DuPont: The Truth Helps Nanotech

I have to give DuPont (NYSE: DD  ) credit: It learns from its mistakes. This month, the chemical giant paid a $16 million administrative penalty for failing to report the dangers of perfluorooctanic acid, or PFOA.

The same week, the Environmental Protection Agency released a draft paper outlining a variety of concerns stemming from the gaps in scientists' understanding of the environmental and health effects of nanotechnology.

On the face of it, the two events may not seem related, but they are. Let me explain.

Being careful
From asbestos and chlorofluorocarbons to leaded gasoline to DuPont's recent run-in with PFOA, history is replete with examples of industry touting the magnificent benefits of a new chemical or materials -- and then pushing those products out into the commercial marketplace -- well before the scientific community (not to mention the unsuspecting public) fully understood the consequences of these new products. The economic consequences of this rashness -- in terms of fines, lawsuits, and damaged reputations -- have often been immense.

This is where DuPont's recent setback and its concomitant actions begin to parallel what is happening in nanotechnology.

Few people -- myself included -- doubt that nanotechnology has scores, if not hundreds or even thousands, of wonderful new applications. At the same time, there remains a staggering number of unanswered questions about the long-term implication of our new ability to manipulate matter at the molecular level.

These questions, if not fully answered in advance, could come back to bite -- in a painful way -- those companies engaged in nanotechnology research and development.

What, then, are companies to do? With the astounding pace of development in nanotechnology and its extraordinary promise, they can't very well afford to miss out on "The Next Big Thing." At the same time, the prospect of developing the "asbestos of the 21st century" isn't exactly an appealing prospect, either.

The answer is simple. You hedge your bets. And that is precisely what DuPont did in the fall when it partnered with Environment Defense, an environmental organization, to "define a systematic and disciplined process that can be used to identify, manage and reduce potential health, safety and environmental risks of nano-scale materials across all lifecycle stages."

Essentially, DuPont is publicly acknowledging that there are possible risks in nanoscale material and nanoparticles; and it's actively working to identify and -- if feasible -- minimize or eliminate those risks as quickly and efficiently as possible.

Acknowledging the risks
DuPont's stance is a refreshing change from your typical corporate position, which has often been to refuse to consider -- let alone acknowledge in advance -- the possibility that some of the materials or chemicals being developed may pose an environmental, safety, or health risk.

I am confident DuPont's openness will be rewarded in the marketplace. In fact, it may even give it a leg up on some of its other competitors such as Dow Chemical (NYSE: DOW  ) and BASF (NYSE: BF  ) .

I feel this way because it is my opinion that the scientific community will inevitably determine that at least some nanoscale materials pose unnecessarily high risks. If the public, however, were to find later that companies knowingly hid or downplayed the risks, it could lead to not only major lawsuits but also a serious backlash against all things nano. The best-case scenario might be over-regulation. Worst case, many nanotechnology-related products may be banned altogether.

This would obviously be detrimental not only to the companies manufacturing beneficial nanoscale materials, but the broader public as well, which might be denied the use of some of the positive applications of nanotechnology.

Therefore, the more DuPont -- as well as others dabbling in the nanorealm -- is open and honest about nanotechnology, the less likely it is that if something bad is discovered, the regulators or the public will demand that the entire nanotechnology "baby" be tossed out with the bathwater.

Let me be clear, though: DuPont's newfound willingness to embrace environmental organizations and engage in openness doesn't signal a leftward shift in corporate policy. It is a hard-headed, practical business decision.

The best business policy
DuPont does a great deal of nanotechnology research and development and wants to protect its investment. A quick look at some of the company's public statements will reveal how much it has riding on nanotechnology.

DuPont's performance materials division perhaps stands the most to gain from applied nanotechnology. The company's work in the field of carbon nanotubes could lead to a variety of new products that incorporate flexible electronics. It might also lead to cheaper flat-panel TVs and better organic light-emitting diodes. Improvements in the latter area could, in turn, find their way into cell phone screens and MP3 players.

New nanoscale titanium dioxide could lead to new coatings, plastics, inks, fibers, and paints. This, in turn, could lead to new surgical products, aircraft engines, sports equipment, environmental catalysts for water treatment or auto emissions, and even self-cleaning and self-sanitizing paints.

Other aspects of DuPont's business also stand to benefit from its sizeable investment in nanotechnology. For instance, the company, along with Raytheon (NYSE: RTN  ) , is one of the co-founders of the Institute of Soldier Nanotechnologies. Located at the Massachusetts Institute of Technology, the institute is dedicated to using nanotechnology to "dramatically improve the survival of the soldier of the future."

DuPont has much to offer in this area. As the maker of Kevlar, the company is looking to exploit nanotechnology to make the material not only stronger and lighter, but also waterproof and germ-resistant. Longer-term, the company has suggested that "dynamic armor" -- which can change its properties on demand -- may be a real possibility, in part because of part nanotechnology.

The market for such materials obviously transcends the military. Police, firefighters, and a host of workers engaged in other hazardous jobs that require protection from sharp machinery would also stand to benefit.

The company has even announced that it is working with two of nanotechnology's more exciting companies -- Nanosys and Konarka -- in the area of nano-enabled photovoltaics. Advances in this field could lead to everything from solar-powered tents to solar-powered fabrics. The latter, it is believed, could provide tomorrow's technology-laden consumers with a convenient, indeed wearable, method for keeping their cell phones, laptops and PDAs constantly charged.

The bottom line is that DuPont has a lot riding on the successful development of nanotechnology, and I am bullish on many of these developments. However, I'm equally bullish on DuPont's willingness to engage in an active and aggressive policy of protecting tomorrow's profitable nanotechnology development with its careful and considered analysis of the field's potential health, safety and environmental risks today. As they say, forewarned is forearmed.

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Fool contributor Jack Uldrich has been accused by teachers and friends alike of thinking small since grade school. He is the author of two books on nanotechnology, including the forthcoming Investing in Nanotechnology: Think Small, Win Big.He can be reached atHe does not own shares of DuPont or any of the other companies mentioned in this article. The Fool has a strict disclosure policy.


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