NEW YORK (Reuters) - Dow Chemical Co (DOW.N) hoped an Olympic sponsorship would boost its global cache, but the company’s link to a gas leak tragedy 28 years ago threatens to curb some of the benefits from the $100 million advertising deal.
As many as 25,000 residents of Bhopal, India, died in the aftermath of a 1984 gas leak at a pesticide factory that was owned by a subsidiary of Union Carbide, which sold the facility in 1994. Dow bought Union Carbide in 2001.
Since then, India, Amnesty International, Greenpeace and some members of the British Parliament have demanded Dow increase a $470-million compensation package that Union Carbide paid victims in 1989.
The Indian government wants Dow to pay an additional $1.7 billion, but Dow has refused, saying it has no responsibility for Bhopal and that Union Carbide settled liabilities with the Indian people.
The dispute was resurrected in the public eye by Dow’s sponsorship of this year’s Olympic games in London, home to a large South Asian population.
Activists succeeded in forcing Dow to remove its logo from a decorative wrap that will don London’s Olympic stadium. Dow had hoped the wrap would showcase its environmentally friendly plastic.
“When you’re doing an Olympics in England, considering the huge Indian population there, you probably could have suspected that there was going to be some protest,” said Elliot Schreiber, executive director of Drexel University’s Center for Corporate Reputation Management. “Dow has walked into a period of time where there’s a lot of sensitivity.”
The U.S. chemical giant will spend roughly $100 million every four years to sponsor the Olympics through 2020, a deal that extends to the 2014 Winter Olympics in Russia’s Sochi, the 2016 Summer Olympics in Brazil’s Rio de Janeiro and the 2018 Winter Olympics in Pyeongchang, South Korea.
London will host the first games since Dow Chief Executive Andrew Liveris signed the deal in July 2010.
The Indian Olympic Association has asked the International Olympic Committee to revoke Dow’s sponsorship, though so far the IOC has refused, saying Dow had nothing to do with Bhopal.
Dow said the controversy has not hurt sales of its plastics, insulation and other products. The company said it was surprised at what it considers a large amount of misinformation surrounding its link to Bhopal.
“Dow was never there. We did not acquire any of the connection with Bhopal,” said George Hamilton, Dow’s vice president of Olympic operations. “For some to try to tie Dow to this, and then to use the Olympic platform to try to serve their cause, it does call for some strong words.”
Dow justified the sponsorship by forecasting an Olympic-related sales boost of $1 billion by 2020. Hamilton said that revenue goal remains on track.
Part of the $1 billion is expected to come from supplying Styrofoam insulation for the aquatics center, where U.S. swimming champion Michael Phelps will try to win his 15th gold medal, and polycarbonate for the seats in the East London stadium that will host the opening ceremony on July 27.
Unlike the majority of the 11 global Olympic sponsors, Dow does not sell its products directly to consumers. That means the Bhopal public relations sting is unlikely to make a dent on Dow’s sales, said Hassan Ahmed, a chemical industry analyst with Alembic Global Advisors.
“By the time you buy your iPhone, you have no idea what Dow material is being used inside,” he said. “I don’t think there’ll be a sales impact.”
Reporting By Ernest Scheyder