Ananth Sundareshwar, an ERM Partner, and Andrew Angle, a Senior Research Associate with the SustainAbility Institute by ERM, spoke with Michelle Noack, Climate Transition Director for Dow, about her company’s work to achieve carbon neutrality across its ecosystem by 2050.
Andrew Angle: What were the drivers behind Dow’s 2050 carbon neutrality target?
Michelle Noack: Dow has a long history of taking care of the environment and our climate targets are a continuation of this legacy. Our customers, employees, and shareholders also care deeply about reducing carbon emissions, so we think it is important to be leaders in the climate space. Our climate targets reflect all this.
Our targets also reflect our support of the Paris Agreement and its goal to limit global warming to well below 2°C. The 2050 timing of our neutrality target in particular is consistent with the timeframe for the emissions reductions needed to achieve the Paris Agreement.
Lastly, we recognize that it will take time for the appropriate technologies and infrastructure needed for full decarbonization to develop, so 2050 makes sense for us in terms of solutions. We hope to achieve carbon neutrality before 2050, but we also want to be realistic. We are big believers in not making promises we cannot keep.
Ananth Sundareshwar: Dow’s carbon neutrality target includes Scopes 1, 2, and 3, plus product benefits. What does Dow seek to achieve by including “plus product benefits” in its target?
MN: If you look around the room you are in now, everything you see is some form of a chemical. At Dow, we firmly believe that the products we make lead to better environmental outcomes, whether that is increasing energy efficiency or reducing carbon emissions. For example, if you choose a plastic product over an aluminum, glass, or wood one, the carbon footprint can be up to 4 times less than the alternative material. Because of this, we firmly believe we play a key role in realizing a carbon neutral future, not just for the chemical industry, but the world at large.
AS: Dow set an interim target for its Scope 1 and 2 emissions. Is Dow considering an interim target for its Scope 3 emissions?
MN: Right now, our Scope 3 target is for 2050 because, like many companies, we are still working to better understand our Scope 3 emissions and how to account for them appropriately. So, to set an interim target before we finish that work puts the cart before the horse. We are collaborating with organizations such as Columbia University and The Nature Conservancy to help identify best practices for Scope 3 accounting. This discipline is quickly evolving in the business world, and collaborations like this will help establish our Scope 3 emissions baseline across our value chain and help allocate these emissions accurately. We are also engaging 500 of our suppliers and working with our logistics providers to better understand their emissions footprints. Once we complete these efforts, we will consider setting interim Scope 3 targets.
AA: How is Dow working to elevate climate as a topic of importance across the organization?
MN: Throughout our organization, we fully believe we can help contribute to a better planet by creating more environmentally-friendly products. We are incredibly fortunate to have a CEO who is passionate about climate. When you have someone at the top that really believes in addressing an issue, it is easier to inspire action across the organization. Our employees’ commitment to doing the right thing is also important. The people at Dow work here because they respect the environment and respect people – these things are central elements of our company culture. Because our employees already care about making a difference, it is not difficult for us to get them to support our climate targets. That buy in simply reflects who we are as a company.
AS: Many companies are developing climate governance structures to help them with climate action. What climate governance structures does Dow have in place?
MN: Many of our climate-related actions were originally grassroots initiatives to increase energy efficiency and reduce emissions at the site level. However, as stakeholders became increasingly interested in climate, we came under more pressure to report on our climate-related actions at the corporate level. Because of this pressure, it was clear that approaching climate governance strictly from a site level or even a regional level was not going to work as the appropriate accounting systems were not in place.
To operationalize climate at the corporate level, we created a global program management office (PMO) specifically for climate. We have four tracks under the PMO that help us govern different climate-related topics. The first track focuses on Scope 1 and 2 emissions, the second on Scope 3 emissions, the third on product benefits, and the fourth on new ventures. I characterize the first two as cost focused, while the other two are growth and opportunity focused. Either an executive sponsor, usually a business president, or a functional sponsor leads each of the four tracks. For example, our vice president of manufacturing directs the first track, because our own assets primarily generate our Scope 1 and 2 emissions. Underneath the tracks are enabling platforms, which help ensure the tracks work in concert. One of our key enabling platforms is metrics, reporting, and tracking, because each track has to do some sort of reporting on its activities. Another is our advocacy-enabling platform, which works on informing both our employees and the public of our climate efforts.
Overseeing everything from our PMO to the enabling platforms is our Climate Steering Team, which includes our business presidents and the key functional leads who we believe are important to climate.
AA: How did Dow decide on this form of climate governance?
MN: We did not want to set up a separate internal organization for climate governance. We were intentional about not creating new processes or creating new functions. The structure that I outlined in response to your prior question has all the same processes that we already used for governance. As a matrixed organization, Dow has business responsibility, geographic responsibility, and functional responsibility. Our climate governance needs to work across each of these. For example, we are working on developing plans to reduce emissions at our top 25 sites. Each of these sites has a point person responsible for this work, which is part of our geographic responsibility. At any given time, we can touch base with this person to understand the progress the site is making. We also have point people for business level responsibility that ensure that different action plans across different sites are consistently working toward our climate goals.
AA: How is Dow collaborating with others to take its climate action to the next level and help others do the same?
MN: One way is through our ESG supplier engagement program where we are engaging our top 500 suppliers on emissions and other ESG issues. Ultimately, we want to engage all our suppliers, but there are thousands, so we targeted the top 500 for our ESG discussions. Another way is developing climate-related technical solutions or advocacy strategies through engagements with academia like our Scope 3 work with Columbia University. We also participate in many regional collaborations. For example, we have a large footprint on the U.S. Gulf Coast, and many of our suppliers there are working together on issues like carbon sequestration and hydrogen where there are opportunities to collaborate together for abatement solutions. Because of this, we are going to collaborate with these companies to set up related infrastructure and advocate for related governmental policies that makes sense for industry. Lastly, we engage with think tanks because collaborating on new ideas is essential to driving toward a low carbon economy.
AS: How is Dow handling the evolution of climate from a sustainability issue to a core business issue?
MN: Our overall company structure likely will not change much because of climate. We will always have production engineers and research and development teams. While our structure is likely to stay the same, our mindset will not. Going forward, climate will be a factor in everything we do just as health and safety is. One way we are starting this process is by providing our employees with literature and case studies on the climate-related action we are taking. We are also incorporating climate elements into internal gatherings like our quarterly all company meeting. I joke that if I do my job well, I will work myself out of a job, because ultimately we must think about climate in everything thing we do and incorporate it into our company’s DNA.
From Promise to Action on Net Zero is a series of research publications, interviews, and events exploring how companies are translating net zero emissions goals into practice. This interview presents one of our discussions with senior executives responsible for delivering their companies’ climate ambitions.