Introduction to ABB's Group Sustainability Report 2001

Adapting to a changing environment

ABB has been undergoing a profound transformation. In 2001, we reorganized ourselves along customer lines, making our company simpler to do business with. One fundamental aspect of our business has not changed - our commitment to sustainability.

Committed to sustainable energy ABB is spearheading the movement to sustainable energy. We are the largest supplier of generators for wind turbines and a leader in advanced power electronics for the latest distributed, small-scale generating solutions.

Our four key goals

• To improve our economic performance
• To extend our environmental management system to all employees and all activities
• To proceed with the full-scale, worldwide implementation of our social policy
• To align our core areas of power and automation technologies with common efforts to help reduce poverty throughout the world

It is almost a decade since ABB first committed itself to sustainability by signing the International Chamber of Commerce’s Charter for Sustainable Development. We are proud to have been a pioneer and aim to maintain our leadership position, devising and implementing best practices in our own operations.

Equally important, we try to stimulate discussion and debate about how to achieve sustainable development internally in ABB, in our direct contacts with customers and suppliers and also in a broader arena that includes governments, non-governmental organizations and international bodies.

One such debate is about greenhouse gases. We believe that climate change is a reality, and we see greenhouse gas abatement as the biggest single environmental challenge facing governments, industry and society today. In 2001 we signed up with “e-mission 55” an international business initiative which calls on governments to ratify the Kyoto Protocol without further delay.

Sustainability and the reshaping of industries
Nearly two years ago we divested our large-scale power generation business, and set out our vision of the future of the electricity supply business. A shift to sustainable energy sources would create demand for new, small-scale, distributed power generation technologies, along with efficiency gains and environmental improvements in the traditional electricity supply.

ABB is already a leading supplier of many of the new alternative technologies, including microturbines, cogeneration systems and wind-powered generators.

We are also strong in power electronics and controls, which are key enabling technologies for distributed power generation. We are developing converters and control systems for microturbines, fuel cells and photovoltaic applications. Some examples of ABB’s activities in these fields are described in this report.

Another fast-growing part of our business is Industrial IT: a new integrated systems architecture for industries and utilities.

Industrial IT brings many benefits. Remote control and automation make factory floors safer; consumption of energy and raw materials is minimized; costs are cut and the finished products are more eco-efficient.

Sustainability in ABB
In 2001, we began a deep transformation of our organization to make it more responsive to our customers’ needs. While this process was under way, a business downturn and improved internal processes caused us to reduce the number of employees working in the company. Our sustainability function, which involves some 600 people worldwide, was unaffected by the reduction.

One of the most significant sustainability developments of the year was the launch of our new social policy, with an unprecedented campaign of stakeholder engagement. We held 45 round-table discussions with stakeholders in 34 countries to gather views on the policy, as well as suggestions on how to implement it and measure its performance.

In years of hard work ABB has made sustainability part of our business approach. Independent assessors confirm this: for instance, the Dow Jones Sustainability Index has ranked us at the top of our industry group for three years running.

In most of our product lines, ABB offers some of the most sustainable solutions available. But this is not enough – our customers have to buy them. It is pointless for our customers to invest in sustainable products, if the extra cost makes their businesses uncompetitive.

Creating the right climate for sustainability requires the involvement of more parties than just suppliers and buyers. Governments, for instance, can create fiscal incentives. Non-governmental organizations of all kinds are increasingly successful in mobilizing public opinion against unsustainable practices. And individual consumers choose to buy sustainable products, even if they cost a little more.

The working environment ABB’s manufacturing and service facilities are run to exacting standards for health and safety, and environmental management. We have implemented the ISO 14001 standard in 531 manufacturing plants - 98 percent of the total.

Ten years after Rio: more talk, more action
A decade ago world leaders, business heads and non-governmental organizations met in Rio de Janeiro, where they issued the United Nations Declaration on Environment and Development. In 2002, they will meet again – this time in Johannesburg, where the agenda includes three of the most important and controversial challenges to sustainability: globalization, climate change and the widening poverty gap.

We at ABB support global efforts to promote sustainability, and we will take part in the discussions in Johannesburg.

But we can do more than talk. In 2001 we started a program called “Access to Electricity.” Two billion of the world’s poorest people have no electricity supply, and no access to the benefits, such as clean water and basic sanitation, that electricity can help provide.

Our researchers are examining how ABB’s sustainable, small-scale power generation technologies might fill this gap. This will be a long-term commitment for ABB, working internationally with various partners to make real progress in the fight against poverty.

Another of our initiatives in 2001 was to launch a corporate research and development program focused on sustainability issues.

Introducing the triple bottom line
One of the biggest problems of reporting on sustainability performance has always been the lack of agreed standards and measurements.

This year, our Sustainability Report has been inspired by the Sustainability Reporting Guidelines, first published in mid-2000 by the Global Reporting Initiative (GRI) - an international multi-stakeholder undertaking. The GRI guidelines are based on a “triple bottom line” reporting concept – covering environmental, economic and social performance.

The changing climate
In 2002, we intend to integrate sustainability into all levels of our organization: our strategic plans, our management systems and our operating processes. This activity will be led and supported by our Group Function – Sustainability Affairs. As a successor to Jan Strömblad, who retired during 2001, we have brought in Christian Kornevall, who has extensive and diverse experience in the sustainability area, to spearhead this effort.

Of course, we will continue to promote sustainability internally, and in discussions with our customers, suppliers, business and government leaders, and all our other stakeholders.

We believe that the global business climate is changing. ABB has already shown that a commitment to sustainability can be good for business. Soon, commitment to sustainability will be a fundamental requirement for all businesses. And this is a climate for which we at ABB are very well prepared.