alcoa hec sustainability challenge

AlcoaThe Sustainability Challenge

Spruce‘just READ consulting’

Agenda

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

Alternatives Contingency SummaryImplementationKeys Issues

Intro

Analysis

Alcoa Goes to Saudi Arabia

ISSUEIn the public’s eye the move to Saudi Arabia is not based on the grounds of sustainability but on the grounds of profitability

COURSE OF

ACTIONAfter an extensive analysis, we at, just READ consulting, are proposing a course of action that will help you regain your sustainability status

Alternatives Contingency SummaryImplementationKeys Issues

Intro

Analysis

R.O.I

Alcoa Image

Effect on Environment

Social Responsibility

I M P O R T A N C EU

R G

E N

C Y

Alternatives Contingency SummaryImplementation

Keys Issues

Intro Analysis

Key Issues

Economic

Environme

ntal

Political

Social

Technological

Alcoa to Saudi Arabia• All of these factors play

a crucial role in Alcoa’s move to Saudi Arabia for Aluminum Production

• Need to assess where weaknesses are in this move and mitigate the consequences

Alternatives Contingency SummaryImplementationKeys IssuesOutlook

Analysis

Market Analysis


Analysis

Environmental

Economical

Social

Political

• Saudi Arabia will provide a regulated natural gas price at US$0.75/MMBtu

• The Ma’aden-Alcoa project has 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 levels (~US$2.50/MMBtu +)

• Iran has been threatening to close the Straight of Hormuz which would be Alocoa’s link to the rest of the world

There is no political risk associated with the implementation

of an aluminum plant in Saudi Arabia

Political


Analysis

CO2 E

mis

sion

s(To

nnes

)/To

nne

of

Alum

inum

Form of Energy

13.96

10.49

0

COALSocial

Technological

Environmental

OIL

NUCLEAR HYDRO6.07

NATURAL GAS

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

Environmental


Analysis

Natural Gas Extraction Process (Hydraulic Fracturing)1. Water, Sand, and additives are pumped down well bore at high

pressure2. High pressure solution fractures the rock and injects sand

propellants to hold formations open 3. Process is repeated in stages 4. High pressure solution is removed for disposal or reuse5. Gas can flow more efficiently through more cracks

Social

Technological

Environmental

Environmental

Economic


Analysis

Saudi Arabia Canada$43.00/MWh

$484,380,000

$672.75

Social

Technological

PoliticalEcono

mical

Economic

Production of 740,000 tonnes of Aluminum


Cost of Energy $14.25/MWh

Total Aluminum Production Cost

$255,485,000

Cost/Tonne $345.25

$20.00/MWh

$310,800,000

$420.00

$25.00/MWh

$358,900,000

$485.00

Savings:

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


Analysis

$14.25 $20.00 $25.00 $43.00 (Canada)$0.00

$100,000,000.00

$200,000,000.00

$300,000,000.00

$400,000,000.00

$500,000,000.00

$600,000,000.00

Cost of Energy for Aluminum Production in Saudi Arabia

Cost of Energy ($US/MWh)

Tota

l Cos

t ($U

S M

illio

ns)

Smelting Cost

Carbon Cost

Moving to Saudi Arabia for aluminum

production makes economical sense

Social

Technological

PoliticalEcono

mical

Economic

Economic


Analysis

There are many Human Rights Issues Associated with Saudi Arabia:“…goods were boycotted based on human rights concerns – just 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 camefrom.” (Eaton, 2009)

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

Ethical Oil Ethical Aluminum

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

Technological

PoliticalEcono

mical

Social

Social


Analysis

Social

PoliticalEcono

mical

Economical

Technological

Technological

• Technology for aluminum production is not a differentiator in the industry

• 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

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

ALCOA


Analysis

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

ALCOA

‘Big 5’ Global Committee

Contact Tier 1 Aluminum Competitors and propose a global committee

Switch to a Renewable

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

Community Development

Focus on community development within Saudi Arabia

Deflect Using the Media

Do not address the social and environmental problems and deflect the blame

Alternatives

Contingency SummaryImplementationKeys IssuesOutlook Analysis

Alternatives

‘Big 5’ Global Committee

• Top 5 Aluminum company’s acting together to achieve greater goals

• Have greater access to money • Be able to leverage power and

influence in the industry to make change

• Might not convince competitors to join forces

• Might have different community and environmental values

Pros Cons

Renewable Energy Source

• Reduce CO2 emissions• Recognized as ‘Green’ in the

media

• Expensive• May not be enough renewable

energy in SA to begin production in 2013

Pros Cons

Alternatives


Community Development

• Will address the human rights issues • Give Alcoa a positive image in the

media• Make living conditions in Saudi Arabia

better for employees and families

• Potentially expensive• May be scrutinized for acting like

a government rather then a company

Pros Cons

Deflect Using the Media

• Profits will substantially increase • Put the blame on other

companies • Will not need to allocate money

for funding

Pros Cons• Alcoa would face human rights

and environmental scrutiny from activists and media

• Might be affected by ‘Ethical Aluminum’ issue

Alternatives


Weight Global Committee

Renewable Energy Source

Community Developmen

tDeflect Using

Media

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

TOTALS1 3.4 2.4 2.5 1.3

Alternatives


Decision Matrix

Timeline – The Strength of Aluminum

TSOA Global Goal Alignment

Build TSOA Proposal

1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Plan Conference

Fracking R&D

PHASE 1 PHASE 2 PHASE 3

Green Energy Exploration

Women Program

Subsidized Housing

Alternatives Contingency Summary

Implementation

Keys IssuesOutlook Analysis

September-FebruaryApril- September FebruaryMonths Months Years

Build TSOA Proposal

1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Plan Conference



Implementation




PHASE 1 - PLANNINGBuild Proposal

Plan Conference


Implementation


• 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

The Strength of Aluminum (TSOA):

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


Build TSOA Propsoal

1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Plan Conference



Implementation




PHASE 2 - ALIGNMENTTSOA Global Goal Alignment


Implementation


• 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


Build TSOA Propsoal

1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Plan Conference

Fracking R&D




Implementation




PHASE 3 – ENVIRONMENTAL ACTIONHydraulic Fracturing R&D



Implementation


•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)


Build TSOA Propsoal

1 2 3 4 5 6 1 2 3 4 5 6 1 2 3 4

Plan Conference

Fracking R&D



Women Program

Subsidized Housing


Implementation




PHASE 3 – SOCIAL ACTIONCommunity

Development Program


Implementation


Employee Non Profit Housing•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

•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

Housing Services

PHASE 3 – SOCIAL ACTIONGender Equality

ProgramEqual Opportunity•Women have a safe, non-discriminatory job opportunity and wage•Provide women, both white and blue collar, an opportunity to work


Implementation


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

Contingency Plan

2 YearsSeptember - 2012

Alternatives

Contingency

SummaryImplementationKeys IssuesOutlook Analysis

Did we get support from our Tier 1 competitors?

YES

Alternatives

Contingency


Go Above and Beyond…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

Contingency Plan

2 YearsSeptember - 2012

Alternatives

Contingency


Did we get support from our Tier 1 competitors?

No

Alternatives

Contingency


Don’t Give Up…Contact Tier 2 competitors in the Aluminum Industry:

• Norsk Hydro• Century Aluminum

Company • Alumina Ltd.

Alternatives Contingency

Summary

ImplementationKeys IssuesOutlook Analysis

QUESTIONS?

alcoa hec sustainability challenge

Documents

saudi arabial

aluminum production

mwhtotal aluminum

human rights issues

naimi saudi oil minister

market analysis politica

cheaper energy

extensive analysis