What changed in this filing

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Item 1A. Risk Factors

2023-02-01 compared with 2022-02-04 · 28 added, 41 removed, 138 unchanged (33% of the section changed)

6 unchanged sentences

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).

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 (Scope 1+2+3, as defined by the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, 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:

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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

PANDEMIC - RELATED RISKS

Public Health Crisis:

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, 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.

While the severity and duration of the COVID-19 pandemic in key geographic regions and end-markets cannot be reasonably estimated at this time, impacts to the Company include, but are not limited to:

fluctuations in the Company’s stock price due to market volatility;

A public health crisis or global outbreak of disease could have a negative effect on the Company's manufacturing operations, supply chain and workforce, creating business disruptions that could have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

A public health crisis, including a pandemic similar in nature to COVID-19, could impact all geographic regions where Dow products are produced and sold.

The global, regional and local spread of a public health crisis could result, and in the past 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.

Business disruptions and market volatility resulting from a public health crisis could have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.

The adverse impact of a pandemic could include, and in the past has included without limitation, fluctuations in the Company’s stock price due to market volatility;

a decrease in demand for certain Company products;

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additional asset impairment charges;

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 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.

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

and tax valuation allowance;

and may also have the effect of heightening many of the other risks described in this "Risk Factors" section.

MACROECONOMIC RISKS

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

As a result, market uncertainty or an economic downturn driven by political tensions, war, terrorism, epidemics, pandemics or political instability in the geographic regions or industries in which the Company sells its products could reduce demand for these products and result in decreased sales volume, which could have a negative impact on the Company’s results of operations.

As a result, market uncertainty or an economic downturn driven by inflationary pressures;

political tensions;

war, including the ongoing conflict between Russia and Ukraine and the related sanctions and export restrictions;

or political instability in the geographic regions or industries in which the Company sells its products could reduce demand for these products and result in decreased sales volume, which could have a negative impact on the Company’s results of operations.

In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia.

Dow suspended all purchases of feedstocks and energy from Russia and has significantly reduced its operations and product offerings in the country.

Dow has also stopped all investments in Russia and is only supplying limited essential goods to Russia.

These actions have not had and are not expected to have a material impact on the Company's financial condition or results of operations.

However, the fluidity and continuation of the conflict may result in additional economic sanctions and other impacts which could have a negative impact on the Company’s financial condition, results of operations and cash flows.

These include decreased sales;

supply chain and logistics disruptions;

volatility in foreign exchange rates and interest rates;

inflationary pressures on and availability of raw materials and energy, most notably in Europe;

and heightened cybersecurity threats.

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 inflation, foreign currency exchange rates, interest rates, commodity prices and other market factors such as equity prices.

The Company’s global business operations also give rise to market risk exposure related to changes in inflation, foreign currency exchange rates (especially in highly inflationary economies such as Argentina), 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.

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All such claims are contested.

With the exception of the possible effect of the asbestos-related liability of Union Carbide Corporation (“Union Carbide”) and Chapter 11 related matters of Dow Silicones Corporation ("Dow Silicones") as described below, it is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

With the exception of the possible effect of the asbestos-related liability of Union Carbide Corporation (“Union Carbide”) as described below, it is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades.

At December 31, 2022, Union Carbide's total asbestos-related liability, including future defense and processing costs, was $947 million ($1,016 million at December 31, 2021).

In 1995, Dow Silicones, a former 50:50 joint venture, voluntarily filed for protection under Chapter 11 of the U.S.

Bankruptcy Code in order to resolve breast implant liabilities and related matters (the “Chapter 11 Proceeding”).

Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004, and is implementing the Joint Plan of Reorganization (the “Plan”).

The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding.

Dow Silicones’ liability for breast implant and other product liability claims was $130 million at December 31, 2021 ($160 million at December 31, 2020).

See Note 16 to the Consolidated Financial Statements for additional information on litigation matters.

Plastic Waste:

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

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.

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As a result, volatility in these costs could impact the Company’s results of operations.

The Company has a number of investments on the U.S.

Gulf Coast to take advantage of increasing supplies of low-cost natural gas and natural gas liquids ("NGLs") derived from shale gas including:

Charles Operations ("SCO-2") ethylene production facility, which commenced operations in December 2012;

an on-purpose propylene production facility, which commenced operations in December 2015;

an ethylene production facility in Plaquemine, Louisiana, which included expanding the facility’s ethylene production capacity and modifications to enable full ethane cracking flexibility;

completion of a new integrated world-scale ethylene production facility and a new ELITE™ Enhanced Polyethylene production facility, both located in Freeport, Texas, in 2017, and a capacity expansion project which brought the facility’s total ethylene capacity to 2,000 kilotonnes per annum in 2020;

and, the Company commenced operations in 2018 on its new LDPE production facility and its new NORDEL™ Metallocene EPDM production facility, both located in Plaquemine, Louisiana.

As a result of these investments, the Company’s exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane- and propane-based feedstocks.

While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist for the foreseeable future, if NGLs become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Company’s results of operations and future investments.

While the Company expects abundant and cost-advantaged supplies of natural gas liquids ("NGLs") in the United States to persist for the foreseeable future, if NGLs become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Company’s results of operations and future investments.

Also, if the Company’s key suppliers of feedstock and energy are unable to provide the raw materials required for production, it could have a negative impact on the Company’s results of operations.

Separation from DowDuPont:

Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont.

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 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) 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 (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