Dow Chemical Human Rights in a Business Strategy

Dow Chemical Human Rights in a Business Strategy Roni Abusaad Steve Odom Nick Pearson Haas School of Business Bo Miller, Dow Chemical May 2nd, 2007 Haas School of Business, UC Berkeley

Context Company background Dow’s strategy, strengths and goals Human Rights in a business context, challenges. Haas School of Business, UC Berkeley

May 2nd, 2007 Haas School of Business, UC Berkeley Haas School of Business, UC Berkeley 3

Dow’s Strategy Dow's corporate strategy calls for growth… • …into emerging markets through joint ventures. • …into more market-facing business. • …through strategic acquisitions. Haas School of Business, UC Berkeley

Dow’s Strategy May 2nd, 2007 Haas School of Business, UC Berkeley Haas School of Business, UC Berkeley 5

Dow’s Strengthsand CSR Initiatives Strong sense of ethics and Code of Business Conduct Operational excellence: productivity, reliability, EH&S Excellent case for environmental efficiency Strengths • The Human Element campaign • Launch of the 2015 SustainAbility strategy • Dow Water Solutions • Initiatives coming from the top of the organization New Initiatives May 2nd, 2007 Haas School of Business, UC Berkeley Haas School of Business, UC Berkeley 6

Human Rights Issues for Multinationals Labor Relations Environmental Health and Safety Security Supply Chains Risk Assessment Haas School of Business, UC Berkeley

Why it’s difficult to address these issues • Operationalizing can be expensive and time consuming • Difficult to measure human impacts • Very difficult to quantify business benefits • Varying needs and interpretations of policies across geographical regions Haas School of Business, UC Berkeley

Key questions for this project • How does Dow’s human rights position compare to other similar scale multi-nationals? • What is the business case for developing a human rights strategy? • Does an explicit human rights strategy increase risks of scrutiny and criticism? • What is the value of signing international codes like the Global Compact? • What could implementation look like for Dow? Haas School of Business, UC Berkeley

Summary of research / methodology • Background research • Summary reports • CSR reports • Human rights strategies • Third party experts • Calls w/Dow leaders • Ian Telford • Susan Carrington • Earl Shipp • Tom McCormick • Darrel Debenham • Tim Scott • Dave Keppler • Calls with other companies • Sasol • Chevron • Dupont • HP • Rio Tinto • Anglo American Haas School of Business, UC Berkeley

Findings • Interviews • Benchmarking • Key findings Haas School of Business, UC Berkeley

Observations from calls with Dow Where is Dow in terms of Human Rights implementation? • Good ethics, but limited implementation • All refer to Code of Business Conduct • No explicit internal policy for addressing issues of human rights in supply chains, partnerships, risk assessment, etc Haas School of Business, UC Berkeley

Haas School of Business, UC Berkeley

Observations from calls with Dow • Support from many key players internally • Why they felt it was important to address HR in internal policy: • Due diligence for partnerships and JV’s • License to operate • Risk reduction • Accountability of suppliers Haas School of Business, UC Berkeley

Overall landscape • Several years ago only 40 large companies had incorporated human rights policies into their business strategies • Now over 100 of the FT Global 500 companies have explicit human rights policies Haas School of Business, UC Berkeley

Is there a business case for these strategies? • Very little direct quantitative info has been compiled on business benefits to human rights strategies. • However, anecdotal support is strong from companies that have implemented human rights strategies. Haas School of Business, UC Berkeley

Key findings: Internal policies • Many of these companies are entering similar markets and addressing similar issues. • Majority have human rights strategies and have signed the Global Compact. • Varying degrees of implementation of policies. • Most common issues addressed include labor relations, EH&S Haas School of Business, UC Berkeley

Key findings: Internal policies • More advanced plans had supply chain strategies, training, and risk assessment, and (for the extractive sector) security and corruption • Rationale: reputation, risk reduction, license to operate • Biggest challenges are in countries with weak governance Haas School of Business, UC Berkeley

Key findings: Global Compact • Most companies had signed it • Some recognition for commitment, reputation benefit • Most did not perceive risk in signing • Most thought the principal benefit was derived from developing internal principles Haas School of Business, UC Berkeley

Recommendations Options, pros and cons Steps toward implementation Parting thoughts Haas School of Business, UC Berkeley

Options and Decisions Haas School of Business, UC Berkeley

Initial steps for moving forward… • Weigh the pros and cons of signing onto an external agreement like the Global Compact and take action. • Apply responsibility to a person or group. • Decide on internal priorities and delegation. • Where should priorities from program development lie? • Supply chain? Security? Labor rights? • How should these programs be delegated? • Centralized? • Decentralized? Haas School of Business, UC Berkeley

H Take Action Approved with restrictions Approved L H Operationalizing Human Rights Policies • Supply chain • Consider putting a stake in the ground. Make an internal statement of commitment. Assign ownership. • Create a risk and relevance scorecard for deciding which suppliers should receive attention. • Ensure that suppliers understand the benefits they receive by adhering – lower costs, more business. • Create a program for “constant improvement” vs. constant compliance through strict auditing. Haas School of Business, UC Berkeley

Operationalizing Human Rights Policies • Joint Ventures, Acquisitions and Partnerships • Potential area in which Dow could set the standard. • Perhaps by building on the “JV Governance” ideas, create a risk scorecard that examines potential partners’ history and current Human Rights standards. • Possibly create an “Alignment” program for acquired units that ensures assimilation of HR standards through training and early evaluations. Haas School of Business, UC Berkeley

Parting thoughts • A strong Human Rights policy may help Dow progress toward becoming the world’s most respected chemical company. • Competitors and peers are moving ahead on these issues. • Many of Dow’s principle concerns regarding implementing a human rights strategy and signing the Global Compact seem to not pose difficulty for the companies we interviewed. • Companies report positive benefits for reputation, risk, and employee and supplier satisfaction as a result of operationalized human rights policies. Haas School of Business, UC Berkeley

Parting thoughts • “It is essential in order for Dow to sustain itself in the future.” • Transparency is valued by third parties and employees. Publicize your policies. If you don’t say what you’re doing, someone else will say it for you. • Demonstrate the positive aspect of human rights policy -- link it to the Human Element campaign, water solutions, global development and other goals met by Dow. Haas School of Business, UC Berkeley

Project’s Value to Dow and to our team To Dow: • Evaluates Dow’s current HRs initiatives and needs vis a vis strategic goals • Compares Dow’s policies and practices with those of its competitors • Provides best practices recommendations To team: • Provided a challenging experience of CSR theory with a practical application • Gaining knowledge of the issue of human rights in a business context • Gaining practice with team work Haas School of Business, UC Berkeley

Dow Chemical Human Rights in a Business Strategy