Green Leaders

Klaus Kleinfeld on why sustainability is encoded in Alcoa’s DNA

Klaus Kleinfeld CEO, Alcoa

It is common knowledge that being at the right place at the right time is half the battle. Yet often this right time and place is cloaked by a thick veil and can only be recognized as such by those who are truly on the lookout.

In May 2008, Klaus Kleinfeld was appointed CEO of Alcoa, the world leader in the production and management of aluminium. He was thus thrown into the driver’s seat of a huge company that employs over 60,000 people worldwide, just months before the outbreak of the worst crisis since the Great Depression.

Some would say he was at the wrong place at the wrong time. Yet Klaus Kleinfeld would beg to differ, as he explained when he sat down with Swiss Style to discuss the major trends facing CEOs across the globe as well as Alcoa’s leadership position in sustainability issues.

Sustainability comes naturally

“Sustainability is in our DNA and has been guiding us since before the word even existed,” Kleinfeld proudly proclaims. This might sound like an empty catch phrase, but in the case of Alcoa, it couldn’t be closer to the truth. Since 2005, the aluminium producer has always made it to the top of the World Economic Forum’s list of the most sustainable corporations. In addition, Alcoa has been a member of the Dow Jones Sustainability Index for 8 consecutive years. “Given our constant efforts and in light of our achievements, we have been recognized as sustainability leaders even beyond our own industry,” he adds.

When it comes to sustainability Alcoa has a natural advantage. Aluminium is both strong and lightweight, the ideal metal for reducing fuel consumption in cars, buses, trains and planes. And it is infinitely recyclable. “Seventy-three percent of all aluminium ever produced is still in use today,” Kleinfeld says. Yet the company’s positive sustainability record is linked to more than a mere natural advantage and is mainly the result of hard work. “We have reduced greenhouse gas emissions by thirty-six percent since the 1990s. At the same time, production has been doubled. Technological innovations as well as better process control have allowed us to improve yields. At Alcoa, efficiency and sustainability are highly linked.”
Combining the notions of efficiency and sustainability is easier said than done and is causing many experts to scratch their heads. What lessons can Alcoa teach us about integrating sustainable solutions into efficient business models?

“The past does not equal the future”

When contemplating trends that will define sustainability consideration in the future, Kleinfeld places emphasis on two fundamental concerns. “We have to be mindful of two major trends that will shape the discourse on sustainability in the years to come: population growth and increasing urbanization. The population is going to grow to over nine billion by 2050. This demographic boom is also linked to a rise in average life expectancy. New York Mayor Michael Bloomberg recently declared that a child born in New York today has an average life expectancy of 104.” Population growth will be accompanied by changing settlement patterns. “More and more people are moving to an urban environment. Experts have forecasted that two thirds of humanity will live in cities by 2050.”

These two trends will shape the world in ways still unknown, yet it is already clear that the impact on consumption will be massive. As Kleinfeld puts it, “They will drive demand for certain goods and services exponentially. Construction, consumer goods and energy consumption will reach unrivalled levels. This is why I believe that the past does not equal the future.”

As awareness of the difficulties ahead grows, attitudes are starting to change. “Especially among consumers, the demand for sustainable products and solutions is on the rise,” he adds. Yet on the supply side work still needs to be done. “One of the fundamental challenges to sustainable development is the current attitude towards investment. We have to move away from the dominant logic that looks at the pure investment cost to one that looks at the entire life cycle of an investment. Business leaders have to ask themselves: ‘How will this work in 50 years’ time?’ Only then will sustainability have an impact on how we invest.”

Sustainability is on everybody’s minds, yet when it comes to finding solutions, the determining bodies are regional ones. “Emphasis has to be placed on treating this as a global problem,” he says. And he is well aware of the fact that this is an uphill battle, but believes that the coordination of policies worldwide is possible. “The world is capable of coming together.” Kleinfeld cites the legislations and actions in response to ozone layer depletion as an example. “I am impressed with what was achieved. This is an example from recent history that is proof of the feasibility of international coordination and that we are capable of turning things around.”

Advantages of thinking green

An important factor aggravating global policy-making on climate issues is that companies often treat sustaina- »»» biity as an add-on that robs them of precious capital they could be investing otherwise, without realizing the potential that it offers. Apart from helping make the world greener, Alcoa’s sustainability efforts have a number of positive side effects. “It has helped our image and also is great at attracting new customers. In essence, it’s good for our reputation.”

“Aluminium itself has inherent sustainable characteristics. Our production process, as well as our product, is thus sustainable”

In September 2009, Alcoa launched a new mine in Juruti on the Amazon riverbank in Brazil. Its sustainable mining methods were a major factor influencing the Brazilian government to offer them the required licences. Alcoa is using the foundations of its world-recognized experience in land rehabilitation in Western Australia and in other parts of Brazil, but is also going beyond and creating a model that is evolving into a benchmark for the industry. “Alcoa will mine bauxite in Juruti and return the area to the same, if not better, condition than when we initially arrived.”

As part of its numerous initiatives in this project, Alcoa has committed to help provide the Juruti region with necessary infrastructures by promising US$ 18 million in investments. Beyond what is planned as part of that commitment, Alcoa will invest voluntarily an additional US$ 30 million to cover projects such as building schools and hospitals.

Being a recognized sustainability leader not only helps Alcoa receive mining contracts. “Our environmental efforts also attract a lot of young talent,” Kleinfeld says. “Often during recruitment interviews, candidates are aware of our sustainability efforts and mention this as a reason for wanting to join our company.”

At the cutting edge

Alcoa is well suited to position itself at the forefront of the sustainability debate. “Aluminium itself has inherent sustainable characteristics. Our production process, as well as our product, is thus sustainable,” Kleinfeld says in conclusion. It seems as if aluminium is naturally unbeatable. It would appear that this is also the case for Alcoa.

Article by Michael Afenzar