Speaker: L. J. Washington, Corporate Vice President Sustainability and Environment, Health & Safety
Event: American Chemistry Council's annual Responsible Care conference
Location: Las Vegas, NV
Date: 05/04/2005

Thank you for the invitation to talk to you today on the subject of challenges and opportunities regarding sustainable development. In the next 20 minutes or so I hope to give you a good look at what I think are some very significant accomplishments at Dow, but also that we are not content to rest on them. I plan to leave you with the understanding that we see our sustainable development role expanding and changing as the world demands more from us as an industry. Most of all, I hope to provide you with some good ideas on how to adapt what we've done into something that can work for you when you return to your roles next week.

Herbert H. Dow, a chemist, founded our company over 107 years ago. His idea was to use the brine underneath Midland, Michigan to produce bromine through electrochemistry.

He was commercially successful in using that bromine to produce bleach for industrial use including the pulp and paper industry and, 107 years later, Dow is a 40 billion dollar science and technology company.

Dow's ideas remain with us today. He was often quoted as saying, "If you can't do it better, why do it." It's that spirit to innovate, to "do it better," that motivates us in our drive towards sustainability.

H.H. Dow was practicing the eco-efficiency component of sustainability near the turn of the previous century. Sure, he didn't call it that. He just did it…..better.

In the 1960s, Carl Gerstacker, Dow's chairman and CEO, offered his insights on whether business and environmentalism could co-exist. He said that "industry should concentrate on minimizing or even eliminating waste product, thereby cutting down on the pollution problems at the same time it boosted its own profits." In the 1960s, Dow as a company and Gerstacker, as its leader, were both recognized as pioneers in pollution control and Gerstacker's opinions were often sought after.

1986, Dow implemented the WRAP Award program - WRAP stands for Waste Reduction Always Pays - to recognize and reward individuals or teams who find innovative ways to save money while reducing waste at Dow. Waste reduction includes waste avoidance, source reduction, material reuse and/or recycle, yield improvement and energy conservation.

In 1996, we implemented the world's first 10 year public, voluntary stretch goals for environment, health, and safety performance improvement. These included items such as a 90% reduction in injuries and illnesses, 90% reduction in spills, and 50% reduction in chemical emissions, etc. To add to our accountability, we agreed to report these publicly until their completion at the end of this year.

So you can see from this brief look at our history that the eco-efficiency component of sustainability has a long tradition at Dow. Let's take a deeper look now at the goals we set a decade ago.

When we set these goals, there were a lot of unknowns. For starters, we didn't know how we were going to achieve them, and we didn't have perfect understanding of the value they would deliver. But, we set them and communicated them publicly.

The Dow leaders who set these goals in 1996 started with a vision - a Vision of Zero: zero injuries, zero incidents and zero harm to the environment. This came after a year (1994) when we recorded:

• An injury rate of 2.57 per 200,000 work hours
   
• A total of 2,616 incidents (leaks, breaks and spills)
   
• Chemical emissions of more than 70,000 tons

Then they set the goals based on a number of variables, not the least of which was how to make the greatest impact in those three areas.

These targets were thought to be the benchmarks of our industry and aligned to the regulatory realities of 10 years hence.

Why the 10-year time frame?

• Annual goals are small, incremental; we wanted people to think boldly
   
• Needed to give people enough time to build the goals into their plans so they could accomplish them
   
• Needed enough time to effect a mindset change
   
• We believe that, over time people can "think bigger" and can achieve more.

You may have seen this quote ("It's tough to make predictions, especially about the future." - Yogi Berra) before, but I found it especially relevant considering what we were facing. Now that we're about nine and a half years into our 10 year goals, we have a pretty good idea where we are going to end up. Let's take a look.

For each of the goals, as I said, we identified a baseline measure in 1994, and set annual targets to achieve an overall 10-year goal.

To give you an idea of how we're performing against those goals, here's the first of two slides that list specific goals, the reduction target, where we stood at the end of 2004, and where we expect to be at the end of this year. You'll see that in some cases, we have achieved and even surpassed our goals, and in others we may fall short. The forecast is based on Dow's historic performance.

We are very proud of our safety record. Since 1994, our injury and illness rate has improved by 80 %. To put this into real numbers, since 1994, more than 11,000 people avoided injury as a result of our safety efforts.

To get a sense of how we stack up against other industries, consider the fact that the typical worker in the chemical industry is one-and-a-half times safer than in general industry - safer even than the average worker in retailing.

And then consider the fact that Dow is one of the top safety performers in the chemical industry … in other words, in a group of very high performers, we are among the best. I also want to highlight that our results also include contractors on our sites.

This graph shows results through the end of 2003. Dow's results through the end of 2004 were 0.61, and our results through first quarter 2005 were 0.45.

We believe that outstanding EH&S performance is a key indicator of operating excellence throughout the company. And our steady improvements are real and meaningful.

Here's the second slide I promised on performance against our 10-year goals, this time in the area of Resource Productivity. Dow will continue to drive improvements in the waste area through continued business and site engagement in the Waste Reduction Always Pays program, along with developing By-Product Synergy opportunities.

When we set our 10-year goals in 1996, this was a huge step towards greater transparency with our stakeholders, but we knew we needed to hold ourselves accountable by regularly reporting our progress publicly. We published our first Public Report in 1997 and we've published updates annually since then, although in 2000 we moved to online reporting.

This year for the first time we included our results in the Dow Corporate Report, which combines a traditional Annual Report with information from the Public Report in a new format to ensure that all our stakeholders, including shareholders, are receiving this important information.

We are proud of what we have accomplished so far. But even with all this now a standard part of our operations, we saw further opportunities for progress.

We saw a need to "hard-wire" sustainability into our company's culture, strategy, operating discipline and work processes.

In 2004, Dow named a Vice President of Sustainability, and I stand before you today. There is some difference between the terms Sustainable Development and Sustainability, so let me offer you my interpretation.

In 1987 the Brundtland Commission offered their initial definition of Sustainable Development, which is: "Development that meets the needs of the present, without compromising the ability of future generations to meet their needs." In general terms, Sustainable Development refers to large global problems, like population control, global climate change and human rights issues to name a few. Essentially, it's about systems and limits.

Sustainability in the corporate context refers to what corporations can contribute to solving these global problems.

For Dow, sustainability means a balance… a balance between improving the environment and society as a whole, while creating a competitive, stable economic business climate.

The ability to strike a balance, however, is contingent on the economic component-without economic fundamentals: an industrial base, jobs, business stability, and a long-term and competitive playing field… the model falls apart. Environmental protection and societal enhancement are not possible without a firm foundation for the economic pillar.

Dow's new chief executive, Andrew Liveris, recognizes the importance of this distinction and has given Sustainability greater visibility in the company by including it in his Corporate Strategy.

At Dow we have four strategic themes, but I want to focus on the second one, entitled Set the Standard for Sustainability. This not only includes the historical definitions of workplace safety and environmental stewardship, but now includes excellence in governance, ethics and compliance.

In a few minutes we'll talk about the next generation of our ten-year goals, but first I want to make a point about company reputation and the bigger picture of what we're trying to achieve with all four of these themes.

When all is said and done, any organization's most valuable asset is its reputation and all of what that means to its investors, employees, customers and communities. A company's reputation is a combination of what it stands for, also known as its "brand," and how it performs against the standards it sets for itself.

An outstanding positive reputation translates to trust and respect. With those two qualities, anything is achievable. But trust and respect are hard won, and even more easily lost. A negative reputation means lack of trust, and nearly everything becomes IMpossible. We could probably generate a long list of companies and individuals we no longer trust or respect.

But our vision is even broader than trust and respect for Dow. We'd like to see it expand to the entire chemical industry. There are many ways chemical companies can go about generating good will among its stakeholders, and I'd like to share with you just a few recent examples from Dow.

A very recent example is the introduction of a project called Cleaner Production in China. Cleaner Production is the continuous application of an integrated preventive environmental strategy to processes, products and services to increase efficiency and reduce risks and possible damage to humans and the environment.

In 2004 Dow and the State Environmental Protection Administration of China signed a Letter of Intent for a three-year project, and in March we launched our first pilot project.

The project focuses on small and medium sized enterprises from the chemicals or related industries such as pharmaceuticals, dyeing, electroplating, paper and brewery, and will be implemented through a series of education, training as well as appraisal and recognition programs.

Also in March, Dow published a new Product Safety web site to make our product safety processes and information more transparent and readily available to the public. Specifically, the site describes the processes Dow uses to characterize and manage the risks associated with its products, and provides general information on our product stewardship efforts. The Dow product safety web site also helps demonstrate our support of the American Chemistry Council's Responsible Care® initiative.

A good example of how we're implementing sustainability through our products is the Sentricon Termite Colony Elimination System, a product of Dow AgroSciences. This innovative system requires only one ten thousandth of the amount of product traditionally applied to eradicate an entire termite colony. Using stations and inspections, bait is used only when and where termites are present. Currently Sentricon is being used to protect over 750,000 structures including the White House, the Statue of Liberty, and the Senate in Rome and even trees lining the avenues of Paris. Sentricon won a Presidential Green Chemistry Award in 2000.

We are also very excited about our hydrogen fuel cell project with General Motors. Hydrogen is generated in many ways now and will continue to be in the future. As for Dow, hydrogen is a normal by-product of several of our chemical manufacturing processes. Typically, we use excess hydrogen as fuel for boilers or sell it to industrial gas companies for re-sale to their customers.

By efficiently consuming by-product hydrogen in fuel cells, Dow will demonstrate the ability to produce competitively priced electricity. One application of this is GM's effort to put fuel cells in cars by the end of the decade. This will reduce dependence on fossil fuels and, in turn will effectively reduce greenhouse gases. This will also be an excellent opening of new pathways for the transportation industry.

With this pilot project, Dow could eventually use up to 35 megawatts of electricity from 400 fuel cells. That's enough electricity for 25,000 homes! This innovation, once proven, may enable the use of hydrogen fuel cells for large industrial power systems. That, in turn, will benefit industry as a whole and improve the global environment through reduced fossil fuel usage and decreased emissions of nitrogen oxide.

Staying with the energy topic for a moment, early this year one of Dow's businesses signed an agreement with World Energy, the nation's premier producer and distributor of biodiesel fuel. This agreement is another step in helping America reduce its dependency on foreign oil.

The use of biodiesel reduces carbon monoxide emissions by 78 percent compared to petroleum diesel, according to a 1998 biodiesel lifecycle study jointly sponsored by the US Department of Energy and the US Department of Agriculture. Integrating biodiesel is very efficient, requiring little, if any, engine adjustments and utilizing existing infrastructure.

So, with all these reasons to be proud of what we've done, and with all that we're doing now, it's time to take a step back and ask ourselves: where do we see ourselves in the NEXT ten years?

Albert Einstein once defined insanity as "doing the same thing over and over again and expecting different results." From that we can surmise that, while we have had good results doing what we're doing, we'll have to change things if we want to do things better - which is what our founder would want us to do.

We find there is a fair amount of pent-up expectation, both internally and externally, for the announcement of the results of our 2005 Goals. But there is an equal if not greater expectation about what we will declare as our next set of goals.

We are still focused on our Vision of Zero, reducing costs and liabilities; promoting innovation and investing for growth; and enhancing our reputation while protecting our people and the environment.

But in the next 10 years our goals will have a broader external focus, and we are just now in the process of defining what those will be. We do envision that our goals will be focused on the areas of product impact, our responsibilities to the communities where we operate, as well as our overall impact on the world.

If the previous ten years have taught us anything, it's that our stakeholders have changed, and so have their expectations. Assuming Einstein was correct, and assuming we want to exceed our stakeholders' expectations, we must take a completely new and different approach to identifying a vision and goals for the next decade -- one that will lead, not only to respect for Dow as a company but, as I said before, the potential for respect for the chemical industry.

• We'll be honing and refining our goals until we're satisfied that we've found the critical few that will have most potential to achieve real significance.
   
• We want to be sure that the small communities where we operate have a good opinion of Dow, and that the world as a whole shares that opinion.
   
• To do this, it's important that we keep our goals simple and relevant to our stakeholders, and also that they align with the four themes I shared with you.
   
• And though I know I've said it already, it bears repeating - At the end of the day, it's all about respect - Not only for Dow, but for all of us in this industry.

As we go through the process of developing and refining our goals, we're being sure to take into account the ideas and opinions of all our stakeholders who have been following our progress against the first set of goals with much interest.

One key contributor is Dow's Corporate Environmental Advisory Council, or CEAC for short. I chair the group of ten opinion and thought leaders from around the world. We reviewed our goals with this broad-based external group just a couple of weeks ago, and received valuable input on our path forward.

As this quote ("Be the change that you want to see in the world." Mohandas Ghandi) implies we cannot wait and see what others will do, and wait for their results. We have to have the courage to act, and we have done so.

The learnings we have gained through our first experience have been tremendous. And I feel confident our next set of goals will help lead us to our ultimate goal of respect.

Thank you.