Dow: Reaching 'Stretch Goals' for Energy Efficiency

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[Editor's Note: This case study is part of a series of profiles of World Business Council on Sustainable Development member company good practice examples on energy efficiency.]

The business case for energy efficiency at Dow is simple: Saving energy makes the company money. Dow benefits from wider uptake of energy efficiency standards through less upward price pressure on the hydrocarbons it uses as feedstocks, and greater demand for its efficiency-related products.

The Situation

The Dow Chemical Company provides customers in more than 175 countries with over 300 diverse chemical products. Its products can be found in everything from pharmaceuticals to paints, packaging to building products. The company has 46,000 employees worldwide and annual sales of $54 billion.

Dow's operations require over 3,700 MW of electricity and over 9 million kilograms of steam per hour. And the company does not just rely on petrochemicals for fuel.

At its core the company's business uses the energy from oil and gas to make and break the chemical bonds in feedstocks such as ethane, propane butane and naphtha, to produce the chemical components for medicines, shampoo, insecticides, paint, glues, lubricants, plastics and thousands of other everyday products.

In 2007 the company used early 850,000 barrels of oil equivalents each day, to supply its energy and feedstock needs globally. That is more than the oil consumption of the Netherlands. 80 percent of this went into feedstocks and 20 percent into fuel. The total fossil fuel bill came to approximately $27 billion; accounting for nearly half of the company's operating costs. This makes it the one of the world's largest industrial consumers of energy.

Rising prices have tripled Dow's annual fossil-fuel bill over the past five years (see Figure 1). In a global economy where Dow's competitors can sometimes have access to energy and raw materials at a fraction of its cost, continually improving efficiency is critical to Dow's business strategy.


Dow Chairman and CEO Andrew Liveris believes that reducing energy use, both in production and through the use of Dow's products, is good for business, for society and for the environment, "energy efficiency plays a key role in our efforts to address the parallel issues of restricted resources, escalating energy costs and climate change," he says.

Targets

Between 1990 and 1994 Dow reduced the energy consumed to make each pound of its product by 20 percent through moves such as cogeneration in which steam and power are produced together.

It then went on to set itself a series of "stretch" targets for energy efficiency:

• In 1995 Dow made a commitment to reduce energy intensity by a further 20 percent per pound of product by 2005.
• In 2005 Dow set a target of reducing energy intensity by a further 25 percent per pound of product by 2015.

Dow has mapped out a set of goals that will allow it to turn back from rising greenhouse gas (GHG) emissions by 2025. From then on the company's goal will be to begin making absolute reductions in its GHG emissions, while continuing to grow the company and its impacts on human welfare.

The overall objective to slow, stop, and ultimately reverse the GHG emissions of the company is an ambitious internal objective, in line with Dow's commitment to be part of the solution.

Activities

Dow Chemical has been engaged in plant based energy management programs since very early in the company's history. But it was not until it made a public commitment to reduce its energy intensity that it began to develop a formal, comprehensive energy management system.

Over the years, cultural, organizational and management approaches have been tried, tested and honed into a comprehensive Energy Efficiency and Conservation Management System which is now applied throughout the global organization.

Key components of this comprehensive approach are leadership commitment, organizational alignment, reporting and measurement, and the use of Six Sigma tools to identify and close energy efficiency gaps.

Clear leadership commitment

Some energy efficiency improvements require capital investment, others can be done at low cost, by altering policies, behavior or accepted practice. What they all depend on is the will to continually find and reap the opportunities for doing things better and more efficiently. This requires top executive commitment and leadership.

Dow has created a Strategy Board of very senior leaders, charged with driving energy efficiency as part of Dow's approach to climate change and energy policy. This leadership team establishes the company's energy policy and goals and sets priorities. Each individual business then develops its own goals in support of the overall business strategy, provides resources and capital funding, and measures individual leader performance in delivering energy efficiency.

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