Andrew Liveris, Dow Chairman and CEO
London
April 2, 2013

Andrew Liveris, Dow Chairman and CEO, delivered the George E. Davis Lecture to members of the Institution of Chemical Engineers (IChemE) in London. Liveris’ lecture, titled “The Industrial Evolution: Advanced Manufacturing in – and for – the Global Economy”, addressed the changing nature of manufacturing in the 21st century and challenged chemical engineers to innovate solutions at the intersection of the sciences that will drive this revolution forward.

Liveris was invited to give the Davis lecture in recognition of his receipt of the George E. Davis medal in 2011. Not given more than once every three years, the Davis Medal recognizes contributions to chemical engineering and honors the founding father of the chemical engineering profession.


REMARKS AS PREPARED FOR DELIVERY

Good evening.

Thank you, Russell, for that wonderful introduction – and for your outstanding leadership at IChemE. And thank you, all, for the warm welcome.

Two years ago, IChemE was generous enough to award me the George E. Davis Medal, an extraordinary honor that I will always treasure. So, I am thrilled to be here to celebrate that honor – and grateful for the opportunity to share a few words this evening.

Here in the land of John Dalton, and Joseph Priestley, and Thomas Graham, you know more than most about the dawn and development of our noble enterprise…

And yes, that would be Alfred Nobel’s enterprise – chemistry – the work of combining and recombining the 118 elements into solutions for humanity’s most intractable challenges.

But at the same time, “chemical” – the adjective – is no longer, in my view, big or broad enough to describe the work we do, the work we love, or the future we seek to build.

Yes, chemicals are our stock-in-trade.

But too often, I think, we, and others, believe they are the extent of what we can produce – the outer limit of what we can achieve. We believe that we are simply in the commodity chemicals business – or only in the specialty chemicals business.

Well, I think that view – and those terms, which reflect it – are outdated.

And I think they diminish the opportunities that we – with our singular expertise – may uniquely be positioned to seize.

Like the opportunity to help master humanity’s most pressing problems – from raising the quality of life… to feeding a growing global population… to decreasing our carbon footprint.

And that is exactly the point I want to expand on this evening:

The most meaningful work is not done – and cannot be done – within a chemical industry that is siloed. The most meaningful work is done at the intersections.

It happens when we collaborate across boundaries, across industries, across markets and value chains, across disciplines, across all discontinuities.

It happens when we understand chemistry as an essential – you might even say elemental – part of manufacturing. The grand project of making the things – novel and necessary things – that transform our world and the way we live in it.

Two centuries ago, the United Kingdom gave birth to the Industrial Revolution, which changed human history.

Two hundred years later, I believe our industry… the chemical industry…. is at the vanguard of another industrial revolution. A manufacturing revolution. Here in the UK and around the world.

This evening, I want to talk about exactly how we – working at the intersection of so many sciences… and, indeed, of all sciences – can drive this revolution forward.

The Chemical Industry’s New Reality – Here and Abroad

First, a little perspective.

Without question, we live and operate in a period of extreme volatility and uncertainty.

Europe, as we all know, is facing existential challenges to its economic models and to its political institutions. Events in Cyprus are only the most recent of numerous examples.

In the United States, meanwhile, a recovery is underway, but it is partial, and gradual.

And yet, at the same time, we all should – and do – have cause for optimism. Especially those of us in the manufacturing sector in general, and in chemistry-related fields in particular.

Around the world, manufacturing is making a comeback. Many of the jobs the United States has created during the past three years – over 500,000 of them, in fact – are in the manufacturing sector.

Countries like China are transitioning from manufacturing low-end products to inventing high-end ones, creating more jobs and wealth for their citizens.

And here in the U.K. – and indeed across much of Europe – we can sense renewed promise and possibility. It was former Chancellor Norman Lamont who first uttered the phrase “green shoots.” Well, we are seeing them here – and in abundance.

For one thing, the U.K.’s manufacturing sector has remained somewhat insulated from the overall downturn because it is such a large exporter – and because the chemical and pharmaceutical industries, in particular, are your largest manufacturing-based export earners. Together they account for one of every five dollars in manufactured exports. That is a £6.1 billion trade surplus.

What is more, the U.K. chemical industry is well positioned to serve as a driver for growth in the automotive, and aerospace, and life sciences industries.

You are producing the essential building blocks that other industries need—whether new battery technologies for the automotive industry or new lightweight materials for the aerospace industry.

You, without a doubt, are at the vanguard of a manufacturing renaissance here, across Europe, and around the world.

And so your challenge is not identifying the opportunities “out there.” Your challenge is seizing them – because they are well within your reach.

Manufacturing Matters

Indeed, we must seize them. We cannot afford not to.

Because manufacturing, in a word, matters. And the data well proves it.

Studies show that depending on the type of manufacturing, each job inside the plant can spur the creation of three to five more outside of it.

That is a remarkable multiplier effect – and it is not limited to job growth alone.

It extends to nearly every metric of a nation’s economic competitiveness.

The multiplier effect extends to trade and exports. Per unit of output, manufacturing businesses are nearly 10 times stronger exporters than services.

The multiplier effect extends to productivity. Compared to jobs in other sectors, manufacturing jobs contribute twice as much, on average, to national productivity.

It extends to the worth of a country’s natural resources. When natural gas, for example, is not exported or burned for energy – but is, instead, used as an ingredient in the manufacturing process – it creates 8 times more value across the economy.

Manufacturing multiplies… boosts… accelerates all these things.

That is how much manufacturing matters.  

The Case for Advanced Manufacturing

Still, I want to be perfectly clear:

Our goal should not merely be restoring traditional factory jobs in the developed economies.

Rather, our goal should be fostering a new breed of manufacturing sector – an advanced manufacturing sector – in developed and emerging economies both.

And that is why we need national strategies… even a global strategy… that all is part of an advanced manufacturing agenda.

Advanced manufacturing refers to state-of-the-art modern industries – industries that support high-paying jobs, create groundbreaking products, use modern processes and forge solutions to the world’s biggest challenges. Advanced manufacturing operates at the intersections of sciences and markets.

And it is a term that I think Dow and our book – Make it in America – have helped build awareness for around the world. Just last week in China, at a forum organized so that foreign executives could meet the country’s new leaders, I heard the Premier use that term at least 6 times… in 45 minutes. A small, but telling example that the Chinese are focused on their SEI’s with a strong advanced manufacturing lens.

China gets it. They understand that when we talk about advanced manufacturing, we are talking, specifically, about making products like medical imaging machines… solar cells… faster, more powerful semiconductors… and advanced water filtration systems.

Or some of the innovations we are developing at The Dow Chemical Company – like Dow’s trans- fat free Omega 9 cooking oils, which – since their launch in 2005 – have reduced the American consumption of trans- and saturated fats by 1 billion pounds…or a smart paint which improves indoor air quality by eliminating toxic formaldehyde from the air.

These are solutions, as you know, that improve our quality of life.

And here is the most critical part: By building advanced, next-generation products, companies and countries will also build capacity for further innovation. For the next, next generation. Let me explain.

As the head of a global company that both manufactures products and invents new ones, I can tell you this: Where production goes, innovation inevitably follows, creating, for countries that get it right, a virtuous and self-sustaining cycle.

Take the electronics industry. One company opens shop. Soon, suppliers, and R&D centers, and universities move in nearby. Over time, more businesses co-locate in the same place. And, ultimately, an entire ecosystem of production and innovation flourishes. An ecosystem, for example, like Silicon Valley.

Silicon Valley is a living organism that knows how to start up, fail, and then start up again. Quickly. The world is building innovation ecosystems and incubators like this everywhere. But especially in places where advanced manufacturing industries – and the talent needed to work in them — are located.

I see the game-changing innovations these industries produce… and the growth they set in motion. Broad-based, sustainable growth – not in which one sector expands and others atrophy, but, instead, many sectors expand together. Growth that sometimes slows or stalls, but always pushes us toward the next frontier of knowledge.

Policy Strategies for Global Growth

Even still, as we all know, this virtuous cycle does not set itself in motion. It depends on our ability to pull together – across oceans, across borders, across sectors, across industries. It depends on our ability to work at the intersections.

Around the world, we have seen nations like China do exactly this. But not just China.

We have seen democratic countries foster a trade environment that minimizes risk and opens markets. We have seen countries invest in modern infrastructure and in better education and training. We have seen countries offer the right mix of incentives for businesses – to build partnerships between their public and private sector.

And guess what happened? In Singapore… and in Germany… and in Thailand… and elsewhere… manufacturing has flourished – and a cycle of investment, job creation, and prosperity has followed.

This, in my view, is what the U.K., the EU, and – indeed – the entire world needs to do more of.

Certainly, I understand that no two countries are exactly alike. We do not all share the same structures of government, the same supplies of natural resources, the same skill sets in our workforces, the same culture.

But increasingly, all countries need to consider the same sorts of economic policies if they want to boost their advanced manufacturing sectors in a new type of growth environment.

Policies from common-sense tax and regulation schemes… to investments in infrastructure… to fair and free trade agreements. And of course, policies that help bridge the gap between the skills that employers need and the competencies that workers have.

In a globalized world, advanced manufacturing companies can – and will – set up shop where the talent is.

That is why we should all be encouraged by the growing trend in this nation – the trend of students and parents making more informed decisions when it comes to choosing degrees that lead to good jobs. Degrees like those in science, math, and engineering.

In fact, the number of undergrads applying to study chemical engineering was at a record high this year.

This pressing policy issue deserves more airtime, but there is one more I would like to address before closing this evening: Energy. Because a manufacturing renaissance, first and foremost, requires a smart energy policy – one that prioritizes affordability and security in addition to climate.

A Smart Energy Policy

I think we all can agree that among manufacturers – and chemical providers – in Europe today, the most pressing concern is access to affordable energy and cost-advantaged feedstocks.

For years, this country and the continent have struggled to find them. And, to some extent, our industry has suffered as a result.

Industrial customers in the EU, for instance, pay 3-4 times more for power than do their competitors in the U.S.

But now we have the chance to reinvent Europe’s energy reality. We have before us the opportunity to tap the crucial stores of energy, right below our feet.

Of course, I’m speaking of shale gas.

In the United States, we have seen just how transformative vast stores of the shale gas can be for our industry – and all industry.

The “shale gale” has created a set of new competitive advantages for America – among them, affordable energy for consumers and manufacturing companies. That is why U.S. manufacturers – including Dow – have announced more than 110 new investments, totaling roughly $100 billion.

I know that the U.K.’s shale-gas reserves are not quite as expansive as those in North America. But they are significant. More than significant enough to drive a comparative advantage for the U.K. – and for the E.U. more broadly.

The data shows that if the U.K. truly takes advantage of its shale resources it could see incremental growth equivalent to that expected in the US … by 2020, this nation’s chemical sector could be growing at 4 percent, year-over-year.

You do not need me to tell you, this is a big deal – for us and for the economy writ large.

It bears repeating: if we choose to turn gas into high-value chemistry, materials and high-tech products rather than burn or to export it, we create 8 times more value across a nation’s economy.

Of course, natural gas alone will not make a manufacturing revolution.

We also need to aggressively pursue energy conservation… an approach being championed by Prime Minister Cameron.

And we need to accelerate innovation in practical, renewable, and clean technologies – especially wind and solar. Europe has been a leader in pursuing this renewable technology.

At the same time, I know that these energy sources have their skeptics – and, sometimes, the criticism is justified. But innovation is a risky business – and sometimes a costly one.

And the more the U.K. and E.U. invests in these areas, the closer we all will come to viable, alternative energy supplies – and to the manufacturing jobs and more balanced economy that follows them.

For our part, Dow aspires to be a leader in this crucial solution space.

We produce resins that allow wind turbines to reach higher and spin faster – enabling them to generate energy more efficiently.

We produce thin-layer advanced materials that we assemble into small solar panels that double as roof shingles for residential homes – and let every roof capture the power of the sun and feed electricity back into the grid.

This is advanced manufacturing in action.

And we at Dow are not alone. Many of you are changing the equation through the work you do, and the rest of us admire and salute you.

Partnership: The Golden Triangle

All that said, no one believes that any single industry – that any single company – can solve challenges like energy security, affordability, and sustainability alone. They are too big, too global. They are too complex, drawing on too many kinds of expertise.

And history tells us that if we hope for a chance of solving these tough problems, we all will need to pool our creativity – all of us from the private sector, the public sector, and civil society.

I have referred to the intersection of sciences – and the intersection of markets. But there is another intersection that the world has failed to navigate and make work in this modern era: the intersection of business, government and civil society at large.

In societies like Britain, where the rule of law governs all our behaviors, the private and public sectors must work as equal partners to establish frameworks – enduring frameworks – that enable business to innovate solutions, create jobs, and generate growth for the long term.

We must work together with elected officials to guard against greed and opportunism.

We must work together with universities and public organizations to come up with the better idea… the better answer… the better solution to the world’s great challenges. That is what we seek.

And that is exactly why the U.K.’s High Value Manufacturing Strategy – with its goal of doubling manufacturing’s percentage of Britain’s GDP in two decades – is both so important and so promising.

It is not a plan written by and for government. It is a plan that asks and expects something from each of us.

And fortunately, solving big problems is something that Britain does have a little experience with.

Back in those early days of the Industrial Revolution, the British economist Thomas Malthus – thinking and writing not far from here – predicted that the world would soon reach a sustainability tipping-point.

He argued that a rising population would consume all the food and all the land, transforming the world into a crowded, starving place.

When Mr. Malthus made this postulation, around the year 1800, only 1 billion people lived on the earth – so he may have overestimated a bit. He was, it must be said, a bit of a pessimist. And not much fun at parties.

But the crisis he predicted was a real one, and it was staved off by human innovation, by the brightest people in the world working together to advance industry, to open new lands, and to make agriculture more productive than ever before.

It took the focused efforts of governments… of businesses… of universities.

And so, what we need now is not really that different.

What we need now is innovation.

What we need now are new business models – for instance, partnerships between businesses and NGOs.

What we need now is a set of new and great solutions for daunting problems.

What we need now are bold leaders; leaders collaborating across outdated divisions between what is best for companies and what is best for countries; leaders innovating new ways to make the world a healthy, productive place for generations to come.

That is how we manufacture a new foundation for economic growth… how we fuel the engines of economic growth… all at the same time.

Conclusion

By training, I am a chemical engineer, like so many of you. I joined this organization as a young student at the University of Queensland in Australia in 1973 – forty years ago. Back then, I was fascinated by chemistry and became a chemical engineer to solve problems.

Today, I am more convinced than ever that the chemical sciences and every aspect of the newly emerging advanced manufacturing sector are essential – indeed, elemental – to solving the problems at the most complex intersection of all: the intersection of humanity and this planet.

By 2050, this planet is projected to become one large, gridlocked intersection, teeming with 9 billion people trying to navigate it. In other words, in less than 40 years’ time – the same amount of time I have been a member of IChemE, Mr. Malthus tipping point might be… well, tipping.

And that is why we must help this next generation of chemical engineers and scientists to innovate… and to solve these problems in a way that protects – and even improves – our quality of life on this overcrowded planet.

Clean water. Affordable medicine. Sustainable housing. Green infrastructure. Lower emissions. Less waste. More efficient inputs like energy.

These are the challenges we must meet. And this is why I believe it is an exciting time to be a chemical engineer – even more exciting than when I became one.

So they say there are no second acts for CEOs. But who knows, maybe a second career looms large for me after all – back in the lab!

Thank you again for this high honor tonight.