Focus - The Dow Chemical Company

Management’s Discussion and Analysis of Financial Condition and Results of Operations
ENVIRONMENTAL MATTERS
Environmental Policies
Dow is committed to world-class environmental, health and safety
(“EH&S”) performance, as demonstrated by a long-standing
commitment to Responsible Care and progress made toward
the Company’s EH&S Goals for 2005. In 1996, Dow publicly
announced its voluntary global EH&S 2005 Goals—ambitious
performance targets to measure progress toward sustainable
development, including targets to reduce chemical emissions,
waste and wastewater by 50 percent. Equally aggressive are
Dow’s EH&S 2005 Goals to reduce leaks, spills, fires, explosions,
work-related injuries and transportation incidents by 90 percent.
Dow continues to work aggressively toward attainment of these
goals and its “Vision of Zero.” More information on Dow’s performance
regarding environmental matters can be found online in
Dow’s 2001 Public Report.
To meet the Company’s public commitments, as well as the
stringent laws and government regulations related to environmental
protection and remediation to which its global operations are subject,
Dow has well-defined policies, requirements and management
systems. Dow’s EH&S Management System (“EMS”) defines for
the businesses the “who, what, when and how” needed to achieve
the Company’s policies, requirements, performance objectives,
leadership expectations and public commitments. EMS is also
designed to minimize the long-term cost of environmental protection
and to comply with these laws and regulations. Furthermore, EMS
is integrated into a company-wide Management System for EH&S,
Operations, Quality and Human Resources, including implementation
of the global EH&S Work Process to improve EH&S performance
and to ensure ongoing compliance worldwide. It is Dow’s
stated EH&S policy that all global operations and products meet
Dow’s requirements or their country’s laws and regulations,
whichever are more stringent.
It is also Dow’s policy to adhere to a waste management hierarchy
that minimizes the impact of wastes and emissions on the
environment. First, Dow works to eliminate or minimize the generation
of waste and emissions at the source through research,
process design, plant operations and maintenance. Second, Dow
finds ways to reuse and recycle materials. Finally, unusable or
non-recyclable hazardous waste is treated before disposal to
eliminate or reduce the hazardous nature and volume of the waste.
Treatment may include destruction by chemical, physical, biological
or thermal means. Disposal of waste materials in landfills is considered
only after all other options have been thoroughly evaluated.
Dow has specific requirements for wastes that are transferred to
non-Dow facilities.
Dow believes third-party verification is a cornerstone of worldclass
EH&S performance and building public trust. Over the last
five years, numerous Dow sites in Europe, Latin America, Australia
and North America have received third-party verification of Dow’s
compliance with Responsible Care and with outside specifications
such as ISO-14001. In 2002, Dow received the American Chemistry
Council’s Responsible Care Employee Health & Safety Code
Sustained Excellence Award. The annual Sustained Excellence
Award recognizes companies that have demonstrated outstanding
safety records over a three-year period. This is the first time that
any company from the “large” size category has been eligible for
the award. For the fourth year in a row, Dow was also added to the
Dow Jones Sustainability Group Index.
> 36 The Dow Chemical Company
Dow’s EMS and EH&S Goals are designed to minimize environmental
risks and impacts, both past and future. The following
paragraphs outline some of these potential risks and how they
are managed to minimize environmental impact and overall costs.
Climate Change
There is growing political and scientific consensus that emissions
of greenhouse gases (“GHG”) due to human activities continue
to alter the composition of the global atmosphere in ways that
are affecting the climate. Dow takes global climate change very
seriously and is committed to reducing its GHG intensity (lbs. of
GHG per lb. of product), developing climate-friendly products and
processes, and, over the longer term, implementing technology
solutions to achieve even greater climate change improvements.
Since 1995, Dow has reduced GHG intensity by over 25 percent.
Total direct emissions of GHG have also been significantly reduced.
This trend could reverse, however, depending on business growth,
capacity utilization and the pace of new technology development.
Given the uncertainties regarding implementation of the Kyoto
Protocol and related climate change policies, it is speculative to
engage in an assessment of either the potential liability or benefit
associated with climate change issues. As noted in the 2001 Public
Report, Dow is making progress toward its 2005 goal to improve
energy efficiency by 20 percent. By the time Dow achieves this
goal, it will have avoided the production of over 290 trillion Btus,
thus contributing in a positive way to climate change. Dow also
contributes to the climate change solution by producing products
that help others reduce GHG emissions, such as lightweight plastics
for automobiles and insulation for energy efficient homes and
appliances. Dow does not currently engage in emissions trading
but is studying this concept and engaging in dialogue with governments
about the development of fair and effective mechanisms to
achieve GHG reductions at the lowest possible cost.
Environmental Remediation
Dow accrues the costs of remediation of its facilities and formerly
owned facilities based on current law and existing technologies.
The nature of such remediation includes, for example, the management
of soil and groundwater contamination and the closure of
contaminated landfills and other waste management facilities. In
the case of landfills and other active waste management facilities,
Dow recognizes the costs over the useful life of the facility. The
policies adopted to properly reflect the monetary impacts of environmental
matters are discussed in Note A to the Consolidated
Financial Statements. To assess the impact on the financial statements,
environmental experts review currently available facts to
evaluate the probability and scope of potential liabilities. Inherent
uncertainties exist in such evaluations primarily due to unknown
conditions, changing governmental regulations and legal standards
regarding liability, and evolving technologies. These liabilities are
adjusted periodically as remediation efforts progress or as additional
technical or legal information becomes available. Dow had an
accrued liability of $351 million at December 31, 2002, related to
the remediation of current or former Dow-owned sites. The liability
related to remediation at December 31, 2001 was $397 million.
The Company has not recorded any third-party recovery related to
these sites as a receivable. Dow filed a lawsuit in November 1999
against several of its insurers seeking recovery of remediation
costs at certain current or former Dow-owned sites. Settlements
have been reached with all carriers, except one.