Path to a Sustainable Future Detailed

March 30, 2022

Dow continues to raise the bar on sustainability and environmental goals since it published its first Sustainability Report in 2003. In 2020, Dow built on its 2025 sustainability goals by announcing its intent to be carbon neutral by 2050 and requiring 100% of Dow products sold into packaging applications to be reusable or recyclable by 2035. Dow has incorporated ESG metrics in its short-term incentive program to achieve its stated goal to be the “most innovative, customer-centric, inclusive and sustainable materials company in the world.” To that end, ESG metrics comprised 20% of all named executive officers (NEOs) short-term incentive opportunity in fiscal year 2021.

NEOs were incented on quantifiable metrics that included:

  • Customer experience: measured by a proprietary customer experience index
  • Sustainability: measured by a world-leading operations index—a composite index measuring unplanned events, total worker health, environmental stewardship, and transportation stewardship
  • Inclusion: measured by global participation in employee resource groups (ERG), global representation of women, and U.S. ethnic minority representation—each measured as a percentage of Dow’s workforce

The performance targets were met and exceeded for all metrics (including financial) except customer experience, resulting in a total corporate performance payout of 177%.

Dow has also introduced ESG metrics into its long-term incentive program to further align compensation practices with its stated sustainability goals. The 2022-2024 Performance Share Program includes ESG metrics with a weighting of 20%. The ESG metrics include:

  • Establish greenhouse gas (GHG) emissions reduction plans for Scope 1 and 2 for the top 25 Dow manufacturing sites by year-end 2022. If not achieved, the ESG payout portion will be reduced to threshold
  • Define Scope 3 GHG emission exposures by year-end 2023 for “purchased goods and services” (Category 1), “fuel and energy-related activities” (Category 3), and “transportation/distribution” (Category 9). If not achieved, ESG payout portion reduced to threshold
  • Achieve a cumulative GHG emissions reduction target for the three-year performance period compared to 2020 baseline

With both up and downstream environmental impacts, Dow has made a concerted effort to build sustainability into its culture through its long-tenured sustainability report. In its compensation program, Dow is focusing executives on multiple dimensions of ESG through its environmental, diversity and customer experience measures.

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