Secrets Behind Alcoa's Sustainability Program

Secrets Behind Alcoa's Sustainability Program

If you're worried about meeting sustainability goals at your company, you may want to pick Kevin Anton's brain a bit.

He's Alcoa's chief sustainability officer, and just one year after Alcoa set long-term targets, he's largely on track or ahead of schedule. Alcoa has already reached its 2020 targets for greenhouse gas emissions and freshwater use. It is also making headway on several others and identified actions plans for the most challenging areas.

First, the good news: Alcoa reduced its carbon intensity (metric tons of emissions per ton of production) by 22 percent below 2005 levels, exceeding its 20 percent target, the company said in its 2010 Sustainability Report released last week. Did the company set its target too low? Maybe.

"If you set a 10-year stretch goal and you achieve it in year one, you can celebrate it but -- keep in mind we have a 30 percent GHG (greenhouse gas) reduction goal in 2030 -- I think what we're going to have to do now is spend some time in 2011 and figure out what our new GHG goal should be," Anton said. "The organization is still focused on hitting the 2030 goal since we already hit the 2020 goal, but I want to put a new goal out in front of the organization to make sure that we don't lose any focus."

The company reduced its freshwater-use intensity (consumption per unit of production) by 19 percent below 2005 levels, well beyond its 10 percent goal. Other goals where the company is making progress include:

• Reduced the energy intensity of global primary products by 3 percent (2020 goal: 10 percent reduction)
• Reduced the energy intensity of remaining businesses by 6 percent (2020 goal: 20 percent reduction)
• Reused or recycled 29 percent of landfilled waste (75 percent recycle or reuse rate by 2020, 100 percent by 2030)

Alcoa has made less progress in the following areas:

• Mercury emissions intensity increased 16 percent (2020 goal: 80 percent reduction)
• Reuse of bauxite residue, a byproduct of aluminum refining, remained flat (2020 goal: 15 percent reuse rate)

Although using green power and improving efficiencies played major roles in Alcoa meeting its carbon footprint and freshwater use goals, Anton also points to four critical elements underpinning Alcoa's sustainability program: leadership, scorecards and roadmaps, compensation, and transparency and data. He explained how each of these components is crucial to maintaining momentum for the program.

Leadership

A commitment to sustainability starts with CEO Klaus Kleinfeld, Alcoa's Board of Directors, Executive Council and finally, Anton, who reports directly to the CEO and sits on the Executive Council. Once each quarter, representatives from each business unit visit the corporate office to talk about their business programs --  how they're tracking toward sales growth, cash flow, customers, etc.

"Part of that overall business review is how they're tracking toward their sustainability goals, with first setting those goals and then how they're tracking against them, "Anton said. "Time on the agenda like that with the CEO and the Executive Council is pretty precious so the fact that we're devoting a portion of that time tells the internal people that this is one of Alcoa's key focus areas and gives it great visibility."

Scorecards and Roadmaps

Alcoa uses scorecards to monitor progress on short-term sustainability goals. For long-term goals, each of its business units has created a long-term roadmap outlining what the company must do today to ensure success in 2020 or 2030.

The roadmap includes "known technologies, the unknown technologies that still need to be invented, the capital costs and the operating impact of getting to the goals," Anton said. "These are very definitive roadmaps to how we can achieve these goals and that helps the organization get aligned around it."

Compensation

Twenty percent of variable compensation is tied to some aspect of sustainability, such as energy, greenhouse gas emissions, safety or diversity in the workplace.

"It says if you want to get well-compensated at Alcoa, you need to be pulling the sustainability lever hard," Anton said.

Transparency and Data

"One of the things we saw when we went after our CO2 goals, is we used technology to give the guy or girl on the shop floor better data and faster data so they could make real-time changes to the processes," Anton said. "This gave us lower energy costs, lower carbon footprint and typically a higher output."

For companies developing their strategies, Anton again cautioned that sustainability programs need to be led by the top. "I always say we have to do it through the front door, not the back door."

He recommends setting aggressive targets. "You want to set real stretch targets that may make operating people in the company feel uncomfortable because they're not sure how they're going to get there," he said. "A strong target and incentive compensation matched to it will drive innovation."

Keep things focused and on point, Anton said. "Identify the critical first few to attack. You can't attack everything at once."

Finally, you need data and measurement. "It's the old adage of what gets measured will get improved," Anton said. "If you don't measure it, it won't get done."

Image CC licensed by Flickr user hyku.