DuPont's Teflon dilemma: how Chad Holliday, the champion of sustainability, is managing an environmental challenge.

Since the early 1900s, the Tennant family had raised cattle over rolling hills in the far western reaches of West Virginia, near the Ohio River. But in the late 1980s, Wilbur Earl Tennant's herd began to die off--280 Hereford cows in all. The Tennants suspected it had something to do with the black, odorous water that had begun appearing in the once-pristine Dry Run Creek, from which the cattle drank.

The creek was near a landfill operated by DuPont, which purchased land from Wilbur's brother Jim in 1983 as a site to dispose of nonhazardous waste. DuPont, court documents show, proceeded to dump materials into the landfill from its nearby Washington Works plant outside of Parkersburg, W. Va. The waste included an unregulated chemical, and proven animal carcinogen, called C-8, which has been used in the manufacture of Teflon, a widely sold DuPont product, for 50years. The Tennants sued DuPont in June 1999. But only after their lawyers uncovered DuPont documents relating to C-8 were the Tennants or anyone else in the community made aware of its existence. DuPont's own testing had found the chemical to be present in high levels in the creek and nearby soil. After the deaths of still more cattle and wildlife, the family reached a settlement with the chemical company in the summer of 2001 for an undisclosed sum.

As part of the settlement, the Tennants are forbidden to discuss the case. But Jim Tennant and his wife, Della, make no secret of their views on DuPont's handling of the situation. "Like my mama taught me," says Jim Tennant, who worked at the plant for 20 years, "there's a right way and a wrong way to do things. And if you do it the wrong way, it's gonna come back and bite you."

For DuPont and its chief executive, Charles O. (Chad) Holliday Jr., that bit of folk wisdom could prove true The Tennant suit sparked an investigation into C-8 by the West Virginia Department of Environmental Protection which determined that local drinking water had been contaminated with the substance. That prompted a class action lawsuit on behalf of up to 50,000 residents of the Mid-Ohio Valley. The residents are being represented by Taft, Stettinius & Hollister, a prominent Cincinnati law firm. Their suit charges that DuPont was aware that the chemical had been in the public water supply since 1984, but never informed the community. For its part, DuPont says the levels of C-8 were too low to raise health concerns and that the company met its reporting obligations. The $24 billion company, based in Wilmington, Del., is vigorously fighting the suit.

The potential fallout extends far beyond West Virginia. The U.S. Environmental Protection Agency has launched an investigation into the health effects of C-8 on a national scale. A preliminary assessment by the agency last year reported "potential systemic toxicity and carcinogenicity." The EPA is also looking into how C-8 has entered the bloodstream of much of the country's population--based on blood-bank samples from across the United States--and whether DuPont violated federal law by not informing the EPA years ago of potential cause for concern. Internal documents in the lawsuit indicate that DuPont was aware of possible problems with C-8 in animals as early as 1981; when studies linked the substance to developmental problems in rats, the company took steps to protect its plant workers. DuPont officials acknowledge that C-8 is an animal carcinogen, but insist it poses no health risk to humans. Despite repeated requests from Chief Executive, DuPont declined to make Holliday available for comment. In an email, spokesman Cliff Webb said the company is cooperating with the EPA. "We are confident that the outcome of this more comprehensive process will support our position that the compounds and products involved are safe for their intended uses," he said.

For DuPont and Holliday, the timing could not be worse. Holliday has burnished a reputation for himself and his company as a champion of "sustainable business." He is a regular speaker at sustainable business events, such as the 2002 Earth Summit in Johannesburg, and he is a former chairman of the World Business Council for Sustainable Development. He also has coauthored a book, Walking the Talk: The Business Case for Sustainable Development, which argues that solving social and environmental problems is essential for business growth. "The price of not being accountable can be quite high, and not only to reputation," the authors write.

Since Holliday declared sustainable growth the mission of DuPont in 2000, the company has churned out annual sustainability reports charting its progress in reducing waste and emissions, among other efforts. But there is no mention of C-8 in these sustainability reports. Because C-8 is an unregulated chemical, DuPont is not required to report on its emissions as it is on, say, greenhouse gases.

Expanding Teflon during strategy shift

At the same time, Holliday is engineering a transformation of DuPont, the second-largest chemical maker in the United States. He is jettisoning traditional DuPont businesses, such as its $6 billion textiles unit, home to famous innovations such as Lycra, Nylon and Spandex, to focus on faster-growing areas such as biotechnology and electronics. Those areas won't contribute significantly to revenues for several years, so Holliday is relying on expanding the market for existing products--including Teflon--to see the company through the transition. Teflon is best known as a coating in nonstick cookware. But it is also a key material in a variety of other consumer products, including stain-repellant rugs, fast-food packaging and household paint.

Despite the issues involving C-8, Holliday is revving up the Teflon business. In July, DuPont launched a $20 million print and television ad campaign promoting Teflon cookware and stain-resistant fabrics. The company has spent another $50 million expanding DuPont's Teflon-production capacity.

For Holliday, the stakes are high. The outcome of his strategic transition could determine how his leadership is viewed. His five years at the helm of the company have not always been smooth. Shortly after becoming CEO in February 1998, be set out to remake the conglomerate, which last year celebrated its 200th birthday, into a life sciences company. DuPont sold Conoco, an oil company that, while not a strategic fit, made money, and it paid $7.7 billion for the biotech/seed giant Pioneer Hi-Bred--a a steep price for which DuPont later took a $3.5 billion write-down. He also promised to build another acquisition, Pharma, into a drug powerhouse, but later sold it to Bristol-Myers Squibb. "The whole strategy fell flat on its face," says James Halloran, chemical industry analyst for National City Bank in Cleveland.

An accident of science

Holliday's new strategy seems to be working, says Halloran. But the C-8 situation could unravel all of that. If the environmental cases erupt, Holliday will not be able to argue that he did not understand the issues or was not informed. An industrial engineer by training and a 33-year veteran at DuPont, Holliday has received regular updates on the C-8 controversy, according to internal company documents disclosed in court. DuPont's filings to the Securities and Exchange Commission, signed by Holliday, have cited the C-8 suit as a financial risk.

According to DuPont lore, Teflon was one of those happy accidents of science. In 1938, Dr. Roy Plunkett, a DuPont chemist, was working with refrigerator coolants when he discovered that a gas coolant stored in a cylinder had converted into a solid, waxy substance, polytetrafluoroethylene, or PTFE. The substance, the most slippery known to man, was patented and later dubbed Teflon. With its remarkable ability to repel water, stains and heat, Teflon soon found many commercial uses, initially in the automotive, electronic and chemical industries. But it was the introduction of nonstick cookware in the 1960s that made Teflon a household name.

Because Teflon and related coatings tend to ball up in the manufacturing process, C-8, a detergent-like substance known scientifically as ammonium perfluorooctanoate, is used to prevent the resins from clumping. Originally, DuPont purchased its C-8 from 3M, the Minnesota-based manufacturing company. But when 3M, under pressure from the EPA, announced in 2000 that it would stop producing C-8 and a related chemical used in its Seotchgard brand (resulting in a $168 million charge against pretax earnings), DuPont announced it would make its own C-8, at a new plant in Fayetteville, N.C.

The first indication that C-8 might pose a health threat came in the late 1970s, when studies by 3M discovered that C-8 is "biopersistent," meaning that it doesn't break down in the environment and that it stays in the human bloodstream for an extended period of time. In addition, studies found that C-8 appeared to cause serious health problems in laboratory animals. In a 1981 study, rats exposed to C-8 gave birth to pups with eye defects.

Informed of the study by 3M, DuPont took the findings seriously enough to remove female workers of childbearing age from its Teflon operations. However, after a subsequent study commissioned by DuPont failed to find a link between C-8 and birth defects, the company allowed women employees to return to its Teflon works. That decision was made even though an earlier DuPont study noted that two out of seven babies born to women employees who worked with C-8 had birth defects similar to those in the rats.

Since then, dozens of animal studies and employee-monitoring programs by 3M and other researchers have been conducted, many of which link C-8 to cancer, liver toxicity and other health problems. A study last year by 3M that tracked two generations of rats found developmental problems in the offspring of rats exposed to C-8, including low birth weight, decreased liver size and increased mortality. A dune 1996 report prepared by DuPont showed increased incidence of heart disease and certain types of cancer among Washington Works employees, although it drew no direct link to C-8.

Critics say DuPont is dismissing valid concerns about the chemical. "There were clear red flags for DuPont and 3M," said Kristina Thayer; senior scientist at the Environmental Working Group, a Washington-based research group and one of DuPont's most vocal foes. The group contends that C-8 and the broader group of perfluorochemicals to which it belongs could turn out to be more harmful than long-banned chemicals such as DDT, PCBs and dioxin, and is lobbying to have the chemicals phased out.

DuPont officials say the animal studies bear no relevance for humans. An informational C-8 Web site set up by DuPont (C8inform.com) states: "In 50 years of C-8 use by DuPont and others, there have been no observed adverse human health effects associated with exposure to C-8." DuPont officials also contend that critics are misreading the data. "There is a tremendous amount of interpretation of the science that's wrong," says Webb, the company spokesman.

C-8 has been detected in foods such as apples, bread and beef, and samples from human blood banks around the nation were found to contain levels of the chemical averaging between 4 and 5 parts per billion. (A longtime "community exposure guideline" used internally by DuPont set the "safe" level of C-8 at 1 part per billion, until it was recently increased). Studies submitted to the EPA by 3M in 2001 detected C-8 in the blood of 96 percent of 598 children ages 2 through 12 across the country--at levels as high as 56 parts per billion. 3M researchers specldated that children might be exposed by crawling on carpets treated with stain repellants.

Is nonstick cookware safe?

The EPA is investigating the pathways of C-8 exposure and whether the substance is harmful to humans. In a draft assessment, the agency said there is no reason for consumers to stop using products made with the chemical. C-8 is not present in most consumer products, but materials such as Teflon can break down into C-8, among other things. For example, when heated to temperatures of 680 degrees Fahrenheit or more, Teflon pans release toxic gases. These include two carcinogens, two global pollutants, a chemical warfare agent known as PFIB and a chemical analog of the World War II nerve gas phosgene, according to the Environmental Working Group. Fumes from Teflon-coated cookware have been known to kill pet birds and cause flu-like symptoms in humans, known as polymer fume fever.

DuPont acknowledges that its nonstick coatings begin to deteriorate when the cookware reaches about 500 degrees, but notes that those temperatures are higher than typical cooking heats. And while it admits that birds may be harmed by Teflon fumes, the company maintains that Teflon pans are safe ['or humans under normal use.

The EPA is still collecting data, and it could be several months before the agency concludes its investigation. "We just don't have answers right now," says EPA spokesman David Deegan. Meanwhile, residents who have lived their entire lives near the Washington Works plant are struggling to explain what appears to be more than their share of illnesses. Tales of health problems abound in the community, where DuPont's main production of Teflon takes place. Many people tell a visitor about a personal or family battle with illness or death. Residents also talk of itching and rashes after taking a shower, and of burning, watery eyes when the air turns foul. "There's a lot of unexplained illness," says Bob Griffin, general manager of the Little Hocking Water Association in Ohio, whose wells, just across the river from the plant, have been found to have C-8 levels as high as 37 parts per billion.

DuPont has made strides toward reducing its C-8 emissions. The company has installed filters and other technology at Washington Works to curtail the amount of C-8 it releases into the air and water, from 45 tons in 1999 to 1(] tons last year. Its new C-8 plant in Fayetteville, N.C., is designed to emit just 200 pounds per year.

But Griffin and others express frustration, because they, believe that DuPont released the chemical into the environment for decades. They are also concerned about the way an investigation by the West Virginia Department of Environmental Protection, in collaboration with DuPont, has been conducted. Although DuPont officially has welcomed public hearings and research into C-8, critics say the process has been marred by lost samples, destroyed documents and withheld information.

Two members of a team set up by the West Virginia DEP to study C-8--Gerald Kennedy, a DuPont toxicologist, and Dee Ann Staats, a scientist with the state agency--were found by a court to have destroyed documents relating to the investigation. DuPont acknowledges that Kennedy destroyed email and other materials, hut says they were not substantive. The team ultimately set a standard of 150 parts per billion as a "safe" level for C-8 in water--150 times higher than DuPont's longtime guideline. The Environmental Working Group has protested that some of the officials in the state agency charged with investigating C-8 have ties to DuPont. Griffin of Little Hocking, who found out that C-8 was in his district's water a .year and a half ago by reading a local newspaper article, said that tests that were supposed to be performed by DuPont on his wells were never fully completed, and that samples have been lost.

Reputation in the balance

The C-8 controversy highlights a larger issue, namely how companies are still wrestling with the notion of sustainable business. By staking a claim to sustainable practices, companies set themselves up for extra scrutiny. And despite rhetoric to the contrary, sustainable business often clashes with a company's near-term financial interests--in DuPont's case, its $800 million fluoropolymers business.

DuPont appears to be keenly concerned with public perception. Though he seldom speaks publicly about C-8, Holliday receives sometimes daily reports from his public relations staff that track media coverage including C-8-related developments, court documents show. During the Tennant suit, DuPont tried unsuccessfully to impose a restraining order on the Tennants' lawyer to prevent him from discussing C-8, citing the damage that might be done i fit were to reach the media. And Holliday opened a shareholder meeting in April by assuring attendees that C-8 and Teflon were safe. Noting that safety was "a core value" at DuPont, Holliday told investors: "We have not seen any negative effects on human health or the environment at the levels of exposure we operate. We are confident that our products are safe for consumers."

Such attention to public image is ingrained in the corporate culture, at least at the Washington Works plant, several former employees say. Ronnie Murray worked there tot 30 years before retiring in 1997, most of that time with a unit that managed the plant's water, waste and power. Murray recalls seeing dead fish and a crust on the river where DuPont discharged waste. But when called to the attention of supervisors, he said, such findings were often shrugged off. Records of spills were recorded in pencil, not pen, he and other workers said. "DuPont will go to any extent to protect their public image," says Murray. Jimmy Carder, who spent 17 years working with Teflon, says if' there was an accident or spill, the first thought was to "cover it up," adding, "everyone knew the drill."

Paul J. Bossert Jr., the plant manager at Washington Works, said DuPont's rules stipulate that all accidental releases into the environment must be reported within an hour to the applicable government agencies. "We take those responsibilities very seriously," Bossert said.

Dupont's thought process on C-8 can be glimpsed in a May 23, 1984 memo by a company executive, J. A. Schmid, summarizing a meeting on the issue. The memo, now part of the court record, stated that attendees agreed that "the issue which will decide future action is one of corporate image, and corporate liability." It defined liability as "the incremental liability from this point on if we do nothing as we are already liable for the past 32 years of operation." The memo went on to say that while DuPont had identified alternatives to C-8, none of them was economically attractive. It also said that although from a corporate perspective "the costs are small" and DuPont's legal and medical departments would "most likely take a position of total elimination," the company's product group would oppose dropping C-8 for financial reasons.

Holliday's reputation also is on the line. Paul Argenti, professor of management and corporate communication at Dartmouth's Tuck School of Business, says companies that declare themselves socially responsible are often attacked unfairly. But he adds, referring to the dilemma Holliday faces about C-8, "If it turns out to be true, it will be a rough ride for him. If you set yourself up as socially responsible, you'd better be pure."

As for the class action, a West Virginia circuit court judge ruled in April that C-8 is "toxic and hazardous to humans," and he ordered DuPont to pay for the blood test of any member of the class who requested one. DuPont filed a motion to have the judge removed from the case. The West Virginia Supreme Court heard arguments from both sides in late September. The trial, which was supposed to begin in September, will be rescheduled.

In the meantime, DuPont continues to promote both Teflon and sustainable business. While the court was deliberating, Holliday was honored on Oct. 7 for his leadership by the U.S. Council for International Business, with United Nations Secretary General Kofi Annan in attendance. A press release praised DuPont's "commitment to environmental excellence and improving the lives of those in the communities where it operates."

The accolade was a notable moment in Holliday's 33-year career. But as more details become known about C-8 and DuPont's handling of the substance, it will become clearer whether Holliday's actions have indeed lived up to his words.

RELATED ARTICLE: The Teflon story.

* 1938 Teflon is discovered DuPont scientist.

* 1970 Chad Holliday joins DuPont as an engineer.

* March 1981 A study by 3M links C-8, a key ingredient in Teflon, with eye defects in rats. DuPont transfers female workers out of its operations where C-8 is used.

* May 1981 DuPont detects C-8 in the blood of five employees who had given birth in recent years. Two of their babies had eye-related birth defects.

* March 1982 After studies by DuPont show no link between C-8 and birth defects in rats, DuPont moves women of child-bearing age back into C-8-related work.

* Feb. 1998 Holliday is named CEO of DuPont.

* June 1999 The Tennant family of W. Va. sues DuPont, alleging C-8 disposal caused their cattle to die. Two years later, they settle with DuPont for undisclosed sum.

* May 2000 Under pressure from EPA, 3M announces it will begin phasing out C-8 and a related chemical due to "principles of responsible environmental management."

* March 2002 DuPont completes a $50 million expansion of its Teflon business.

* Sept. 2002 EPA says new data suggest potential for reproductive/developmental toxicity, and that blood samples suggest unexplained exposure to general public.

* Sept. 2002 Walking the Talk: The Business Case for Sustainable Development, coauthored by Holliday, is published.

* April 2003 In class-action against DuPont, a W. Va. judge rules 08 is "toxic and hazardous to humans." orders DuPont to pay for medical testing of up to 50,000 people. DuPont files petition to set aside the order.

* July 2003 DuPont launches a $20 million ad campaign featuring Teflon products:

* Sept. 2003 Arguments are heard on motion by DuPont to remove judge from case. Trial is postponed.

* Oct. 2003 Holliday honored by U.N. Secretary General Kofi Annan for commitment to sustainable business.

What is C-8?

C-8 IS SHORTHAND for ammonium peffluorooctanoate (the name refers to the number of carbon atoms in its chemical chain). C-8 is the main salt of perfluoroctanoic acid, also called PFOA. A synthetic, detergent-like substance, C-8 is a key processing aid in the manufacture of Teflon. C-8 and other so-called perfluorochemicals (PFCs) are also essential for the production of a wide range of stain, dirt and water-repellant products.