From Awareness to Action 2005Annual review Table of Contents Chairman’s Message 2 President’s Message 3 About the WBCSD 6 Tomorrow’s Leaders - Business in tomorrow’s society 8 Focus Areas Energy & Climate 10 Development 14 Business Role 18 Council Projects Energy Efficiency in Buildings 22 Water and Sustainable Development 23 Sector Projects Sustainable Forest Products Industry 24 Cement Sustainability Initiative 25 Mining, Minerals and Sustainable Development 26 Sustainable Mobility 27 Electricity Utilities 28 Tire Sector 29 The Chemical Sector Project 30 Initiatives Sustainable Health Systems 31 Sustaining Ecosystems and Ecosystem Services 32 Learning by Sharing 33 The Regional Network 34 Advocacy & Communications 38 Partnerships and Alliances 40 Membership & Governance 42 Executive Committee 43 Member Companies and Council Members 44 WBCSD Personnel 47 2005 Publications 48 1 Chairman’s Message Before being appointed chairman of the World Business Council for Sustainable Development, I was closely involved with its work as a co-chair of the Energy and Climate project and the Cement Sustainability Initiative. My two years as WBCSD chairman have only reinforced my long-held admiration for the extraordinary dedication of our members. In 2005 I was fortunate to have been involved in the decision-making process that created the new WBCSD strategy. This new strategy comes at an important time for the council, and I believe that we now have a solid foundation on which to provide solutions and engage new partners so that we can better contribute to the global debate. As we move from strategy to action, we see stronger cross-fertilization between WBCSD programs and greater CEO involvement. The WBCSD has come to exemplify the business case for sustainable development. We are a unique organization in terms of the issues we address and the broad cross-section of our membership. Being solution- driven and strong on implementation, we focus on issues where business can truly make a difference. Furthermore, we have been instrumental in showing that business is part of the solution. I hope more companies will realize that a corporate focus on sustainable development improves corporate results and join us in our efforts. Companies must put their principles into operation, and demonstrate that they are doing this. They must also have the courage to come out of their comfort zones and provide solutions to fundamental issues such as poverty alleviation. We need to be open to sound economic instruments for internalizing environmental or societal costs. By coming together under umbrellas like the WBCSD, business can share common dilemmas and come up with common solutions. The main challenge faced by business is the lack of a global and efficient institutional framework to establish the rules of the sustainable development game. On climate change, for example, industry is ready to discuss worldwide actions, but the necessary framework and right set of actors have been missing. The initiative of the G8 under the British presidency and its follow-up until 2008 may provide an opportunity to create such a framework. The keys to success will remain the same in the future. Our new chairman will need to work with members and then focus the energy of the organization in a few areas where we can make a difference. We must think harder about how we as businesses can help governments and NGOs to find solutions to global dilemmas. 2 Bertrand Collomb President’s Message 2005 was not only successful for the WBCSD, but it marked a major turning point in our operations. When the council began its work more than 10 years ago, it seemed sufficient, and difficult enough, for business to engage in the issues of sustainable development and to find ways to bring these issues into corporate decision-making. We pursued eco-efficiency – doing more with less – and we worked to decide the nature of our companies’ responsibilities toward society and the natural environment. These were all necessary efforts. However, as our chairman noted in his message, we find ourselves in a world that lacks the institutional frameworks needed to make sustainable development a reality. This same world is more than ever before beset by what might be called “sustainability issues”: widespread poverty, climate change, pathogens in the environment, loss of species and the degrading of ecosystems and their services. Examining the council’s strategy, our members boldly decided that it is no longer enough to study issues, engage with other stakeholders, raise awareness and spread information. All these are important, and the council will continue these activities. But we must now work with new partners to develop and advocate solutions and to manage issues. We need to help put in place framework conditions that will allow business to play an ever- more effective role in managing natural resources and alleviating poverty. We can advocate better if we focus better. So we have grouped the council’s efforts into three focus areas: Energy and Climate, Development, and The Role of Business. Each has a core team of dedicated corporate leaders forming and directing the area’s work. As our members’ activities are increasingly shaped by sustainable development issues, understanding and managing these issues will be a key factor in maintaining the business license to operate, innovate and grow. Companies that understand the challenges will be able to reduce risk and define new business opportunities. Business models must be made robust enough to integrate the constraints and opportunities to come. In 2005, GlobeScan predicted that the WBCSD would play a major role in advancing sustainable development globally. The fact that our membership is growing is evidence that increasing numbers of companies believe this and see a future in shaping strategies to help encourage sustainable human progress. The increasing media coverage we receive suggests that others also understand that business is an important provider of solutions. General Electric, a new and important member in terms of size, hopes to grow its business in environmentally friendly technologies from 10 billion 3 12.1million employees dollars today to 20 billion dollars by 2010. The council’s influence is becoming ever more global, and we have recently welcomed new members from Pakistan and Saudi Arabia. Overall, we estimate that our members employ 12.1 million people and reach about half of the world’s population with a product or service every day. Looking forward, I believe we must recast the debate away from the perceived conflict between shareholder value and corporate social responsibility. The fundamental role of business will always be the creation of value for its owners, employees, customers and society as a whole. However, the boundaries that divide the role of business from those of governments and NGOs are blurring and continually shifting. As the council’s Tomorrow’s Leaders group reported, our major contribution to society will come through our core business, rather than through philanthropic programs. If action to address global issues such as poverty is to be substantial and sustainable, it must also be profitable. We need new partners to create new business models, and to build partnerships we must build trust. NGOs have public trust but lack resources; business and governments have resources but often lack public trust. With new partners we can work together to better manage globalization. It has been a strong driver for economic growth that has lifted many people out of poverty. However, the wealth has not been evenly divided between countries or inside countries, and the gulf between the haves and have-nots is growing. A special problem for both governments and business is the shift in investments from traditional industrialized countries to fast-growing economies, putting the spotlight on unemployment and job creation issues. We can better secure natural resources and ecosystems in the face of this rapid globalization and economic growth. Population growth and the ambitions of billions of people to improve their situation are key drivers behind the growth in resource use and increasing pressure on ecosystems. To progress, we need to integrate externalities like the value of ecosystems 4 into the pricing of the resources in our market system. we estimate that our members employ 12.1 million people We welcome the fact that many NGOs understand the power of markets, and that many have concluded that the changes needed to create a sustainable world will not come solely from governments. We must work together to create markets that support sustainable development. Our members and our many partners have helped us in our work throughout 2005. Our founder and Honorary Chairman Stephan Schmidheiny and founding member Erling Lorentzen together sponsored the writing of a history of the council, so we can better understand our mistakes, our successes and the foundation upon which we are building. I would like to thank the eight WBCSD council members who accepted my challenge to help formulate a vision of business action for the future. This Tomorrow’s Leaders group has provided an important report, From Challenge to Opportunity: The role of business in tomorrow’s society. I trust that it will stimulate dialogue about the role that leading businesses will play in tomorrow’s society. (The group’s manifesto can be found on page 8.) A special thanks also goes to WBCSD staff who have worked hard and efficiently in this crucial change of course by the council. As we move from awareness to action, I envisage strong leadership from our members and the companies they lead. I am confident that the WBCSD and its members can and will make a major contribution to the shaping of efficient future societies. In doing so, we will also enhance the trust in business and the support for business’s main purpose: to generate wealth, jobs, innovations and investments.