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Sustainability Report Review
For our 2007 sustainability report, we used the services of the independent firm AccountAbility to convene and facilitate a pilot sustainability report review panel to help us identify gaps in our reporting and take an initial step toward incorporating third-party assurance into our process. While this pilot panel did not provide assurance on our data, it did advise us on content.
Since then, we have continued to address the issues and gaps the pilot panel found most significant. We also engaged AccountAbility to develop an independent commentary on our 2008 reporting to provide a review of the continued response to the panel’s recommendations and advice and also give us direction for continuous improvement in our reporting process.
The following is AccountAbility’s commentary, which we could not revise and were required to publish.
In 2007, Alcoa convened a Stakeholder Panel, facilitated by AccountAbility, to review and provide public commentary on its Sustainability Report. In developing its 2008 report, Alcoa asked AccountAbility to guide the company in responding to the Panel’s comments, and to offer a summary and reflection on the progress it has made in strengthening its reporting. Our commentary is not an audit or verification statement, but aims to provide guidance to Alcoa and its report readers.
Summary looking back to the 2007 Panel Letter
Alcoa’s 2008 sustainability reporting has made significant advances in responding to the comments of the Stakeholder Panel. Notably, the reporting provides a deeper understanding of Alcoa’s position and responses to several specific challenges and dilemmas, including the financial crisis, climate change mitigation, and safety. It gives greater emphasis to stakeholders’ viewpoints and the context for its policies and actions, in particular through the inclusion of staff perspectives and case studies, providing valuable insight into how and why the company is implementing its global commitments in different ways in different locations. Several specific issues, including water management and recycling, are discussed in more detail, as well as greater case material reviewing the company’s human rights impacts. One major theme highlighted by the Panel, the company’s approach to biodiversity, remains under development.
Response to the Stakeholder Panel recommendations
Last year, Panel members agreed that Alcoa had provided significant and useful information on how it manages its sustainability performance. However, they called for further disclosure on how sustainability is reflected in senior executive responsibilities and incentives. They also hoped that Alcoa would provide more practical examples of how it is engaging with stakeholders to inform its own decision-making and provide more thorough coverage on engagement with local authorities.
In this year’s reporting, Alcoa discloses increased information on sustainability-related responsibilities, including announcing that it has elevated responsibility for global sustainability from Director to Vice President level, and highlighting new roles created to manage the company’s procurement sustainability strategy. While the report does not provide full disclosure on how sustainability is reflected in executive remuneration, there is additional disclosure about how targets are set and who is responsible for local implementation. More detail is provided regarding public policy engagements in the European Region, but more information could be provided regarding engagements in the development of climate change policy in developing countries.
Last year, while commending the coverage of Alcoa’s reporting on many issues material to Alcoa's business and stakeholders, Panel members called for a stronger discussion of how Alcoa's ambitious business growth strategy and the broader development of the industry aligns with sustainability goals. They also called for more thorough disclosure on the recycling and recyclability of aluminium and the use of renewable energy, as well as on Alcoa’s action to protect sustainable livelihoods and human rights commitments throughout its value chain.
The 2008 sustainability reporting presents the company’s sustainability commitments in the context of its business strategy and provides extended reflections on the direction of the sector and, in particular, the role that aluminium plays in climate change mitigation. Alcoa has also strengthened disclosure on internal and external recycling challenges, the use of renewable energy, and human rights, including providing information and case studies of how environment, health, and safety (EHS) and local economic development issues are managed within supply chain and contractor relationships.
In 2007, panel members agreed that Alcoa’s reporting of targets and performance data for most material issues was adequate to enable progress to be assessed, but they asked the company to put these targets into context with more regional breakdowns of data, reference to international norms and industry benchmarks, and stakeholder feedback. In particular, the panel urged Alcoa to back up its water use figures with broader discussion on how it is managing water use across its global operations and also to identify targets and provide greater coverage on the issue of biodiversity and ecosystem conservation.
In its 2008 sustainability reporting, Alcoa has included more viewpoints from both external and internal stakeholders to provide additional context to its performance data. Case studies link back to and so demonstrate how the company is implementing its global goals and vision and illuminate local challenges. For the 2009 report, the company indicates that it will aim to report its performance metrics alongside credible industry benchmarks, where appropriate. However, it has not yet met the Panel’s request to provide more clarity on its position in reference to international norms and standards. The report provides details of both water usage data and management, but does not include targets and indicators on biodiversity and ecosystems. Alcoa plans to address this gap in 2009 when it reviews its 2020 community framework.
AccountAbility’s reflections for 2009
Alcoa has made significant advances in responding to Stakeholder Panel comments. If it strengthens its reporting on biodiversity and on its position in relation to relevant international norms and standards, as well as continuing to deepen its discussion of the alignment between its business strategy and sustainability goals, we believe that it will have met both the spirit and the specifics of the Stakeholder Panel recommendations.
Going beyond this, but reflecting on the panel discussions in 2007 and our conversations with senior Alcoa executives during this report review, we offer three lenses on the company’s sustainability strategy and performance, which Alcoa could use to further advance its thinking, reporting, and impacts on sustainability:
- Looking at the whole lifecycle of aluminium. With climate change a critical issue, the 2008 report discusses the impacts on the atmosphere asssociated with aluminium in the production, use, and recycling phases of its lifecycle. But it does not offer an overall assessment of the relative scale and scope for improvement of each of these areas. Providing a picture of the impacts of aluminium across its whole lifecycle could help Alcoa and its stakeholders more clearly identify where the company’s most valuable potential contributions to climate change mitigation are to be found, whether in reducing its own greenhouse gas emissions or in reducing the overall greenhouse gas emissions intensity of the global economy through innovative and energy-efficient uses of aluminium.
- Looking to the future. The report reflects on the dominant trends of population growth, urbanization, and growth of energy demands, but does not yet provide a proactive and forward-looking reflection on what these trends and possible responses amongst Alcoa’s stakeholders could mean for the future of the business and the diverse communities it serves. For example, how far could more efficient aluminium recycling reduce the need for extraction, and how would this impact on workers and communities dependent on the industry? What is Alcoa’s long-term vision for the aluminium industry in contributing to climate stablisation in the face of different energy and carbon price and technological development options? Reflecting on these long-term questions would help Alcoa demonstrate leadership in developing responsible strategies for navigating the future.
- Looking at interconnections. While the 2008 report covers many material social and environmental issues, it addresses each in isolation without tackling either the interconnectivity between the company’s impacts in different areas (such as water, ecosystems, and local economic development) or the linkage between sustainability issues and business performance. Moving away from this issue-by-issue approach toward one that integrates social and environmental challenges and opportunities with business strategy would enable Alcoa to use its sustainability reporting to help bring together its broad community of external and internal stakeholders in co-designing business solutions to meet these challenges.
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