ABSTRACT. The ethics of Du Pont’s CFC strategyfrom 1975 to 1995 are analyzed using a Potter’s Boxframework. This approach includes an examination ofrelevant facts, prioritization of stakeholder loyalties,selection of a mode of ethical reasoning, and a worldview. Du Pont’s approach to ethical reasoning reflectschanging facts and changing interpretation of thefacts, a focus on shareholders as the primary and mostimportant stakeholder, and ends-based reasoning,which views creating shareholder value as the primaryend. An alternative approach is proposed, based onanalysis of Du Pont’s and stakeholders’ needs.

Introduction

The Montreal Protocol on substances thatdeplete the ozone layer was a groundbreakinginternational environmental treaty, bringingtogether the members of the United Nations tosolve a problem of the global commons (UnitedNations, 1987).1 For the first time in interna-tional environmental treaty-making, multi-national corporations such as Du Pont wereparties to the treaty-making process, helping toshape the form of the final treaty and the dead-lines to which the member nations committedthemselves. It could even be said that the par-ticipation of firms like Du Pont made the

Protocol possible, for without their assurance thattechnical substitutes were available or could beproduced, nations may not have been willing tosign and ratify the Protocol.

Du Pont’s behavior throughout the process ofdevelopment, signing and ratification, and imple-mentation of the Protocol appeared inconsistentto government and environmental constituencies,and is difficult to understand. Moreover, DuPont explained its behavior in different ways todifferent stakeholders, so that it is difficult todetermine its actual strategy. While environ-mentalists applaud the positive role that Du Pontplayed in enabling the development of theProtocol, they are suspicious of Du Pont’smotives and some of the positions that Du Ponthas taken before and after its ratification.2

Legislators have publicly pointed out the incon-sistency of Du Pont’s public statements andbehavior. Du Pont’s peers in the Alliance forResponsible CFC policy felt betrayed by DuPont’s abandonment of their publicly developedgroup position. However, shareholders andmembers of the business community see DuPont’s strategy as a wise, long-term profit-maximizing strategy.

An examination of Du Pont’s ethical reasoningis important because the Montreal Protocol isbeing used as a model for subsequent interna-tional environmental treaty-making, both interms of North-South cooperation, and in termsof business-government cooperation. If we canunderstand the ethical reasoning that Du Pontused to develop its political strategy, whichshaped the Montreal Protocol, it will be possibleto anticipate the political strategies of firmswhose interests are served by participating in thedevelopment of the Framework Climate Change

Ethics of Du Pont’s CFCStrategy 1975–1995

Brigitte Smith

Journal of Business Ethics 17: 557–568, 1998.© 1998 Kluwer Academic Publishers. Printed in the Netherlands.

Brigitte Smith is a manager of business development at aBoston-based environmental technology firm. She has abachelor in Chemical Engineering from the Universityof Melbourne, an MBA from the Harvard BusinessSchool, and a Master of Arts in Law and Diplomacyfrom the Fletcher School of Law and Diplomacy. Herresearch interests include international business, envi-ronment, and negotiations. She previously worked as astrategic management consultant for Bain & Company.

Convention and other international environ-mental treaties.

This paper will examine the reasoning behindDu Pont’s behavior over the period 1975 to1995, trying to find a consistent ethical model tounderstand Du Pont’s apparently changingbusiness and political strategy. It will begin bybriefly describing the distinct phases of Du Pont’sstrategy. It will then present an ethical reasoningmodel within a Potter’s Box framework, anddescribe how that methodology appears toexplain Du Pont’s inconsistent behavior overtime. Finally, it will examine where the ethicalreasoning of various stakeholders differs from thatof Du Pont, and describe an alternative methodof ethical reasoning that Du Pont could haveemployed to better satisfy the various stake-holders. This method would have avoided thenegative public relations associated with DuPont’s CFC strategy, assuming that this is one ofits objectives.

Du Pont’s behavior – three distinct phases

Du Pont’s CFC strategy had three distinctphases.3 Figure 1 illustrates these three phases.The first covers the period from 1975 to 1986,while the Framework United Nations ViennaConvention for the Protection of the OzoneLayer was developed and agreed upon (UnitedNations, 1985). Du Pont during this period ledindustry opposition to further CFC control, setup an industry group for that purpose, and madepublic statements denying that scientific evidencesupported the need to reduce CFC outputs. DuPont’s behavior during this phase is similar to thatof several petroleum companies in the 1990s withrespect to the greenhouse effect.

The second phase of Du Pont’s strategy covers1986 to 1988 when the Montreal Protocol wasdeveloped, signed and ratified. During this time,Du Pont lobbied the international policy makingprocess not only to come quickly to a bindingagreement, but also to strengthen the existingagreement and make more aggressive commit-ments to reductions than had originally beenplanned. Congressional hearings on the topic

clearly illustrate Du Pont’s new position (U.S.Congress, 1990): (italics added)

Not much more than about a year ago, the DuPont Corporation presented much of its researchand announced that they thought the MontrealProtocol results were inadequate, that we could notwait until the end of the century to cut CFC pro-duction by half, that we ought to cut it out entirely,and do it now. (italics added)

The third phase was from 1988 to 1995, whenfurther amendments to the Protocol tighteneddeadlines and targets, and nations and firmsaround the world began and, in many cases com-pleted phasing out the use of CFCs in their oper-ations. During this phase Du Pont continued tomanufacture CFCs in both developed and devel-oping countries, while trying to introduce sub-stitute products.

At each stage, Du Pont’s CFC strategy hadseveral important components. Its politicalstrategy comprised its lobbying and public policyactivity, provision of information to policymaking processes, participation in industryassociations set up to influence the policy makingprocess, and its contribution to reducing thescientific uncertainty associated with the effect ofCFCs on the ozone layer. Its business strategyincluded its manufacturing strategy (investmentin plant and equipment, production and phase-out of production of CFCs and their varioussubstitutes) and its research and developmentstrategy of developing substitutes and productenhancements.

Management at Du Pont at both the businessunit level and at the board and senior manage-ment level was consistent over phases 1 through3, so the apparent changes in strategy cannot beattributed to internal management changes.

A Potter’s box analysis of Du Pont’sdecision making

Given the complexity of these strategies, it ishelpful to parse out the different components ofDu Pont’s ethical reasoning. Potter (1969)suggests a framework where all relevant decisionmaking factors can be mapped into four possible

558 Brigitte Smith

Ethics of Du Pont’s CFC Strategy 1975–1995 559

Phase Dates Events

I 1940s • CFC patents expire.

1972 • DuPont invests in basic ozone science, helps to form the Fluorocarbon Program Panelunder the auspices of the Chemical Manufacturers Association to pool funds for scienceand to oversee industry research on ozone depletion.

• Total DuPont expenditures on atmospheric science, aimed at a better understanding of the ozone depletion problem rather than at any immediate commercial advantage, averaged $1M per year throughout the ensuing decade.

1974 • Rowland and Molina theory, but no evidence.• DuPont CFC After Tax Operating Income (ATOI) 1.6% of sales 74–79.• Spent $3–$4M per year in developing substitutes.• Policy position – science too weak to justify the widespread regulation of a whole

class of demonstrably useful chemicals.• Public statement in advertisements from chairman, “should reputable evidence show

that some fluorocarbons cause a health hazard through depletion of the ozone layer, we are prepared to stop production of these compounds”.

• Testify in Congress “if credible scientific data . . . show that any chlorofluorocarbons cannot be used without a threat to health, DuPont will stop production of these com-pounds.”

1978 • EPA ban for “non-essential” uses, i.e. aerosol, U.S. consumption falls 50%, substantialover capacity remains in the industry, DuPont loses 1/3 of its business.

• Continue to sell to aerosol applications in non U.S. markets, real list prices drop 20%.

1980 • DuPont helps form the Alliance for Responsible CFC Policy.

1980–1986 • DuPont leads industry opposition to further CFC controls, urges that any further controls should be international, not U.S. only.

Early 80s • Refinement of computer models – effect had been overstated.• DuPont CFC ATOI 3% of sales, spend nothing on developing substitutes.• CFC business not earning its keep, therefore cost reductions, yield and operating

improvements – goal to become U.S. low cost producer.• Discover ozone hole over antartica in 1985.• $5M on research for substitutes.

II Mid 1986 • More evidence, new DuPont press release.• “It would be prudent to limit worldwide emissions of CFCs while science continues

to work to provide better guidance to policy makers.”• Support development of the Montreal Protocol.

Sept. 1987 • Montreal Protocol on Substances that Deplete the Ozone Layer.

Dec. 1987 • EPA implementing regulations.• DuPont doesn’t price gouge in an attempt to retain customers for substitutes.

III Feb. 1988 • Senators write to DuPont – request and urge cessation of CFC production.• DuPont states its public position – scientific evidence does not point to the need

for dramatic CFC emission reductions, severe cutbacks would be unwarranted, counterproductive and irresponsible.

1990s • DuPont continues to produce CFCs.

Fig. 1.

elements, which when applied to businessdecision making can be described as follows.

1. Facts. An empirical definition of the situa-tion.

2. Stakeholder loyalties. A hierarchy of theimportance of various stakeholders.

3. Mode of ethical reasoning. A selection ofeither ends- or means-based reasoning.

4. World view. Basic beliefs about the way theworld does or should work.

Du Pont’s CFC strategy can be explained interms of these factors.

Facts

Throughout the period described, Du Pont wasthe world’s largest manufacturer of CFCs. In1985, Du Pont held 50% of the large U.S. marketand a 27% global market share, and was the onlymajor producer to have a significant marketposition in all three major markets, the UnitedStates, Europe and Japan. Du Pont’s marketpower assured it of its position at the table at theinternational negotiations which resulted in theMontreal Protocol, along with ICI, Allied Signal,Atochem, and Montefluos. Du Pont was alsoheavily involved in developing the U.S. positionas the U.S. approached the international negoti-ations and developed implementing legislation.

While Du Pont was the most significant playerin the global CFC business, the $600M CFCbusiness was not particularly significant to DuPont, representing only 2% of sales. In fact, inits 1992 Environmental Annual Report Du Pontexplained that while it continued to producesome CFCs, “to cease manufacture of CFCswould have no meaningful impact on our finan-cial results.” Before concern over the impact ofCFCs on the ozone layer became an issue, theFreon division produced commodity chemicals,at low margins with high capital intensity, in anindustry with significant over capacity. Patentprotection for the chemicals had long expiredand the industry was mature and highly concen-trated. While these industry characteristics hadthe potential to change with the advent of a newregulatory environment, the Freon division did

not become of critical strategic importance toDu Pont.

Other facts, however, changed considerablyover time. The most important of these was thescientific uncertainty associated with the role ofCFCs in destroying the ozone layer. Rowlandand Molina, in 1974, published a theory thatCFCs would break down in the stratosphere andcatalyze chain reactions leading to the destruc-tion of massive quantities of stratospheric ozone(Brodeur, 1986). At the time, this effect was atheory that could not be verified empirically.Furthermore it was not clear what damage tohuman and plant health would result from thistheoretical effect, even if it did occur in practice.

Nevertheless, this proposed effect, once itreached the popular press, was enough topersuade consumers to change their purchasingbehavior and switch to non-aerosol packaging formany common household products. As a result,CFC sales in the U.S. decreased steadily from a1973 peak. The U.S. Environmental ProtectionAgency (EPA) followed up with a 1978 ban onCFCs for non-essential uses. Despite scientificuncertainty, consumer behavior and the regula-tory environment changed in the United States,reflecting the precautionary principle.

Du Pont did not accept the Rowland andMolina hypothesis, and pursued a strategy oftrying to reduce scientific uncertainty. Alongwith other CFC makers, it formed theFluorocarbon Program Panel (FPP) under theauspices of the Chemical ManufacturersAssociation, to oversee research and to pool fundsfor peer reviewed scientific research on ozonedepletion. Total Du Pont expenditures on atmos-pheric science, aimed at a better understandingof the ozone depletion problem, averaged $1Mper year from 1972 to 1982.

In the mid 1970s, Du Pont made a publicpromise, both in newspaper advertisements andin Congressional hearings, that, “should rep-utable evidence show that some fluorocarbonscause a health hazard through depletion of theozone layer, we are prepared to stop productionof those compounds.” At this point, Du Pont’spublic position rested on the idea that theoriesproposing ozone depletion were unsubstantiated.

At first, Du Pont appeared to have been proved

560 Brigitte Smith

right. Peer reviewed science developed in the late1970s and early 1980s produced different modelswhich demonstrated that the ozone effect wasnot as dramatic as Rowland and Molina’s hypoth-esis suggested.

In 1985, however, British scientists reported adramatic decrease in springtime stratosphericozone concentrations across Antarctica. The sizeof this ozone hole empirically demonstrated thatRowland and Molina might actually have under-estimated the ozone depletion effect. This newscientific evidence acted as a catalyst for changein the international community. The EPA quan-tified the considerable damage to human andplant health that could result from damage to theozone layer and the Montreal Protocol wasrapidly developed from the earlier frameworkVienna Convention.

Du Pont responded to the changed facts bymoving to Phase 2 of its strategy. Du Pontpublicly supported regulation of CFC produc-tion. The overwhelming consensus of scientificopinion that CFCs destroy stratospheric ozone,and that this is potentially harmful to humanhealth developed through Phase 3 (Service, 1995)and (Drake, 1995). However, from 1988 to 1995Du Pont continued to produce CFCs, despitepublic requests from members of Congress tocease production in light of evidence that CFCsproduced harm to human health. Eventually theyannounced a phase out of production, but in1995, continued to produce CFCs.

Another important set of facts that is relevantto Du Pont’s CFC strategy is the existence ofCFC substitutes. The existence of substitutes isa fact which Du Pont was able to influence.Consistent with its Phase 1 position that therewas no reason to cease production, Du Pontargued that there were no effective substitutes forrefrigeration and electronics manufacturingapplications. When they were urging the devel-opment of the Montreal Protocol in Phase 2, DuPont claimed that there were substitutes, or thatthey would be able to develop the substitutes inthe foreseeable future. In Phase 3, Du Pont statedthat economically viable substitutes had not beendeveloped for all uses and continued productionof CFCs. A technically sophisticated sciencebased company, Du Pont changed the facts with

respect to its ability to produce substitutes in eachphase. (Mathews, 1991).4

Du Pont is able to select the facts that itchooses to use in its ethical reasoning, and inthe case of the existence of substitutes, interpretthe facts as it wills. Despite advances in scien-tific understanding, and a reduction in scientificuncertainty, Du Pont did not cease production asit publicly committed to do. In order to under-stand Du Pont’s ethical reasoning in its CFCstrategy, it is important to consider other aspects.

Stakeholder loyalty

Firms have a variety of stakeholders to whomthey are accountable. According to MiltonFriedman (1989), shareholders are of paramountimportance and the objective of firms should beto maximize profits, and thus returns to theirshareholders. It would appear that Du Pontsubscribes to the perspective that shareholders arethe most important stakeholder. The Du Pontshareholder profile was in no way unusual for aU.S. based Fortune 500 company.

Other stakeholders might include customers,and regulators. Without pleasing customers it isdifficult to maximize shareholder returns, whilewithout regulatory support shareholder returnscannot be assured. Employees, suppliers, industrypeers, the general public and the environmentappear to have been regarded by Du Pont as lessimportant stakeholders than shareholders, cus-tomers and domestic and international regulators.The letter from the chairman in the 1990 DuPont Annual Report advocates the primacy ofshareholder interests and financial rewards, whilerecognizing the importance of other stake-holders.:

Fundamentally, we must improve performance inthe eyes of our constituencies: shareholders,customers, employees and society. For you, ourshareholders, a strong financial performance is aprerequisite – the first benchmark on the road togreatness. . . . However, to consistently achieveoutstanding financial results, we must serve all ofour constituencies in a superior way: by becomingthe preeminent global partner with our customers;by tapping the full potential of our people; and by

Ethics of Du Pont’s CFC Strategy 1975–1995 561

maintaining the confidence of the public in thesocieties where we operate.

With a significant amount of capital invested inCFC producing plant and equipment, it was notin Du Pont shareholders’ interests to phase outproduction of CFCs immediately, even when itbecame apparent that CFCs might harm theatmosphere and therefore human health. Amature business should be harvested, not aban-doned. While scientific uncertainty was high inPhase 1, Du Pont scaled back investment inR&D in substitutes, or in the Freon business asa whole, to less than one third of firm averages.In the early 1980s Du Pont focused its attentionon reducing costs through backward integrationinto raw materials, and process improvements toincrease yields, to become the low cost producerof CFCs in the U.S. Du Pont intended tocontinue to make CFCs, even if other playersdropped out of the industry. Both of these actionswere consistent with Du Pont’s interpretation ofthe facts, and a strategy of maximizing share-holder value.

In Phase 2, while Du Pont claimed that itcould produce substitutes, spending on R&D todevelop substitutes was less than half firmaverages as a percent of sales. It was not until1988, after the Montreal Protocol was signed anda regulatory monopoly assured, that R&Dspending increased to firm average levels and DuPont made a concerted effort to develop substi-tutes. During this phase Du Pont chose tomaintain prices rather than realize the regulatoryrent which developed as the supply of CFCs wasconstrained before demand had the opportunityto adjust. Du Pont explained this decision asconsistent with maintaining long term customerrelationships, and wanting to retain customersrather than realize short term profits.5

In Phase 3, Du Pont invested heavily in thedevelopment and production of substitutes, asexplained in its 1993 Annual Report,

Du Pont is leading the transition away from pro-duction of ozone depleting chlorofluorocarbons(CFCs), having invested more than $500 millionto develop a full line of alternative products. Today,Du Pont Fluorochemicals produces alternativeproducts at eight plants in North America, Europe

and Asia Pacific. One of these is Corpus Christiwhere the world’s largest hydrofluorocarbon(HFC)-134a (Du Pont “Suva”) facility started uplast fall.

The Montreal Protocol provided Du Pont withthe opportunity to develop a new high marginbusiness, and capitalize on their considerableresearch and development capability, to replacea mature commodity business. Despite this, DuPont did not follow the absolute action of ceasingproduction of CFCs.

Du Pont argued, in justification of its Phase 3behavior, that the general public, society, the U.S.government and major customers have asked DuPont to continue to produce CFCs. As Du Pontexplained in its environmental annual reports andannual reports:

Du Pont would cease production of CFCs imme-diately if substitute products and equipment werebroadly available. To cease manufacture of CFCswould have no meaningful impact on our finan-cial results. But we, along with the governments ofthe world who could ban production of CFCs,recognize that these materials are required to meet societalneeds.

Du Pont regularly assesses its phase out program.We feel that it is the responsibility of governmentsand users to decide whether CFCs continue to beessential, and that it would be irresponsible to disregard the considered positions of international bodiesand world governments through a unilateral decision tocease production.

We have reduced production of CFCs for saleby 75% since 1986, have ceased production inEurope and Canada, and have produced less thanallotted under the Montreal Protocol for the pastfour years. As reported last year, we will continue toproduce CFCs for sale in 1995 as requested by the U.S.Government. (italics added)

Customer requests derive either from a perceivedlack of substitutes, or from a desire to postponemaking new capital investments to accommodatesubstitutes, such as in the case of auto manufac-turers who do not wish prematurely to redesignthe air-conditioning systems of their vehicles.The considered position of international bodiesand world governments, broadly speaking, is tophase out CFC production. Du Pont makes

562 Brigitte Smith

money for shareholders through its continuingproduction and sale of CFCs, but the needs ofcustomers and government requests take prece-dence over the well being of the planet and theozone layer in Du Pont’s decision making. If theexplicitly stated needs of these less importantstakeholders coincides with Du Pont’s desire tomaximize shareholder returns through continueduse of its mature equipment and technology, itwill reverse the behavior expected from itspublicly stated goal of phasing out and ceasing toproduce CFCs as soon as possible.

Du Pont’s public commitment, in Safety,Health and the Environment states that,

We affirm to all our stakeholders, including ouremployees, customers, shareholders and the public,that we will conduct our business with respect andcare for the environment. We will implement thosestrategies that build successful businesses andachieve the greatest benefit for all our stakeholderswithout compromising the ability of future gen-erations to meet their needs.

This appears inconsistent with Du Pont’s strongfocus on shareholders as its primary stakeholders.It is also inconsistent with Du Pont’s actualbehavior. The continued production of CFCs inlight of clear scientific evidence compromises theability of future generations to meet their needs.

To understand the seeming inconsistency ofDu Pont’s public statements and actual behavior,the clarification of the hierarchy of stakeholderloyalties is helpful, yet it is also important toexamine the mode of ethical reasoning employedby Du Pont.

Mode of ethical reasoning

Du Pont is a proponent of the teleological modeof ethical reasoning, emphasizing the ends to beachieved for shareholders, and perhaps for otherstakeholders. Its reasoning is relatively uncon-cerned with the means used to reach thoseends.

Consistency in its statements and between itswords and deeds appears to be relatively unim-portant to Du Pont. When Du Pont made apublic promise to phase out CFC production if

it was proved to be harmful to human health, itgained some credibility and the right to continueto produce CFCs. It also stalled the regulatorytrend toward banning CFCs. All of these benefitsled to continued sales of CFCs and continuedcontribution to shareholder returns. When proofand scientific evidence materialized in the formof the ozone hole, Du Pont was slow to react,despite EPA estimates that the benefit of ceasedCFC production would be of the order of $6500B. Du Pont continued to produce the com-pounds in 1996, albeit in reduced quantities. Itdid not make a decisive step and close downplants, refusing to follow up on its previouscommitment. Ceasing production would nothave been consistent with its primary end – max-imizing shareholder value. By 1994, as the majorproducer of substitute products, Du Pont has stillbeen unable to convert all of its facilities. In1994, Du Pont was only able to report that, “Wehave made substantial progress in converting DuPont facilities.”

While Du Pont made some effort to appearconsistent with its earlier position, by declaringin 1988 that scientific evidence was still insuffi-cient to justify ceasing CFC production, thisstatement was undermined by Du Pont’s lobbyingto urge faster phase-outs. Once Du Pont decidedit could gain strategic advantage from a fasterphase-out, it abandoned its peers in the Alliancefor Responsible CFC policy, an organization thatit had helped to form, and its public position thatscientific evidence was insufficient to reduceproduction, and pushed for aggressive phase outof production on a worldwide basis under theMontreal Protocol.

The deontological duty of doing no harm tothe planet appears to have been unimportant toDu Pont in Phase 3. At a time when many firmsinvolved in the industry were banding togetherto find substitutes and share the results of theirinnovation with suppliers, peers and customers,Du Pont stuck to its traditional mode of tech-nology transfer; selling substitutes as proprietaryproducts, licensing rights to which would onlybe available to developing countries once thesubstitutes were becoming obsolete in developedcountries. While innovating with respect to itsparticipation in the international regulatory

Ethics of Du Pont’s CFC Strategy 1975–1995 563

process, Du Pont did not share in the innovationsin technology cooperation around the CFCissue.

In U.S. Congressional hearings, RichardSmith, Acting Deputy Assistant Secretary of theDepartment of Environment, Health and NaturalResources, explained the attitude of othermembers of industry:

I am very encouraged by what I see as the dynamicof what is happening in the private sector and thedevelopment of substitutes, the eagerness I see onthe part of the concerned industry to address thisproblem and to work with developing countriesand others to achieve it.

The Industry Cooperative for Ozone LayerProtection (ICOLP) is an industry-funded orga-nization of electronics companies that providesinformation on the reduction of use of CFCsolvents in the manufacture of electronic com-ponents. Its membership includes AT&T, IBM,Northern Telecom, and the U.S. EPA. Membersagreed to make available a wide range of non-proprietary CFC information through tech-nology transfer workshops, an on-line electronicdatabase, and guide books which have beenjointly published with the EPA. The guidebooksare freely available for copy and use. These firmsdecided not to make this technology a source ofcompetitive advantage, but instead an area ofcooperation in which all could share for thehealth of the planet. Du Pont chose not toparticipate in this enlightened approach. Its onlypublic statements with respect to disseminationof substitutes relate to implications for firmprofitability:

While we have significantly reduced our produc-tion of CFCs, we continue to be disappointed bythe market’s slower than anticipated transition awayfrom CFCs to the more environmentally accept-able alternatives.

It would appear that the mode of ethical rea-soning employed by Du Pont in developing andimplementing its CFC strategy was an extremecase of ends-based reasoning, with very littleconcern for process, internal consistency, ortruth. Motivated towards the end of maximizingshareholder wealth, Du Pont was willing to

vacillate in its commitment to the commonposition established with its peers, to reverse itscommitment to a previous public position, andto sacrifice the precautionary principle regardingenvironmental harm. This is even more sur-prising given the fact that CFCs represented analmost insignificant fraction of Du Pont’srevenues.

World view

To finish an analysis of Du Pont’s ethical rea-soning, it is necessary to consider the world viewof the corporation. Du Pont’s world view wascolored by its previous experience with the banof aerosol production by the U.S. EPA. Given DuPont’s sales in the U.S. market, it was importantthat the U.S. not impose any further unilaterallegislation which would differentially hurt itsproducers. The best solution, once the factschanged and regulatory change seemed inevit-able, was an international regulatory regime.

As a large player, used to being the largest inits industry, Du Pont doesn’t favor unbridledatomistic competition, but rather a regulatoryregime which allows considerable industryconsolidation and concentration of power. DuPont thus supports changes in regulations thatfavor entrenched interests. It is thus importantfor Du Pont to be able to shape the timing andform of regulatory change. Du Pont states itspublic policy goal to:

Build alliances with governments, policy makers,businesses and advocacy groups to develop soundpolicies, laws, regulations and practices thatimprove safety, health and the environment.

Du Pont further explains that it will, “promoteopen discussion with our stakeholders about thematerials we make, use and transport and theimpacts of our activities on their safety, healthand environments.” This open discussion willalways be aimed at shaping policy such that DuPont can continue to make profit once theregulations have changed.

In summary, Du Pont’s changing CFC strategythrough the 1970s, 1980s and 1990s, reflectschanging facts and interpretations of the facts, a

564 Brigitte Smith

focus on shareholders as the primary stake-holders, ends-based reasoning and a world viewwhich emphasizes strong business – governmentpartnership. Only in light of these factors, wouldDu Pont’s CFC strategy appears to be well-reasoned and ethically consistent over time.

Other stakeholder perspectives

Shareholders and the business community, withthe exception of peer members of the Alliancefor Responsible CFC Policy, appear to considerDu Pont’s strategy rational and morally sound.This agreement derives from the alignmentbetween this stakeholder group and Du Pont’sprimary loyalty to shareholders. Shareholdersargue that if they want to diversify out of theCFC business, they can do so by selling Du Pontshares. They choose not to take this actionbecause it is less important to them than thereturns they derive from owning Du Pont shares.Du Pont’s share performance did not suffer as aresult of its CFC strategy, which indicates thatthis important stakeholder group agreed withDu Pont.

The ethical reasoning of industry peers differswith Du Pont’s on several fronts. First, Du Pont’spartners in the Alliance for Responsible CFCPolicy differed from Du Pont in Phase 2 in theirinterpretation of the facts. The other membersof this coalition held to their position that therewas insufficient evidence to warrant dramaticchanges in CFC production and consumption,and that effective substitutes had yet to beproduced. Secondly, they disagreed with Du Pontin the means it used to make its decision. Ratherthan working from within the alliance to changeposition and revise its interpretation of the facts,Du Pont abandoned the alliance and publiclytook an opposing position. Du Pont at this pointalso abandoned the coalition it had broughttogether, and the world view implicit in thatcoalition, that industry collaboration was impor-tant to influence policy development.

Later, in Phase 3, the actions of other playersin the CFC industry, particularly major elec-tronics users, indicate that they do not agree thatthey owe their primary loyalty to shareholders.

They did not make non-use of CFCs a majorsource of strategic advantage or differentiation,but rather chose to share their technical innova-tions with one another, with suppliers andgovernment bodies. This action shows theimportance these firms attach to the generalpublic, and the global environment as stake-holders. It also demonstrates a difference in themode of ethical reasoning employed.

Environmentalists disagree with the ethicalreasoning employed by Du Pont in severalrespects. First, environmentalists disagreed attimes with Du Pont with respect to the facts. InPhase 1, consumers, environmentalists and theEPA agreed that under the precautionary prin-ciple, there was sufficient cause for concernregarding stratospheric ozone depletion to reduceCFC usage and begin work to develop substi-tutes. This was at direct variance with Du Pont,which did not adhere to the precautionaryprinciple and did not believe that scientificevidence supported environmentalists’ claims.Later, however, Du Pont’s interpretation of thefacts aligned with that of environmentalists’, asDu Pont agreed that a rapid phase out of CFCswas prudent in Phase 2.

Generally, environmentalists disagree fairlyenergetically with Du Pont’s ordering of stake-holder loyalties. Environmentalists are convincedof the importance of stratospheric ozone to theplanet, and some within the environmentalmovement would like to see irreversible envi-ronmental damage raised above the interests ofshareholders, customers and suppliers. Environ-mentalists applauded the actions of major users,who surpassed their own aggressive phase-outschedules, and participated in technology sharingprograms. Most environmentalists disapprove ofDu Pont’s continued CFC production in the1990s and lack of decisive action. This inconsis-tency in the ordering of stakeholder loyalties isthe most fundamental disagreement betweenenvironmentalists and Du Pont.

Moves by environmentalists to align the inter-ests of shareholders with environmental goalshave had limited success. Following the strategyof the Sullivan Principles (Kline, 1991), theCERES Principles have been developed to bringpressure on companies to behave in an environ-

Ethics of Du Pont’s CFC Strategy 1975–1995 565

mentally progressive way through shareholdersactions (Parrish, 1994).6 It would appear that thegeneral population of shareholders are moreinterested in monetary returns than other goals.This fundamental disagreement between firmsand environmentalists is thus likely to remain forthe foreseeable future.

Members of government disagree most fun-damentally with Du Pont in its selection of ateleological mode of ethical reasoning. Du Pont’sreversal of a public promise, specifically of apromise before Congress, violate the systemwhich is used to develop trust between firms andlegislators. Legislators expect that firms will tellthe truth in Congressional hearings, and that theywill honor the commitments made to this forum.Furthermore, government believes that firmshave a duty to do no harm to the planet and toits constituents. Du Pont violated this duty withits continued production of CFCs.

In summary, it would appear that other inter-ested parties disagree with almost every aspectof Du Pont’s ethical reasoning, from facts, toordering of stakeholder loyalty, to mode ofethical reasoning. Each of these interested partiesalso has some area of agreement with Du Pont,for example surrounding the fact of scientificuncertainty in the early phases or the importanceof shareholder returns. This divergence in normsof ethical reasoning helps to explain the variedreactions to Du Pont’s strategy over time.

An alternative approach

Du Pont missed an important opportunity tosimultaneously please shareholders and otherstakeholders in its CFC strategy. The approachthat Du Pont adopted alienated importantconstituencies unnecessarily. An alternativeapproach is outlined, which would have achievedshareholder benefits through positive publicitywhile maintaining the trust of other importantstakeholders.

Du Pont should adopt the precautionary prin-cipal with respect to scientific facts. When thereis reasonable uncertainty associated with theglobal environmental harm associated with theconsumption of one of its products, it should

prepare to stop producing that product, andinvest in reducing scientific uncertainty. It shoulddevelop objective standards of proof of scientificcertainty, make these public, and stand by itsdecision to stop production should these stan-dards be met. Such a system of accountabilitywould do much to repair the trust of many stake-holders.

Du Pont should reprioritize stakeholders, andbalance the needs of human life on the planetwith shareholders, rather than hold shareholdersabove all others. Further, it should search forsolutions where the needs of both can be satis-fied simultaneously. In this instance, CFCs werea very small portion of Du Pont’s sales andprofits, and considerable positive public relationscould have been generated through an earlier andmore decisive phase out of CFCs.

Du Pont needs to pay more attention to themeans it uses to achieve its goals. With a trackrecord of inconsistent and unpredictablebehavior, its credibility will decrease and it willhave fewer options in the future. Du Pont couldhave adopted this alternative method of ethicalreasoning, with positive results in terms of publicperception, and limited cost in terms of satisfyingany major stakeholder. Environmentalists and thegovernment would have been considerably moresatisfied, and Du Pont’s relationship with thesegroups far better preserved.

Conclusion

Du Pont’s changing CFC strategy through the1970s, 1980s and 1990s, can be explained as theconsistent result of a particular ethical approach.The strategy includes both business and politicaldecision making, and the approach reflects:changing facts and interpretations of the facts; afocus on shareholders as the primary stakeholdersover the environment and other stakeholders; andends-based reasoning, with shareholder value theprimary end.

Other concerned stakeholders do not neces-sarily share this framework for ethical decisionmaking, which is why many have reacted nega-tively to Du Pont’s strategy over time, anddeclared it unethical. Du Pont would have reaped

566 Brigitte Smith

considerable benefits from an alternative ethicalapproach.

Notes

1 The Montreal Protocol entered into force onJanuary 1, 1989. It establishes a phase-out of pro-duction of ozone depleting chemicals, and states haveagreed to phase out the production of specific chem-icals by specific dates. Under the Protocol, industri-alized states have committed to progressively phaseout production of these chemicals from current levels.2 Du Pont has been both praised and criticized byenvironmental groups for its chlorofluorocarbons(CFC) strategy over time. While Du Pont’s supportof a CFC phase out has been praised by environ-mentalists, lobbying to prevent CFC regulations over15 years prior to the Montreal Protocol and the moveto extend production until 1995, reversing previouscommitments to phase out by the end of 1994 havebrought criticism by environmental groups such asGreenpeace.3 I draw from Harvard Business School case 9-389-111 for the business strategy in the first and secondphases, and from Du Pont’s recent annual reports andenvironmental annual reports for evidence of the thirdphase strategy.4 CFCs are stable, nonflammable, non toxic and noncorrosive – qualities that make them extremely usefulin varied applications: coolants for refrigerators andair conditioners; propellants in spray containers;energy efficient insulators; manufacture of rigid andflexible foam materials; solvents for cleaningmicrochips and telecommunications equipment.While similar CFC compounds can be used for all ofthese applications, a variety of substances andprocesses need to be used as substitutes. When theProtocol was ratified, substitutes for different appli-cations were at varying stages of development.Alternative propellants had been compulsory in theUnited States since the ban of CFCs as propellants in1978, so both the alternative products and processeswere clearly available and proven. Substitutes forrefrigeration and air conditioning had not beendeveloped at the signing of the treaty. Those that havesubsequently be developed are not “drop in” substi-tutes, i.e. they can not replace CFCs in existingequipment, the equipment must also be redesigned.No substitute for cleaning electronic circuit boardswas available at the signing of the treaty, but a sub-stitute derived from citrus fruit was developed soonafter, and first announced by AT&T. Foam products

can be generated using substitutes or foam can bereplaced in different packaging applications. Whilesubstitutes were available for some applications, othersrequired technical innovation after ratification of theProtocol.5 Customers were willing to buy the potentiallyharmful products in cases where functionally equiv-alent substitutes were not yet made commerciallyavailable. Where substitutes were available, as in thecase of aerosol propellants, customers quickly madethe transition.6 CERES advocates control $150 billion of corpo-rate stock, and launched shareholder resolutions tohave the principles signed at many Fortune 500 com-panies, forcing dialogue about the principles and thecompanies’ environmental performance. Du Pontrejected a shareholder proposal at its 1991 annualmeeting recommending that Du Pont sign the ValdezPrinciples.

References

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Council on Economic Priorities.: 1994, Du Pont;Report on the Company’s Environmental Policies andPractices (The Council on Economic Priorities).

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Du Pont.: 1992, Environmental Annual Report.Du Pont.: 1990, 1990 Annual Report.Du Pont.: 1991, 1991 Annual Report.Du Pont.: 1992, 1992 Annual Report.Du Pont.: 1993, 1993 Annual Report.Du Pont.: 1994, 1994 Annual Report.Du Pont.: 1994, Safety, Health and Environmental

Progress Report.Friedman, M.: 1989, The Social Responsibility of

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Parrish, M.: 1994, ‘GM Signs On To EnvironmentalCode of Conduct; Policy: Proponents of theCERES Principles Praise The Pact, but Others areSuspicious of The Auto Maker’s Motives’, LosAngeles Times (February 4, 1994).

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United Nations.: 1987, Montreal Protocol on Substancesthat Deplete the Ozone Layer, Montreal, 16September, 1987.

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Science, Space, and Technology. Subcommittee onNatural Resources, Agriculture Research, andEnvironment.: 1990, CFC reduction – technologytransfer to the developing world : Hearing before theSubcommittee on Natural Resources, AgricultureResearch, and Environment and the Subcommittee onInternational Scientific Cooperation of the Committee onScience, Space, and Technology, U.S. House ofRepresentatives, One Hundred First Congress, secondsession, July 11, 1990, Washington DC, : U.S.G.P.O. Government Document NumberY4.Sci2:101/149.

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