What changed in this filing

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Item 1A. Risk Factors

2022-02-04 compared with 2021-02-05 · 41 added, 22 removed, 138 unchanged (31% of the section changed)

The factors described below represent the Company's principal risks.

CLIMATE CHANGE - RELATED RISKS

Climate Change:

Climate change-related risks and uncertainties, legal or regulatory responses to climate change and failure to meet the Company’s climate change commitments could negatively impact the Company’s results of operations, financial condition and/or reputation.

The Company is subject to increasing climate-related risks and uncertainties, many of which are outside of its control.

Climate change may result in more frequent severe weather events, potential changes in precipitation patterns and extreme variability in weather patterns, which can disrupt the operations of the Company as well as those of its customers, partners and vendors.

The transition to lower greenhouse gas emissions technology, the effects of carbon pricing and changes in public sentiment, regulations, taxes, public mandates or requirements and increases in climate-related lawsuits, insurance premiums and implementation of more robust disaster recovery and business continuity plans could increase costs to maintain or resume the Company’s operations or achieve its sustainability commitments in the expected timeframes, which would negatively impact the Company’s results of operations.

In 2020, the Company announced commitments to reduce its net annual greenhouse gas emissions by an additional 5 million metric tons, or 15 percent compared with its 2020 baseline, by 2030 (the 2020 baseline represents a 15 percent reduction in greenhouse gas emissions since 2005) and its intention to be carbon neutral by 2050 (Scopes 1+2+3, as defined by the Greenhouse Gas Protocol, plus product benefits).

Execution and achievement of these commitments within the currently projected costs and expected timeframes are also subject to risks and uncertainties which include, but are not limited to:

advancement, availability, development and affordability of technology necessary to achieve these commitments;

unforeseen design, operational and technological difficulties;

availability of necessary materials and components;

adapting products to customer preferences and customer acceptance of sustainable supply chain solutions;

changes in public sentiment and political leadership;

the Company’s ability to comply with changing regulations, taxes, mandates or requirements related to greenhouse gas emissions or other climate-related matters;

and the pace of regional and global recovery from the pandemic caused by coronavirus disease 2019 ("COVID-19").

Given the focus on sustainable investing, if the Company fails to meet its climate change commitments within the committed timeframe and adopt policies and practices to enhance sustainability, the Company’s reputation and its customer and other stakeholder relationships could be negatively impacted and it may be more difficult for the Company to compete effectively or gain access to financing on acceptable terms when needed, which would have an adverse effect on the Company’s results of operations.

COVID-19 PANDEMIC - RELATED RISKS

Public Health Crisis:

A public health crisis or global outbreak of disease, including the pandemic caused by coronavirus disease 2019 (“COVID-19”) has had, and could continue to have, a negative effect on the Company's manufacturing operations, supply chain and workforce, creating business disruptions that could continue to have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

A public health crisis or global outbreak of disease, including the pandemic caused by COVID-19 has had, and could continue to have, a negative effect on the Company's manufacturing operations, supply chain and workforce, creating business disruptions that could continue to have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

The pandemic caused by COVID-19 has impacted all geographic regions where Dow products are produced and sold.

The global, regional and local spread of COVID-19 has resulted in significant global mitigation measures, including government-directed quarantines, social distancing and shelter-in-place mandates, travel restrictions and/or bans, and restricted access to certain corporate facilities and manufacturing sites.

The global, regional and local spread of COVID-19, including existing and new variants, has resulted in significant global mitigation measures, including government-directed quarantines, social distancing and shelter-in-place mandates, travel restrictions and/or bans, mask and vaccination mandates, restrictions on large gatherings and restricted access to certain corporate facilities and manufacturing sites.

Uncertainty with respect to the severity and duration of the COVID-19 pandemic, coupled with oil price fluctuations due in part to the global spread of COVID-19 and the continued increase in global cases, has contributed to the volatility of financial markets.

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additional asset impairment charges;

increased obligations related to the Company’s pension and other postretirement benefit plans;

increased obligations related to the Company’s pension and other

postretirement benefit plans;

and tax valuation allowances.

Business disruptions and market volatility resulting from the COVID-19 pandemic have had and could continue to have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

Business disruptions and market volatility resulting from the COVID-19 pandemic have had and could have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

The adverse impact of the COVID-19 pandemic on the Company may also have the effect of heightening many of the other risks described in this "Risk Factors" section.

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Increased levels of competition could result in lower prices or lower sales volume, which could have a negative impact on the Company’s results of operations.

Sales of the Company's products are also subject to extensive federal, state, local and foreign laws and regulations, trade agreements, import and export controls and duties and tariffs.

The imposition of additional regulations, controls and duties and tariffs or changes to bilateral and regional trade agreements could result in lower sales volume, which could negatively impact the Company’s results of operations.

Sales of the Company's products are also subject to extensive federal, state, local and foreign laws and regulations;

trade agreements;

import and export controls;

and duties and tariffs.

The imposition of additional regulations, controls, taxes and duties and tariffs or changes to bilateral and regional trade agreements could result in lower sales volume, which could negatively impact the Company’s results of operations.

Economic conditions around the world, and in certain industries in which the Company does business, also impact sales price and volume.

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In addition, volatility and disruption of financial markets could limit customers’ ability to obtain adequate financing to maintain operations, which could result in a decrease in sales volume and have a negative impact on the Company’s results of operations.

The Company’s global business operations also give rise to market risk exposure

related to changes in foreign currency exchange rates, interest rates, commodity prices and other market factors such as equity prices.

To manage such risks, the Company enters into hedging transactions pursuant to established guidelines and policies.

The Company’s global business operations also give rise to market risk exposure related to changes in inflation, foreign currency exchange rates, interest rates, commodity prices and other market factors such as equity prices.

To manage such risks, the Company enters into hedging transactions, where deemed appropriate, pursuant to established guidelines and policies.

If the Company fails to effectively manage such risks, it could have a negative impact on its results of operations.

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Plastic Waste:

Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for the Company’s plastic products and could negatively impact the Company’s financial results.

Local, state, federal and foreign governments have been increasingly proposing and in some cases approving bans on certain plastic-based products including single-use plastics, plastic straws and utensils.

In addition, plastics have faced increased public scrutiny due to negative coverage of plastic waste in the environment, including the world’s oceans.

As Dow is one of the world’s largest producers of plastics, increased regulation on the use of plastics could cause reduced demand for the Company’s polyethylene products which could negatively impact the Company’s financial condition, results of operations and cash flows.

Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products, a lack of plastic waste collection and recycling infrastructure, or new or more restrictive regulations and rules related to plastic waste could reduce demand for the Company’s plastic products and could negatively impact the Company’s financial results.

Local, state, federal and foreign governments have been increasingly proposing regulations to address the global plastic waste challenge, including, but not limited to, extended producer responsibility fees, a Global Plastics Treaty and bans on non-essential items.

These regulations on plastic waste drive demand toward plastic solutions that are recyclable, reusable, made with recycled content and/or renewable raw materials.

In addition, without proper waste collection and recycling infrastructure at scale, plastics have faced increased public scrutiny due to negative coverage of plastic waste in the environment, including the world’s oceans and rivers.

As Dow is one of the world’s largest producers of plastics, increased pressure on the use of plastics, despite positive carbon benefits and essential functions such as food preservation and medical uses, could cause reduced demand for the Company’s polyethylene products which could negatively impact the Company’s financial condition, results of operations and cash flows.

OPERATIONAL AND STRATEGIC RISKS

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and determining raw material supply and other details regarding product movement.

If the manufacturing operations, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company’s financial condition, cash flows and results of operations.

In addition, disruptions to supply chains, distribution chains and/or public and private infrastructure, including those caused by industry capacity constraints, material availability, global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers and labor availability constraints, could materially and adversely impact our business operations.

If the manufacturing operations, supply chains, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company’s financial condition, cash flows and results of operations.

Cyber Threat:

The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results.

The risk of loss of the Company’s trade secrets, know-how or other sensitive business information or disruption of operations could negatively impact the Company’s financial results.

Cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company's reputation.

The Company has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information.

The Company has attractive information assets, including trade secrets, know-how and other sensitive, business critical information.

While the Company has a comprehensive cyber-security program that is continuously reviewed, maintained and upgraded, a significant cyber-attack could result in the loss of critical business information and/or could negatively impact operations, which could have a negative impact on the Company’s financial results.

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As a diversified chemical manufacturing company, the Company's operations, the transportation of products, cyber-attacks, pandemics and other public health-related events or severe weather conditions and other natural phenomena (such as freezing, drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, which could have a negative impact on the Company's results of operations.

Major hurricanes have caused significant disruption in the Company's operations on the U.S.

Major hurricanes and other weather-related events have caused significant disruption in the Company's operations on the U.S.

Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of its products.

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Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont include, but are not limited to, a number of conditions outside the control of Dow, including risks related to:

(i) Dow's inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont;

(i) Dow's failure to achieve in full the anticipated benefits from the separation from DowDuPont;

(ii) certain tax risks associated with the separation;

(iii) the failure of Dow's pro forma financial information to be a reliable indicator of Dow's future results;

(iv) Dow's inability to receive third-party consents required under the separation agreement;

(v) non-compete restrictions under the separation agreement;

(vi) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont and Corteva, Inc.

(iv) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont and Corteva, Inc.

("Corteva"), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party;

and (vii) Dow's obligation to indemnify DuPont and/or Corteva for certain liabilities.

and (v) Dow's obligation to indemnify DuPont and/or Corteva for certain liabilities.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors