What Dow Knows (But Won't Tell)

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http://www.alternet.org/envirohealth/21981/

 

What Dow Knows (But Won't Tell)

 

By Shelley Alpern, AlterNet. Posted May 12, 2005.

 

Dow Chemical's financial liabilities related to toxic chemical

production would make its shareholders very nervous -- if they only knew.

 

At this week's annual stockholder meeting, Dow Chemical will surely

tout the fact that its stock has outperformed the S & P 500 for the

better part of the last five years. But can a company as

environmentally burdened as Dow keep it up? Dow is being sued in the

U.S. and overseas for environmental damages that stem from both its

core products and from the toxic chemicals that are byproducts of its

big manufacturing processes.

 

Take Dow's dioxin liabilities. Dioxins, which are a byproduct of

production of some Dow chemicals, are known to cause cancer, immune

suppression, reproductive, developmental and liver damage. A class

action lawsuit by Michigan residents is seeking compensation for the

contamination. Residents in the region are asserting approximately

$100 million in property damages and seeking medical monitoring. The

medical monitoring claim is now before the Michigan Supreme Court.

 

Dioxin is also a severe problem in Agent Orange hotspots including

Vietnam, New Zealand and Australia, where the Dow-produced herbicide

was sprayed as a lethal war defoliant and released at manufacturing

facilities. Roughly 100,000 claims of Agent Orange exposure-related

health problems by U.S. veterans have been filed with the government

since 2000. U.S. and Vietnamese veterans and their families are suing

Dow for compensation.

 

The unfinished legacy of the 1985 Union Carbide chemical factory

explosion in Bhopal, India became Dow's problem when it acquired

Carbide in 2001. One hundred and fifty thousand survivors and

residents of Bhopal are still suffering from the after-effects of that

explosion, which has killed 20,000 people to date. These survivors are

seeking additional compensation and the environmental cleanup that was

never performed.

 

But it's not just Dow's past that should make investors, by nature a

nervous bunch, more nervous. Developing legal and public policy trends

raise a big question mark as to whether Dow's reliance on

organochlorine chemistry is the way to go in the 21st century. Just

last month a landmark U.S. Supreme Court decision, Bates v. Dow

Agrosciences, affirmed the right of citizens to sue chemical

manufacturers for harm caused by their pesticides. Thousands of people

harmed by pesticides will now be able to hold pesticide companies

accountable in state courts for making and distributing dangerous

chemicals.

 

In the last 15 years, Dow has already been sued in 300 lawsuits

claiming damage from Dursban (the trade name for the neurotoxic

pesticide chlorpyrifos), which can cause respiratory paralysis,

convulsions, nausea, headaches and other symptoms with acute exposure.

Last year, the Centers for Disease Control (CDC) reported that 93

percent of the U.S. population had this chemical in their bodies and

one market analysis indicates that Dow Chemical likely contributed at

least 80 percent of public exposure to chlorpyrifos.

 

Just over the horizon is the European Union's REACH (Registration,

Evaluation, and Authorization of Chemicals) policy, which will require

chemical companies to provide data on their products including

toxicity and exposure to humans and the environment. Toxic chemicals

must be registered, and the worst could be restricted in favor of

safer alternatives. Some industry associations suggest that up to 20

percent of chemicals on the market will be discontinued. Approximately

one-third of Dow's revenues are derived from Europe. Other

international documents such as the Great Lakes Water Quality

Agreement and the Stockholm Persistent Organic Pollutants Treaty are

paving the way for the elimination or restriction of certain chemicals

that Dow produces. Dow appears to be bound for a head-on collision

course with changing public policies.

 

Incredibly, Dow's filings with the Securities and Exchange Commission

fail to mention any of these factors except the Dursban suits. The SEC

requires discussion of " any known trends, demands, commitments, events

or uncertainties " that are " reasonably likely " to have a material

effect on the bottom line. Unfortunately, the Commission is notorious

for failing to enforce these rules.

 

Dow is already expending hundreds of millions of dollars on

environmental liabilities and the future looks like more of the same.

This week, shareholders will vote on a resolution that asks the

company to 1) account to investors for the impacts of changing science

and new public policies that are increasingly targeting chlorpyrifos,

dioxins and other persistent bio-accumulative toxics associated with

Dow products; and 2) provide a plan for phase-out of products targeted

by public policymakers in the U.S. and Europe.

 

Dow has to be thinking about these things, and it's time to disclose

its plans to shareholders.

 

Shelley Alpern is the director of social research & advocacy at

Trillium Asset Management. The firm is the sponsor of the shareholder

proposal on Dow Chemical's 2005 proxy, which will be voted upon this

Thursday.