Introduction
Good morning ladies and gentlemen. I am delighted to be here today at this respected business-and-environment event, and to take part in discussions on the business of sustainability a matter that is increasingly top of mind for political and corporate leaders around the world.
Alcan is proud to support the Globe series as an expression of our commitment to promoting sustainable practices practices that help global citizens meet their current needs without compromising the ability of future generations to meet their own needs.
At Alcan, sustainability is not just top of mind. Along with our governing objective of Maximizing Value, and company-wide initiatives such as EHS FIRST and Continuous Improvement, sustainability is becoming part of a management system that helps us set priorities, shape strategies, and choose between alternatives.
Today I would like to share with you how sustainability is being embedded in the very model we use to run our multinational business at Alcan how it is driving innovation and enabling us to generate value in many ways, for many stakeholders.
The Roots of Sustainability at Alcan
For those who are not familiar with Alcan, let me take a moment to tell you about our company. Since the first meeting of Alcan shareholders in Montreal in 1902, Alcan has evolved into a global leader in aluminum and packaging as well as aluminum recycling. Our recent acquisition of the French company Pechiney nearly doubled our size, making us a US$25 billion company with 88,000 employees and operations in over 60 countries.
Today Alcan runs bauxite mines, alumina refineries, aluminum smelters, power generation facilities, aluminum rolling plants and specialty packaging facilities in diverse and sometimes impoverished regions of the world. Our continued success depends on our ability to access the natural and human resources we need to operate and grow.
Like all manufacturing companies, we have, at various points in time, struggled with issues relating to our impact on the environment and communities. In some cases, these challenges continue to this very day. But with more than 100 years of history full of accomplishments and some things we would do differently if we could go back and do them again we have learned many lessons about what works and what does not work in building a sustainable business and in being part of sustainable communities.
At the heart of today’s business case for sustainable global success lies a cycle of economic, environmental and social interconnections. Economic viability is the starting point, because all companies are first and foremost economic entities. No company can be sustainable over the long term if it is not economically viable. And by the same token, no company can be economically viable in the 21st century if it fails to accept its environmental and social responsibilities. These three interrelated components of sustainability provide the foundation for global business success. As media reports confirm every day, a crack or failure in any one of these components can be enough to weaken the entire structure.
In my business dealings, I interact with the leaders of many other multinationals, as well as with the heads of governments and NGOs, and I can tell that we all face similar challenges when it comes to sustainability.
In the global community, well-defined performance measures exist for the financial and environmental dimensions of sustainability. However there is little consensus on metrics for the exceedingly complex social/economic dimensions. What role should companies, governments, even aid organizations seek to play here? How do we measure contributions to local communities as we measure a business’s economic returns?
These are but a few of the challenges that every major organization in the world has to face if any real progress is to be made. We do not claim to have all the answers at Alcan, but we have discovered a few of them and I believe we are making real progress in the area of sustainability. My goal today is to share some of this progress with you.
Sustainability: A Fundamental Operating Tenet at Alcan
As I mentioned in my opening comments, sustainability is becoming a fundamental operating tenet at Alcan not an overlay, but an integral part of what we think about and do every day. Maximizing Value, our governing objective, has focused us on creating value and taught us to manage for value, while our growing sustainability mindset has expanded our very notion of value, which now includes the three sustainability pillars.
In other words, Maximizing Value is the cornerstone of our ambitious sustainability agenda Alcan’s game plan for sustaining its profitability well into the future.
Alcan employees also make the case for the importance of sustainability when, in our annual employee surveys, they consistently rank operating as a sustainable company as the highest priority. Our people live in local communities and are concerned about making sure that our industrial practices are contributing to, not detracting from, the sustainability of these communities. No one wants to be associated with an enterprise that is going in the wrong direction. We all want to be able to hold our heads high.
Society has moved in terms of what it expects of companies. Stakeholders have new expectations in terms of accountability, and they are no longer limited to the financial realm. Forward-looking businesses and I believe Alcan is among them recognize the need to be accountable to shareholders and others for the overall impact of their operations on society. As co-chair of the World Business Council for Sustainable Development’s Accountability and Reporting Project, I am proud to participate in creating this broader definition of accountability a definition that, I am convinced, will spell good news for all of us here today.
In keeping with our growing sustainability mindset at Alcan, we have allocated significant resources in recent years to develop the policies, systems, metrics and tools needed to aggressively pursue our sustainability-driven business agenda and to continually improve our performance in the many countries where we operate.
Our ambitious sustainability agenda permeates every aspect of our business. It drives us to innovate in order to generate the expanded resources required to meet shareholder expectations while continually improving our environmental performance and delivering meaningful social benefits. This is the new business paradigm one in which innovation and sustainability are intrinsically linked.
Innovation and Sustainability: Intrinsically Linked
Looking at what we do through a value creation and sustainability lens enables us to see things from a different perspective. It makes us aware of other options. It increases our opportunities and opens the door to innovation. It forces us to explore how we might improve or do something better, that is, with fewer resources, reduced environmental impact and enhanced social benefits.
Let’s take a look at how our value creation and sustainability agendas push us to innovate at Alcan.
First, we have been inspired to a deeper understanding of sustainability by the main product we manufacture. Aluminum is one of the world’s most recyclable materials. Its net benefit to the planet is a positive one, and is becoming more so every year as we find new ways to reduce the environmental footprint of our manufacturing processes and work to recover ever greater amounts of aluminum after use. Aluminum makes us keenly aware of our responsibility to design and manufacture our products with a view to keeping them out of the waste stream.
As the world’s largest recycler of aluminum cans, we have made substantial investments in modern, clean and highly efficient recycling facilities. Recycled aluminum is a strategic source of metal for us, which results in significant environmental benefits. Producing new metal from used aluminum saves up to 95% of the energy required to manufacture primary aluminum and avoids up to 95% of related emissions such as greenhouse gases. Aluminum is an "energy bank" from which the original significant energy input can be reused again and again the epitome of sustainability.
Due to its high re-use value and infinite recyclability, aluminum is one of the very few packaging materials that make recycling profitable. At Alcan, we actively support the recycling of aluminum cans around the world. Alcan alone recycles 30 percent of the beverage cans reclaimed in the world that represents more than 30 billion cans!
Aluminum’s unique properties lend themselves to innovation. In the transportation industry, these properties, in particular aluminum’s strength-to-weight ratio, enable us to contribute to all three sustainability pillars. We have forged breakthrough agreements with major automotive dealers such as Ford and others to “light-weight” their vehicles. These innovative agreements move us towards increasingly high value opportunities that connect our business with sustainability.
When used to build motor vehicles, aluminum, which is both light and strong, lowers fuel consumption, saves energy costs, and reduces emissions, scoring points across all three dimensions of sustainability. When these vehicles reach the end of their active lives, the aluminum in them can be fully recycled and used over and over again. That is why in the aluminum life cycle, we talk about cradle-to-cradle as opposed to cradle-to-grave stewardship.
Across all of our manufacturing processes, our sustainability principles guide us as we work to recycle by-products into useful inputs to our own industrial systems or those of other manufacturers. For example, a long-standing issue for the entire primary aluminum industry has been the disposal of spent potlining. Years of thinking about this issue from a value creation and sustainability standpoint enabled our R&D scientists to develop a whole new set of technologies to process the residue in a closed loop, which not only renders the potlining environmentally benign but also allows the recycling of potlining by-products. Alcan is about to reinforce its leadership in this area by building in Quebec a CAN$150 million spent potlining treatment facility that features our proprietary technology.
Alcan R&D is also behind the development of an innovative activated alumina product that is fast becoming a preferred solution for removing naturally occurring but very deleterious arsenic and fluoride from drinking water. Several thousand units are now in use in Bangladesh and India by relief organizations such as UNICEF, the Red Cross, Rotary, World Vision and CARE.
As co-chair of the World Economic Forum Water Initiative, I am a firm believer in the need for multi-stakeholder dialogue and cooperation to resolve the world’s sustainability challenges. One of the most pressing challenges we face on the planet today is the provision of water security for all. Thanks to this innovative technology and our partnerships with the NGOs mentioned above, Alcan is now in a position to help provide safe drinking water to millions of people, with the added benefit of generating business opportunities for our company.
Our focus on water came out of our long experience in caring for water resources around the world. Because our business is inextricably linked with water, we manage watersheds, employ water to generate hydroelectric power, and use water in our industrial processes. Recognition of our dependence on water has triggered a heightened awareness of our responsibility to manage this crucial resource in an efficient and sustainable manner.
We recently shared our experience in a position paper dedicated to sustainable water management. By contributing to the evolving body of knowledge on this topic, we hope to stimulate discussion and provide insight into the types of best practices that will help protect and preserve the planet’s freshwater. We hope that our experience will inspire others to rethink how they manage water and to develop solutions that help spare, share, and care for the earth’s freshwater resources.
At Alcan, we believe that all the issues that stand in the way of economic, environmental and social sustainability can be better managed when various sectors work together. This belief has given us a keen sense of community responsibility and produced a long history of innovative partnerships at the community level. Our decommissioning of a 91-year-old smelter in Kinlocheven, Scotland in 2000 provides a very good example of such partnerships. To ensure that the legacy we left to Kinlocheven was a positive one, we started working with the employees and the community six years prior to the smelter’s actual closure.
Throughout this period, we continued to win safety awards, which is no small feat in the context of a plant closure. We donated land and buildings and helped lay the foundation for the development of eco-tourism in the region. The Kinlochleven closure is widely viewed in Scotland and the U.K. as representing best practices in terms of socially responsible plant closures.
One of the avenues available to us for direct community interaction is Alcan’s Community Investment Program. For many years, this program reflected our preoccupation with the principles of sustainability even if the term was not yet in common use. From “Project Smiles”, which delivers free dental care to Brazilian children, to our award-winning international network of “Micro-Businesses” that promote social responsibility in elementary schools, and our celebrated YNOTS program, which provides vocational training to young indigenous people in a remote region of Australia Alcan has a proud history of supporting and creating innovative sustainability-based programs.
Working with aboriginal communities and supporting local economic development initiatives are an integral part of sustainability for a multinational enterprise. Here in British Columbia, this is borne out through our relationships with First Nations communities and our involvement in the creation of the Nechako Watershed Council, aimed at enhancing this important watershed for the benefit of all stakeholders.
Recognizing our Community Investment Program as a powerful tool to communicate our values to the world outside our plant gates, we have recently adopted sustainability as the platform for our corporate-giving decisions. By aligning our community investments through sustainability, we are able to more accurately reflect our corporate priorities, generate positive impacts in areas we truly care about, and help return to our children a world that is better than the one we borrowed.
Back in January, while at the annual meeting of the World Economic Forum in Davos, Switzerland, I had the distinct honour of announcing some very exciting news the creation of “The Alcan Prize for Sustainability”, the new flagship of our sustainability-driven Community Investment Program. This US$1 million annual prize will be awarded to not-for-profit, non-governmental, and civil society organizations that have made, and continue to make, outstanding contributions to the goals of economic, social and environmental sustainability.
Let me take a minute to elaborate on the Alcan Prize as an example of our growing sustainability mindset. Giving a million dollars a year to the not-for-profit sector is more than a grand gesture on the world stage. From our own economic perspective, it provides us with a way to consolidate some of our corporate-giving dollars to be much more effective. It also connects us with even more opportunities to increase our understanding of the world’s best sustainability principles and practices and to expand and deepen our own expertise in these matters.
The Alcan Prize provides us with an innovative way to walk the sustainability talk. It reflects our respect for the role of NGOs in promoting and implementing the principles of sustainability. In some respects, it is a form of enlightened self-interest. It will allow us to build relationships in the not-for-profit sector. It will also help foster a culture of employee volunteerism by creating opportunities for Alcan employees to be part of creative solutions to the challenges facing our world, now and in the future.
The Alcan Prize for Sustainability reflects our profound belief that we are all in this together every sector, including business, has a role to play in preserving our planet for future generations. At Alcan, we believe we play our role most effectively when we work in partnership with other stakeholders.
The Alcan Prize program is managed by the Prince of Wales International Business Leaders Forum. A panel of respected international leaders in the field of sustainability will select the winners based on their contributions to economic, social and environmental sustainability. By the way, Alcan will not have a voice on the judging panel. José-Maria Figueres, CEO of the World Economic Forum and former president of Costa Rica, has generously agreed to chair the prize’s 2004 adjudication panel.
My fondest hope is that the Alcan Prize for Sustainability will be so effective in facilitating good works in the world that Alcan will renew it for many years beyond our initial nine-year commitment. I also hope that some of you here today who represent NGOs will encourage your organizations to participate in the Alcan Prize program in the future.
Conclusion: A Rewarding Approach to Business
At Alcan, we know that understanding sustainability and behaving in a sustainable way is about learning and change learning and change that has, as I have pointed out, many rewards no matter where you stand in the sustainability circle. These rewards include improved stakeholder relationships, new and innovative business opportunities, and external recognition of our efforts.
In terms of external accolades, we are increasingly recognized as a leading sustainability-driven company focused on moving our business agenda forward with the support, and to the benefit of, our various stakeholders.
We are gratified that our efforts, both inside and outside our operations, are being noticed. As an example, earlier this year, Fortune magazine ranked Alcan as the world’s most admired company in the metals industry and as one of the top 10 most admired companies in the world for social responsibility. This yearly survey asks executives, directors and security analysts to rate global companies in nine areas including use of corporate assets, long-term investment value and social responsibility. In June 2003, Alcan was honoured by Canada’s Corporate Knights Inc. as the country’s leading company in the field of social responsibility.
In 2001, Innovest Strategic Value Advisors singled out our company as leading all aluminum producers in environmental performance.
We have also been selected as a representative company on the Dow Jones Sustainability World Index, which tracks the performance of sustainability-driven companies worldwide. And at the 2002 World Summit on Sustainable Development in Johannesburg, Alcan was honoured for its development and longstanding support of the international Micro-Business Network that I mentioned earlier.
These accolades represent an external validation of our efforts to be the best at everything we do to be a global leader with a clear and credible track record that is committed to creating value across the dimensions of sustainability.
Shareholder value is definitely one of these dimensions and our share price development offers further evidence that we are headed in the right direction. Alcan's stock rose CAN$14.24 or 31% on the TSX in 2003, from CAN$46.33 to $60.57, outperforming the TSX Composite index, which rose 24% over the same period. During the past five years, our shares have risen 46% versus 27% for the TSX Composite as a whole. This performance speaks volumes about our ability to compete effectively in today’s global economy.
There is no doubt in my mind that sustainability makes good business sense. It creates value today and preserves it for tomorrow. It drives us to become a better employer, a better investment, a better neighbour, a better company with superior value-added products. At the same time, it forces us to manage an aggressive and, often, challenging change agenda as we continually raise the bar on our economic, environmental and social performance.
Sustainability is, in my opinion, a permanent feature of the contemporary business landscape. A feature that challenges us to innovate by finding new and better ways of dealing with our increasingly complex and interconnected world.
We are deeply convinced that our ability to understand and do the right thing is greatly enhanced by strong stakeholder relationships and cross-sector partnerships, based on mutual benefits. In the end, we share a collective responsibility to build a better world. Multinationals have an important role to play in this pursuit … and we must play it.
As Albert Einstein said, “We cannot solve the problems we have created with the same thinking that created them.”
This statement offers a succinct description of how sustainability and innovation are fundamentally linked. It captures the essence of the discussions that will be taking place over the next couple of days at Globe 2004. It also goes to the heart of the rewards and challenges of sustainability. A learning experience that I look forward to continuing together.
Thank you.
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