Chairman and CEO Statement
In a year that marked the start of a global economic recovery, Alcoa’s progress in overall business performance was matched by positive developments in our sustainability agenda.
At Alcoa, we take a long-term approach to sustainability. In 2010, our businesses developed roadmaps and action plans for achieving our 2020 and 2030 strategic sustainability targets. These plans take into account the technology, investment, and operational decisions we will need to meet our longer-term targets. With plans in place, we are prepared to achieve our goals.
One way to ensure that sustainability is a shared value throughout Alcoa, and that we apply the right focus and resources to reach our sustainability goals, is to link sustainability performance to variable compensation. During 2010, 20% of our variable compensation was tied to achieving significant aspects of our sustainability targets. Across the entire workforce, the targets focused on improvements in energy intensity and safety. Our management-level employees had an additional target to improve the diversity of our workforce.
We made solid progress on our sustainability agenda in 2010, including the following:
- Climate Change: We continued our progress in reducing the greenhouse gas footprint of our operations. Our Global Primary Products business lowered its CO2 intensity by 7% over 2009 levels and achieved a 22% reduction over 2005 levels, exceeding our 2020 goal of a 20% reduction. These reductions are the result of our strategic efforts to reposition our operations to take advantage of clean hydroelectric power; quickly share best practices to reduce process emissions; and drive energy efficiency at every location. The year-over-year reduction was also impacted somewhat by curtailments in smelting capacity, but we will work hard to hold current results as capacity comes back online.
- Safety: In our employee survey, Global Voices, the statement “I work in an environment that promotes safety” was reinforced with a favorable score of 82% in 2010. We ended 2010 with 82% of our locations reporting zero lost workdays and 48% with no recordable injuries—a significant improvement over our 2009 performance.
- Cash Sustainability: We exceeded every one of our seven Cash Sustainability Program targets, ending the year with more than US$1.5 billion in cash on hand. In addition, our debt-to-capital dropped to 34.9%—380 basis points lower than 2009.
- Community & Stakeholder Engagement: Our locations are engaged in community programs that are characterized by regular dialogue with a broad group of stakeholders to understand their issues and work together on appropriate resolutions. In addition, Alcoa and Alcoa Foundation contributed more than US$36.8 million to the communities where we operate.
- Employee Engagement: We improved worldwide employee engagement scores as measured in our Global Voices survey for the third consecutive year. In addition, 49% of our employees participated in community service projects during our Worldwide Month of Service in October 2010.
- Ethics: Alcoa was again recognized globally as among the most ethical companies, placing first in the Basic Resources category in the Covalence Ethical Rankings. We have been rated number one in this category since the ranking began in 2005. Across all industries and companies, we placed 15th out of the 581 companies tracked for the 2010 ranking, which was released in early 2011.
Despite the substantial progress that we made in 2010, we lost three employees and one contractor in the line of work. These fatalities are deeply disturbing to every Alcoan. Operational and financial success at Alcoa is hollow if we don’t maintain the commitment and diligence needed to identify risks and completely eliminate fatalities. We continue to focus our safety efforts on these areas, and you can find more information in the Safety section of this report.
The entire aluminum industry was reminded of the significant consequences of improperly managing bauxite residue when the Magyar Aluminium ZR bauxite residue storage area in Hungary failed in October 2010. Impounded water containing bauxite residue flooded a nearby community, leading to the loss of life and property and environmental damage. Although the facility was not related to Alcoa, our bauxite residue and medical experts saw first-hand the ramifications when they assisted the Hungarian government with clean-up and medical care.
Prior to this disaster, our enterprise-wide risk management process had identified bauxite residue management as a potential significant risk if not properly managed. Although our practices for managing residue within Alcoa are fundamentally different from those that led to the Hungarian failure, the disaster caused us to review our management practices at every one of our residue storage areas worldwide. We continue to develop and deploy industry-leading practices to ensure these areas are effectively managed.
In 2010, the U.S. state of North Carolina criticized Alcoa for allegedly failing to disclose pertinent environmental and water quality data related to our efforts to relicense four dams we have operated on the Yadkin River in that state for more than 50 years. We are working with the state, regulatory authorities, and other stakeholders to clear up any concerns and to move forward in a mutually agreeable way.
Alcoa continues to garner recognition from renowned organizations around the world. We were named to the Dow Jones Sustainability Index (the ninth year in a row) and recognized by Bloomberg-Maplecroft as among the top three companies in climate-related innovation and carbon management. In China, we received the inaugural Multinational Companies with Contribution to Public Welfare in China Award. In Brazil, we were named the sustainable company of the year by the leading business magazine, Exame. To receive this recognition during a phase of tremendous expansion in Brazil speaks volumes of the sustainable fashion in which we have grown there.
While recognition is gratifying, we know we need to do better in some areas. In August 2010, I asked Kevin Anton to become Alcoa’s first chief sustainability officer (CSO). Kevin has been the leader of the Alcoa Sustainability Steering Committee since its inception and is the right person to sharpen our focus and develop a comprehensive strategy that integrates all of our sustainability efforts. You will read more from him in his inaugural CSO statement.
I see an amazing future for Alcoa and aluminum. The properties of our “miracle metal”—strong, lightweight, recyclable—will continue to contribute to the sustainability of our planet and the advancement of societies. Alcoa, in turn, will keep leading the industry in sustainable products and processes.
We welcome input from all of our stakeholders about our sustainability performance. Please email us or take a brief survey about this sustainability report to let us know how we are doing.
Klaus Kleinfeld
Chairman and Chief Executive Officer
