Alcoa HEC Sustainability Challenge

Alcoa
The Sustainability Challenge
Spruce
‘just READ consulting’

Agenda
• Introduction
• Key Issues
• Analysis
• Alternatives
• Implementation Plan
• Contingency
• Summary
Intro

Keys Issues Analysis Alternatives Implementation Contingency Summary

Alcoa Goes to Saudi Arabia
In the public’s eye the move to
ISSUE Saudi Arabia is not based on the
grounds of sustainability but on the
grounds of profitability

COURSE OF After an extensive analysis, we at,
just READ consulting, are
ACTION proposing a course of action that
will help you regain your
sustainability status
Intro

Keys Issues Analysis Alternatives Implementation Contingency Summary

Key Issues
IMPORTANCE

R.O.I Effect on Environment
URGENCY

Social Responsibility Alcoa Image

Keys Issues

Intro Analysis Alternatives Implementation Contingency Summary

Market Analysis

Politica Alcoa to Saudi Arabia
l •
All of these factors play
a crucial role in Alcoa’s
move to Saudi Arabia
Technologic Aluminum
for
Environment al Production
al • Need to assess where
weaknesses are in this
move and mitigate the
consequences
Economic Socia
l

Analysis

Outlook Keys Issues Alternatives Implementation Contingency Summary

Political Political

Econo

• Saudi Arabia will provide a regulated mical

natural gas price at US$0.75/MMBtu Environm So
• The Ma’aden-Alcoa project has ental cial

obtained an allocation from the Saudi
Arabian government
• Ali al-Naimi (Saudi Oil Minister) has
stated that he would consider raising
these prices but not to international
There is no political
levels (~US$2.50/MMBtu +) risk associated with
• Iran has been threatening to close the the implementation
Straight of Hormuz which would be of an aluminum
Alocoa’s link to the rest of the world plant in Saudi Arabia

Analysis


Environmental
Environmental Technolo
Form of Energy gical

COAL
So
cial
CO2 Emissions(Tonnes)/Tonne of

13.96
OIL

10.49
Aluminum

NATURAL GAS

6.07
NUCLEAR HYDRO

0 Natural Gas is the transition
fuel from more dangerous
fossil fuels to cleaner and
greener energy sources
Analysis


Environmental
Natural Gas Extraction Process (Hydraulic Fracturing) Environmental Technolo
1. Water, Sand, and additives are pumped down well bore at high gical
pressure
2. High pressure solution fractures the rock and injects sand So
cial
propellants to hold formations open
3. Process is repeated in stages
4. High pressure solution is removed for disposal or reuse
5. Gas can flow more efficiently through more cracks

Analysis


Economic Politi
Econo cal Technolo
Production of 740,000 tonnes of Aluminum gical
mical

Economic So
cial

Saudi Arabia Canada
Cost of Energy $14.25/MWh $20.00/MWh $25.00/MWh $43.00/MWh
Total Aluminum $255,485,000 $310,800,000 $358,900,000 $484,380,000
Production Cost
Cost/Tonne $345.25 $420.00 $485.00 $672.75

Savings:

•Total – $125,480,000  34.9%
•Cost/Tonne – $187.75

Analysis


Economic Politi
Econo cal Technolo
mical gical

Cost of Energy for Aluminum Production in Saudi
Economic So
$600.00
Arabia cial
Total Cost ($US Millions)

$500.00 Smelting
Cost

$400.00 Carbon
Cost

$300.00

$200.00

$100.00 Moving to Saudi
Arabia for aluminum
$0.00
$14.25 $20.00 $25.00 $43.00 (Canada) production makes
economical sense
Cost of Energy ($US/MWh)

Analysis


Social Politi
There are many Human Rights Issues Associated with Saudi Econo cal Technolo
mical gical
Arabia:
“…goods were boycotted based on human rights concerns – just Social
like oil from Saudi Arabia should be.” (Kheiriddin, 2011)
“Women are treated like second class citizens.” (Eaton, 2010)

“It is a hot house for Islamic fundamentalism, where 15 out of the 19 hijackers on 9/11 came
from.” (Eaton, 2009)

“Oil from Saudi Arabia that supports terrorism.” (Eaton, 2009)

Alcoa has to be proactive in regards to human rights to avoid company’s in support of
a potential “Ethical Aluminum”

Analysis


Technological Politi
Econo cal Technologic
al
mical
• Technology for aluminum production is not a differentiator Economica So
in the industry l cial

• But, ability to use aluminum production technology is highly
dependent on energy

Not a main area that Alcoa needs to be concerned with at the moment

Analysis


ALCOA
STRENGTHS
• Global presence – operating in 31 countries
• Integrated structure for Aluminium products
• Rise in demand of Aluminium consistently
• Committed management for core values such as health
and safety
• 100% recyclable product

WEAKNESSES
• Product requires CO2 emissions
• Heavy dependence on Energy/electricity sector
• Less focus on Technological development

Analysis


ALCOA
OPPORTUNITIES
• Rapid growth of developing countries, leading to
increase in demand of Aluminium

THREATS
• Economic collapse can lead to severe decrease in
demand for product
• Moving to areas with cheaper energy may come with a
human rights cost

Analysis


Alternatives
‘Big 5’ Global Contact Tier 1 Aluminum Competitors and propose a global
Committee committee

Switch to a
Renewable Stop Natural Gas usage in Saudi Arabia and switch to Solar
Energy

Community
Focus on community development within Saudi Arabia
Development

Deflect Using Do not address the social and environmental problems and
the Media deflect the blame
Alternatives

Outlook Keys Issues Analysis Implementation Contingency Summary

‘Big 5’ Global Committee
Pros Cons
• Top 5 Aluminum company’s • Might not convince competitors
acting together to achieve to join forces
greater goals • Might have different community
• Have greater access to money and environmental values
• Be able to leverage power and
influence in the industry to make
change

Renewable Energy Source
Pros Cons
• Reduce CO2 emissions • Expensive
• Recognized as ‘Green’ in the • May not be enough renewable
media energy in SA to begin production
in 2013
Alternatives


Community Development
Pros Cons
• Will address the human rights issues • Potentially expensive
• Give Alcoa a positive image in the • May be scrutinized for acting like
media a government rather then a
• Make living conditions in Saudi Arabia company
better for employees and families

Deflect Using the Media
Pros Cons
• Profits will substantially increase • Alcoa would face human rights
• Put the blame on other and environmental scrutiny from
companies activists and media
• Will not need to allocate money • Might be affected by ‘Ethical
for funding Aluminum’ issue

Alternatives


Decision Matrix
Renewable
Global Community Deflect Using
Weight Energy
Committee Development Media
Source

R.O.I. 0.1 3 1 2 4

Effect on
Environment 0.25 3 4 2 1

Social
Responsibility 0.25 3 2 4 1

Alcoa
Image 0.4 4 2 2 1

1 3.4 2.4 2.5 1.3
TOTALS

Alternatives


Timeline – The Strength of Aluminum
April- September September-February February
Months Months Years
1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4
PHASE 1 PHASE 2 PHASE 3

Build TSOA Proposal

Plan
Conference

TSOA Global Goal Alignment

Fracking R&D
Green Energy Exploration

Subsidized
Housing
Women Program
Implementation

Outlook Keys Issues Analysis Alternatives Contingency Summary

Months Months Years
1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Build TSOA Proposal

Plan
Conference

Implementation


PHASE 1 - PLANNING
Build Proposal The Strength of Aluminum (TSOA):
• Form a Global Committee with hopeful support from our
tier 1 Competitors:
• BHP Billiton Ltd., Kaiser Aluminum, Aluminum Corp of
China, Rio Tinto
• Vision: To transform the aluminum industry into a leader of
sustainability
• Mission: Align the goals of the aluminum industry with that
of a healthy planet

Plan Conference Friday, September 7, 2012. Tennessee, United States:
• Send invites to the top 4 aluminum companies
• RSVP – with a template for suggested topics for discussion
• Determine whether or not they are interested in partaking
in the TSOA alignment phase

Implementation


Months Months Years
1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Build TSOA Propsoal

Plan
Conference


Implementation


PHASE 2 - ALIGNMENT

• Spend 6 months working with top 4 companies on what over
lapping issues affect the aluminum industry
• Create an urgency and importance list to help determine
which issues need to be dealt with immediately and in the
long term
• Vote on a advisory board consisting of leading environmental
and human rights activists
• Review and evaluate the proposals for implementation
• Green technology sharing throughout the aluminum industry
• Devoted commitment to the committee and full support of
the initiatives
• Committee meeting held 3 times a year

Implementation


Months Months Years
1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Build TSOA Propsoal

Plan
Conference


Fracking R&D

Implementation


PHASE 3 – ENVIRONMENTAL ACTION
Hydraulic Fracturing R&D
•Perfect natural gas extraction
•Natural gas, a stepping stone in energy consumption
•Alcoa and partners will allocate funding for 2 years of R&D
with the option for an extension (10,000,000/company)
•Fund well known research institutes interested in exploring
and enhancing the natural gas extraction process

•2-3 years begin investing in R&D how we can fund solar energy
programs (Grey Area)
•Incorporate solar energy into infrastructure of plants
•Saudi Arabia has a lot of potential for solar panel farms (open
deserts and vast amounts of sun)

Implementation


Months Months Years
1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Build TSOA Propsoal

Plan
Conference


Fracking R&D

Subsidized
Housing
Women Program
Implementation


PHASE 3 – SOCIAL ACTION
Community Employee Non Profit Housing
Development Program •Design and build a green housing development
•Blue collared worker
•Assume 60% (800) employees will need homes
•Duplex cost of $100,000 USD (Green)
•Total Cost of Construction 40,000,000 USD
Housing Services
•Support rent-geared-towards-income program and help manage payment plans
•Employee Avg. Salary $25,000 USD/Yr
•Housing Allowance incl. Utilities (15%) $3750
•Education allowance for migrant workers
•Transportation services
•Barrier for women, 24/7
•Location
•Close proximity to workplace
•Security
•Create a liberal environment
•Women Zones for single, no male guardian, work driven
Implementation


PHASE 3 – SOCIAL ACTION
Gender Equality Equal Opportunity
Program •Women have a safe, non-discriminatory job opportunity and wage
•Provide women, both white and blue collar, an opportunity to
work
White Collar
•Target the universities
•Educate on global equality standards
•Reach those who are willing to work
•Passed the gender barrier
Blue Collar
•Provide families with the opportunity to earn dual income
•Barrier of not being able to afford childcare, preventing equal opportunity
•Alcoa funded Childcare (24 hrs/day)
•Flexible work hours/part-time options
•Flexible employee movement between Saudi and US for short term to familiarize employees
with Western Management and the global strength of women

Implementation


Contingency Plan

September - 2012
2 Years

Did we get support from our Tier 1 competitors?

Contingency

Outlook Keys Issues Analysis Alternatives Implementation Summary

Set New Goals as an Industry:
• 30% reduction in CO2 emissions for entire
Aluminum Industry
• >20% of women in executive positions
• Play an Active Positive Role in all the communities
you operate in

YES

Contingency


Contact Tier 2 competitors in the Aluminum Industry:
• Norsk Hydro
• Century Aluminum
Company
• Alumina Ltd.

No

Contingency


Summary

Outlook Keys Issues Analysis Alternatives Implementation Contingency

Alcoa HEC Sustainability Challenge

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