Today, Dow considers its sustainability strategy and business strategy to be one and the same; employees understand that the two can no longer be separate. But, as Global Sustainability Director Haley Lowry explains, this didn’t happen overnight.
The urgency for governments and businesses to work together to address the climate crisis was further underlined at COP26 last month, where nations agreed on a way forward to avert the worst impacts of global warming.
The mainstream reporting of the climate agenda will have left many individuals scratching their heads, wondering what they can do to contribute. It will also have magnified the need for consumers to ask more pertinent questions of companies — and themselves — about their performance, practices and purpose when it comes to aligning with global efforts to reverse the decline of our natural environment.
Making a sound assessment of the sustainability of a business is easier said than done. One of the most important factors determining a company’s inherent sustainability is its approach to transparency. Another might be understanding a company’s purpose or core mission. Getting to grips with why a brand exists can be a great indicator of just how dedicated it is to be doing the right thing.
Such considerations have been acute for Dow, the global materials science company with a 125-year history. Today, the company proudly considers its sustainability strategy and business strategy to be one and the same; employees operate with the understanding that the two can no longer be separate.
But this didn’t happen overnight, says Global Sustainability Director Haley Lowry. The transformation has been a long time in the making and has involved shifting its entire business model, how the business engages with its customers and employees, the products it creates, and how it runs its operations.
“We hosted an investor day at the New York Stock Exchange recently,” Lowry recalls. “The entire focus of the event was on environmental, social and governance (ESG) issues and the commitments we’ve made towards carbon neutrality and reducing plastic waste. It was an important moment of realization. We were no longer trying to convince others to move towards using more recycled contents in packaging or using bio-based materials. After all, this is a US$5 billion addressable market opportunity for us.”
A true sustainability journey
Dow is not alone in waking up to the huge commercial opportunity of sustainability. According to NYU Stern’s Center for Sustainable Business, in the last four years, products marketed as “sustainable” delivered more than half (54.7 percent) of market growth in consumer packaged goods, for instance — despite representing just 16 percent of market share. Businesses, everywhere, are reacting.
Dow — which is focused on developing innovative and sustainable solutions for customers in packaging, infrastructure and consumer care — is well set for the next decade. It has worked hard to get its own house in order, by understanding its footprint and establishing progressive carbon targets, for example. The next part of its journey will centre on helping customers, as well as all of the links in its supply chain, to do the same.
In the past, the business worked solely with companies to which it was directly connected: customers, brand owners and retailers. But that’s not enough anymore, Lowry admits. Solving challenges such as carbon reduction or building a circular economy requires a much larger conversation with the wider value chain: “Now, it’s about talking to waste-management companies, disruptive startups and impact venture capital funds,” she says.
For Dow to succeed, it has had to bring all of its stakeholders along for the ride — educating, informing, engaging and influencing others on the benefits of making the switch to new and better ways of doing things. Of course, some businesses are easier to engage with than others. So, how does Lowry manage to connect with the hearts and minds of a variety of different people?
“Where there might be resistance from some, it’s a case of just not giving up on them — understanding where they’re coming from, legitimizing and addressing some of their main concerns, and influencing them by finding other people who may work more closely with them,” she says. “Ultimately, it’s about seeking common ground.”
Engaging the workforce
Arguably, the most important stakeholder for maintaining momentum during Dow’s transformation is its employees. Lowry’s “fun journey” with the business started 16 years ago and has included roles from marketing to product management. Now heading up sustainability, she plays a key role in speaking to Dow’s different functions about sustainability issues on a regular basis. And it’s working — according to internal employee surveys, the workforce derives meaning from their roles, which is doubling job-satisfaction scores.
Dow’s Business Impact Fund (BIF) has become the ultimate employee-engagement tool. Over the past three years, the business has allocated around US$5 million from the Dow Foundation to support 25 different projects that have been developed and pitched by staff.
“It’s pretty game-changing. Some employees tell me that the BIF is the most important thing that they have ever done in their career. It motivates them to stay at Dow and they’re seeing it changing lives,” Lowry says.
A recent recipient of the Fund was the Recycling for a Change initiative in Brazil, which is designed to improve access to waste materials that can be collected and reused. The local co-operative of waste pickers increased their salaries by 50 percent; and Dow got access to more recycled material, which increased sales: “It’s a beautiful example of a triple-bottom-line project that’s lifting people out of poverty, cleaning up the environment, providing jobs and tools for the circular economy to work, and connecting the supply and demand that the marketplace wants.”
A carrot-stick approach to ESG
The company’s decision to link ESG metrics to annual performance awards and bonuses is designed to further stimulate engagement and innovation. It holds all of Dow’s managers accountable for delivering on ESG performance. The idea is that if you work in logistics and distribution, you will think more about how to decarbonize the fleet, for example. Or if you’re running the IT department, you will be encouraged to find new ways to track and trace carbon and waste.
“It shows how seriously we’re taking this. If we’re going to be successful in carbon neutrality or reducing waste, that’s not going to happen with just me and my team,” Lowry says. “That’s going to happen if every single person in the company starts to think about how they can encompass that into their roles.”
So, if ESG-linked bonuses offer employees a ‘carrot,’ what’s the ‘stick’ to ensure that the business stays on track and continues to reduce its impact? Lowry suggests that missing out on the commercial opportunity associated with being a sustainable business is enough of a ‘stick’: “When we started out on our journey, we very much took a risk-based approach, focused on how we mitigate those risks. But when you translate that into a market opportunity, that’s when I’ve seen us succeed. The ‘stick’ is that you miss out on market growth,” she says.
The fact that many big brands have announced commitments to ensure their packaging is fully recyclable by 2025 will fuel Dow’s growth in the coming years, as it continues to invest in new materials and machinery to develop solutions fit for the future. Dow has added enhanced capabilities to its Pack Studios to work on fully recyclable solutions for customers including Kellogg’s, Levi Strauss and Seventh Generation.
But the company acknowledges a need for ongoing engagement and collaboration to truly transform markets for the better. Take recycling, for example. In the US, plastic recycling rates are currently at just nine percent. To improve the situation means improving collection and processing infrastructure — not just in the US but worldwide. Recognising its limited influence and expertise in a number of areas, it has been working closely with partners that can and do — including The Recycling Partnership in North America.
“They work with cities, municipalities and community leaders to understand their pain points and the barriers for getting access to that recycling. We do not understand that part of the system as well as they do, so it’s about working in partnership with others to help effect change,” Lowry says.
So, what’s next for Dow as it continues its evolution? In the wake of COP26, it’s no surprise that carbon reduction — and the interconnected challenge of circularity — will be a focus in the next 12 months and beyond. Plastics often have a lower carbon footprint, especially flexible plastics. But Lowry admits plastics do have a circularity challenge: “We have to figure out how to solve both of these challenges for the future. That’s what we need to do for society to thrive.”