Keynote Address

Dennis H. Reilley
Executive Vice President and Chief Operating Officer, DuPont

For the past 10 years DuPont has been on a remarkable environmental journey. In 1989, then-chairman and CEO Ed Woolard announced that CEO stood for "chief environmental officer" and that he was going to make environmental leadership a priority of his tenure. Ed's successors -- Jack Krol and Chad Holliday -- each accepted that same accountability.

During that period of time, we went from a mindset that said environmental performance was defined by external regulations, to a fuller perspective that says environmental performance is part of an all-encompassing internal drive toward true sustainable growth.

Operationally, we began by proposing a series of numerical goals that included reducing levels of hazardous waste at the source; major reductions in airborne emissions, especially carcinogens; and land "set asides" for wildlife habitat. Later we set a goal to eliminate discharges to deep wells. Eventually we adopted a zero waste and emissions goal as a direction in which to move.

Although those goals were concrete, our ultimate objective was to make environmental protection a value that would be on the same level as the value that we had assigned to safety for nearly two centuries. We wanted environmental protection to become an enduring part of our company's culture, and an integral part of all business decisions.

In many respects we succeeded -- so much so that in the past few years we have been able to turn our focus to the ultimate challenge that faces all of us: How can we achieve sustainable growth? We are trying to envision what sustainability would look like for a company such as ours, which continues to grow and transform itself in a global economy that is itself dynamic and unpredictable.

For many industrial companies, the creation of value is still linked to the throughput of materials and increased pounds of production made possible by the expenditure of large amounts of energy in the form of fossil fuels. A sustainable growth company, by contrast, builds value for shareholders and society while decreasing its environmental footprint. It sees the marketplace and civil society as integral to business decisions, not as external entities that we simply interact with. And it fulfills the needs of a growing world population using the best and most advanced forms of modern technology while minimizing risk and environmental impact.

For a company like DuPont, there are several factors to consider as we seek sustainable growth. One of the most important is the one I want to address today -- energy, and its impact on global climate. Our experience with atmospheric science issues goes back to the 1970s. So we are not newcomers to the climate change issue. In 1991, we concluded that there was sufficient evidence linking greenhouse gas emissions to global climate change that we needed to take action. And, in 1993 we became the first company to volunteer under the U.S. Environmental Protection Agency/Department of Energy Climate Wise program.

Since 1991, we have spent over $50 million to achieve a goal of reducing greenhouse gas emissions from our global operations (on a carbon-equivalent basis) by 45 percent by the year 2000. We have done this primarily by reducing point sources - nitrous oxides and fluorochemicals. During that same past decade our production volumes increased by over 35 percent while we held total energy consumption flat. About half of that flat energy profile came from the classic energy efficiency items of equipment, yield and uptime improvements. The rest came from changes in our mix of products and processes and from significant powerhouse improvements. During the same time period, our shareholder return increased by a factor of four. We have been able to demonstrate that performance in at least one key area of sustainability can be consistent with a growing business and solid return to our shareholders.

When we think about energy use and climate change at DuPont, we take a very long view. The long-term view is nothing new to DuPont. We have been in business for nearly 200 years and we have undergone several transformations. We are in the midst of another transformation now -- one in which information science and biology are just as key to our outlook and plans as chemistry and chemical engineering were through much of the 20th century. In this process, we continually ask ourselves, do the businesses and technologies that we are building lend themselves to sustainable models? What actions must we take now to make sure that we are able to maintain sustainable growth over the next 100 years?

Of course, we don't have any special means for predicting the future. It is humbling for us at DuPont in 1999 to think about our predecessors in corporate management back in 1899. How would they have gone about planning for the uncertain and largely unimaginable industrial developments of the century ahead? The answer is that they did not wait for certainty. Nor can we. No business leader can afford to do that. We make decisions in the face of uncertainty all the time. We rely on good science and tried and true values to make plans and decisions in the face of uncertainty.

One thing that we do have as a result of being in business for two centuries is a very real understanding of what it means to have a legacy and what it means to leave a legacy. It is not an easy thing for a business focused on the next quarter's earnings to make costly decisions to ensure that our children's children and the generations after them do not live in a world of collapsing ecosystems. But that is the ethical response we must make to the situation we currently face.

Such a long-term view is obviously relevant to the discussion of climate change, because climate change scenarios will play out over that time frame -- the next century and beyond. To give you an idea of the order of magnitude of what we face, consider this: to achieve atmospheric carbon dioxide levels currently being considered as possible stabilization targets -- between 1.6 and 3 times pre-industrial levels -- per capita global carbon emissions will have to be one-tenth that of the U.S. today and falling rapidly 75 to 150 years from now. From this perspective, the Kyoto Protocol represents only a signal that global leaders are taking the issue of climate change seriously. Given the global challenge before us, the Kyoto goals have an effect, but do not, over the course of the next 100 years, alter the curve. They may shift it downward, but not to any degree that makes a difference. Moreover, they arguably are a negative, because they set an extremely challenging short-term target, and that target now dominates political discussion.

From our point of view, what matters is not whether we are for Kyoto or against Kyoto. Our bias should be for prompt and meaningful action where there is reasonable cause for concern. And there is no question in our minds about whether there is reasonable cause for concern.

From that point of view and in addition to our actions of the past decade, we have set for ourselves three goals for the year 2010:

First, we will reduce our global carbon-equivalent greenhouse gas emissions by 65 percent using 1990 as a base year. For the purposes of our "scorecard," we will use the Kyoto basket of gases.

Second, we will hold total energy use flat using 1990 as a base year. While this continues the progress we have already made, this is clearly a stretch goal for us. To achieve this goal in the future will require that our business growth be much more "knowledge intensive" and much less "raw material and energy" intensive than in the past - a move that is very consistent with our stated corporate direction.

Third, we will source 10 percent of our global energy use in the year 2010 from renewable resources. We want to show that we are serious about the need for renewable energy to be a part of our future, and to provide a strong "market signal" that there will be at least one major energy consumer ready to buy. We also want to indicate that we are prepared to work with energy suppliers and others to develop renewable energy.

To put this goal in perspective, DuPont's renewable energy demand in 2010 will require 300 megawatts of capacity, which represents 17 percent of the present U.S. commercial capacity and 4 percent of the present world commercial capacity for renewable wind energy. However, with the projected double-digit growth for renewable energy, we expect that our demand will be a small, but not insignificant, part of the available supply in 2010. We know that we will need help to achieve these goals if we are to achieve them in a way that is good for our business. This help will need to come from the commitment and creativity of our employees, from alliances with global energy providers, and from responsible public policy. That is why I am very pleased that you are talking about "credit for early action" at this conference.

As we look at our own goals and consider what needs to be done by industry more broadly, it becomes critically important that incentives are provided. Equally important is making sure that disincentives are not put in place. If a primary objective is to reduce our dependence on fossil fuel technologies and to encourage renewable energy technologies, incentives for early action will surely help.

For example, our goal of 10 percent sourcing of renewable energy by the year 2010 may bring with it a significant cost penalty. If we bought the best-priced renewable energy today, we would pay 2-3 cents per kilowatt hour more than the most attractive fossil fuels. This would increase our energy costs by $60-90 million dollars per year -- a change that would, obviously, not be good for business.

"Credit for early action" and other incentives offer the possibility of eliminating cost penalties and encouraging, and possibly accelerating, the growth of cost-effective sources of renewable energy. The absence of incentives, and the continuance of subsidies for our fossil fuel based global economy, will only serve to strengthen the status quo -- a scenario that shows increasing carbon concentrations in the atmosphere with unknown, but potentially significant, changes in our global climate.

As a company, we believe that action is warranted, not further debate. We also believe that the best approach is for business to lead, not wait for public outcry or government mandates. From our experience of the past ten years, we know that integrating environmental considerations into our business strategies enhances our ability to achieve sustainable growth. But, we have also learned that the transition to sustainable growth is accelerated when the economics are positive, a critical factor that can be highly influenced by responsible public policy.

DuPont has already weighed in on the side of prudent action. We are convinced that the key to lower long-term concentrations of carbon in the atmosphere will be a fundamental change in energy technology -- one that will take several decades to achieve. However, we also believe that several important steps need to be taken now, and we have learned during our environmental journey of the past decade to face reality squarely and to respond with creative action.

The goals I have announced today are to challenge us as a company, and to show the world that we are serious about the changes we need to make. We believe that our response satisfies our scientific understanding and ethical standards. We also believe that it can be good for business. And, we believe that meeting these goals will be a step towards creating a world that is more sustainable for future generations.