The Dow Chemical Co. first entered China in the 1930s. To date, it has invested $900 million in Greater China, which covers mainland China, Hong Kong, and Taiwan. Dow’s 2009 revenue in Greater China was $3.7 billion, and the region is now Dow’s second-largest market after the United States.
Dow operates 5 business centers and 20 manufacturing sites across Greater China with 3,900 employees total. On the mainland, it has a regional headquarters in Shanghai, business centers in Beijing; Guangzhou, Guangdong; and Shanghai, and manufacturing sites in Beijing; Huzhou, Zhejiang; Nantong and Zhangjiagang, Jiangsu; Shanghai; Weihai, Shandong; Wuhan, Hubei; and Zhongshan, Sanshui, and Dongguan, Guangdong. It also has research and development (R&D) facilities in Ningbo, Zhejiang; Shanghai; and Zhongshan.
Dow Chemical delivers a broad range of products and services to customers in more than 160 countries and aims to connect chemistry and innovation with the principles of sustainability. The company provides chemical, plastic, and agricultural products as well as advanced materials and solutions in electronics, coating, water purification, and building insulation in China. Dow Technical Licensing also serves the China market by developing and licensing proprietary technologies and providing licensing services for the petrochemical industry.
Andrew N. Liveris, chairman and chief executive officer of Dow and chair of the US-China Business Council’s board of directors, recently discussed the company’s China operations and its environmental initiatives there with CBR Assistant Editor Julia Zhao. (The US-China Business Council is the publisher of the CBR.)
In what ways have environmental issues evolved since Dow established its first office in China in 1979, and how has the company adapted to these changes?
Liveris: We have witnessed several important and positive changes over the three decades that we have been engaged in trade and business in China. Chief among those changes is a widespread realization—across business, government, industry, and society as a whole—that cooperating and collaborating together to improve our collective environmental footprint is good for all of us. I have been pleased that awareness about the importance of reducing greenhouse gases in China has dramatically increased, for example, and that it has embraced principles such as sustainability and sustainable growth as core values of the domestic agenda and corporate strategies. In major cities—such as Beijing, Guangzhou, and Shanghai—sustainability has even become a popular lifestyle choice among the younger generation.
China’s growing commitment to sustainability coincides with Dow’s own philosophy. We have implemented rigorous sustainability goals, which benefit our bottom line and the environment. Between 1995 and 2005, Dow invested $1 billion to improve our energy efficiency—reducing our emissions below Kyoto targets and, most important, returning $5 billion in cost savings and energy improvements. Through the end of 2009, that savings reached $8.6 billion. These results encourage other companies to commit to improving their operations in similar ways.
We brought our 2015 sustainability goals and best practices to China and have been extremely pleased at the reception they received. In the past three decades, Dow has increased our local participation from a business partner to a solutions provider and leader in the area of sustainability.
What are the biggest environment-related challenges that foreign companies face in China? What strategies does Dow use to manage these issues?
Liveris: Foreign companies face the same challenges as domestic companies in China: How can we improve what we do? How can we create sustainable solutions to the world’s challenges while developing and growing our business? We understand that we have only one planet and limited resources. Living like we have been simply is not an option.
The answer is two-fold. We are constantly improving our own manufacturing practices by implementing state of the art practices and technologies, with a view toward achieving a better, more sustainable footprint. But just as important, we also view every environmental issue as an opportunity to do what we do best, which is to harness our deep reservoir of science and chemistry to develop real, tangible, and practical solutions to environmental problems.
We have engaged in several successful partnerships in China that have yielded fruitful results. We are partnering with the Ministry of Environmental Protection (MEP) [and partnered with its predecessor the State Environmental Protection Administration (SEPA)], the Ministry of Health, and the Ministry of Housing and Urban-Rural Development [formerly the Ministry of Construction] to help elevate China’s capabilities in managing sustainability challenges. Dow’s partnership with the United Nations Environmental Program (UNEP) and MEP is a good example of how we are promoting safer production, chemical safety, and emergency preparedness in China’s chemical sector. Since establishing the partnership in September 2008, Dow has committed $580,000 for the two-year project and has developed training materials for the chemical industry. We also hosted the community-based pilot project from our Zhangjiagang site in China and a Chinese delegation at our Freeport, Texas, site in February 2010 as part of this collaboration.
In addition, Dow and SEPA launched a project in 2005 to promote and streamline cleaner production practices in small and medium-sized enterprises in chemical and related industries. Dow delivered its “best practice” training course as well as ¥8 million ($1.2 million) to the project. This partnership lasted until April 2009 and has already yielded returns of ¥93 million ($13.3 million) for 68 enterprises that participated in the program and implemented improved clean production practices that helped save water and energy, as well as reduce waste and emissions.
Dow also has a multiyear partnership with the PRC State Administration of Work Safety to promote safe production in Chinese chemical enterprises, including by increasing safety awareness and promoting safety standardization—areas of significant strength for Dow.
Achieving environmental sustainability will require the development of new and innovative products and processes. What is Dow doing in these areas in China?
Liveris: This is truly an exciting area for Dow. Our company is applying our global technologies to solve local challenges in China. Dow Building Solutions Styrofoam insulation board, for example, reduces the energy footprint of the Chinese construction industry. Omex, a key business within Dow Water & Process Solutions, applies our combined talent and technology to solving China’s water challenges. Terminal 3 of the Beijing Capital International Airport uses Dow’s water purification technology and systems. Dow’s water treatment projects greatly increased the reutilization rate of water at the 2008 Beijing Olympics, and the Athletes Village in the Beijing Olympics Park used Dow’s styrofoam insulation board. These and other Dow products and systems are also being used in earthquake reconstruction efforts in Sichuan, helping increase the amount of high-quality and sustainable construction there. Using opportunities like these makes good business sense, and it makes good environmental sense too. It enables customer success, improves efficiency, lowers operating costs, positions us for growth, and creates green jobs.
Dow also collaborates with Peking University, which houses our Sustainability Student Innovation Challenge Award. This award fosters interdisciplinary collaboration within Peking University to harness the best ideas and innovations that address world challenges. Organizing and elevating the best talent around the world to bring attention to environmental challenges is another example of the collaboration it will take to accelerate progress.
R&D is key to Dow’s innovative efforts. Our new R&D center in Shanghai plays a critical role in leveraging the talent and innovative spirit of our Chinese scientists and engineers to develop new approaches to address our planet’s most significant challenges. The center is just one way we can harness the interests of the young Chinese who are pursuing science and engineering futures.
Why did Dow decide to create the new Shanghai Dow Center that opened in 2009? What does the company hope to achieve through this center?
Liveris: The Shanghai center brings our corporate R&D expertise and our growing market-focused application development capabilities together under one roof. It is also a key hub in the integrated research network that harnesses the innovation and creativity of our people around the world. Powered by 700 leading scientists and engineers working in over 80 integrated laboratories, these capabilities enable us to address the needs of our local customers, while drawing upon and contributing to Dow’s proven global expertise. In Shanghai, our R&D team is developing innovative solutions for many markets vital to human progress. We make buildings more energy efficient, improve the comfort and fuel consumption of automobiles, ensure access to clean water, and contribute to the newest breakthroughs in electronics and appliances. From construction and transportation to water, electronics, and personal care, the product development activities in our Shanghai Dow Center are improving people’s lives in the region and around the world.
Dow has high expectations for our Shanghai Dow Center. It is an R&D hub in China, for China and for the world. First, we hope it will help us adapt our 114-year history of global technologies and practices to domestic use in China. Ultimately, this center will help Dow complete its transformation to a high-performance science and technology company. To achieve this goal, we must invest in innovation and emerging markets.
The Shanghai Dow Center provides closer access to our customers in the Asia Pacific, bringing our best-in-class technology to this market and further developing local talent. The facility’s Customer Innovation Center also ushers in an era of new collaboration, where Dow combines forces with customers to create new breakthrough solutions for China and the rest of the world. On January 22, 2010, Dow won the “2009 Haier Best Strategic Supplier Award,” demonstrating Dow’s commitment to leading-edge technology and innovative solutions. It also showcases how the company connects its broad R&D and business expertise with customers’ needs and knowledge to enable Dow’s customers to provide the consumer market with more high-quality products.
Dow’s sustainability goals for 2015 include commitments to energy efficiency, clean water, and addressing climate change. What steps will the company take to meet these commitments in China?
Liveris: Though Dow’s sustainability goals are global, the way we implement them makes a huge impact on the local communities where we do business. Each Dow site in China has its own goals that are tied directly to our 2015 global road map. We look for ways to contribute to community success while adhering to the principles of sustainability. For example, in September 2008, Dow cooperated with the local government to plant elm trees around our production facilities in Yulin Sandlot Forestry Scientific & Industrial Park. To ensure that the trees survive, we used saplings best suited to the local climate and advanced forestry technology such as infiltrative membrane and water-saving drip irrigation.
Another great partnership worth highlighting is our collaboration with the Chinese Energy Research Institute (ERI) and Lawrence Berkeley National Laboratory (LBNL). The project allows leading companies like Dow to share their best practices with Chinese peer companies interested in improving their energy efficiencies. This is a long process, but we are committed to China and have chosen to invest strategically in our key partnerships there.
A major accomplishment to date has been the development and initial release of a state-of-the-art benchmarking and evaluation tool developed for China’s cement industry to identify energy-efficient technologies and measures that will help achieve national energy-efficiency goals. It was developed by LBNL and ERI in collaboration with the China Building Materials Association, China Cement Association, and others.
Dow is an official sponsor of the USA Pavilion at the 2010 Shanghai World Expo. How does this fit in with the company’s strategy to promote sustainable development?
Liveris: The USA Pavilion is built upon a theme of sustainability and innovation, and we are honored to play a key role by providing building insulation, carpet, and wall-coating technologies. We look forward to promoting the spirit of the expo by bringing together the best and the brightest to work cooperatively on the world’s challenges. Visitors to the pavilion can see how Dow’s products reduced the pavilion’s energy footprint.
You are just wrapping up two years as chair of the board of the US-China Business Council (USCBC). As chair, you have led several USCBC board delegations to China, where you have met with some of the country’s top leaders. What is your impression of US-China commercial relations today, and what can we expect in 2010?
Liveris: The commercial relationship between China and the United States is closely integrated across a multitude of fronts—from trade and finance to environment and energy issues. This mutually beneficial relationship is not new but is becoming increasingly complex. I am heartened that political leaders from both sides recognize this and are trying very hard to keep in place a balanced, cohesive, and positive approach to what are some difficult issues.
In 2010, we can expect pressures from both sides to maintain this open and candid dialogue. I urge everyone involved to do so—the US-China relationship is the defining relationship of this century.
