Fortune Staff

This year’s Fortune 500 marks the 68th running of the list.

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Mark Costa sees other CEOs “very serious about climate change” and taking “aggressive actions to reduce their carbon footprint.”

Eastman CEO says sustainability is a “huge innovation opportunity”

Leadership

Eastman CEO: sustainability is “huge innovation opportunity”

mark. It's great to see you two talk about Eastman company and all the things that's doing with climate change issues. It's interesting that the Eastman story goes back more than 100 years. You are actually part of Kodak. Tell us about the company's business back then and what it's doing now. Well, Eastman does have a really long history over 100 years and we're incredibly proud of it. We started making polymer for films and processing chemicals and over time dramatically diversified a wide range of products off of these core technology platforms where we're world leaders today, we make a variety of sustainable materials that touch everyday life, whether it's in appliances or electronics or cars or homes or additives and coatings or personal care. We're a very diverse company, but all centered on sustainability as our core. Well, you are a big believer in solving the plastic waste crisis and you're using what's called molecular recycling technology and I'm not sure I have this alright. But basically you're taking waste plastics, you're recycling them and you're turning them into a form of new plastics that can be reused. Tell us a little bit more how that works. We're really excited about our technology, which complements what happens today, which is mechanical recycling, where they just take clean bottles, wash them, chop them up and melt them, but they have limitations, you know, our quality on degradation. So we step in with our technology where we can use chemistry to unzip polymer back to building blocks purified and make the virgin polymer all over again. We can do it at a lower carbon footprint. So we're improving the climate and improving plastic waste and susie. It's really important when you think about this because a lot of people say just banned plastic sounds good. But the challenges plastics incredibly energy efficient. So if you want to switch to glass, that's four times the energy than a plastic bottle or two times for aluminum. So what we're doing is essential to really build a future for climate and plastic waste. And it's not just plastic bottles that you're doing. I understand it's all kinds of things, carpeting, building materials, shrink wrap, your recycling all that hard to recycle stuff. Right. Exactly. So mechanical recycling can only really use very clean feedstock because they're just washing it. When we unzip it, we can use all of what you said, the textiles carpet, fiber, you know, all kinds of packaging that's dirty. Uh and and give that all an infinite life. And what's important is what we do is like aluminum recycling. It's infinite. We can do it forever, even improving the quality, mechanical recycling that degrades over time. So, it's a perfect partnership that we try and create with them. So how would you describe the progress and contributions that Eastman has made so far? I'm incredibly proud of our team. How we've dealt with chaos that we're all going through from pandemics supply chain crisis and really developing our sustainable platforms or circular platform in particular. We now have three projects that we're developing. We have one that we completing in King's sport, one that we announced early this year with President Macron, that will be the largest billion dollar investment in France. Now a third one base loaded by France by Pepsi, that will be building somewhere here in the U. S. And when you put that together, it's $2 billion investment, $450 million of it. But it's a significant event that's change that will change the company and really prove to the world Circular economy recycling is scalable and can solve these problems. Probably you've been collaborating with the United Nations climate group was called Cop 27, it held summit recently. Is it making meaningful progress? I think it is. I think what was encouraging about the last meeting, even though there's been some criticism of it is I think they started to have some practical conversation, you know, the challenges of this are huge around climate that involves countries companies, consumers. But it also got a wake up call with the Ukraine war and the crisis they're now facing the energy to say this is a little more complicated making the transition and things like natural gas need to be part of that transition for a long period of time. But it's a complicated conversation that requires, you know, really understand the tradeoffs and the time it's going to take. How would you rate what Ceo and businesses are doing when it comes to climate action? I think we see great alignment with the brands that we work with, the peers in our industry, where everyone is very serious about climate and taking aggressive actions to improve their carbon footprint. I also think the circular economy and what we're doing there is a great example of collaboration. The brands are essential that uh and it really helps them not just get waste out of the environment, but dramatically lower their carbon footprint. So you see people like Pepsi Base holding our third plant, Procter and Gamble LVMH Loreal, Black and Decker, a wide range of customers that are signing up committing to these very aggressive sustainability goals. So we see great engagement and I think that's what's going to take to build this future. It's interesting that the former Ceo of Unilever recently told fortune that climate is no longer a peripheral issue, it's the absolute core of sharp business strategy. How do you respond to that? And how do you think most businesses feel about it? Do they agree or not just yet? I think most businesses agree. I know we do right at the center of our history is being innovation driven, but now it has this extreme, extreme sort of sustainability lens put on everything we do. You know, my team, I told them when I became Ceo innovate or die, um that's how you survive in this industry and now it's even more existential than that. I think those who center on sustainable materials and sustainable practices are going to exist and grow and thrive in the future. And frankly those who don't won't be around anymore. So I think we view it as core our moral purpose in our center of how we think about growth and success and value creation. Well, Mark you have and advocating a strategy of sustainable innovation over the past nine years, pretty much since you became Ceo and you said it's more than a business purpose. It's a moral purpose. Tell us what you mean by that, What is your thinking? I think that at the core of any successful company, you have to have a moral compass that engages and excites everyone every day for why they show up. They don't show up because shareholder value of the stock price is exciting, they show up because they want to make sure they're making an impact on the world. And I think where we're at and how we focused on really driving on the sustainability trends, especially in today's world, allows everyone to feel highly engaged. Now, enhancing the quality of life and material way is our mantra. It's our moral purpose. But underneath of that is improving the quality of products, improving our impact on the environment. And I'll tell you it's it's a great way to attract talent, get them excited and retain them. What motivated you to take Eastman in this direction? Well, for me, I saw the world evolving very quickly in the last decade, especially the last four years around how we impact the environment and still need to really improve the quality for many people around the world and how to do that is a huge opportunity. Most people in our industry think of it as a threat to their business, we viewed it as a huge innovation opportunity, you know, our industry frankly hasn't had that much innovation in the last couple of decades and this creates an entirely new innovation curve where we can come up with sustained material sustainable additives and make a huge impact on the world. Well, I understand that your leadership on this is also rubbing off on that your two sons are now considering to having careers that have to do with climate change. So how do you feel about that? I feel great. I mean I've always been an adventure sport addict and my kids have followed too, so we do a lot of mountain biking skiing, a lot of different water sports and they love that, but in that environment, whether you're in the mountains or the oceans, you can see the impact we're having on the environment and they certainly like to point it out and say, dad, you run a materials company, what are you doing to make the world a better place? And they've got very excited about. I can't tell you how many projects I've done with them, uh an entrepreneur classes and economics classes about products that they want to launch that will be more sustainable. So it's become a family business at this stage. Well, that's fantastic. Well, your leadership has been transformative and in fact, Eastman ranks unfortunate change the world list. These are companies that are making meaningful changes for the world. So when the day comes that you leave Eastman, what do you want people to describe as your leadership? I think right now we're at an incredible time in our industry, a time of challenge to innovate and solve huge environmental challenges and still improve everyone's quality of life. And I think the leadership I've been able to provide to build a company centered on that, to be innovation driven to focus on sustainable materials and really solve these challenges. It's a huge legacy and a game changing event for our industry and in the Foundation, I hope I've built a company, an employee base that is engaged, excited, diverse and inclusive, that's really able around the world to implement this strategy and really differentiate us from many in our industry.

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Health

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Jim Fitterling says Dow’s diverse, innovative workforce is both motivated by and driving ESG success.

Dow CEO on what it takes to hit Net Zero

Jim thank you so much for joining us to talk about your company down incorporated. You've been recognized for your leadership on sustainability and for all the progress you've made on diversity inclusion. And I'd like to get your thoughts on both of them. Let's start with sustainability. You have set a goal of net zero by 2050. How would you describe your progress so far? Well, we made a 15% reduction in our scope. One and two emissions from 2005 to 2020 at the time that we grew the business 20% and we've got a target for another 15% by 2030. And we're well on our way, we're investing a little over a billion dollars a year and we're going through all of our core assets and making new investments to have lower C. 02 footprints. Taking sites completely to zero scope one and two emissions. And it's a range of technologies, hydrogen and carbon capture in the near term. As far as small modular nuclear reactors in the long term. Well, it sounds like you've made really a lot of progress, you know, we hear from so many fortune 500 companies that are setting targets and goals for 2050. But what will it realistically take to hit zero? That's 27 years away. What have you learned in this whole process? We have to have a very disciplined consistent investment in capital. It's all for us. We're an energy intensive industry. So it's all about capital and new technologies and behind our 2050 goal our projects at every site. So I can show you the curve and show you the projects that lead to those reductions. Um, so that I feel comfortable with. I think we will get there. We're working hard on scope three emissions scope three requires us to go upstream. Our raw material suppliers are logistics providers. Those are the biggest buckets of scope, three emissions and the good news is all of them have measurements and targets. I mean 90, of them have data and 80% of them have set a target. So we're I feel encouraged by that. I think we're gonna make real progress. We're gonna need good policies to support it. And in the United States on top of what we just did with the inflation reduction act to support those technologies. We need to get to a price on carbon not not attacks but a price on carbon that incentivizes that investment to go faster. So you find this inflation reduction act that was just passed recently. The so called climate change act is going to help you to get to net definitely I mean it will continue to grow the amount of alternative energy power that's out there both in the short term with wind and solar in the long term with advanced nuclear small modular reactors. Um it will also help build the hydrogen and carbon capture hubs that we need. It will build the fuel for those small modular reactors that we need to make that happen. And we have some sites in the United States where one small modular reactor could take the entire site to net zero. So I think they're they're really spot on. Well, half your businesses and plastics which depend on fossil fuels. So right there, that's a challenge for you at how do you balance the need to grow your business and make profits for dow and at the same time, do the right thing so that you have a positive impact on the environment. Sure. I think you have to look at two things on plastics. They've grown substantially because they're very sustainable product. So if you look at their carbon footprint versus paper, glass, aluminum, uh, any other metal, they're the lowest. And that's why they've grown so fast. They're lightweight. They're easy to transport. Now. We have to work on recyclable itty, which is both an an industry challenge as well as the government challenge on being able to collect more and recycle more. The good news is consumers want it. We make products today that have as much as 70% post consumer recycled material in them. And consumer goods forum across the board have targets of 30% post consumer recycled material by 2030. So there's demand there for recycled plastics, I think it will continue to grow. So I understand that you have a new program at doubts called transform the way to collect and recycle plastics? Like you've just been talking about? Do you think that this will solve the problem and get you pretty much there or are you going to have to come up with other technologies? I think we'll have to continue to do more. We set the first target at a million metric tons per year. We called it to stop the waste target. And that idea at the time was, you know, we need to take care of our fair share of the waste that's in the environment. We're very close to being able to meet that target. There's a lot of work that goes on in food packaging, on design. Being able to design it for recycle. There are some very great food packages out there that are very complex structures today that are hard to recycle. So one of our goals internally is that 100% of everything we sell packaging customer has the ability to be recycled. You've said that to get breakthroughs on these big issues, you need talent, diverse talent and you've done a lot to diversify the workforce. What's the most important thing? If you had a single one thing, what's the most important thing you did to get the changes that you wanted, having the goals and having the commitment to achieve these sustainability goals as a fantastic hiring tool, young people coming out of college or coming from any walk of life into our business really are motivated by the purpose that that gives the company and then when they come in they've got to go to work on those projects. They've got to be able to see, I'm working on something and I have the data to show that I'm making an impact. Secondarily, we've got to create the right environment to invite people into our company. This is a very male dominated and white male dominated industry for years. So creating a more inclusive environment, which is the main job of leaders, is Set the strategy, set the goals, create the right environment and then get out of people's way and let them do their work well. The numbers show the data show that you are making progress on this. 30% of the leadership team is women and us ethnic minorities, 70% of the Dow's independent directors on your board are women or minorities. And Dow has achieved gender pay equity, which is fantastic. How do you feel about your track record and what more do you want to do? I feel good where there's more work to do. We need better representation at all levels of the company. We need more women in manufacturing. And a goal of mine is most of us that went into the industry got an opportunity that became great for our families. You know, it allowed us to make a living, but not just that, you know, pass down wealth to the next generation. We're trying to do that for parts of the population that have never had that opportunity And if we can do that, I think that's gonna be a big contribution towards closing social inequities and having a more sustainable, not just workforce, but a more sustainable community gym you've been working at for 38 years, you started straight out of college to work for the company and it was a very different company back then culturally. How would you describe the impact of having a diverse workforce today compared to back then? And also what kind of impact does it have on the business? Yeah, it's been a big transformation that was always a very international company. We used to joke join Dallas see the world. Um and today some of that is still true, but we didn't reflect the communities that we were in and we didn't necessarily reflect our customers and the people we matched up with. And I would say today we're closer much closer to being able to do that. The basic premise behind it is happy, happy employees, happy customers. And we want the environment to be one where we have an easy time hiring, we give people a chance for advancement, which is good not only for them, but for their families. Uh we create a better environment in the community. We live our values and that translates into the market share at the customers, We get more business with certain customers and it translates into financial value. Our employees are as happy as they've ever been and satisfaction surveys with their experience And um our customer experience levels are as high as they've ever been. And our attrition rate in the last two years through the pandemic is 4%. So I think we've got the right recipe. We just need to continue to make progress on these, these metrics. So I understand dow is celebrating its 125th anniversary and for four of those years you've been the Ceo. So you're part of that history. When people look back at your chapter in the history, what do you want them to describe as your legacy to do? You know when I came in, I said to the board when I was in the process of interviewing for Ceo, we put together an ambition which was to be the most innovative customer centric, inclusive and sustainable material science company in the world. So I wanted to be best in class in all four of those areas and the best investment in the material space. And I think we're well on track to do that. I'd like to be able to look back and say we delivered that goal

Year	Revenues ($M)	Profits ($M)	Assets ($M)	Total Stockholder Equity ($M)
2021	$6,090-28.2%	$-2,542	$9,929	$5,210
2020	$8,4790.3%	$-6,095	$13,149	$7,778
2019	$8,45315.7%	$-31	$19,796	$13,819
2018	$7,3040.7%	$-237	$20,206	$14,094
2017	$7,251-50.9%	$-2,412	$21,140	$13,940

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