Dow Chemical Company: Synthesizing a Sustainability Strategy

In the United States, the chemical industry is the second largest industrial consumer of energy exceeded only by the petrochemical industry¹.  Accordingly, the continued threat of climate change and subsequent increasing regulatory pressures poses a threat to corporations in this industry, including Dow Chemical Company.  Regulatory requirements are driven by the necessity to reduce greenhouse gas emissions produced from the use of fossil-fuels among other causes.  As governments pledge to reduce their carbon footprint, companies such as Dow that rely upon fossil-carbon feedstocks will be required to adapt at the manufacturing and business operation levels².

Sustainability Strategies 

Clean Energy

Dow recognizes that limits on greenhouse gas emissions will require investment in modifying greenhouse gas emitting equipment³.  Additionally, regulations will affect taxes related to emissions³.  As Dow’s primary source of greenhouse gas emissions are a result of energy usage, they have commissioned projects aimed at reducing dependence on fossil-fuels in order to mitigate relevant costs such as carbon taxes and cap and trade systems³.  For example, Dow has committed to using 400 MW of clean energy by 2025⁴.  In order to achieve this goal, Dow has launched a variety of programs, including efforts aimed at using energy generated from eucalyptus biomass and sugarcane as clean energy alternatives for their production processes³.

Manufacturing

In order to remain competitive in the face of increasing regulatory pressures to reduce greenhouse gas emissions and dependence on fossil fuels, Dow also relies upon innovative manufacturing processes.  Advanced control and optimization models allow Dow to monitor plant conditions and adjust inputs to achieve greater efficiency⁵.  This initiative resulted in decreased energy intensity by 4 to 6 percent in 2009⁵.  Dow also uses innovative catalysts which improve the yield of raw materials to finished goods during their production processes and results in a lower energy usage⁵.

Financial Planning

In order to fully mitigate risk and incentivize projects that carry a lower carbon footprint, Dow has changed its business planning processes as well³.  When assessing potential capital investments, the price of carbon is included in Dow’s calculations and therefore influences the attractiveness of a potential project³.

Infrastructure

In addition to adapting their financial valuation processes, Dow has also implemented changes in its infrastructure to mitigate the risks that physical manifestations of global warming present³.  Several of Dow’s manufacturing facilities key to their supply chain are located in the Gulf region, which may be susceptible to increasingly severe weather patterns caused by global warming³.  Consequently, Dow has taken preventative measures and engineered facilities to better handle these types of situations³.

Opportunities

Although Dow will likely be required to allocate capital towards adapting key components of their business model in order to survive in a world in which global warming represents a significant threat, the situation presents opportunities as well.  Many of Dow’s product offerings provide both at-home and industrial consumers methods to reduce energy usage and improve carbon footprints.  For example, Dow’s STYROFOAM^TM insulation saves consumers $10 billion in energy costs each year³.  In addition, Dow’s BETAMATE^TM product, which is used in the steel industry, has resulted in a reduction of 23 million metric tons in carbon dioxide emissions³.

Potential Future Strategies

In order to further mitigate the risks caused by global warming and its related regulations and promote adoption of clean energy sources, Dow should consider additional strategies.  In particular, there is significant opportunity in expanding research on how non-carbon raw materials may be substituted for carbon materials in the synthesis of Dow’s chemical products.  Not only would such improved processes reduce Dow’s carbon footprint, it may also have the added benefit of reducing manufacturing costs.  Additionally, improving energy efficiency through reusing energy at key points in the production process would reduce the extent of Dow’s dependency on fossil fuels.  For example, recapturing energy units from heat sources could be applied to drive other processes.  Finally, carbon capture and storage in mines or other subterranean locations may be a potential method to reduce carbon emissions⁶.

Conclusion

Although Dow is heavily dependent on fossil fuels, its efforts to reduce its carbon footprint are noteworthy.  They are managing this issue through a multifold strategy, and represent a good model for others in the chemicals industry hoping to abate their contribution to global warming.

 

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References

[1] U.S. Energy Information Administration. December 2014. <http://www.eia.gov/energyexplained/index.cfm/data/index.cfm?page=us_energy_industry>.

[2] Pye, E. Kendall. January 2016. The Laboratory for Research on the Structure of Matter. <http://www.lrsm.upenn.edu/event/how-will-climate-change-change-chemical-industry/>.

[3] The Dow Chemical Company. 2015 Sustainability Report. <http://media-library.dow.com/WebContent/www-dow-com/Documents/Dow_2015_SustainabilityReport.pdf>.

[4] The Dow Chemical Company. Our 2015 Sustainability Goals: Addressing Climate Change. <http://www.dow.com/en-us/science-and-sustainability/2025-sustainability-goals/addressing-climate-change>.

[5] Banholzer, JJ Patt and WF. Improving Energy Efficiency in the Chemical Industry. 2009. National Academy of Engineering. <https://www.nae.edu/Publications/Bridge/EnergyEfficiency14874/ImprovingEnergyEfficiencyintheChemicalIndustry.aspx >.

[6] McKinsey & Company. Pathways to a Low-Carbon Economy. 2009. <http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/sustainability/cost%20curve%20pdfs/pathways_lowcarbon_economy_version2.ashx >.