For most companies, dealing with the environment is still primarily about compliance—a costly, cumbersome, and unwelcome process. For a small but growing number of others, however, environmental concerns shape every aspect of strategy and action. Among these companies, The Dow Chemical Company has long been viewed as a leader. This interview outlines, from its CEO’s perspective, the evolution and key components of Dow’s environmental strategy, what this means for the structure and operations of the company, and the challenges and opportunities it faces.

McKinsey: How did Dow’s environmental strategy develop?

Popoff: It has evolved over the years—in line with that of the chemical industry. We often characterize this evolution in terms of the "three Ds": denial, data, and dialogue. When the chemical industry found itself in the center of an environmental outcry in the fifties, its initial response—ours too—was to deny everything: "What do you mean, we are jeopardizing the planet?" This response was not very satisfactory because we kept shouting at—and talking past—each other.

Soon we realized that even though we could reject some of the more egregious claims, we needed to address the rational arguments. We then moved to the data stage, where we got tied up...