Following a 25% reduction in GHG emissions from 1990-2005, we have now entered the second phase of our ongoing TARGET program with a goal of an additional 10% reduction in GHG emissions intensity over the next five years. Through the stalwart dedication of our employees and a continued investment in advanced technologies, I am proud to report that by the end of 2006 we had already achieved a 2% reduction towards this goal. This includes a significant 18% reduction in smelter-based PFC (perfluorocarbon) emissions intensity.

This level of performance and our role in numerous climate change organizations and working groups in 2006 have helped position Alcan as an industry leader in the global climate change discussion. Initiatives include our regular participation in the World Economic Forum’s Global Greenhouse Register and Canada’s Environmental Leadership Initiative, as well as signing the UN Global Compact's "Caring for Climate" statement and being the first Canadian company to join the United States Climate Action Partnership. This last initiative is a coalition of leading companies and NGOs calling for strong national GHG reduction legislation in the United States. We also promote our industry as an advocate of the product life cycle approach, demonstrating aluminum’s contribution to global GHG emission reductions through various product applications and recycling activities.

Ongoing culture change
Since our first Corporate Sustainability Report in 2002 we have witnessed a dramatic change at Alcan in terms of a general understanding of sustainability concepts. With the full support of our Board of Directors, the sustainability message is now evident in our corporate policies, programs and strategic thinking at all levels of Alcan. As the data shows in the Global Employee Survey section of this report, our cross-company and multi-level approach has accelerated employee involvement and the related integration of sustainability into our mainstream business strategy.

Alcan employees have become more focused on doing things better, especially now that the Alcan Integrated Management System (AIMS) is firmly entrenched in all business groups and regions. In 2006, we strengthened this employee support system by introducing a fourth pillar of AIMS – the Alcan People Advantage – to complement Value-based Management, Continuous Improvement, and EHS FIRST. The Alcan People Advantage will bolster the skills, dedication and engagement level of our employees, which in turn supports sustainability by fueling innovation and reinforcing our competitive advantage. As a key component of our talent management approach, we also re-vamped the Nathanael V. Davis Award – the Company’s highest tribute to employee excellence – to make it more accessible to all Alcan employees.

Our corporate values and policies are strongly linked to the UN Global Compact’s principles relating to human rights, labour, the environment and anti-corruption. In addition to our Worldwide Code of Employee and Business Conduct, examples include a separate code of ethics for senior financial officers and our release of an Indigenous People’s Policy in 2006 aimed at promoting constructive and sustainable relationships with indigenous communities worldwide. Community relations are central to our sustainability strategy as seen at Gove in Australia where we are helping the Yolngu people adjust to the mainstream workforce and in Ghana where we are supporting the country’s Millennium Development Goals with a three-year collaboration aimed at issues such as sustainable access to safe drinking water.

Building on strengths
Our research and development activities – approximately $220 million in 2006 – continue to be closely aligned with our core businesses and are focused on improving process technologies and developing new product applications for a diverse range of markets and customers.

Reducing energy consumption is a good example of a sustainability imperative that can be both a challenge and an opportunity as energy demand and prices are on the rise worldwide. Achieving greater energy efficiency in operations translates into cost savings and a reduced environmental footprint; however, volatile energy markets also create stronger demand for Alcan’s expertise in proprietary, high-efficiency smelter technology. Building on the industry-wide acceptance of our AP series technology, in 2006 we announced the planned construction of a pilot AP50 smelting facility that is the cornerstone of an industrial strategy developed in concert with the Government of Quebec in Canada. The $550-million pilot plant is the initial step in creating up to 450,000 tonnes of new generation AP smelting capacity that will be based entirely on clean, renewable hydroelectricity.

Our actions continue to gain external recognition, such as being one of only five Canadian companies on the Global 100 list of the “Most Sustainable Corporations in the World” or being Fortune Magazine’s industry champion for metals on its “World’s Most Admired Companies” list in 2007. Innovest Strategic Value Advisors recently rated Alcan as the top metals and mining company for the year, which was a special honour as it recognizes the link between our governance and environmental efforts and our sustainable, profitable growth. Along with many of our plants being acknowledged for local initiatives, other global corporate recognition includes the World Environment Center’s Gold Medal for “International Corporate Achievement in Sustainable Development” and the National Safety Council’s Robert W. Campbell award for integrating environment, health and safety management as a key business value.

On July 12, 2007, a new chapter opened in Alcan’s story as our Board of Directors recommended an offer by Rio Tinto Group to acquire all outstanding Alcan common shares. To be named Rio Tinto Alcan, the combined aluminum group will be a new global industry leader with an attractive cost position, a strong technology portfolio, complementary refining and smelting assets, and a strong growth pipeline. This represents an excellent strategic fit, especially in the context of sustainability as Rio Tinto has been recognized for its efforts to tackle climate change and promote biodiversity while also striving to become a leader in sustainability and a preferred developer in its communities.

As more companies join Alcan in adopting sustainability as an underlying business principle creating long-term value, we know that there is still a lot to do. This is true whether we are discussing operational efficiency, customer satisfaction, employee well-being, ongoing community support or building investor confidence. We also know that Alcan’s ongoing economic success will be dependant on our ability to maintain a high level of dialogue with both external and internal stakeholders as a key part of our sustainability strategy.

By integrating sustainability at all levels of the organization we are helping to maintain our place as a partner of choice in both remote and developed regions of the world. This in turn uncovers new opportunities for Alcan and creates value for all our stakeholders through our long-term presence and community commitments.

Dick Evans
President and CEO
Alcan Inc.