Marc Brammer

Innovest Strategic Value Advisors

[Editor's note: The following Investment Analysis of Dow by Innovest Strategic Value Advisors is intended only as an illustration of potential investment community concerns arising from decisions that fall within the CSR/sustainability realm. While Dow Chemical is the subject of the analysis, it is not the intention of the editors to recognize all of the positive developments that have been undertaken by Dow and that are referenced elsewhere in this book.]

Companies that don't meet their responsibilities to all their constituencies will have a difficult time. Responsible customers won't want to buy their products . .. Enlightened communities won't want them as neighbors, and wise investors won't entrust them with their economic futures.

—Dow's Chairman and CEO, William Stavropoulos, The Business of Business Managing Corporate Social Responsibility: What Business Leaders are Saying and

Doing 2002-2007

This chapter details the effects of the Bhopal, India, chemical disaster on Dow Chemical, the world's largest commodity chemicals business, after it merged with the Union Carbide Corporation (UCC) in 2001. In the late 1990s, Dow was beginning to gain a reputation for environmental excellence and innovation, both in facilities management and product development. However, the merger with Union Carbide brought with it a number of high-profile liabilities such as asbestos cases and the Bhopal disaster. Through the addition of UCC's portfolio of products, the merger entrenched the company's commitment to developing organochlorines, a dangerous class of chemicals. In addition, many long-term issues such as Agent

Orange manufacturing and dioxin contamination at the company's main plant in Midland, MI, began to re-emerge as major causes of concern. Dow's handling of the Bhopal issue after the UCC merger provides a good case study of corporate responsibility in the age of globalization and mega-mergers.

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