TCB | The strong dollar and downturn in the oil and gas industry, one of your prime business sectors, have cut into your profits. How challenging has this been for you?
Doug Baker Jr: Foreign exchange rates, or FX, by far have had the biggest impact, followed by the oil and gas downturn. The oil and gas industry had accounted for about 30 percent of our sales. FX increases the cost of products you export, but we don’t export a lot. Our strategy is to make our products in the markets we serve because we don’t want currency fluctuation to be a strategic problem. It will be a financial issue, though. The translational impact for us—if we froze FX at today’s rates—would be a $1.5-billion decline in sales revenue between 2015 and 2016. It’s a big deal.
Oil is in a historic slump. This downturn is driven by an oversupply of oil. We are near the bottom. The next six quarters will be more fun than the last. Our business remains focused on what matters most—driving innovation, driving accounts and increasing investment in R&D and technology.
TCB | With antibiotic and antimicrobial resistance becoming a serious threat globally, are you finding that you need to accelerate the pace of your investments in research and development to stay on top of these growing problems?
Baker: It will create opportunities. If we quit giving animals antibiotics prophylactically, the effect of that will need to be to raise hygiene levels. We are already working on that in Europe. We are well equipped in this area because we are already working in parts of the world where this philosophy has permeated. We try to get ahead—before resistance is realized in our antimicrobials—but it is a constant fight.
We have increased our R&D and tech budget, but our biggest thrust is in two other areas. We continue to up our focus on reducing our customers’ carbon and water footprints. We saved our customers 150 billion gallons of fresh water in the last 12 months; we want to get to 300 billion gallons. With water reduction comes energy reduction. We are also focusing on leveraging digital activity. We are currently monitoring 30,000 industrial sites around the world from a facility in Pune, India. We can then take best practices and apply them to other plants to help customers reduce their water and energy use.
TCB | How do you get your customers to conserve water when it is so inexpensive?
Baker: It is becoming less hard because they are becoming aware that in certain parts of the world there is water stress. In California, China, big parts of Asia and Africa, the Middle East and India there is water stress. Nearly half of the world’s population will live in water-stressed areas by 2030. Food and beverage manufacturers have been the first to recognize this. When we show the large companies—Unilever, NestlÃ©, Cargill, Coke and Pepsi—that we have great technology to help them conserve water, they are all for it. We are in a position to help people in water-stressed areas.
TCB | Is it becoming more challenging to create chemical products for use across countries at a time when environmental regulations are also rapidly changing?
Baker: It has never been easy. There are different regulatory regimes. We have a global standard or local standard that we follow, whichever is more stringent. Europe recently passed new standards called REACH to regulate chemicals, and the United States recently enacted TSCA (Toxic Substances Control Act), which is more stringent than previous regulations and will cost more to adhere to, but it will cover 50 states.