Everything is bigger in Texas, and that includes the Dow Chemical (NYS: DOW) plant in Freeport. The biggest chemical complex in North America is now the site of Dow's most ambitious environmental initiative. An initiative that may very well carry over to the rest of the American manufacturing industry.
Go green, or go home
The company is launching a five-year, $10 million partnership with the Nature Conservancy to develop business and operation models based on environmental costs and benefits. Essentially the project seeks to properly value the role nature can play in saving and making money; for example, studying the impact of developing wetlands instead of building levees to effectively quell storm surges.
One of the most important impacts of the project will be on Dow's water usage. The Texas plant uses more water than many Texas cities, and though it has reduced consumption by 15%, there is still work to be done.
The bigger picture
The study couldn't come at a better time as Dow moves to increase its American footprint. The company has announced plans to build or reopen several domestic chemical plants in order to take advantage of the U.S. supply of plentiful and cheap natural gas.
The emphasis on green operations could set an important precedent, as Dow is not the only big company set to return to the American manufacturing scene. Boeing (NYS: BA) and General Electric (NYS: GE) are intent on bringing some operations back to the U.S. as well.
Boeing cited problems with controlling quality and service after outsourcing too many manufacturing responsibilities as the reason for returning some operations to the U.S. The company's bungled Dreamliner production schedule is a perfect example of the manifestation of this problem.
GE chief executive Jeff Immelt pointed to changing market dynamics to explain the shift back to domestic manufacturing, citing less-expensive materials and distribution costs, acknowledging that while labor costs are still higher here, the gap is closing.
Ten million dollars is not a lot of money for a company the size of Dow Chemical. If its partnership with the Nature Conservancy is even moderately successful, the return on investment could be profound. Additionally, as resident of Planet Earth, I'm sort of relieved that a giant chemical company is paying attention to the environment.
I like what I see in Dow's strategy right now, so I'm heading over to CAPS and give it the green thumbs-up. The nice thing about CAPS is that I can paste my investment thesis into a CAPS pitch, allowing me to revisit my thoughts down the road.
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