards sustainability, we found it useful
to group them under two distinct categories:
I. The external category, meaning activities that target sustainability goals outside the
company, e.g. providing products that help clients be more sustainable or working
with non-profit organizations to conduct research or educate the public.
II. The operational category, which includes activities that aim at decreasing the
company’s environmental impact by switching to alternative energy (such as the
agreement with a wind farm to supply 200 MW of wind power annually) or the
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decisions undertaken to maintain CO2 emissions constant for the next 10 years
despite the company growth.
DOW has received multiple awards for these – and many more – initiatives but
identifying the validity, worth and selection process of these awards is almost impossible for
not only the average consumer but also industry professionals.
Here are some of the areas for improvement for Dow:
A. Employee-Based Initiatives
Despite the overly positive picture painted through its report, our research shows that
the company lacks severely in terms of internal, employee based, initiatives that could actually
help shift the organization’s culture and show Dow’s candid commitment to its values.
Specifically, even though the company mentions the importance of employee
engagement and even reports on its employees’ time spent volunteering for various causes, it
fails to establish (or at least effectively report on) processes and incentives that would identify
their employees’ behaviors regarding the environment and feed into meaningful
recommendations about how to enable them to drive change. If Dow’s idea of innovation and
sustainability doesn’t include a prominent role for its employees, then it’s unlikely we will ever
see true commitment from Dow – or what is now DowDuPont.
In Dow’s 2014 Sustainability Report, we see that the company has been conducting
annual surveys to increase employee engagement, especially when it comes to job
development, leadership, communications, etc., called GEOAS - Global Employee Opinion and
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Action Survey. There is no mention of questions around employees’ environmental behaviors
or practices, which leads us to question the company’s awareness of behavioral patterns in its
employees that could either harm or benefit the environment. With the lack of such
information, it is almost impossible for any company to get its employees to engage and invest
in sustainability in a way that would help the company become a change agent in the industry.
Therefore, our recommendation to DowDuPont would be, once they have finalized the
separation of the three future entities, to start with soliciting information about what its
thousands of employees are doing at work in terms of the environment. Understanding how
employees behave will allow them to form the right mix of employee-based initiatives that will
reflect the companies’ commitment to long-term sustainability.
Dow also seems to fail to incorporate environmental concerns at any stage of the
company-employee relationship; recruiting, selection, training or performance management.
This leads us to believe that, despite their continuous efforts to portray Dow as a company
driven by sustainability and innovation, no significant changes were made to the organizational
structure and its core operations to reflect that.
For DowDuPont, we’d also like to see how many women is part of this company
throughout all the ranks. How many new jobs were added that were “Green” jobs; jobs, whose
primary function is to develop new products, chemicals, and processes while using cost-benefit
analysis to determine how impactful they might be on the environment.
B. Sustainable Chemistry – Life Cycle Assessment
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One of Dow’s 2025 Sustainability Goals is enhancing Sustainable Chemistry and
increasing revenue from products that are “highly advantaged by sustainable chemistry”.
However, we can’t seem to find what that means exactly since the company only provides
generic statements about the materiality of this initiative and the amount of revenue gained
through such products for 2014 ($13 billion). What we need is for Dow to at least provide some
examples of products that were significantly modified by sustainable chemistry, how this
change was implemented, what it meant for procurement, production and distribution, how
they benefited Dow’s clients and how that was promoted and communicated to the clients.
Otherwise, one would assume that the increase in those sales was not necessarily due to
sustainable chemistry, but rather served as a way for Dow to boast about integrating
sustainability into its products without actually providing any comprehensive data that would
be easy for a layman to identify and understand.
The same goes for the Life Cycle Assessment (LCA), an extremely significant tool for
companies like Dow, that helps record and assess the environmental impact of a product in all
stages of its life, from cradle to grave. There are two main issues with how Dow reports around
its products’ LCA:
Information is scattered throughout the report and not concentrated in one
chapter or section that would help understand what the company is actually
doing and whether LCA is applied across all business segments or only in a few.
The information provided is limited and for the most part it’s a repetition of the
same statement about how Dow uses LCA to get a holistic view of its products’
impact. Every now and then the company offers more information on very
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specific points, such as what LCA has shown about Scope 3 GHG emissions saved
by Dow insulation products.
A Dow advocate might say that Dow owns various different segments with multiple
products each and it would be very difficult – and perhaps pointless? – To include all that
technical information in the Sustainability Report. We would agree that Sustainability Reports
should not exhaust the reader to the point where they would give up reading but there are
many stages between what Dow does now and what an exhaustive report would look like.
C. STEM Education
For a company like Dow, the supply of talent in STEM professions is key. It is what will
keep the company innovating and, given the increasing focus of various programs and colleges
on sustainability, it will equip the company with professionals who share an interest and
passion in creating positive change. Dow claims to support initiatives related to STEM
education through its STEMtheGAP program and DuPont has a variety of initiatives around
STEM education. However, we cannot find any information about tangible results of Dow’s
initiatives nor do we see the company connecting education with sustainability and using that
to advance its current employees. In order for DowDuPont to sustain its place in the market,
stay ahead of the curve and become a true leader in sustainability, they will have to prioritize
STEM education, combine it with sustainability and offer it not only to future generations but
also to the already invested human capital of approximately 100,000 employees combined4.
4
Joseph N. Distefano, “DowandDuPontplanto merge, thenbreakapart”, (December 12,2015),Philly.com,
http://www.philly.com/philly/business/20151212_Dow_and_DuPont_plan_to_merge__then_break_apart.html#LqbUemjLPQRctCHl.99
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D. Data Presentation
While Dow’s report touches on many important aspects of sustainability, such as GHG
emissions, governance and ethics, alternative energy, etc., the method they use to present it
seems more like a data-dump for the company to make sure that no legal issues can arise, by
virtually saying, “hey, we reported all of it.” They may have reported all of it, but not in a way
that is effective for people, communities and their shareholders to see and comprehend how
the company is changing to adhere to Sustainability principles and what that means for them
and the future of the industry. The current report has an extensive “Strategy and Profile”
section that includes everything from climate to communities, many of which are simply
repeated later on in the respective sections. As a result, the reader must go back and forth and
weed out the continuous boasting statements to get a full view of what the company is doing
to, for example, engage communities or to reduce energy usage.
The new reports should definitely follow the GRI format, but it also needs to be more
structured. The letters from the CEO and the CSO should be included, as is the case so far, not
because there is important information in those letters but because it reflects commitment and
responsibility from the top down. A table of contents, highlights and summary is a “must”,
especially with such long reports. Dow has been following this template but DuPont goes
straight into content without giving the reader the opportunity to find information easily. Then
a distinction should be made based on their business segments; for companies like DowDuPont
it is important for the public to know how much the company has integrated sustainability
across businesses and how. What we get now is a generic overview that makes it difficult to
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detect which business segments are the least and most harmful to the environment and what
actions are being taken. Under each business segment they can present their progress of old
programs and any new initiatives and partnerships by following the triple-bottom line format
(people, planet, profit) so as to make it very clear to identify their impact.
There is always a need for a data-dump, how they were calculated, where they got the
numbers from, but the point of this report should be to make it easily available and
comprehensible to the public so they should leave that at the end and put an index on it. We
believe that with these changes in the structure of the report, the general public as well as
industry and sustainability analysts will be able to better monitor and evaluate the
sustainability efforts of such a complex and large entity. Otherwise, the sustainability report is
simply a PR effort, not an essential part of the company’s function and growth.
E. Economic Impact
There is a heated debate amongst analysts on whether companies should publish
integrated reports featuring both financial and sustainability results. Many would argue that
the two do not belong together because there is very little cross-over on the people who care
about both. Accountants, the traditional type of investor, the SEC, and IRA care about the
financial statements, they care about the taxes and the value of the stock. However, more and
more investors and hedge fund managers also care about how green the company is because it
gives a sense of whether this company is moving forward with the times. Whether it can follow
– and perhaps lead – the ever-changing sociopolitical dynamics those large corporations are
called to address.
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Dow includes a section on “Economic Impact”’ where they give an overview of the
company’s financial performance and attempt to demonstrate how sustainability has added to
that (e.g. revenue from products enhanced by sustainability). They also include potential
financial risks from climate change, as well as benefit plans, provided financial assistance and
indirect economic impacts such as building strong and healthy communities. But is this all
necessary in a Sustainability Report?
When a company integrates sustainability into its business, it’s only logical to measure,
monitor and report on the economic aspect of those initiatives. The financial angle should be
included but it should also be clear and straightforward, not the flowery paragraphs that depict
Dow as the benefactor of countless communities. If they want to make this information
available to the public, then by following the triple bottom line for each business segment, they
can effectively showcase the true investment and financial impact of each of their sustainability
programs. However, dumping financial data, some of which are not even related to
sustainability, seems like a desperate attempt to fill some more report pages and show that the
company is doing more that it actually is.
Some investors decide to only invest in companies that care about the ecosystem and
society due to their morals, while other investors support companies that care about the
ecosystem because they tend to have better ROIs; The main point is that until DowDuPont
figures out a meaningful, direct way to report on the financial aspects of sustainability, they
should keep them separate and simple. If they wish to keep them all in one, they can simply
index the financial data at the end for the analyst from Bloomberg.
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Online Presence
Taking a step back from the actual sustainability reports and viewing the companies’
websites, one might think that both sustainability sections were written by the same person.
Each website begins with a general “mission statement” that overuses the words innovation
and sustainability. Each company claims that they are the leader and the driver of change in
the industry. It almost feels as if the two companies merged a long time ago and simply kept
separate books for anti-trust reasons.
Diving a bit deeper into the websites, we start to hit business segments and industries
that we typically don’t realize that either company has any interest in. The one that stands out
is solar power and solar panels. Dow pushes hard their new product, which is the Powerhouse
Solar System 2.0, a new solar-power shingle that is supposed to increase the efficiency of solar
power for the modern home. DuPont is pushing their partnership with Moser Baer to bring
efficient and effective solar power to northern India. Although it is exciting to hear about these
innovations, we doubt that Dow and DuPont are the industry leaders. Tesla comes to mind for
the industry leader in solar power with their partnership with Solar City. Which brings up the
question: how do Dow and DuPont choose which segments to enter? What are the criteria?
It seems like Dow and DuPont are innovating to stay competitive and profitable and that
innovation comes in ways that are sustainable and environmentally-friendly because that is
what our era calls for, it is what American – and not only – consumers request and, more
importantly, climate change is a hot-button issue for the globally-developed economies. It’s
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hard to believe that if governments and people were not driving the push for more sustainable
technology, that either Dow or DuPont would be pushing these innovations.
There is nothing wrong with companies following the “green trend”, if it means that the
industry’s net effect is positive and not only harms but benefits the environment. We do need
companies though that strives for true change, not just good PR.
Recognizing the Past
This brings us to our next point, the lack of recognition for the companies’ past. Dow
and DuPont both have had practices in the past that have severely harmed people and the
environment. None of that is mentioned in their sustainability reports though. Should we not,
as consumers, hold these companies accountable and recognize that very little has been done
by these companies to make up for the calamity of their past? Dow pushed through herbicides
and pesticides that were unsafe to consumers and end-users and promoted them as safe. Dow
claimed that the EPA was incompetent and not fit to judge their chemicals. DuPont has a
history of dumping toxic chemicals into rivers and bears responsibility for polluting the Hudson
River in New York. These companies should and need to address these issues going forward. It
would be a strong step, as they work on becoming one company, to show that the new
company has really changed, that they matured, not just grew bigger. By admitting to their
pasts, the new company can be stronger going forward.
We don’t expect companies to be eternally indebted to society for mistakes of the past.
As a community and as a society we accept that things change but the key is how they address
and fix them now. They can be a true leader in sustainability by, for example, pushing forward
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ideas on how to rectify the “brime” spillage in Midland, Michigan, or how to clean up rivers
they have polluted to make them inhabitable again. The report that Dow – or DowDuPont -
puts out should be focused on that, their goals and their mission as a company should be
focused on how to reverse the negative effects of their actions in the recent past. The Dow
sustainability report is 178 pages long and not only jumps from one idea to the next but we also
don’t see the company taking ownership of the environmental issues they created in the past.
Expectations for the Future
Dow and DuPont see sustainability as good for business. However, consumers and
governments are pushing all businesses and industries to be more eco-friendly and sustainable.
What is essential here is Dow’s power and influence in the industry. The fact is that Dow is the
company who can single-handily, and more so after the merger with DuPont, affect how our
food is grown, what kind of herbicide and pesticide are used, what the impact on our health
and environment is. They can positively affect the lives of the end-consumers of plastics and
household products. The biggest change can come from the fact that most of Dow’s business is
in business-to-business transactions, which means if Dow actually puts sustainability at the
focus of everything it does, and not just what is profitable, then they can really start to impact
many different industries.
The merger of Dow and DuPont is a great thing for all of the reasons above. They are
combing two major companies and then splitting them into three separate entities. Though the
structure of these entities is unknown, we hope that it will be easier to prioritize sustainability
and eco-system friendly initiatives in the smaller companies, which will still have the same
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resources and capacity of the larger ones. It also allows Dow and DuPont to reinvent the
reporting standards for “sustainability”, to make them crisp and clear and understandable so
other companies in other industries can duplicate and reproduce them for their own
operations.
Dow and DuPont may not be perfect, and their reasons for environmental
consciousness are certainly questionable, but they have the power and knowledge (they are
companies with great scientific talent, after all) to change how the world operates for the
greater good.