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2015: Year in Review Working Together to Value Nature

A COLLABORATION OF THE NATURE CONSERVANCY & THE DOW CHEMICAL COMPANY

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Five years ago, The Nature Conservancy and The Dow Chemical Company set out to demonstrate how the value of nature could improve business decisions and outcomes. It was an ambitious goal, rooted in Dow’s commitment to leading on sustainability and The Nature Conservancy’s focus to accelerate private sector integration of nature’s benefits in decision making.

Through the development of our Collaboration’s tools and research, we have shown that nature can benefit the bottom line of businesses and we are pleased to be on the forefront of this new shift in corporate strategy. The word is out – natural solutions can be good for business.

We are also pleased to report that Dow has established a new framework to identify, implement and value projects that are good for both nature and Dow. In April, Dow released its new set of 2025 Sustainability Goals, including a goal to Value Nature, which aims to begin delivering systematic and widespread investments in nature across the company. This transformative approach at Dow requires not only changes to the business environment and culture, but also the knowledge base and tools to assess the value of nature that the work of the Collaboration has helped to develop.

One of the key tools we developed is the ESII (Ecosystem Services Identification and Inventory) tool, designed to help companies across the world quantify ecosystem services. We launched the tool at the GreenBiz conference in February 2016 and it is now available in the Apple App Store for download by companies and individuals. At Dow, the Collaboration team is deploying the ESII tool at sites around the globe to both quantify the benefits from and impacts on nature and improve projects by enhancing ecosystem services and reducing impacts on the environment.

Our Collaboration constantly challenges the status quo in terms of reducing impacts on nature. Breaking new ground also means identifying challenges and further opportunities. As we embark on our sixth year, it is our hope that the momentum from our work is sufficient to show the importance of valuing nature so that it becomes mainstream for companies, governments and non-governmental organizations.

As always, we are excited to share the results of the past year with you and we invite you to take a look at our Annual Report that follows. We are particularly interested to share our work with other companies as the focus on natural solutions continues to evolve in the corporate sector.

We welcome your feedback on our work to date and your interest in helping to ensure what is good for business is also good for nature.

Sincerely,

Neil Hawkins Glenn PrickettCorporate Vice President Chief External Affairs OfficerChief Sustainability Officer The Nature ConservancyThe Dow Chemical Company

At the Forefront of Bringing Nature into Business

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Goals & ObjectivesOur Collaboration has always been motivated by showing that integrating the value of nature into business decisions can lead to better business outcomes and better conservation outcomes. Since the start, the Collaboration has been at the forefront of innovative nature-based approaches and solutions to business challenges. This was a bold new way of thinking that looks at how companies both impact nature and benefit from it.

We have not only helped build the case for why businesses should invest in nature; we have developed the tools and methodology to evaluate projects on this basis. As the Collaboration moves into its sixth and final year, we are now mainstreaming these tools into Dow’s business to support the implementation of their Nature Goal.

The Collaboration between Dow and The Nature Conservancy is an example of how organizations from different sectors can work together to further conservation and business outcomes. Our intention is that this Collaboration and its outcomes will serve as a model that other companies can replicate globally. Our ultimate goal is to encourage more companies to incorporate the value of nature into their practices and increase investment in protecting the planet’s natural systems, including freshwater, air, land, oceans and species, and the services they provide to people.

Capturing Nature’s Value: Lessons Learned and AccomplishmentsSince 2011, we have completed research at two Pilot sites and tested our newly developed tools and processes to work towards our goal. The Collaboration’s first Pilot was in Freeport, Texas – a site along the Gulf of Mexico that is Dow’s largest integrated manufacturing site globally and the largest single-company chemical complex in North America. Pilot #2 was located in Santa Vitória, Brazil, at a site where sugar cane is being grown and converted to ethanol, in an agricultural region on the border of two critically endangered biomes: the Cerrado and the Atlantic Forest. Our initial work at both these Pilot sites has helped to show a strong business case for nature and helped us develop the approaches needed to evaluate the business case for nature.

Lessons learned from our initial efforts include the importance of increasing awareness about conservation issues in business, creating a normative culture around the value of nature across Dow, identifying the incentives to build nature into business practices, and addressing policy and public affairs as key components of successful sustainability practices. Particularly, one lesson we have noted is that quantifying the value of nature may be sufficient to change business decisions when costs and benefits are internal to the business. However, many costs and benefits remain external to the business, likely requiring additional market or policy incentives. This is further described in the section on Challenges & Opportunities (pg. 16).

Our Collaboration – Goals & Milestones

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Collaboration MilestonesThis section highlights achievements since 2011, with a particular focus on how our research has informed Dow’s business decisions.

Nature-based solutions can mitigate risks associated with water scarcity. Research at Pilot #1 site Freeport, Texas, showed that nature-based solutions can be cost competitive with other solutions for increasing water availability in areas that are more at risk for drought. Our analysis showed how Dow could better translate water risk into economic terms and account for the risk from climate change,i which were both incorporated into the site’s water management plan.

Nature can help protect business assets from storm damage. Our research at Pilot #1 site in Freeport, Texas also showed that asset protection strategies, which incorporate marshes with more conventional infrastructure, such as dikes and levees, could better protect business assets from storms and flooding than conventional infrastructure alone. While marshes can help protect against sea level rise and small storms, levees are still needed in this location to protect against the damage from large hurricanes.ii The analysis did not result in a change in levee design by accounting for coastal habitats, but it increased Dow’s understanding of the value of coastal habitats and the replicable method could be applied at other sites.

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New tools quantify natural infrastructure and services. The Collaboration’s work to develop advanced tools and evaluation methods, such as the ESII tool (Ecosystem Services Identification and Inventory), can offer strong insight into nature-based solutions for businesses. Through understanding baseline conditions and natural design alternatives, companies can make decisions with nature taken into account.

Using forests to reduce air pollution. Our pilot project in Freeport showed that reforestation could be an important natural solution to mitigate high ground-ozone levels, a harmful air pollutant.iii These findings have important policy implications and the team has met with federal and state agencies to advance reforestation as a novel regulatory approach for ozone abatement. (See Policy section, pg. 16).

Balancing economic and nature trade-offs. The Collaboration’s second pilot in Santa Vitória, Brazil was an opportunity to address new and different challenges. Brazil’s Forest Code requires forest protection and restoration, and Santa Vitória is in a region where less than 6% of natural vegetation remains. Our analysis showed how the site could strategically lease farm land and conduct required reforestation in a way that would be both cost effective and better for biodiversity and ecosystem services. The Collaboration developed new tools to assess different approaches and demonstrated that better economic and ecosystem benefits can be achieved when a landscape level approach is applied as compared to a parcel-by-parcel approach.

Creating a corporate culture to value nature. The work of the Collaboration has engaged staff at eight Dow sites to date, which has helped to build a network of champions across the company motivated to look for new nature-based solutions to business challenges. This set of champions will be vital to support the team as Dow seeks to implement the Nature Goal across the company.

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2015 marked a shift in our Collaboration’s work toward a more integrated and crosscutting approach to incorporating nature into Dow’s broader business practices. This year, we launched Pilot #3, which tests Dow’s 2025 Nature Goal at multiple locations and builds on the research and insight we gained through our previous pilot studies, in Freeport, Texas and Santa Vitória, Brazil.

Our 2015 objectives and progress are highlighted in Table 1 below.

2015: In Focus

2015 Objectives Status

1. Complete first version of the ESII (Ecosystem Services Identification and Inventory) tool; publish business cases and roll out across Dow at a minimum of five sites and begin testing with other companies.

In Progress

2. Conduct third pilot that incorporates the value of nature into Dow’s next-generation approach to sustainability.

Complete

3. Continue to evaluate the ways to leverage results from first two pilots by defining opportunities to bring nature’s value into business processes at Dow.

Complete

4. Share Collaboration results with other companies to encourage them to integrate the value of nature into their business decision-making.

Complete

5. Continue to advocate jointly on policies that support ecosystem-related strategies and natural-infrastructure investments.

Complete

Note on Objective 1: ESII tool is complete, and business cases have been published; however testing has not begun with other companies.

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Dow’s 2025 Nature Goal – Next Generation Sustainability at DowOver the last five years, the Collaboration has worked at different sites and in various ecosystems to address a range of business questions. This gave us proof of concept for the business case for nature and allowed us to develop and test tools for valuing nature in the business context. One of the biggest challenges has been to determine how to make valuing nature practical, routine and ultimately, conventional for staff across Dow.

Earlier this year, Dow launched its 2025 Sustainability Goals, including the unprecedented goal to Value Nature. Dow’s 2025 Nature Goal is a milestone in the business sector, marking one of the first commitments of its kind by a corporation to consider nature in nearly all of its business decisions. Corporations often own or interact with substantial amounts of natural resources and therefore have significant potential to direct spending towards natural solutions. Dow’s Nature Goal aims to address both the direct and indirect impacts of business on nature. Being aware of and investing in natural solutions can help businesses save money, reduce risks, and build value for shareholders, stakeholders, and customers. It can also help to ensure the health of ecosystems upon which businesses and communities rely.

Recognizing that systematic and widespread investments in nature are good for business, the Nature Goal aims to deliver the tools, structure and business environment through which to do so. This will result in the evaluation of thousands of business projects each year on their benefit from or impact (positive or negative) on nature – fundamentally changing the way Dow does business.

Dow’s 2025 Nature Goal has two parts:1. By 2020, all capital, research and development, and real

estate projects at Dow will be assessed to determine their dependence on or impact on nature using methodology and screening tools developed by the Collaboration. Following screening, analyses will be conducted on any projects that pass the screen to compare the value of nature from alternative project designs-- with the aim of improving project designs to enhance positive impacts on nature and reduce negative impacts on nature.

2. By 2025, Dow will deliver $1 billion in value through projects that are both good for business and good for nature.

The goal will transform behavior and culture across the company and implementation will rest with every project lead at Dow. The goal is a long-term approach to produce lasting value for both business and nature, with a view towards more sustainable business solutions and practices.

Tools & Practices: Evaluating Nature-Based SolutionsOur rigorous scientific testing during our first five years gave us a strong platform to adapt our research and tools for assessing nature-based solutions at Dow, and provided us a basis by which to bring our work to scale.

Key accomplishments in 2015 have included finalizing the development of new tools to assess the value of nature and applying our knowledge to more geographically-diverse project portfolios, including the following:

• Creating a screening tool to assess projects for Dow’s Nature Goal;

• Finalizing development of the ESII (Ecosystem Services Identification and Inventory) tool to quantify the value of nature; and

• Launching Pilot #3 to test implementation of the Nature Goal at multiple sites.

Screening Tool: Assessing Nature’s Future Value

The Collaboration has identified three tiered steps, together embodying Nature’s Future Value or NFV, to evaluate projects and their interaction with nature as part of Dow’s Nature Goal: 1) overall screening for impacts/dependencies; 2) analysis to improve projects’ use of nature-based solutions and impact on ecosystem services (using ESII or other tools); and 3) research to advance new, promising projects and technologies.

The first step – screening –uses a tool developed by the Collaboration to assess all of Dow’s projects to see how they interact with nature. The screen helps a project manager consider a project’s inputs (e.g., water, natural resources), outputs (e.g., emissions, wastewater), impacts (positive or negative) on natural and semi-natural areas, and opportunity for nature-based solutions. In 2015, our screening tool was tested at three sites on multiple projects, with a focus on improving the screen after each site test.

As part of Dow’s Nature Goal, by 2020, all capital, research and development, and real estate projects are required to be assessed by the screening tool before implementation. Dow project designers and managers will use the tool at the outset of a new project.

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ESII Tool: Quantifying the Value of Nature

A key achievement of the Collaboration in 2015 was the completion of the ESII (Ecosystem Services Identity & Inventory) tool, designed to rapidly provide metrics about the various ecosystem services delivered by nature on a business site.

The tool stands apart from other ecosystem service tools for business because of its ease of use, modeling of multiple ecosystem services on a site scale, and its outputs in both relative percent performance and in engineering units. The ESII software will allow any trained user to collect ecological data, which the tool processes to provide outputs on the production of ecosystem services. Providing outputs in standard units of measure (e.g., gallons of stormwater controlled) is important because these units make sense in absolute terms to business users and they can readily be input into financial models to inform business decisions.

These attributes of the tool make it easy for project managers to relatively quickly assess alternative project designs based on how good they are for the business and nature. The ESII tool is an important part of the Collaboration’s mission to incorporate the value of nature into business decisions, strategies and goals.

Development and Completion of the ESII Tool v1

The tool fills an important gap in the ecosystem service tool space between simple tools, which don’t provide sufficiently robust outputs and very complex tools that only experts can use.

Building on lessons learned in 2014 from various ESII model and usability testing, the tool was refined to be more adaptable and user-friendly. In late 2015, the team completed a rebuild of the tool’s interface, setting up the tool for its next phase; general release of an application that can be downloaded on a tablet and the development of a web portal for project set up and reporting.

The ESII tool application was launched publicly in February, 2016, and is available in the Apple App Store.

ESII Tool in Practice

Business question: Dow’s Industrial Park in Institute, West Virginia, was in the process of clearing tanks from a 10-acre portion of land and wanted to redevelop the area as a greenbelt to deliver rainwater to streams, help control erosion and improve overall aesthetics for the community.

Scenarios: The project team developed and analyzed two sustainable landscaping scenarios: a basic restoration plan and a more complete restoration plan to redevelop the area as a greenbelt with native trees, grasses, and restoration of the stream running through the site. These options were compared to a standard redevelopment plan, involving planting a traditional lawn, as well as to the baseline conditions.

Using the ESII Tool: In order to model the baseline ecosystem services, the team visited the Institute site and used the ESII tool to collect data on the attributes of the site. The tool asks the user a series of questions (e.g., What is the dominant vegetation? Is water present?) to gather input data that is then used by the tool to model various ecosystem services. The team then develops alternative scenarios, in this case for sustainable landscaping, and inputs data on these scenarios into the tool. The team can then easily compare ecosystem services under alternative project scenarios (e.g., sustainable landscaping, standard re-development, baseline).

Outputs of the ESII Tool: By using the ESII tool, Dow engineers and experts from The Nature Conservancy were able to determine that using sustainable landscaping was cost-competitive with conventional redevelopment options, while providing greater ecosystem services benefits to Dow and the surrounding community. Specifically, sustainable landscaping could help improve water quality and manage runoff while improving aesthetics for the neighbors of the site.

Ecosystem Services Modeled by ESII Tool:

• Water provisioning• Water quality control• Water quantity control• Air quality• Local climate regulation• Erosion regulation• Aesthetics – visual and sound• Flood mitigation

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The key objectives of the third pilot are to:

1. Build a cadre of champions and implementers for the Nature Goal process at Dow supported by The Nature Conservancy;

2. Test the tools and process underlying the Nature Goal at multiple sites a. Screen multiple business decisions for their benefit from and impact on nature; and b. For projects that pass the screen, scope and analyze opportunities to support or improve project design in order to enhance benefits

to the business, society, and nature.

Highlights from our project work in 2015 are captured on the following pages.

Highlights from Pilot #3 Locations

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Enhance Ecosystem Services & Reduce Business Costs: Greenbelt Restoration

Site Location: Midland, Michigan; Project: Midland Greenbelt

At a portion of the Midland site’s greenbelt containing legacy site issues, Dow’s business question was how to address the site issue and restore habitats to reduce operating and maintenance costs, while enhancing the ecosystem services to Dow and the surrounding community. The 37-acre parcel was also of particular interest as it is located on the Tittabawassee River, adjacent to a city park and another brownfield property owned by the city, which could add another 10 acres of restoration. Dow could move ahead with the standard business restoration practice of capping the impacted area and planting grass seed or could instead cap and ecologically restore the land.

To address the business question, the ESII tool was used to evaluate the baseline conditions at the Midland greenbelt site as well as three alternative restoration designs, including:1) Standard brownfield restoration (SBR) on the greenbelt and additional city-owned brownfield property; 2) Ecological restoration (ER) on the greenbelt, and using standard restoration on the additional city-owned brownfield property; and 3) Ecological restoration of both the greenbelt and additional city-owned brownfield property (ER+).

Using the ESII tool, the research team looked at several different ecosystem services, including: noise, visual aesthetics, water filtration, water nitrogen removal, and water quantity control. (See Figure 1 below)

Outcome: The research team found that if ecological restoration of both the Dow greenbelt and additional city-owned brownfield property (ER+) were undertaken, that the majority of ecosystem services would be higher than the baseline measurements. The restoration would save Dow an estimated $2 million in maintenance costs (mowing, fencing, etc.) over a ten-year time frame, provide numerous ecosystem services to the surrounding community (e.g., open space, improved aesthetics and storm water management), and provide benefits to nature by restoring pre-settlement beech-maple forest, prairie, and wetlands.

80%

70%

60%

50%

40%

30%

20%

10%

0%Aesthetics – Noise Aesthetics – Visual Water Quality –

Water FiltrationWater Quality –

Nitrogen RemovalWater Quality Control

◼ Baseline ◼ ER ◼ ER+◼ SBR

Figure 1

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Building the Business Case for a New Nature-Based Technology

Site Location: Midland, Michigan; Project: Dow Headquarters

At the planned new Dow headquarters building in Midland, there was interest in using the ESII tool to analyze how landscaping could be designed in a more sustainable way, particularly focusing on use of native grasses to reduce mowing and improvements in stormwater management.

Permeable pavement was identified as a possible way to help with stormwater management and the team used the ESII tool to look at a number of services associated with this new type of pavement, including water quantity, water quality, and erosion. Evaluating the full design of the new headquarters’ landscaping, the research team found that all services improved relative to the baseline current condition of the land.

Outcome: The research team demonstrated that the newer pavement helps nature do what it does best. Standard pavement blocks water absorption, but permeable pavement enables the ground to absorb water the way it naturally would – and at a lower cost due to a reduction in future maintenance requirements. As this technology is newer, more research needs to be conducted to validate that permeable pavement is a strong, long-term solution, at engineering and policy levels. The findings of this work, as well as the in-house expertise developed at Dow, will be applied to future development projects at Dow sites around the world.

Constructing a Wetland for Water Recycling

Site Location: Terneuzen, Netherlands; Project: Water Nexus

In late 2015, the Collaboration began assessments of projects at a Dow site in Terneuzen, Netherlands and is outlining which projects will be analyzed further following a review of Nature Screen outcomes. The site holds strong potential for Nature Goal related projects, particularly as the site has committed to using no remote sources of freshwater in their operations by 2020. One potential solution to reduce the site’s dependence on remote freshwater supplies is to construct a wetland to recycle brackish water.

The site staff, assisted by the pilot team, will use ESII to evaluate scenarios for the site both with and without the constructed wetland. The Terneuzen staff will also be the first Dow employees to use the completed ESII tool, showcasing the path for rolling out the tool across the company.

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Considering Nature’s Value in Real Estate Management

Site Location: Bristol, Pennsylvania; Project: Croydon Woods

Across Dow, and at other corporations, there is a need to make decisions about how to manage real estate, which often includes vast natural areas. A standard business decision might be to simply sell land for development; however, natural areas on a site present an opportunity to sell land into conservation, which would generate revenue and maintain ecosystem services. At Dow’s site in Bristol, Pennsylvania, the business question was whether placing 80 acres of natural land into conservation (and selling it at discounted price) provides an equal or greater value to Dow and the community than simply selling the land for development because conservation preserves valuable ecosystem services. This parcel of land is of particular interest for conservation because it is a rare woodland in the Delaware River floodplain. The woodland provides habitat for seven endangered and four threatened plant species.

The ESII tool played an important role in answering the business question as it accounted for ecosystem service values from the land, which would typically not be considered in the decision. If the ecosystem services were not taken into account, selling the land into conservation could be less attractive. To address this question, the ESII tool was used to evaluate three scenarios:1) Maintain ownership of the land2) Standard business practice: sell the land for development at market price3) Conservation: have a conservation easement placed on the land, selling the land to a local land trust at a discounted price

Outcome: Preliminary results indicated that selling the land to conservation would result in reduced maintenance costs to Dow over time (relative to maintaining ownership of the land), as well as tax breaks, and would preserve an area of open space buffer between the plant and the nearby community. The community would benefit from maintaining open space, air quality, and creating new recreation possibilities. The benefit to nature, of course, would be securing protection for a rare woodland habitat, which helps to support ecological functions in the area and endangered and threatened species. In late December 2015, Dow sold the land to the Heritage Conservancy, a local Pennsylvania preservation group.

One important lesson so far from this analysis, however, is that although the ESII tool can identify a number of ecosystem services that the woodlands may provide to Dow (e.g., air quality control, storm water management), Dow cannot currently capture the value of those services in terms of avoided costs due to current market and policy conditions. Importantly, this business case and others from Pilot #3 are helping to identify specific market and policy barriers that may continue to impede investment in natural capital.

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As a follow-up to the Collaboration’s Pilot #1 in Freeport, Texas, on air-quality, the team continues to work with counterparts from Dow Texas Operations and The Nature Conservancy’s Texas Chapter to influence policy at the state level – (Texas Commission on Environmental Quality – TCEQ) and at the federal level (U.S. EPA Office of Air Quality Planning and Standards). The team has met with federal and state agencies to advance a novel regulatory approach for ozone abatement. Specifically, the team is soliciting input on how the reforestation concept from the Freeport air pilot could be included in the Texas State Implementation Plan (SIP) for air quality, which would allow Dow and other companies the option to invest in reforestation alongside other traditional

engineered measures, such as air scrubbers, to meet regulatory requirements. Dow currently owns a parcel of land appropriate for forest restoration that has been identified as a potential pilot site to further this work. Pilot #3 has shown that there are more cases where policy change is needed to enable Dow and other businesses to invest in natural infrastructure. The policy groups from both organizations continue to discuss how they can work together to advance these, in addition to seeking to achieve common conservation goals at the Federal and State levels.

Challenges & Opportunities

Policy

Through the work of our Collaboration, we have been able to identify several challenges and opportunities related to valuing nature. As previously mentioned, we have gained insight into research limitations and challenges in identifying incentives to build nature into business practices. Particular findings include:

Progress and Limitations in Assessing and Capturing Costs/Benefits: Our research confirmed that simply quantifying the value of nature, and thereby uncovering an incentive for investing in nature, may be sufficient to change business decisions when the costs and benefits related to nature are internal to the business (e.g., captured as new cash flows, avoided costs) and/or meet a business need (e.g., operational or regulatory requirement). For example, research at the Dow site in Institute, WV showed that nature-based solutions to removing a tank farm and developing the open land as a greenbelt were quite clear as there were benefits that were internal to Dow and met a business need (e.g., reduced mowing and compliance costs). We recognize—and our research has confirmed—there is also value from nature that is not easily quantifiable, but does provide benefits (e.g. reputational value, employee engagement, community relations, etc.) that factor into decision making. Using the same example, the Institute research also provided quantitative indicators of how the greenbelt could potentially benefit the community and Dow’s relationship with the community. Yet, more work is needed to strengthen the link between nature's value and business decisions in cases where costs/benefits from nature remain external to the business and/or nature’s value is difficult to assess. For example, our work at Dow’s Midland location to assess permeable pavement showed that policy conditions, in this case standard city stormwater

management, hindered the ability to fully assess and capture potential cost savings associated with permeable pavement. During the final year of the Collaboration, we will continue to conduct research and pursue changes in business and public policy that enhance the viability of nature-based projects at Dow and other businesses.

Natural Infrastructure is an Emerging Concept: The concept of natural infrastructure is new and less tested than traditional technologies. In a business context, applying a type of infrastructure that is less validated carries a certain level of risk, particularly when compared with standard infrastructure that has been used many times and has documented performance outcomes. The challenge and opportunity is further validating natural infrastructure as a cost- and performance-competitive option to standard infrastructure, thereby strengthening the overall business case.

Change Management and Shifts in Corporate Culture: Historically, business and nature have been considered separate, which requires a certain ‘shift in culture’ towards more nature-focused solutions and opportunities. Furthermore, adapting the tools and knowledge generated by our Collaboration will undoubtedly take time to become mainstream across Dow. For the Nature Goal to succeed, all Dow project managers and engineers will need to take ownership of these new processes, which is an important and substantial company-wide change management strategy. The Collaboration’s work, particularly around tool development and progress in Pilot #3, is an important aspect of Dow’s broader change management process.

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Next StepsWe are heading into our sixth year and final year – one that will be the culmination of our efforts to date. To begin 2016, the Collaboration launched the ESII tool. Building on the Collaboration's methodology, the team will focus heavily on helping ensure that the right tools and processes are in place to help support Dow’s 2025 Nature Goal.

In 2016, our aim is to revisit our first pilot site in Freeport, Texas, and start to enable the site to value nature more broadly through Dow’s 2025 Nature Goal process. As with other Nature Goal pilot sites, we will conduct a nature screen workshop to evaluate a variety of projects and identify a few for further analysis with the ESII tool or other tools. To do so, we will apply the tools and process in a range of previously untested conditions – from varied Dow project types, ecosystem services and geographies – building out our list of locations for Pilot #3, including the following:

• Freeport, Texas: The Collaboration’s first site location provided substantial knowledge and lessons learned through in-depth research on three business questions related to freshwater scarcity, coastal hazards, and air quality. Building on previous work at Freeport, we expect to explore further opportunities to manage freshwater, looking at the economics of nature-based solutions, as well as assessing real estate decisions at the site.

• St. Charles, Louisiana: Dow’s facility in St. Charles sits inland 50 miles from the Gulf of Mexico behind a complex set of wetlands and other land uses, which provides the opportunity to take some of our previous research in Pilot #1 on the role of coastal habitats in providing natural hazard mitigation to scale.

Communicating FindingsA foundational principle of the Collaboration is to share results and tools publicly through peer-reviewed publications and various other communications so that other companies, scientists, and interested parties can test, apply and benefit from the Collaboration’s work. Additionally, the Collaboration has begun to share our experiences with policymaking authorities and key stakeholders around the world to raise awareness and inspire broader action.

From the beginning of the Collaboration, it has been our hope that by sharing experiences and lessons learned, other companies will be inspired and have the tools to better integrate the value of nature into their decision making. As more companies use these methods and tools, we expect that greater investment in nature conservation should follow because in many cases, such investment makes good business sense.

2016 Objectives1. Complete third pilot testing of Dow’s 2025 Nature Goal

process and tools, and develop summary materials for dissemination within Dow and externally.

2. Launch ESII tool publicly, and collect feedback from select companies and organizations, while continuing to also conduct further ESII tool testing at Dow.

3. Identify opportunities to leverage results from the three pilots at Dow and beyond.

4. Collect, summarize and share lessons learned from the six year Collaboration through a variety of media (speeches, conferences, papers, blogs, and web).

5. Continue to advocate jointly on policies that support ecosystem-related strategies and natural-infrastructure investments.

Looking Ahead to 2016

Articles Published in 2015

Reddy, S.M.W1, R.I. McDonald1, A. Maas2, A. Rogers3, EH Girvetz1, J. Molnar1, T. Finley4, G. Leathers4, and J.L. DiMuro4. 2015. Industrialized watersheds have elevated risk and limited opportunities to mitigate risk through water trading. Water Resources and Industry 11, 27-451The Nature Conservancy, 2Department of Agricultural and Resource Economics, Colorado State University, 3Nicholas School of the Environment, Duke University, 4The Dow Chemical Company

Reddy, S.M.W1, R.I. McDonald1, A. Maas2, A. Rogers3, E.H. Girvertz1, J. North1, J. Molnar1, J.L. DiMuro4, T. Finley4, G. Leathers4. 2015. Finding solutions to water scarcity: A case study of incorporating ecosystem service values into business planning at The Dow Chemical Company’s Freeport facility. Ecosystem Services 12: 94-107. 1The Nature Conservancy, 2Department of Agricultural and Resource Economics, Colorado State University, 3Nicholas School of the Environment, Duke University, 4The Dow Chemical Company

Reddy, S.M.W.1, G. Guannel2, R. Griffin3, J. Faries2, T. Boucher4, M. Thompson5, J. Brenner5, J. Bernhardt2,6, G. Verutes7,8, S.A. Wood2, J. Silver2, J. Toft2, A. Rogers1,9, A. Maas1,10, A. Guerry2, J. Molnar4, J.L. DiMuro11. 2015. Evaluating the role of coastal habitats and sea-level rise in hurricane risk mitigation: An ecological economic assessment method and application to a business decision. Integrated Environmental Assessment and Management doi: 10.1002/ieam.16781Central Science Division, The Nature Conservancy, Durham, North Carolina, USA; 2The Natural Capital Project, Woods Institute for the Environment-Stanford University, School of Environmental and Forest Sciences, University of Washington, Seattle, Washington, USA; 3The Natural Capital Project, Woods Institute for the Environment-Stanford University, Stanford, California, USA; 4Central Science Division, The Nature Conservancy, Arlington, Virginia, USA; 5Texas State Chapter, The Nature Conservancy, Corpus Christi, Texas, USA; 6Department of Zoology, University of British Columbia, Vancouver, British Columbia, Canada; 7The Natural Caxpital Project, Woods Institute for the Environment-Stanford University, Conservation Science Program, World Wildlife Fund-US, Washington, DC, USA; 8The Natural Capital Project, Woods Institute for the Environment-Stanford University, Stanford, California, USA; 9Nicholas School of the Environment, Duke University, Durham, North Carolina, USA; 10Department of Agricultural and Resource Economics, Colorado State University, Fort Collins, Colorado, USA; 11Global EH&S and Sustainability, The Dow Chemical Company, Midland, Michigan, USA

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Neil HawkinsMark WeickMary Draves

Beth UhlhornFrance GuertinLisa Gill

The Dow Chemical Company The Nature Conservancy

Catherine AbbottTodd BeardRichard BiddleTim BoucherRobert CasselberryNina ChenRenata CortesMartin CrookJarod DavisPaul DeanMichael De GraafJohn DiMuroMary DravesAnita Drummond Zachary DunkelburgerMorgan ErhardtJon FisherJosh Goldstein

Cornelis GrootFrance GuertinTodd GuidryJudy GundersonMichelle HalseyKevin HalseyLaura HuffmanCrystal JonesZoe KantMichael KayTheron KelsoJim KoloszarChloe LieberknechtPaul MansonChris MayKevin McVeySteve PolaskyThomas Polzin

Caroline SpruillSteve ThroneCornelis Van HouwelingenPaul Van RietLauren VersagliJeff WeigelBetsy WittEcoMetrix Solutions Group, LLCThe Gartrell Group, LLCTNC – Michigan State ChapterTNC – Pennsylvania State ChapterTNC – Texas State ChapterTNC – Office of the Chief ScientistTNC – Corporate EngagementDow BristolDow Texas OperationsDow West Virginia Operations

We would like to acknowledge the following people, groups, and organizations for their involvement in and support of the Collaboration work in 2015.

Core Project Team Members in 2015

Acknowledgements

Glenn PrickettBen PackardJennifer MolnarJim South

Jeff NorthSheila ReddyJesse GallunKathryn Graczyk

Eric SchrierJulie Ulrich

References

i Reddy, S.M.W, et al. 2015. Finding solutions to water scarcity: A case study of incorporating ecosystem service values into business planning at The Dow Chemical Company’s Freeport facility. Ecosystem Services 12: 94-107.

ii Reddy, S.M.W, et al. 2015. Evaluating the role of coastal habitats and sea-level rise in hurricane risk mitigation: An ecological economic assessment method and application to a business decision. Integrated Environmental Assessment and Management. 9999: 1-17

iii Kroeger, T, et al. 2014. Reforestation as a novel abatement and compliance measure for ground-level ozone. PNAS Plus. 111(4): E4204:E4213.

iv The Nature Conservancy & Dow. 2014 Annual Progress Report. Available at: http://www.nature.org/media/companies/the-nature-conservancy-dow-collaboration-progress-report-2014.pdf

ContactsThe Nature Conservancy

Benjamin Packard, Managing Director, Corporate Engagement, bpackard@tnc.orgJennifer Molnar, Managing Director and Lead Scientist, Center for Sustainability Science, jmolnar@tnc.org

Jim South, TNC-Dow Collaboration Lead, jsouth@tnc.orgwww.nature.org/dow

The Dow Chemical CompanyMark Weick, Director, Sustainability Programs, mcweick@dow.com

Beth Uhlhorn, Project Manager, Ecosystem Services, emuhlhorn@dow.comwww.dow.com/sustainability

Photo credits: Pages 1, 2, 3, 6, 7, 11, 12, 18, 20: Courtesy of Jennifer Molnar, The Nature Conservancy Pages 5, 8, 14, 15: Courtesy of The Dow Chemical Company®™ The DOW Diamond Logo is a trademark of The Dow Chemical Company (“Dow”) or an affiliated company of Dow.© 2016 The Dow Chemical Company

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