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Lindsey Hall: I'm Lindsay Hall.

Esther Whieldon: And I'm Esther Whieldon.

Lindsey Hall: Welcome to All Things Sustainable, a podcast from S&P Global. As your hosts, we'll dive in to all the sustainability topics that are reshaping the business world.

Esther Whieldon: Join us every Friday for in-depth analysis and interviews of leaders from around the globe. Together, we'll break down from big sustainability headlines and cut through the jargon.

Lindsey Hall: Last year, we published a series of episodes on this podcast, exploring the topic of plastic, and that was at a time when countries around the world were engaging in international plastic treaty talks. We heard how plastic pollution poses a risk to human health and the environment.

We also heard how companies are approaching these challenges. Now plastic is largely derived from fossil fuels by the petrochemical industry and a very small share, less than 10% of plastic is currently recycled. Today, we're revisiting the question of how petrochemical companies are working to solve these challenges. We'll hear from one of the largest companies in this space, and that's Dow.

Esther Whieldon: We talk with Han Zhang, Dow's Global Sustainability Director for Packaging and Specialty Plastics. I sat down with him while in Houston in March for the annual CERAWeek Energy Conference hosted by S&P Global. As we'll hear today, Dow has sustainability targets related to climate change, including to be carbon neutral by 2050. That target includes Scopes 1, 2, and 3 emissions. Scope 1 emissions are direct emissions from a company's operations.

Scope 2 emissions come primarily from purchased energy, and Scope 3 emissions occur up and down the company's supply chain as well as when a customer uses their products. Dow also has targets related to transforming waste and advancing a circular economy.

By 2035, Dow aims to enable 100% of its products sold into packaging applications to be reusable or recyclable. In today's episode, we'll hear about Dow's strategy, the partnerships it is leveraging, and some of the different recycling and decarbonization technologies it's investing in. Han starts off by introducing himself and describing the opportunities the company sees in plastic recycling. Here he is.

Han Zhang: So I have been with Dow for about 12 years. And in my role, I lead projects to improve plastic circularity as well as deliver low-carbon solutions to our customer. For the past seven years, I live in Singapore.

So I helped the company to develop a strategy to advance the plastic circularity in Asia Pacific, reduce marine debris as well as building strategic partnership like Circulate Capital, who invested more than $100 million into recycling industry in South and Southeast Asia and also develop a partnership like the alliance and the plastic waste.

I think right now, the business is at a pivotal moment and the sustainability is a key part of this transition. So sustainability used to be something nice to have, but now it's a key part of the business strategy. Why is it so important? It's because there are a lot of brand owners' commitment and the government regulation, and also, there's a consumer demand. So all of this create a lot of opportunities to company who can develop those sustainable solutions.

And Dow is really working in this space. For example, we are working to transform the waste. We have a target to commercialize 3 million metric tons of circular or renewable solutions. So they're all developed from plastic waste or bio waste. And also on the carbon side, we have already done a lot in this space. From 2005 to 2020, we have reduced our carbon footprint by 15%. And now we set up a target from 2020 to 2030, we want to reduce another 15% compared to our 2020 baseline.

That's 5 million metric tons of Scope 1 and 2 emissions. And eventually, we want to become carbon neutral by 2050. So those are very ambitious goal, and we are walking the talk. For example, last year, we acquired a company called Circulus.

It's a leading recycler in North America. So now Dow 120-plus years company, petrochemical company, now we are officially a recycler. And also, you may heard about our flagship project in Canada, in Alberta, Canada. We are building the first net zero Scope 1 and 2 ethylene plants in Alberta, Canada. So once we have the asset online, we can produce a low or zero carbon footprint product to our customers.

Esther Whieldon: Are you finding that customers are asking to understand the emissions profile of the product? Is that a demand from your customers?

Han Zhang: Yes. There are a lot of demand requests from customer side. They want to understand the product carbon footprint. I think it's very important for the industry to be transparent and to share the product carbon footprint with the customer.

But this is also tied to a challenge I want -- you just asked about, right? Everyone they're demanding for low-carbon solutions. But for petrochemical industry in order for us to deliver low-carbon solutions, there are several key challenges, which is kind of unique to petrochemical industry. So one challenge is geographic proximity. For example, we are decarbonizing our asset in Alberta, Canada. However, we may have a customer who is willing to pay for low-carbon solution, but the product they're buying is not produced in Alberta, Canada.

So how can we help this customer? How can we leverage the decarbonization benefit from Alberta, Canada to meet this customer's low-carbon solutions demand. So this is one -- the first challenge we need to overcome. The second challenge is impact dilution. So as you know, for petrochemical industry, we have a few feedstock we send it into our cracker. And then they become maybe, 10, 15 high-value chemicals.

And then they are further converted into hundreds of thousands of intermediates and eventually, become an ingredient into brand owners' product and reach to consumer. So if we spend billions of dollars to decarbonize our cracker and if we allocate this carbon reduction proportionally to that hundreds of thousands of products, then the benefit will be significantly diluted along the value chain.

So how can we concentrate those carbon reduction benefit to a few selected product, which you can find a buyer who is willing to pay for that. That's the second challenge. And the third challenge is tied to your earlier question about the product carbon footprint.

So everyone is asking for a product carbon footprint. But how can we ensure we can share this product carbon footprint transparently? How can we make sure it's verifiable? How can you verify the product carbon footprint? And how can you trace this product carbon footprint transaction along the value chain. These are the three unique challenges faced by the chemical industry. And fortunately, Dow is taking the lead to find a solution.

Last year, we developed a market-based carbon accounting methodology we call the Carbon Footprint Ledger . So CFL Carbon Footprint Ledger leverages chain of custody mechanism. And also this methodology is developed in compliance with the existing carbon accounting standard, for example, GHG, Greenhouse Gas Protocol as well as the ISO standard. It also received the third-party limited assurance.

Esther Whieldon: Han mentioned that Dow uses a number of feedstocks to produce its chemicals. The term feedstock refers to the materials or you can even say ingredients used in an industrial process such as the one Han described.

Han also says the company has aligned its Carbon Footprint Ledger with the GHG protocol and ISO standards. ISO stands for International Organization for Standardization. That's an organization that develops and publishes international standards and other deliverables covering almost all aspects of technology management and manufacturing.

Han also noted that the chemicals Dow produces go into hundreds of thousands of products, which basically dilutes the carbon reduction benefits the company makes on a per product basis. That's why for them, it's better to focus on increasing the carbon benefits to a few specific products. Here he is explaining what customers are looking for and an example of the kinds of companies Dow is working with.

Han Zhang: Dow is a leading material science company. We offer product and service from plastic to industry intermediates to silicon coating and a wide range of products. So what we are focusing on is to bring those products, which you can find a demand for low-carbon solutions.

And for example, I work for our packaging and specialty plastic business. And we start to see a lot of brand owners' commitment that they want to decarbonize and they want to reduce their Scope 3 emission. They sign up the science-based target. And all of them, they need the Dow solution, for example, like a low-carbon packaging to meet their sustainability targets. Just a few weeks ago, we signed a long-term agreement with leading brand owners. We will deliver low-carbon solutions for them, and this is for the consumer care, home care products.

Esther Whieldon: What are some other examples of how you're leveraging partnerships?

Han Zhang: Yes. I think partnership is very critical, specifically for solving sustainable issue because sustainability is a big challenge. There's no one company can solve it long. We have been partnering with other companies for a long time.

But I would say if we want to solve this the climate change issue or circular economy issue, we may need a new type of partnership. For example, previously, we live in a linear economy. When we talk about the partnership, it's a lot of times it's a partnership you have immediately with your supplier or with your customer.

But now if we want to transit to a circular economy and decarbonize the circular economy, we may need to partner with someone at the very end of the supply chain or further up on the value chain. One example is our partnership with P&G. So we had a joint development agreement with them to develop a new technology, we call it dissolution technology to recycle hard-to-recycle plastic. And P&G is a brand owner.

The unique part of this partnership is P&G as a brand owner instead of just sitting there waiting for someone to bring post-consumer recycled material to them, they reach out to the further upstream company like Dow because they understand our material science expertise. So we jointly develop this technology. We can unlock the future post-consumer recycled material, which can help P&G meet their target.

Esther Whieldon: So we've heard how Dow is working with companies on new recycling technologies. For example, he mentioned consumer goods company, P&G or Procter & Gamble. Last year, at the S&P Global World Petrochemical Conference in Houston, I heard a lot of companies talking about advances in chemical processes for recycling. I asked Han if the dissolution recycling process he just mentioned is a type of chemical recycling or perhaps, something different.

Han Zhang: Dissolution is different from chemical recycling. So it's more kind of like a mechanical recycling or you can call it a physical recycling because it does not change the chemical composition of a polymer. It uses a solvent to segregate a different type of polymer and also remove contaminates, but it does not change the chemical part.

Esther Whieldon: Okay. So that does bring me to -- I did hear chemical recycling mentioned as like a technology that's being invested in. Is that something you guys are working on? And can you explain to me what it is and why it's needed?

Han Zhang: In order to achieve circular economy, we need all kinds of solutions, all kinds of technology. Earlier, I already mentioned, we acquired a recycler called Circulus. It's a mechanical recycling. So mechanical recycling doesn't change the chemical composition of polymer.

So it's a relatively low cost as well as high energy efficiency. However, mechanical recycling has some limitation. For example, it cannot tolerate a lot of contaminants. You have to have a relatively pure single stream of polymer like polyethylene, you can recycle them together. Polypropylene, you can recycle them together.

But when you have a mixed plastic and contaminant with other materials, it will be very difficult for mechanical recycling to handle it. And another challenge faced by mechanical recycling is how to produce a food-grade recycled content because by nature, the feedstock is from -- it's waste.

There are a lot of risk associated with waste and how do you decontaminate those material through mechanical recycling. It will always be a challenge. That's why you need a chemical recycling or sometimes we call it advanced recycling. The advanced recycling break down the long chain polymer to short-chain polymer and then we regroup them in our petrochemical plant. It goes through the cracking process. And then you can -- basically, you can produce a virgin quality polymer using recycled materials.

Esther Whieldon: What are the economics around that? Is that still quite an expensive option compared to mechanical?

Han Zhang: It's still an early stage, but just like any new technology, when you at a pilot stage or early stage, you don't have the scale factor. But I do have a high hope about this technology in the future, once we scale it up, we can bring down the cost. Another advantage of advanced recycling is this technology can leverage the existing petrochemical infrastructure. Think about the cracker, we already built. Think about the pipeline, the logistics, we're already developed. So advanced recycling can leverage all of those existing infrastructure.

Esther Whieldon: Han went on to describe why government policy support is critical to increasing the global rate of recycling. Let me note here that last year, countries around the world met to negotiate a global on plastic pollution. We'll include a link in our show notes to episodes we did on the treaty. Although, countries didn't reach a deal, negotiations are continuing, and countries are slated to meet again in August 2025 in Geneva, Switzerland. For its part, Dow has voiced support for plastic treaty. Here's Han again.

Han Zhang: Dow as a company, we do support international legally binding instrument, and we want to have one which can help us and the plastic waste leakage to the environment, recognize the role of plastic in the society as well as help us to proliferate the circular economy program.

And in order for us to achieve a circular economy, we need a lot of policy support. If you look around the world, I think over the past decade, significant progress has been made. For example, in Asia, the recycling rate has been increased from 9% to 12% and also, Asia countries reduced their mismanaged plastic from 41% to 30%. If you look at Europe, they made a similar progress.

The increased the recycling rate from 10% to 15%. However, we don't see the progress across the board. Why not every country make the same progress? I think one key reason is the policy difference.

And right now, we see extended producer responsibility is a very effective lever to create the necessary investment to support building the circular economy infrastructure. And the EPR encourages companies to take the lead, adopt circular design, incorporate more recycled content and also EPR shift the burden from consumer to business. And this is something we want to do and we can contribute to the development.

Esther Whieldon: Han just mentioned extended producer responsibility. That's when a producer bears a significant degree of responsibility for the environmental impacts of the products throughout their entire life cycle. At the end of my discussion with Han, I asked him for any final thoughts on the long-term trajectory for the plastics industry. Here's what he said.

Han Zhang: One last thing I want to emphasize is now we're talking about the circularity and decarbonization. We set out a target for both, but they are not disconnected. They're really integrated together. We cannot decarbonize the society without a circular plastic, and we cannot achieve a circular economy with a higher carbon emission. So Dow as a company, we're tackling both in the same lens, and I highly encourage the industry to do the same.

Esther Whieldon: A couple of things Han mentioned are aligned with several of the themes we've been hearing from guests across sectors. that is the value of collaboration and partnerships and not treating sustainability issues and silos. As Han said, making the petrochemicals industry more sustainable will require moving toward a circular economy and also reducing emissions.

Lindsey Hall: And next week, please stay tuned as we're again taking the podcast on the road. This time, we'll be covering the annual S&P Global Sustainable1 Summit in London, where we'll be hearing from guests across sectors, including the CEO of Infrastructure Finance at big British bank, HSBC. Thanks for tuning to this episode of All Things Sustainable. If you like what you heard, please subscribe, share, and leave us a review wherever you get your podcasts.

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