For most companies, dealing with the environment is still primarily about compliance—a costly, cumbersome, and unwelcome process. For a small but growing number of others, however, environmental concerns shape every aspect of strategy and action. Among these companies, The Dow Chemical Company has long been viewed as a leader. This interview outlines, from its CEO’s perspective, the evolution and key components of Dow’s environmental strategy, what this means for the structure and operations of the company, and the challenges and opportunities it faces.

McKinsey: How did Dow’s environmental strategy develop?

Popoff: It has evolved over the years—in line with that of the chemical industry. We often characterize this evolution in terms of the "three Ds": denial, data, and dialogue. When the chemical industry found itself in the center of an environmental outcry in the fifties, its initial response—ours too—was to deny everything: "What do you mean, we are jeopardizing the planet?" This response was not very satisfactory because we kept shouting at—and talking past—each other.

Soon we realized that even though we could reject some of the more egregious claims, we needed to address the rational arguments. We then moved to the data stage, where we got tied up in meaningless debates: "My data are better than yours." It was a slight improvement over the first stage—at least we were communicating with one another—but it failed to satisfy people. They either challenged the data or said, "You don’t understand. We don’t want data, we want improvements—and improvements that address our concerns, not yours."

Finally we moved into the dialogue stage. Now issues are getting discussed and we are beginning to make improvements that address common concerns. We do not always agree, but at least the chemical industry—and Dow—has embraced the idea of sustainable development: that there can be no environmental reform without economic development, and no economic development without environmental reform. Our definitions may not be identical, but industry, government, and environmental groups now believe that sustainable development is the way of the future.

After dialogue, how do you follow up and deal with the issues?

Buzzelli: We are now moving into the "fourth D": delivery. Here our responses go beyond compliance with current mandates and address global environmental issues on a proactive, voluntary basis. The problem with local mandates is that, because they are often nation- or even state-oriented, they can be contradictory—or at least guilty of approaching a common issue from different perspectives. For global companies like ours, this makes compliance a bureaucratic nightmare.

Popoff: Until a few years ago, Dave was President of Dow Canada and chaired the Canadian Chemical Producers’ Association, which was responsible for launching the Responsible Care initiative. Eventually Responsible Care came to the US Chemical Manufacturers Association, which made it a condition of membership.

Responsible Care says that everyone in the chemical industry, regardless of where they start, will demonstrate continuous annual improvement in their emissions to air, land, and water and be accountable against six codes: community awareness and emergency response; process safety; pollution prevention; distribution; employee health and safety; and product stewardship (a company’s responsibility for its products throughout their entire life cycle).

In the chemical business, any incident anywhere affects everyone, regardless of whether or not it happened in our company

Buzzelli: The Responsible Care initiative has now spread to more than 20 nations—and not just within the OECD. Mexico is a Responsible Care signatory; so is Brazil. We are selective in our outreach to associations around the world. We do not want the program cheapened in any way; we pass it out only to those we feel will not just give it lip service, but put in the effort it requires. But we obviously want the concept to spread worldwide eventually, because our industry is one of the most global of them all. In the chemical business, any incident anywhere affects everyone, regardless of whether or not it happened in our company.

With Responsible Care, collective action clearly makes sense for a lot of reasons: sharing the burden, the risk of being harmed by others’ actions, and so on. But what if a company wants to act alone—either because it wants to lead, or because it feels it can somehow achieve a competitive advantage?

Competitive advantage must not be gained through noncompliance or minimum compliance

Popoff: Competitive advantage must not be gained through noncompliance or minimum compliance. Some companies try to reduce cost this way. But it is deadly. Sooner or later mandates will come into place to prevent such an approach, and put the company—or the whole industry—at an enormous competitive disadvantage.

Success truly belongs, I believe, to those companies that not only comply with environmental standards, whether mandated or self-imposed, but do it more efficiently and effectively than others. If they conserve energy more effectively, for example, or if they deal with waste more efficiently through internal recycling or on-site disposal, they will ultimately reduce cost. I believe such companies will always have a competitive advantage over those that do not comply—and especially over those that actively avoid complying by moving operations to another country where environmental regulations are less stringent.

Buzzelli: Companies that go it alone often turn their environmental convictions into a popularity contest. Let’s take a consumer products company that is unique in recycling 30 percent of its bottles. Nobody else can make this claim; it’s the epitome of "green" marketing. But someone comes along and says, "Gee, that’s nice. Would you like to go for 50 percent? How about 100?" Where will it end?

Courting long-term prosperity through green marketing, or through claims that are not sustainable, is asking for trouble

Ultimately this temporary advantage is likely to become a handicap. Courting long-term prosperity through green marketing, or through claims that are not sustainable, is asking for trouble. Expectations will rocket beyond what you can achieve, and you will end up disappointing your constituents.

What we must do is improve the credibility of the entire industry and make it publicly accountable. When someone comes up with a great idea, the first question we ask is: Should we execute this alone, or should we get two or three other companies and execute it together? Ten years ago, the question would never even have been raised.

Besides being a leader in an industry where environmental concerns are important, are there any other characteristics that make Dow particularly sensitive to these issues?

We live in the communities where we produce our goods; we live under our stacks

Popoff: We live in the communities where we produce our goods: small towns around the world. We are in Midland, not Detroit; Freeport, not Houston; Terneuzen, not Rotterdam; Stade, not Hamburg; Tarragona, not Barcelona. Generally we are based 60 to 90 kilometers from the large cities where the chemical industry grew up. Our sites do need to be close to major centers for access, but usually we are the biggest game in the local community, and we live under our stacks. We have always been aware of how our units operate and what problems can arise from mismanagement, or simply from a lack of concern.

Our people have been environmentalists for as long as I can remember. The founder, Herbert H. Dow, was a pretty good example; he grew apples down the road and had a real care for nature. I think his legacy stayed with the company. We recognize the need to deliver on environmental issues not just for our shareholders—which is critical, of course—but for all our stakeholders, both now and in the future.

Does your organizational structure help?

Popoff: Traditionally Dow had a strong functional orientation—function first, then geography, then businesses. Only in the eighties did we begin to make the businesses global; not until then did the pressure for corporate autonomy overwhelm the need for a local area focus.

What this means, structurally, is that we have always delegated aggressively. This is vital. A hierarchical organization has an entirely different approach to environmental reform from that of a bottom-up company. I think we are the latter, which makes it easier to get things moving in the beginning, but tougher to meet and carry on meeting the expectations of your employees and stakeholders. Maintaining your position is harder; there is no going back. Recession or boom, you cannot say, "Let’s turn down the burner on environmental reform for a while." It’s like taking hold of a tiger.

The chemical industry recognized early on that the environment is a defining issue for all of us. When Dow identified the six issues that are critical to our long-term future, the environment was high among them. First is competitiveness: without that, everything else is academic. By "competitive," I do not just mean classic ideas about productivity and more output per unit of input, but all the related issues like legal and tort reform and taxation. You have to get competitiveness right, and practise it on as global a basis as you can. That is the basis for our vocal support for free and fair trade—another of our key issues.

If you are environmentally irresponsible someone can and will—and should—padlock your door

Then we come to the environment. No matter how competitive you are and how globally you trade, if you are environmentally irresponsible someone can and will—and should—padlock your door. Of all the six issues, this is the one that has our biggest commitment in terms of people and dollars.

The next issue, education, may be the most important of them all. We used to worry: Are we getting the best and the brightest before DuPont, or ICI, or Bayer does? Now we have begun to look beyond university level, not just ensuring that we get top graduates, but seeing that there are good faculties and that we are furnishing them with good students—which takes us all the way back to pre-school.

Then it dawns on you that what you really need is an enlightened public. Every day we bombard them with discussions of terribly important issues; the environment is a classic example. But how can I expect the US public—which, according to a recent New York Times article, is 97 percent scientifically illiterate—to understand, for example, genetic engineering, global climatic change, biodiversity, and ozone depeletion?

Technology is important too: the comparative advantage of the US now is not about energy and raw materials and a big monolithic market. Today, it is about adding value through technology. And last comes corporate credibility. It is a matter of example more than rhetoric; without it you cannot make a difference in the other five issues. For us, managing issues like these is as important as bottom-line management, because today’s issues ultimately find a place on tomorrow’s bottom line.

You mentioned three structural characteristics that work to your advantage: one, a bottom-up orientation; two, your systematic presence in small communities; and three, the fact that the chemical industry is inherently global and recognizes the environment as a defining issue. Did any external events have an impact?

Buzzelli: Something happened along the way. Suddenly, in 1986, the ozone layer became a big concern. Until then our initiatives had been geographically focused—environmental issues were treated as local issues. But when we all started seeing the hole over Antarctica on TV every night, the first truly global issue emerged. Shortly after, we decided that we could no longer be satisfied with the local structure we had. To address the environment we needed a global structure.

The key to keeping a bottom-up organization vigorous is to give it enough central direction, and then liberate it to meet the challenge

Popoff: This brings us back to local autonomy and the bottom-up organization. For me, the key to keeping such an organization viable and vigorous is to give it enough central direction and challenge, and then liberate it to meet the challenge. That is the management task that you really have to master. Otherwise, you create a top-down initiative and people wait for things to be done. But if you rely exclusively on a bottom-up initiative, you get disengaged. You have to reinvent the wheel in every location, you are not leveraging what you can do, you become immensely inefficient, and there is no progress.

What role does leadership play in this?

At Dow, after denial, data, dialogue, and delivery, we finally saw that we needed to give the whole thing leadership

Popoff: What happened at Dow was that after we recognized the environment as an issue and went through the continuum of denial, data, dialogue, and delivery, we finally saw that we needed to give the whole thing leadership. I tried to do it myself with a lot of other people on an ad hoc basis, but it became evident that we needed someone who could devote full time to it—someone with the stature to marshal the whole company. So we brought Buzzelli back from Canada to a board-level position—vice-president with global responsibility for the environment.

But just being there and in the job is not enough. How do you reach out to the rest of the organization? The approach we adopted was to listen to what the enterprise needed, put together a formal structure, and reinforce it with an informal network of people who are involved off-line with our environmental initiatives. One step Dave took was to set up local panels; now there are community advisory councils at 18 sites.

Another initiative was creating a panel for the corporation on a worldwide basis. It includes academicians, environmentalists, a former EPA director, someone from the United Nations, a journalist, a former premier of Quebec, a fellow with both a medical and a legal degree... People said we had really put the cat among the pigeons—these people would tell us what to do. We decided we would take the risk, and it worked: we have learned from the panel, and they have learned from us.

Within the environmental arena, how do you set priorities?

Buzzelli: We have a global environment health and safety council that now includes 17 people. It meets four times a year to set priorities. But it really is a struggle, because suddenly out of the blue an issue will hit you—like, say, carbon tax, which was unheard of five years ago. Without any warning, the whole organization has to develop a strategy for tackling a new issue.

So issue management is becoming a way of life. We have to get input from around the world; we have to reach a consensus, because we cannot afford to be inconsistent. That is the one thing that would kill us: inconsistency in either performance or strategy. Critics of the industry would say, "Yes, that’s great for Midland, Michigan, but what are you doing in Thailand?"

Popoff: What we need to realize is that the $500 million that we spend on compliance is on the whole a lousy investment. It is oriented toward complying with mandates that are not necessarily the most enlightened.

But Dave also has a budget for voluntary preemptive initiatives under what we call the Waste Reduction Always Pays program. WRAP is carrying a 55 percent return on investment for 1992—so here we begin to appreciate what the environment is all about. Working alone as a company, or an industry, or a nation, acting only in response to external pressures, we can be seen as self-serving and defensive. But if we have the courage voluntarily to mandate for ourselves global environmental standards, then I think we will get well ahead.

We are perfectly capable of preparing model laws and regulations, usually on a national basis, in response to a threat, but that is too late. Why can’t we put them together in advance of the public outcry, so that we are seen as the solution rather than the problem—and we are left free of the expensive aftermath of imposed mandates?

How do you go about anticipating future mandates?

Buzzelli: A few years ago we were planning a new plant in Mexico, and decided it was going to be the best of its kind in the company. Not only would it comply with the recent Clean Air Act in the United States, it would also have a brand-new feature: all the sewers would be raised above ground, so that if they leaked we could catch the spillage. Then NAFTA came along, and we felt pretty smug. When we made the decision to build a world-class plant in Mexico, NAFTA was only a glimmer in our eye.

Two new plants in Thailand started up in the second quarter of 1993. Again, they were designed to be the best in the whole of Dow. Thailand now has its first hazardous waste incinerator. We did not have to build it, but we wanted to avoid landfill and repeat what we had been doing in the US for many years. What Frank was talking about translates, on the ground, into building the new generation of plants.

Every plant we build will represent not only the best operating technology but the best environmental technology available

Popoff: Our policy is that every plant we build will represent not only the best operating technology but the best environmental technology available at the time, no matter where it happens to be and what the local politics or regulations are. The first plant where we had a continuous closed loop on latex and took it away from waste water—a little bit of latex can make a lot of water look white—was in Argentina. The Argentinians thought we were nuts: "Why are you doing this? Make the water white—everybody else does." But once it was developed we took the technology to all our latex plants around the world, about twenty of them.

The bottom line is that as an operating principle you do not do a return on investment on environmental impact alone. You do a return on investment on the entire facility, and then you compare it to what the ROI would look like without the environmental features.

You mentioned the WRAP program that yields a return on investment of 55 percent. How does it work?

Popoff: We give recognition and reward to people in the organization who come up with Waste Reduction Always Pays projects. Their ideas are as simple or as complex as you can imagine. Someone recently proposed that instead of venting hydrocarbon from cars into the atmosphere, we should capture it and either recycle it back to process or at least capture its BTU value. They came up with the idea, designed the concept, and submitted it; there was a peer review and it was approved.

Buzzelli: Last year we spent about $200 million on the environment from our capital budget. If you look at the whole $200 million, it earned us a negative 16 percent return on investment. But if you take that part of the $200 million that went into the WRAP program and pollution prevention, we got a 55 percent ROI on pollution prevention in 1992. So we made money on those initiatives, but lost it on end-of-pipe treatment.

That tells us that what we need to do in public policy around the world is begin to work with governments to get pollution prevention instilled in manufacturing, instead of resorting to end-of-pipe treatment. Then we could make money on it. This is what the Business Council for Sustainable Development called eco-efficiency—economic and environmental efficiency.

That is the process point of view; what about products?

Popoff: We can become—we think we are—the most efficient chlorinated solvents producer in the world, with virtually zero discharge at our plants. But we know that chlorinated solvents are now under attack in dry cleaning plants, in metal degreasing applications, in aerosol cans, and wherever else you find them. So the next step is not to become more environmentally responsible in producing chlorinated solvents, it is to produce a new generation of aqueous-based solvents, which is what we have done.

About three years ago, we started to get our businesses to do an opportunity analysis on the environment

Buzzelli: Historically, our businesses have focused on the environment from a defensive, product stewardship standpoint. About three years ago, we started a structural change by trying to get our businesses to do an opportunity analysis on the environment. First we did pilots in Europe, and now the practice has spread almost everywhere. It makes people look hard at their product, and not just from a liability angle. They now ask, "Is there a real environmental opportunity here?" Often there is, and we can modify the product to take advantage of it.

In Brazil, for instance, we developed new technology for making polystyrene foam cups and other products. Instead of using CFCs as a blowing agent, we now use CO2. We decided to licence that technology. We also founded, and own, a subsidiary that remediates other people’s sites—a whole new business for us.

Why did we get into that? Some time ago, we took a step back and realized that we were in the hazardous waste business. We are a generator, a transporter, and a disposer, and we think we know how to do these things well. Maybe other people will think so too. Why not turn this into a commercial opportunity? And so today we have a rapidly growing enterprise.

A program like WRAP may pay for itself, but some projects—plant upgrades, say—could destroy shareholder value. How do you decide the level of investment you are willing to make?

Buzzelli: Several years ago we decided to build a new ethylene plant in Fort Saskatchewan, Alberta. It happened to sit on the North Saskatchewan river, the drinking water supply for many Canadians. It was a big—$600 million—and a long-term investment; the plant would probably run for thirty years. Look that far into the future and you can see the writing on the wall for waste entering any drinking water supply.

Experience shows that when we have to go back into an old plant and fix it up to comply with regulations, it costs us a bundle

So we asked our engineers to design an ethylene plant that discharged zero—not a little, zero—process water into the North Saskatchewan river. And they did: the first ethylene plant in the world that has no waste water discharge to a river. Look at this from a shareholder value standpoint. Experience shows that when we have to go back into an old plant and fix it up to comply with regulations, it costs us a bundle.

When we make decisions like this, what we do is identify the additional capital that has to be spent on a plant to achieve the degree of environmental protection we are aiming for, and then assess whether that piece of capital is going to add to or subtract from shareholder value in the long term. In the past, we have abandoned projects after doing this analysis. We have chosen not to build a plant at all because we could not afford to put in as much environmental protection as we wanted.

But the truth is that you do have judgments to make. You cannot do everything in hard dollars and cents. Somewhere along the line somebody has to say, "You know, we just invested $140 million in Texas for a waste water treatment plant. I wonder if we’ll have to do that in Saskatchewan in 25 years—and what the net present value of that might be. Maybe we would be better off investing the money now and not having to worry." So we use some of our experiences from the past and try to project them into the future. That is how we really work.

How do you define environmental cost?

Popoff: Let me say that it does not involve going all the way back and asking how I replace a reservoir of oil, or how I value a forest aesthetically. The real question is: Can we come together and develop a body of knowledge that gives a fair valuation to key raw materials and energy? I think so; I think we know what it costs to grow a tree, to process a barrel of oil, to generate a calorie or a BTU, or whatever. With this knowledge, you can build a bridge between pollution reduction and pollution prevention. It is an issue we have wrestled with a lot, and it takes us to full-cost accounting.

People do not allocate environment costs to their products. They build mountains of waste that they never account for

The problem with much current accounting is that people do not allocate environment costs to their products. Many companies still assume they can run incrementally, dealing with today’s issues one piece at a time with no thought for the big picture. They build mountains of waste that they never account for. They exploit what they see as competitive advantages between various materials—aluminum over steel, say, or wood over paper, or plastic over wood. What this means, in the end, is that by failing to account for the full cycle of production, use, and disposal, they often subsidize the wrong choices.

Full-cost accounting is simply about allocating the full cost—including environmental costs that arise during use and disposal—to a given product or process. It ensures that the best process is put in place—and that we avoid subsidizing things that look good on paper, but have a long-term negative impact.

If a mine does not have to worry about environmental impact, the wrong cost gets built into the rate structure and consumption patterns

Take a coal-fired plant in the utility industry. If the coal mine that supplies the plant does not have to worry about environmental impact, the wrong cost gets built into the rate structure and consumption patterns. Twenty years later, when we are faced with a big clean-up, the public has to pay for it, or the mine goes out of business, or the coal company collapses. Not having full-cost accounting allows us to build facilities that are not truly competitive. They deny their environmental impact, although its cost will ultimately have to be paid. That is precisely what full-cost accounting is trying to prevent.

What would you prefer as a consumer? Do you want to see a product’s environmental impact subsidized for now, and then have to make a payout in twenty years’ time, after the government has managed the clean-up for you? Or would you like the problem taken care of at the time, so that you pay for it when you buy the product? I think the public would like more honest environmental guidelines concerning the long- and short-term impact of what they are consuming.

Some customers—perhaps in retail rather than industry—still seem to like being free riders, happy to let everyone share the burden when society finally has to clean up the mess.

Popoff: I think consumers want to do the right thing, but are not prepared to pay a lot for it. Take cloth versus disposable diapers. Who knows what the relative cost is? One woman might say, "I am going to use disposables: this is one small insult to the environment that is important to me"; another, "No, I am going to wash diapers because I want to save the planet."

But is she right? What is the cost of washing those diapers, or transporting them to a diaper service? What is the impact on the water treatment facilities? Walk a cloth diaper through its eco-energy cycle, and then do the same for the disposable. If it costs a nickel more with full cost included—which, incidentally, it does not—I can make the conscious decision to buy the disposable and know I have salved my environmental conscience, because built into the price is a structure for incinerating or disposing of it.

The reality, though, is that we usually make our choice of products in ignorance. We have no idea of cost differentials and of whether we are running up a pollution bill. What we do know is that if the bill is excessive, we will end up with a problem on our hands. A solution will be mandated, and the government will deny us the product, or tax us for using it. But why not let the free market work? Why not calculate the real cost of product A and product B at the outset—the cost of the cellulose, or the cotton, and the attendant agricultural involvement, and the ultimate laundry or disposal, and all that goes with it?

You are advocating that private industry should take responsibility, rather than wait for government to come in. How do you put this principle into practice?

If we have a process that does not pollute, I want to make a natural bridge to the next generation facility that does not pollute

Popoff: The chemicals industry—and the government too—is making pollution prevention the desired outcome of all our actions. Progressing from there, if we have a process that does not pollute, I want to make a natural bridge to the next generation facility that does not pollute.

My colleagues in industry understand what that means: plants that do not discharge to the river. So we are saying to them: we need your help in inducing the industry to set worldwide standards employing the best available technology, and we must do this voluntarily to preempt the legislation that will surely come along if we do not. If we fail to act of our own accord, we will face government mandates, and they will be inefficient, punitive, and inconsistent from nation to nation—a quagmire.

This is hard, cold economics. Pay now or pay a whole lot more later

I am not an evangelist preaching some social cause; this is hard, cold economics. Pay now or pay a whole lot more later. Do it today or have it done unto you tomorrow. If we were not shooting for pollution prevention, I would have a hard sell. But everybody knows that that will be part of the next generation of environmental initiatives.

Imagine that you are eventually moving to a plant that does not need to have external full-cost accounting for remediation, recovery, and disposal, since it has been designed so that it does not create these problems. Why not extend the principle and saddle your existing plant with its own remediation, recovery, and disposal costs? You will have to account for all the trucks, and dumps, and incinerators you need in any case, so why not face up to it? Your new plant will operate without all these things because you are developing a closed-loop technology or handling your incineration internally—not leaving your problems to someone else.

Buzzelli: Not too many years in the future, I could see us applying an internal environmental tax—though it would not be popular with everybody. As we evaluate projects that will still be running in twenty or thirty years’ time, we need to develop a database to tell us what a pound of pollutants might cost us by then so that we can do our internal costings and make decisions accordingly. Full-cost accounting may be controversial outside the company, but it is also controversial inside.

The biggest single emission, for instance, that we have in our company—and throughout the whole chemical industry—is to the air. There is perceived to be no charge for this at the moment, but eventually our shareholders will have to pay in one way or another. The issue then becomes: should we start to build air emissions into the economic evaluations of our plants so that we automatically reach better decisions? The only alternative is to wait for a top-down mandate where a CEO has to dictate: "Fifty percent reduction in our emissions by 1998."

How do you allocate the cost of treatment facilities to various operating units or plants in a big division?

Popoff: In times past we said, "Let us allocate cost on the basis of sales. Everybody pays so much for the incinerator, the landfill, and the treatment ponds."

In the past, dumping waste was effectively free; people paid a fixed charge regardless of quantity. Now we charge them for what they actually send

We scrapped that way of thinking. Now we charge people for what they actually send to the facilities, rather than levying some arbitrary charge. Do you know what has happened? The life of our internal hazardous waste dump has been extended by 27 years. Before, people calculated that dumping waste was effectively free, because they paid a fixed charge regardless of quantity. These days, now that they have to pay for all their waste, they send a lot less.

We are even looking at charging for waste treatment facilities on the basis of their replacement value, rather than their existing costs

Buzzelli: At the moment we are charging waste treatment facilities back to specific products. One step further, we are looking at charging on the basis of the replacement value of those facilities, rather than their existing costs. A waste treatment plant lasts for 25 or 30 years; it may be written off in the books, which could be the wrong economic decision. What we are talking about, in the end, is value-based management.

How do you audit your total spending on the environment?

Buzzelli: We publish a set of environmental operating guidelines for our plants. Used throughout the world, they are not just about compliance with regulations. In loss prevention, for example, we have tight minimum internal requirements on the containment around our vessels and plants to make sure that, if an accident happens, we do not have a spill that affects the public.

Every geographic area has done audits over the past two years and identified where it is deficient. Then each of them is asked to put a priority and a cost on its deficiencies. We have to get them stacked in some order and start working through them. For me, the biggest challenge in a company this size is getting the priorities right on that list.

We cannot afford to do everything at once, but neither can we afford to do nothing. We have to start somewhere. Auditing all our facilities against the set of company guidelines is a systematic effort, and it has been most helpful.

How are managers evaluated on the environment?

Buzzelli: Dow’s performance improvement review has a number of elements against which each person is judged. One of them—for every single employee—is environmental performance. Another, which we added a few years ago, is quality performance, TQM. The aim is to make sure all our employees understand that whether you are an office professional or a senior manager or anything in between, you have a role to play in the environment. So it is built into our performance review process for employees, and also, tangibly, into our bonus system and incentive pay. How well you meet your personal performance goals directly affects your earnings.

What kind of goal do you set for the whole company, so that people are not chasing 50,000 different environmental initiatives?

Buzzelli: Everything goes back to a couple of very simple aims: drastically improving our performance, and improving our communication of that performance. To achieve them, we have had three priorities for the past three years. First is the global implementation of Responsible Care. Second is to develop a process to integrate environmental issues into all our business planning within the company. And third is for us to improve our public outreach.

Integration is a real challenge, because for years there has been an attitude that the environmental department will take care of this, or manufacturing will look after that. We are trying to create a joint decision-making process, with all the businesses involved in environmental goal-setting, and all the functions implementing it. That is where we think we need to be.

What experiences would you share with a CEO who is struggling with effective integration?

Understanding expectations is critical: if you hit the target you are aiming at but it is the wrong target, tough

Popoff: First, I would focus on understanding expectations. Many of my colleagues know about minimum compliance, or today’s rules and regulations, but they do not have an accurate idea of where things are moving. Understanding expectations is critical: if you hit the target you are aiming at but it is the wrong target, tough. That is why our industry has tried to help itself by focusing on Responsible Care and setting proactive, preemptive standards.

Second, try to understand the barriers to achieving those expectations. Initially they are as much internal as external. You have got to build a culture for environmental reform in your organization. Nothing will happen without it—it is just like the quality issue all over again.

Third, you must empower your organization. At base, this is highly individual and personal. Your people will need a great amount of help and support. Again this is like quality: you might want to use a guru to facilitate the process, but ultimately it has to be of your own making.

A friend of mine, Bob Kennedy from Union Carbide, said, "On quality, we have five divisions, and I gave each one a guru. They all came up with programs that were good, but none was perfect. Only when I integrated the five and put the Union Carbide stamp on them did everybody say, ’This is a great quality program.’" He found he had to "Carbidize" the approach to quality.

I think you have to localize and personalize your approach to the environment in the same way. How? Get involved in the issues, get involved in your associations, take a position, and be willing—I am talking to American CEOs now—to go to the Hill and articulate your proactive approach.

How much of your time do you spend dealing with environmental issues?

I spend about 50 percent of my time on today’s bottom line and 50 percent on issues management

Popoff: I still spend about 50 percent of my time on business—I like customers, and the numbers have to come out right—but it is about an even split: 50 percent on today’s bottom line, 50 percent on issues management. Currently, despite the importance of NAFTA, despite my own commitment to education, despite the need for legal and tort reform, I am spending more time on the environment than on any of the other issues, although they all take up a fair amount of my day. So environment is around 20, 25 percent overall.

It is a little less now than it was because I am not chairman of the Chemical Manufacturers Association any more, but for several reasons—association activities or Dow’s position—I get to give talks in a variety of places. The environment is always a central issue. If it is not in my speech, it takes up a big part of the questions and answers.

It is central within Dow too. My most hardbitten security analyst who lives on today’s ledgers, my most demanding shareholder who wants maximum yield now, my most anxious retiree who asks, "Are you taking care of my pension benefits?," my most embattled employee worrying about education reform or community affairs—of all of them, none challenges me on the time I spend on environment, because they understand how important it is.

And let me close the loop by saying this is a shareholder/stakeholder issue. We have got to get it right—it is a defining issue for the industry. We will get the environment right, and benefit, or we will get the environment wrong, and pay.