Dow Chemical Can Head Off Future Liabilities by Phasing Out Problematic Product Lines (A)

Beset with $2.2 billion in projected asbestos-related liabilities, and a likely wave of new Agent Orange lawsuits, Dow Chemical doesn’t need another enormous environmental health-related liability. Unfortunately, its reliance on certain toxic product lines leave it with the prospect of that scenario.
Last May, Trillium Asset Management presented a shareholder proposal at Dow’s annual stockholder meeting calling for a report on the company’s potential liabilities for dioxins and persistent bioaccumulative toxics (PBTs), along with the company’s plans to clean up existing contamination sites and to phase out problematic products and processes. Nearly seven percent of votes were cast in favor of the proposal, a modest level but sufficient to qualify the question for the ballot next year. In this article, environmental attorney Sanford Lewis explains why it is in everyone’s best interest – especially Dow’s – for the company to phase out products and processes that place dioxins and PBTs into the environment.
Dioxins are a scientific term used for a group of 210 chlorinated substances — dioxins and furans — which exhibit similar chemical and physical properties. Seventeen members of this group are considered most toxic. Dioxin was the contaminant that led to the evacuation of Love Canal, New York, in the 1980s.
Dow Chemical produces an array of products that place dioxins in the environment. It is one of the world’s largest producers of ethylene dichloride the intermediate material for production of polyvinyl chloride, which yields dioxin emissions in the production. In addition, dioxin is emitted when production wastes are incinerated by Dow, and when polyvinyl chloride products are disposed in incinerators or burned in house, car, or landfill fires.
Other Dow products such as elemental chlorine and chlorinated pesticides and solvents have also been associated with dioxin formation. The environmental advocacy group Greenpeace has identified Dow as one of the leading root sources of dioxin, based on analyses of its product lines and of dioxin formation associated with the life cycle of the company’s products.
In its Updated Draft Reassessment of Dioxin (2001), the Environmental Protection Agency affirmed and amplified the known hazards of dioxins. There is increasing evidence that dioxin is toxic in tiny amounts, and can disrupt many of the body’s systems. A large body of evidence has demonstrated effects such as cancer, reproductive and developmental effects, disruption of normal hormone functions, skin rashes (chloracne), immune suppression, and liver damage. The EPA review concluded that impacts on development, the reproductive system and metabolism may be occurring in people who are exposed to the high end of the general population’s everyday “background” levels.
Dow has already experienced negative impacts due to its emphasis on some toxic product lines.
For instance, Dow pesticide Dibromochloropropane (DBCP) was banned in the US in 1978 following evidence linking it to sterilization and cancer, but its use continued in industrializing countries. In December 2002, a Nicaraguan judge ordered Dow, Shell Oil and Standard Fruit to pay $490 million to 583 banana workers allegedly affected by the use of a pesticide containing DBCP.
The Dow pesticide Dursban is believed to be associated with illness in thousands of exposed people, including potential neurological damage to children. The EPA fined the company $732,000 in 1995 for failing to disclose reports of adverse effects associated with Dursban. Though the company entered a voluntary agreement to end sale in over-the-counter products by the end of 2000, Dow still manufactures and sells this product for agriculture in the US, and some foreign countries such India. New York Attorney General Elliot Spitzer recently threatened to sue Dow for misleadingly advertising Dursban products as safe.
A Growing Backlash
Numerous public policy bodies and instruments are targeting dioxins as a priority public health and environmental concern. International treaty organizations focused on the great Lakes, Northeast Atlantic and Mediterranean Sea have all advocated a phase-out of chlorine and chlorinated compounds. The global Stockholm Treaty on Persistent Organic Pollutants, signed May 2001 but yet to be ratified by the U.S., also advocates the use of alternatives. The focus of policy at every level is increasingly on the elimination of production of persistent bioaccumulative toxics (PBTs) like dioxins, because as long as these products are marketed, they will eventually enter and pollute the environment.
Numerous states and localities have adopted policies to end the purchase or production of dioxin and PBT generating products. For example, Oregon has committed to a statewide effort to eliminate releases of PBTs into the environment, utilizing education, technical assistance, incentives, state purchasing, compliance, and permitting activities to eliminate PBTs. In addition, numerous private institutions have begun to shift away from PVC because of its link to dioxin, among other reasons.
Communities Fighting Back
Dow’s production facility in its headquarter town of Midland, Michigan has produced chlorinated compounds for more than 60 years. In 2001, extensive dioxin contamination was discovered downstream from Dow’s manufacturing facility and water discharge, extending more than 22 miles downriver. The dioxin is thought to have resulted primarily from historical operations and releases. Flooding appears to have spread dioxin widely in the floodplain. State regulations require cleanup if dioxin exceeds 90 parts per trillion (ppt) in a residential area. Samples tested thus far range from background to more than 7,200 ppt, more than 80 times that standard. Federal toxicologists have called for immediate, widespread testing.
This year, 140 residents of Saginaw, Michigan filed suit contending that dioxin contamination caused by the Dow, Midland plant has threatened their health and left their property worthless. The suit seeks to represent 2,000 residents of the region whose properties are believed contaminated. Property damages alone have been estimated by the plaintiffs at $100 million.
Dow has filed a plan to test for off-site contamination, as ordered to by the Michigan Department of Environmental Quality. In June, Dow commented publicly that it was a “remote” possibility that any costs incurred in excess of those already accrued for environmental matters ($392 million) would hurt its financial statements.
Dow’s Response
For years, a key Dow strategy has been to downplay health risks to exposed populations. In 2002, for example, Dow tried unsuccessfully to broker a deal with Michigan’s Department of Environmental Quality that would have raised allowable dioxin contamination levels nine-fold in Midland and reduced the company’s likely remedial liabilities while increasing long term exposures of the public.
More helpfully, the company has reduced its direct dioxin emissions. In 1996, it committed to a 90% reduction in its dioxin emissions to air and water by the year 2005. It has allocated more than $250 million to this end. While a positive development, this does not address the need demanded by policymakers — to shift away from harmful products rather than only controlling emissions.
As long as Dow products enter the marketplace and release dioxin or persistent toxic chemicals in their use or disposal, Dow will continue to face shifting markets, reputation risks and potential liabilities from these product lines. A broad range of groups, including Trillium Asset Management, continue to work to encourage the company to eliminate once and for all products and processes that produce dioxin, which threaten people, communities, and the company’s long-term financial health.
For more information:
Trillium Asset Management’s 2003 shareholder proposal on dioxins and PBTs
The Ecology Center of Ann Arbor, Michigan
Updated Draft Reassessment of Dioxin (2001), Environmental Protection Agency.