dow chemical human rights in a business strategy

May 2nd, 2007 Haas School of Business, UC Berkeley 1

Living.Improved Daily.

Dow Chemical Human Rights in a Business Strategy

Roni AbusaadSteve Odom

Nick PearsonHaas School of BusinessBo Miller, Dow Chemical

May 2nd, 2007



ContextCompany backgroundDow’s strategy, strengths and goalsHuman Rights in a business context, challenges.



Dow’s StrategyDow's corporate strategy calls for growth…

…into emerging markets through joint ventures. …into more market-facing business. …through strategic acquisitions.




Dow’s Strategy




Dow’s Strengths and CSR Initiatives

Strong sense of ethics and Code of Business Conduct Operational excellence: productivity, reliability, EH&S Excellent case for environmental efficiency

The Human Element campaign Launch of the 2015 SustainAbility strategy Dow Water Solutions Initiatives coming from the top of the organization

Str

engt

hsN

ew In

itiat

ives



Labor Relations

Supply Chains

Environmental Health and Safety

Risk Assessment

Security

Human Rights Issues for Multinationals



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



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?



Summary of research / methodologyBackground

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



Findings

InterviewsBenchmarkingKey findings



Observations from calls with DowWhere 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



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



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



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.



Company Overall

Dow

DuPont*

Chevron

GE

Sasol*

Rio Tinto*

Anglo American*

HP*

BP*

Shell*

BASF*

No explicit human rights policy

Explicit human rights statement or policy

Statement plus active programs

Supply chainLabor

practicesHealth and

safetySecurity

arrangements Training Corruption



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



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



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



Recommendations

Options, pros and cons Steps toward implementation Parting thoughts



Options and Decisions



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?



L H

H

Approved

Approved with

restrictions

Take Action

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.



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.



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.



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.



Project’s Value to Dow and to our teamTo 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 recommendationsTo 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

dow chemical human rights in a business strategy

Documents

etchaas school of business

business case

business benefitsvarying

business strategiesnow

business context

uc berkeleymay

uc berkeleyobservations

uc berkeleywhy