How Alcoa's Board Hopes to Keep it Green
from May/June 2007
Ask directors of aluminum giant Alcoa the key to staying on the cusp of the climate-change front, and the response comes quickly: CEO leadership. “The board can ask insightful questions and provide fresh eyes to help evaluate the issue,” says Judith Gueron, 65, an Alcoa director and a scholar in residence at MDRC, a social-policy research firm in New York City. “But the leadership needs to come from the top.”That’s especially true at a company like Alcoa. Aluminum production accounts for 1% of global greenhouse-gas emissions all by itself. Back in the early 1990s, then-chairman and CEO Paul O’Neill began to talk extensively to the board about the threat of climate change to Alcoa’s bottom line. When O’Neill left to become Treasury secretary in 2000, his replacement, Alain Belda, now 63, took up the cause and set a goal of reducing Alcoa’s greenhouse-gas output to 25% of 1990 levels—a target the company actually passed in 2003.
Belda’s not done yet. He makes sure that directors get regular staff briefings on progress toward achieving further emission-reduction targets. Board members also receive updates on the latest trends and developments from outside experts. “We get a very non-whitewashed view of the issue from all sides,” says Gueron.
Along the way, Belda has helped recruit directors who bring environmental expertise to the board. Kathryn Fuller, former president of the World Wildlife Fund, says she was asked to join Alcoa’s board in 2002 “because of my work on sustainability in a lot of places where Alcoa operates.”
The board’s public-issues committee—which includes Gueron, the chair; Fuller; Henry Schact, 72, former CEO of Lucent Technologies; Ratan N. Tata, 69, chairman of India’s Tata Sons Ltd.; and former Mexican president Ernesto Zedillo, 55—helps set and monitor emission-reduction targets.
The committee members delve into the details and report back to the full board with their recommendations, which are almost always adopted. “Giving a committee specific responsibility lets the company’s staff know that it has a high profile and they’re going to have to report on it,” Gueron says. As for the full board, “we always reach the same conclusion,” says Belda. “We’re going to have challenges, and it’s going to cost us some money. But the company will be better for it in the long run.”
Alcoa is spending $330 million to retrofit a company-owned coal-fired power plant in Indiana with cleaner technologies and, mindful of coming regulations, is weighing various methods of controlling emissions from its operations. One approach being tried in Australia, for instance, involves piping exhaust deep into the ground so it can’t foul the air.
Eight directors spent four days in Iceland last September to witness progress on a new smelter, set to open this spring, that will be powered by a government-built hydroelectric plant. “We’d read and heard a lot about it, but this was an opportunity to go see things for ourselves and take a look at our options,” Fuller says. The trip included tutorials on hydroelectric and geothermal energy, both in good supply in Iceland. “We got a real-world sense for the issue that you can’t get through reading a report.”
Hydroelectricity produces no gas emissions, but European environmentalists complained to Fuller about the dam. She believes the ability to run the smelter with emission-free energy was worth the trade-off, but the criticism shows that climate change is one more area where it sometimes seems that you just can’t win.
