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Environmental

Economic

Social

2003SustainabilityReport

CEO Statement

We hope these improvements allow abroader and timelier exploration ofour global performance than can beaccomplished purely between thecovers of a printed report. Inresponse to input from externalstakeholders, we have improved theusability of the Sustainability Reportwith, for example, the inclusion ofan index based on Global ReportingInitiative (GRI) indicators. We hopethat index makes it easier to com-pare our performance with otherorganizations using the GRI report-ing guidelines.

Read in its entirety, the informationpresented on alcoa.com shows strongprogress in all our economic, envi-ronmental, and social activities. Thefollowing highlights serve to illus-trate that:

● Our total shareowner return for2003 was more than 71%, mean-ing US$100 invested (with divi-dends reinvested) at the beginningof the year would be worth morethan US$171 as of December 31,2003. In comparison, the DowJones Industrial Average, of whichwe are a component, returnedapproximately 28% during thesame period.

● Since we published our strategicenvironmental targets in 2000,we’ve reduced water use by 16%,landfilled waste by 44%, andgreenhouse gas emissions by 25%(from 1990). Our rapid integrationprocess will ensure that we see sim-ilar progress in the waste streamsthat come to us through our acqui-sitions.

2871

0 20 40 60 80 100

2003

Total ShareownerReturn

(percent)

■ Alcoa■ Dow Jones

Industrial Average

251

0 20 40 60 80 100

2003 4416

Strategic Environmental Targets

(percent reduction since 2000)

■ Water■ Landfilled Waste■ Greenhouse

Gas Emissions

1Reduction from 1990.

Alain J. P. BeldaChairman and Chief Executive Officer

Performance rather than talk is Alcoa’s way of demonstrating

progress toward a sustainable future. Through our 2020 strategic

framework, we have established clear targets to support our

vision of becoming the best company in the world. In this report,

we offer you a collection of data and information that measures

our progress.

This is Alcoa’s second Sustainability Report, the latest offering in

a long tradition of reporting. This year, for the first time, we are

releasing it simultaneously with our 2003 Annual Report to offer

you a comprehensive view of the company. We are also fully

integrating the Sustainability Report within alcoa.com and its

associated regional and location websites.

● In 2003, we had the best lost work-day and total recordable injuryrates in the company’s history. Ourlost workday rate improved to 0.12from 0.15 the previous year, andour total recordable rate was 1.66,down from 2.22 in 2002. Morethan 99.8% of our 120,000employees worked through 2003without incurring a lost workdayinjury. Regrettably, despite thisimprovement, we experienced fourfatalities. That is why we areincreasing our emphasis on identi-fying difficult-to-predict, low-prob-ability events that have potentialfor catastrophic consequences —and why we are analyzing the caus-es of human error and how to pre-vent them.

● As we went to press with thisreport, we were again named oneof Fortune Magazine’s “MostAdmired Companies.” We alsoranked second in terms of socialresponsibility among all companiesin all industries. In addition, wewere the number one company inthe metals category.

In addition to the data in our report-ing, we are playing an active role ininternational efforts on sustainabledevelopment. We are helping lead theAluminum Sustainable DevelopmentInitiative of the InternationalAluminum Institute, and we havecommitted to report against theSustainable Development Principlesdeveloped by the InternationalCouncil on Mining and Metals.

From all this, I trust you can see thatAlcoa considers sustainability report-ing an important tool for providingmeaningful information to our manystakeholders. But it is just that; atool to assess our performance. Whatreally counts is how we are doing onthe ground. As this commitment toreporting is shared with customers,suppliers, shareholders, employees,and representatives of communitieswhere we have a presence world-wide, I hope it will be used to helpidentify areas where we can collabo-rate even more productively in pur-suit of a sustainable future.

I invite you to submit your com-ments about this report through our dedicated e-mail address — [email protected] — or viaour online survey.

Alain J. P. BeldaChairman and Chief Executive Officer

0.12

0 0.5

2002

1.0 1.5 2.0

2001

2003

1.7

2.0

0.16

0.18

Lost Workdays

2000

1.8

■ Lost Workdays■ US Industry Average

2003 industry average not available

0.15

Table of ContentsSocial Performance Indicators .............................................28Work Environment...............................28Health and Safety..........................30Human Rights.......................................34Society......................................................35Product Responsibility .......................41

Economic Performance Indicators .............................................42Long-term

Shareholder Value ......................42Customers...............................................47Supplier Relationships........................49Public Commitment ............................49

Awards and Recognition ............50Internal Awards and

Recognition................................50External Awards and

Recognition........................................53

Case Studies......................................57

GRI Content Index ..........................58

Vision and Strategy..........................3

Organizational and Report Profile.......................................6Organizational Profile...........................6Report Scope............................................6Report Profile...........................................7

Governance Structure and Management Systems ....................8Structure and Governance...................8Stakeholder Engagement ...................14Overarching Policies and

Management Systems .....................14

Environmental Performance Indicators .............................................16Material Use ..........................................16Energy......................................................17Water........................................................19Biodiversity ............................................19Emissions, Effluents, and Waste......21Products and Services .........................25Environment, Health, and Safety

Compliance ........................................26Capital Expenditures ..........................27

Reporting FrameworkAs yet, there are no Generally AcceptedAccounting Principles for reporting social andenvironmental performance. We continue touse the reporting framework emerging fromthe voluntary Global Reporting Initiative aswell as criteria established by other organiza-tions to guide the structure of this report.

Forward-looking StatementCertain statements in this report relate to future events and expectations and as such constituteforward-looking statements. Forward-looking statements also include those containing suchwords as “anticipates,” “believes,” “estimates,” “expects,” “hopes,” “targets,” “should,” “will,”“will likely result,” “forecast,” “outlook,” “projects” or similar expressions. Such forward-look-ing statements involve known and unknown risks, uncertainties and other factors that may causeactual results, performance or achievements of Alcoa to be different from those expressed orimplied in the forward-looking statements. Important factors that could cause actual results todiffer materially from those in the forward-looking statements include material adverse changesin economic or aluminum industry conditions generally, including global supply and demand con-ditions and prices for primary aluminum, alumina and other products, or material adversechanges in the markets served by Alcoa; the company’s inability to achieve the level of cost sav-ings, productivity improvements or earnings growth anticipated by management, whether due tosignificant increases in energy, raw materials or employee benefits costs or other factors; changesin laws or governmental regulations or policies in the countries in which Alcoa operates, includ-ing those affecting environmental, health or safety compliance; relationships with and financialand operating conditions of customers and suppliers; and the other risk factors summarized inAlcoa’s Form 10-K for the year ended December 31, 2003 and other SEC reports.

Vision and Strategy

3

Our commitment to sustainabilityhas a long history and is evidenteveryday — from the way we liveour Values to the following strategicframework for sustainability sup-ported by measurable objectives forguiding our operations.

● Supporting the growth of customerbusinesses.

● Standing among the industrialcompanies in the first quintile ofreturn on capital among Standard& Poor’s Industrials Index.

● Elimination of all injuries andwork-related illnesses and the elimination of waste.

● Integration of environment, health,and safety with manufacturing.

● Products designed for the environ-ment.

● Environment, Health, and Safetyas a core Value.

● An incident-free workplace (anincident is any unpredicted eventwith capacity to harm humanhealth, the environment, or physical property).

● Increased transparency and closercollaboration in community-basedenvironmental, health, and safetyinitiatives

1World Commission on Environment andDevelopment, April 1987, OxfordUniversity Press, Introduction — pp 22-23 IV.

Sustainable Development Alcoa concurs with the definition ofsustainability first published withinthe World Commission onEnvironment and Development’s1987 Brundtland Report, alsoknown as Our Common Future.This report defined sustainabledevelopment as “development thatmeets the needs of the present without compromising the ability of future generations to meet theirown needs.”1

At Alcoa, sustainability is defined asusing our Values to build financialsuccess, environmental excellence,and social responsibility throughpartnerships in order to deliver netlong-term benefits to our shareown-ers, employees, customers, suppliers,and the communities in which weoperate.

Ten Million Trees

When Alcoa’s Chairman and CEO AlainBelda planted a seedling on June 5,2003, in Poços de Caldas, Brazil, Alcoaemployees had, in five years, fulfilled agoal to plant one million trees aroundthe world within 10 years. That achieve-ment triggered the beginning of anotherambitious initiative: to plant 10 milliontrees by 2020.

The Ten Million Trees program countsand recognizes the trees personallyplanted by Alcoa employees, contractors,suppliers, and their families worldwide.These trees are planted in addition tothose used in revegetation programs thatAlcoa routinely undertakes as part of itsmine rehabilitation programs.

Each participating Alcoa location pur-chases trees for the Ten Million Treesprogram from a supplier of its choice,and the location’s employees select thetypes of trees used to match local condi-tions and purposes.

Under this program, employees areencouraged to plant their trees on theAlcoa property where they work to helpemphasize the progress toward sustain-ability of Alcoa operations and toenhance the environment around thecompany’s facilities. Integrated into facili-ty land management plans, the trees provide shade, offer habitat for wildlife,

reduce stormwater runoff, enhance theaesthetics of the facilities, and absorbcarbon dioxide from the atmosphere.

Trees can also be planted at home, inparks (with appropriate permission), orat other places that are of special significance for individuals or communi-ties. Many Alcoa locations routinely usea tree-planting ceremony as a way towelcome and recognize prominent visi-tors to the facilities, providing a perma-nent memorial to honor those visitors.

A tree census is conducted eachDecember, and locations report on thenumber of trees planted during theyear as part of the program. Updateson various plantings around the worldare available on alcoa.com.

Schoolchildren help plant Alcoa’s firstseedlings in Iceland.

4

Vision and ValuesAt Alcoa, our vision is to be the bestcompany in the world — in the eyesof our customers, shareholders, communities, and people. We expectand demand the best we have tooffer by always keeping Alcoa’sValues top of mind.

IntegrityAlcoa’s foundation is our integrity.We are open, honest, and trustwor-thy in dealing with customers, suppliers, coworkers, shareholders,and the communities where we havean impact.

Environment, Health and SafetyWe work safely in a manner thatprotects and promotes the healthand well-being of the individual andthe environment.

CustomerWe support our customers’ successby creating exceptional valuethrough innovative product andservice solutions.

ExcellenceWe relentlessly pursue excellence ineverything we do, every day.

PeopleWe work in an inclusive environ-ment that embraces change, newideas, respect for the individual, andequal opportunity to succeed.

ProfitabilityWe earn sustainable financial resultsthat enable profitable growth andsuperior shareholder value.

AccountabilityWe are accountable — individuallyand in teams — for our behaviors,actions, and results.

We live our Values and measure oursuccess by the success of our customers, shareholders, communi-ties, and people.

Principles Integrity● We live our Values everywhere, all

of the time.

● We demonstrate integrity in ourbehavior and actions.

● We keep our promises.

● We have the confidence andcourage to ask for help.

● We expect integrity from everyAlcoan and do not tolerate unethical behavior.

● We avoid conflicts of interest butwill declare situations where theymay occur.

● We expect integrity from our customers, suppliers, and otherswho do business with us.

● We communicate openly with individuals and communities onissues that affect them.

Environment, Health and Safety1

● We value human life above all elseand manage risks accordingly.

● We relentlessly pursue and contin-ually improve EHS systems and

processes to achieve an EHS incident-free workplace.

● We do not compromise our EHSValue for profit or production.

● We comply with all laws and sethigher standards for ourselves andour suppliers where unacceptablerisks are identified.

● We support pollution preventionand sustainable development, byincorporating social responsibility,economic success and environmen-tal excellence into our decisionmaking process.

● We measure and assess our per-formance and are open and trans-parent in our communications.

● We supply and use safe and reli-able products and services.

● We use our EHS knowledge toenhance the safety and well-beingof our communities.

● We are all accountable for conforming with and deployingour EHS Value and Principles.

1In 2003, we updated the Principles under-lying Alcoa’s EHS Value to more clearlyspell out Alcoa’s commitment to continualimprovement and pollution prevention.

Vision and Strategy

5

● We empower our people through adiverse learning organization tocapture the best from everyone.

People● We treat each other with dignity

and respect at all times.

● We seek to understand each othersideas and suggestions.

● We value diversity and our individ-ual differences.

● We create and seize opportunitiesfor growth and development.

● We seek and accelerate change.

● We continuously re-design ourwork to eliminate waste andimprove the value of our work.

● We provide appreciative and constructive feedback to eachother to improve our individualand team performance.

● We create the appropriate balancein our work and family lives.

● We create value in the communityin which we live and work,through our presence and leader-ship.

Profitability● We all understand how our job

contributes to profitability.

● We eliminate waste every day,reducing our costs and capitalrequirements.

● We earn our right to grow byachieving returns that exceed ourcost of capital.

● We aggressively pursue organicgrowth by creating exceptionalvalue for customers.

● We make strategic acquisitions andintegrate them excellently.

● We openly and effectively commu-nicate our financial results inter-nally and externally.

● We do not make money at theexpense of our Values.

Accountability● We first recognize our role and

responsibilities, then take owner-ship, and accept the consequencesof our actions.

● We act with a sense of ownershipin our workplace.

● We encourage an environment ofrisk taking within the context ofaccountability.

● We solve the problems in our areaof responsibility and drive continu-ous improvement of our work.

● We do what we say we will do.

● We communicate openly as posi-tive team members to increase theperformance of our teams.

● We recognize the impact that ourown actions have in all outcomes.

● We recognize individual and teamaccomplishments and successes.

Customer● We deeply understand our

customers needs and consistentlymeet or exceed them through ABS.

● We build strong long-term customer relationships at all levels.

● We cross organizational and geographic boundaries to seam-lessly serve customers.

● We are the leader in our chosenmarket segments.

● We develop innovative product,service, and information solutions.

● We develop and nurture clearAlcoa and product brand identities.

● We develop and maintain a strong commercial organizationalcapability.

Excellence● We continuously set goals beyond

the best.

● We demand, recognize, and rewardexcellence.

● We achieve system excellencethrough application of the rules ofour system and by rapidly imple-menting best practices.

● We eliminate waste by rapidlysolving problems at their source.

● We move practical and theoreticallimits through innovation.

● We have rapid change as a mindset.

● We are committed to excellence byliving our Values.

6

ORGANIZATIONALPROFILE

Reporting OrganizationAlcoa Inc.

Products and ServicesIn addition to aluminum productsand components, Alcoa also marketsconsumer brands including ReynoldsWrap® aluminum foil, Alcoa® wheels,and Baco® household wraps. Amongour other businesses are vinyl siding,closures, precision castings, and elec-trical distribution systems for carsand trucks.

Countries with Alcoa OperationsAs of the end of 2003, Alcoa operat-ed in 41 countries. A complete cur-rent list is available on alcoa.com.

Nature of OwnershipFormed in 1888 under the laws ofthe Commonwealth of Pennsylvania,Alcoa Inc. is a publicly listed compa-ny on the New York Stock Exchange(NYSE ticker symbol: AA).

Markets ServedAlcoa serves customers in the aero-space, alumina, aluminum, automo-tive, commercial transportation,building and construction, industrialproducts, and packaging and con-sumer markets.

REPORT SCOPE

Contact PersonAnita RoperDirector — Sustainability

If you would like to write to us about this sustainability report, pleasesend an e-mail to [email protected]. To provide anonymousfeedback, please complete our onlinesurvey at http://www.surveymonkey.com/s.asp?u=8114403192.

Reporting PeriodJanuary 1 through December 31, 2003.This is Alcoa’s second sustainabilityreport in this format, but we have beenreporting publicly on our global EHSperformance for 11 years and commu-nity involvement for four years.

Generally, we have provided four yearsof data for each performance indicator.Beginning with our 2004 report, wewill provide and maintain up to fiveyears of data when available.

Boundaries of ReportData contained in this report are forAlcoa’s global operations unless oth-erwise noted as regional.

Alcoa Metrics SystemAlcoa’s metrics system is the source ofmuch of the data in this report.

In 1988, Alcoa initiated a process tocollect and display current detailed information on safety in a way thatwould be available to all employees. Webuilt a system that allows every locationto enter data electronically throughinteractive computer displays, and we

use the information as a tool for develop-ing action plans, corrective actions, goalsetting, and progress measurement.

We have expanded the original data sys-tem to include incident management, andwe now use the system for all environ-mental, health, and safety data collectionand analysis, incident management, andreporting. At any time, we can use thesystem to determine current safety statis-tics, including accidents or near missesthat occur anywhere in the world on aparticular day. We can also view detailedreports on incidents, evaluate the correc-tive action plans or status of a correctiveaction, and evaluate our progress towardour goals in environment, health, andsafety. The system is an excellent man-agement tool that has helped us facilitateour rapid progress in these areas.

As part of our commitment to open-ness and transparency, we began pub-lishing real-time safety data publicly on alcoa.com in 2003 to provide timelyinsight into our performance on thiscritical measure.

We continue to work on determiningwhat regional or global metrics arerequired to guide us toward the achieve-ment of sustainability, particularly in themore complex and difficult-to-measuresocial aspects of our operations.

Basis for Reporting on JointVentures, Partially OwnedSubsidiaries, Etc.Data in this report are drawn from thoseoperations where Alcoa has majorityinterest and/or management control.

2003 474

0 100 200 300 400 500

2001

2002

2000 459

459

482

Number of Locations

As of year end.

ProfileKey Statistics (As of December 31)

*Millions of US dollars

Please see endnote on page 49 for an explanation on data changes from 2002 reporting.

Ten-year historical data can be found in Annual Report.

Employees Sales* Debt* Equity* Assets*

2002 127,000 20,351 8,488 9,927 29,8102003 120,000 21,504 7,271 12,075 31,711

7

REPORT PROFILEThis second sustainability report con-tinues our evolution toward an inte-grated report highlighting economic,social, and environmental aspects ofour operations. With its emphasis ononline presentation, this report alsorepresents our commitment to usemodern technology to rapidlyincrease the availability and timeli-ness of the report.

In preparing this report, we initiateddirect consultation with a number ofinterested stakeholder groups and dis-tributed an online survey via CSRwireto more than 4,500 organizations thatare in contact with potential readerswho have a stated interest in corporatesocial responsibility. Thirty-seven peo-ple responded to the online survey.

On the basis of inputs from this con-sultative process, we have retainedthe basic structure of our 2002Sustainability Report with perform-ance data supported by illustrativecase studies. Case studies are present-ed here as summaries, which are gen-erally drawn from more detailed andlocalized progress reports that arepublished and updated on alcoa.com.Links within the summarized casestudies lead directly to those expand-ed versions when they are available.

This year, we have introduced anindex to help interested readers com-pare the information contained in ourreport with the Global ReportingInitiative guidelines. We also drawupon criteria from other organizationsto frame our sustainability reporting.

Throughout this report, we haveselected data that we believe con-tribute to meaningful insight intoAlcoa operations worldwide. We alsoselected data on the basis that sys-

tems for collecting and collating thatdata already exist or that we canmake a reasonable estimate.

We also offer readers opportunitiesto look beyond the boundaries ofthis corporate sustainability reportby reviewing these additional publi-cations found on alcoa.com.

Alcoa Annual ReportPublication of the Alcoa 2003Sustainability Report has been syn-chronized with publication of theAlcoa 2003 Annual Report.

Regional Sustainability ReportsThree regional sustainability reportswere published in 2002. These areeffectively regional chapters that adddepth and breadth to the corporatereport and web pages.

Alcoa in Australia Alcoa in Canada Alcoa Latin America

Location ReportsWithin each region, a number ofoperating locations published 2002community reports that broughtlocalized insight into our operations.

Warrick, Indiana (USA)Massena, New York (USA)Tennessee Operations (USA)Rockdale, Texas (USA)Atlanta, Georgia (USA)*Chicago, Illinois (USA)*Danville, Illinois (USA)*Davenport, Iowa (USA)*Dallas, Texas (USA)*Hutchinson, Kansas (USA)*Detroit, Michigan (USA)*Irvine, California (USA)*Los Angeles, California (USA)*Lancaster, Pennsylvania (USA)*Philadelphia, Pennsylvania (USA)*

San Antonio, Texas (USA)*Seattle, Washington (USA)*Texarkana,Texas (USA)*

*A single report published for communities with Alcoa Mill Products locations.

Alcoa News BriefsThese news items cover activitiesfrom Alcoa operations worldwideand can be found in Alcoa’s 2003Annual Report.

Criteria/Definitions Please refer to the Alcoa 2003 Annual Report for details on ourfinancial accounting policies.

Internal Report AssuranceAlcoa management is responsible forthe integrity of the data published inthis report. The company maintains asystem of internal controls, includingaccounting controls and a strong pro-gram of internal and external audit-ing. The system of controls providesfor appropriate procedures that areconsistent with high standards ofaccounting and administration. Thisreport has been prepared within theframework of those standards.

Independent Report AssuranceIn considering independent verifica-tion of this report, we have consultedwith a number of interested stake-holders and determined that, at thisstage, no single source of verificationwill necessarily satisfy every individ-ual stakeholder group. Alcoa remainscommitted to the principle of a credi-ble and meaningful verificationprocess, and we will continue toexplore this issue and report onprogress.

Information RequestsPlease visit alcoa.com for additionalinformation about Alcoa’s economic,environmental, and social performance.

Profile

8

STRUCTURE ANDGOVERNANCEAlcoa endorses The BusinessRoundtable Principles of CorporateGovernance, which is a comprehen-sive statement of responsible corpo-rate governance principles datedMay 2002. These principles and theNYSE Listing Standards provide thefoundation on which our CorporateGovernance Guidelines and ourboard committee charters are based.

Board of Directors(As of February 20, 2004)

Alain J.P. Belda, 60, chairman of theboard of Alcoa since January 2001,and chief executive officer since May1999. Elected president and chiefoperating officer in January 1997,vice chairman in 1995, and executivevice president in 1994. President ofAlcoa Aluminio S.A. from 1979 to1994; president — Latin America in1991. Director of Alcoa since 1998.

Kathryn S. Fuller, 57, president ofthe World Wildlife Fund U.S.(WWF), an independent organizationdedicated to the conservation ofnature, since 1989; various positionswith the organization since 1982including executive vice president,general counsel, and director ofWWF’s public policy and wildlifetrade monitoring programs. Directorof Alcoa since 2002.

Carlos Ghosn, 49, president andchief executive officer, Nissan MotorCompany, Ltd., since 2001. Mr.Ghosn previously served as chief

operating officer of Nissan MotorCompany, Ltd. from 1999. From1996 to 1999 he was executive vicepresident of Renault S.A., and from1979 to 1996 he served in variouscapacities with Compagnie Généraledes Etablissements Michelin. Directorof Alcoa since 2002.

Joseph T. Gorman, 66, chairmanand chief executive officer ofMoxahela Enterprise, LLC, a venture capital firm, since 2001. Hewas chairman and chief executiveofficer of TRW Inc., a global compa-ny serving the automotive, space, andinformation systems markets, 1988-2001. Director of Alcoa since 1991.

Judith M. Gueron, 62, president ofMDRC (formerly ManpowerDemonstration Research Corpora-tion), a nonprofit research organiza-tion, since 1986; executive vice presi-dent for research and evaluation1978-1986. Director of Alcoa since1988.

Sir Ronald Hampel, 71, formerchairman of United Business Media,a U.K.-based media company, from1999-2002; chairman of ImperialChemical Industries plc (ICI) 1995-1999, and a director 1985-1999;deputy chairman and chief executiveofficer 1993-1995; chief operatingofficer 1991-1993. Director of Alcoasince 1995.

Klaus Kleinfeld, 46, member of theCorporate Executive Committee ofthe Managing Board, Siemens AG, aglobal electronics and industrial conglomerate, since January 2004.Served as president and chief execu-tive officer of Siemens Corporation,the U.S. arm of Siemens AG, 2002-

2003 and member of the ManagingBoard of Siemens AG fromDecember 2002 to December 2003;chief operating officer of SiemensCorporation from January toDecember 2001. From January toDecember 2000, he was executivevice president of Siemens MedicalEngineering Group. For two yearsuntil December 1999, he was presi-dent of the angiography, fluoroscopy,and X-ray systems businesses ofSiemens Medical Group. Director ofAlcoa since 2003.

John Mulroney, 68, president of theOpera Company of Philadelphiasince 2003; executive director 1999-2003; former president and chiefoperating officer of Rohm and HaasCompany, a specialty chemicalsmanufacturer, from 1986-1998.Director of Alcoa since 1987.

Henry B. Schacht, 69, director andsenior advisor to Lucent TechnologiesInc., a communications systems andservices company, since February2003. On unpaid leave fromWarburg Pincus as managing direc-tor and partner. Served as chairmanof Lucent Technologies Inc. fromOctober 2000 to February 2003 andfrom 1996 to 1998; chief executiveofficer from October 2000 toJanuary 2002 and from February1996 to October 1997; and senioradvisor from February 1998 toFebruary 1999. Was managing direc-tor of Warburg Pincus fromFebruary 1999 until October 2000.Director of Alcoa since 1994.

Governance Structure and Management Systems

9

Franklin A. Thomas, 69, consultant,TFF Study Group, a nonprofit institution assisting development inSouth Africa, since 1996; chairman,September 11 Fund since 2001; president and chief executive officerof The Ford Foundation 1979-1996.Director of Alcoa since 1977.

Ernesto Zedillo, 52, director, YaleCenter for the Study of Globalization,since September 2002. Former presi-dent of Mexico, elected in 1994 andserved until 2000; held various posi-tions in the Mexican federal govern-ment from late 1987 to his election.Director of Alcoa since 2002.

Board CommitteesAudit CommitteeReviews Alcoa’s auditing, financialreporting, and internal control functions and retains the independ-ent auditors. It also reviews the com-pany’s environmental, health, andsafety audits and monitors compli-ance with Alcoa business conductpolicies. The members of the AuditCommittee are independent, asdefined under the New York StockExchange listing standards. Theindependent auditors, the chieffinancial officer, the vice president —audit, and the general counsel haveaccess to the committee without anyother members of management being present.

Joseph T. Gorman

Judith M. Gueron

Klaus Kleinfeld

Henry B. Schacht — Chair

Ernesto Zedillo

Compensation and Benefits CommitteeDetermines compensation for Alcoaofficers, administers the stock optionplan, oversees investment manage-ment of the principal pension andsavings plans, approves any specialpost-retirement arrangements forretiring Alcoa officers, and performsother functions specified by the company’s compensation and benefitplans. The committee retains independent compensation consult-ants to assist it. The members of the Compensation and BenefitsCommittee are independent, asdefined under the New York StockExchange listing standards.

Carlos Ghosn

Joseph T. Gorman — Chair

Sir Ronald Hampel

John P. Mulroney

Franklin A. Thomas

Executive CommitteeActs on behalf of the board whenspecific action must be takenbetween board meetings. Under theby-laws of the company, this com-mittee is comprised of three or moredirectors and shall have and exercisethe authority of the board in themanagement of the business andaffairs of the company except as otherwise limited by law.

Alain J. P. Belda — Chair

Joseph T. Gorman

Henry B. Schacht

Franklin A. Thomas

Governance and Nominating CommitteeRecommends nominees for electionas directors and has oversightresponsibility for corporate gover-nance, director education and orientation, and the performanceevaluation process for directors, thecommittees, and the board.

Kathryn S. Fuller

Sir Ronald Hampel

John P. Mulroney — Chair

Franklin A. Thomas

Public Issues CommitteeProvides advice and guidance onpublic issues, oversees corporate giv-ing, makes recommendations to theboard regarding significant share-holder issues, and reviews companyreporting initiatives regarding socialand environmental matters.

Kathryn S. Fuller

Carlos Ghosn

Judith M. Gueron — Chair

Henry B. Schacht

Ernesto Zedillo

Independence Standard forAlcoa DirectorsAlcoa believes that a strong independ-ent board is critical. A majority ofdirectors must be “independent”under the listing standards of theNYSE as well as the Alcoa board’sown Director IndependenceStandards, as determined by theBoard of Directors. Board independ-ence depends not only on directors’individual relationships, but also onthe board’s overall attitude. Providingobjective, independent judgment is at


10

the core of the board’s oversight func-tion, and the board’s compositionshould reflect this principle. Since1991, Alcoa has had only one insidedirector on its board, the chief execu-tive officer, except during a brief peri-od during a CEO transition. Today, 10 out of the 11 directors are independ-ent, and the Audit Committee, theCompensation and Benefits Commit-tee, and the Governance and Nomi-nating Committee are composed entirely of independent directors.

Officers(As of February 20, 2004)

Alain J.P. BeldaChairman and Chief ExecutiveOfficer

Robert T. AlexanderVice President — Alcoa andChairman, Alcoa Fujikura Ltd.

Ricardo E. BeldaExecutive Vice President — Alcoaand Group President, Alcoa Europe

Julie A. CaponiAssistant Controller

William F. ChristopherExecutive Vice President — Alcoaand Group President, AlcoaAerospace, Automotive andCommercial Transportation

Michael ColemanVice President — ABS and Qualityand President, Alcoa RigidPackaging

Denis A. DemblowskiAssistant General Counsel

Ronald D. DickelVice President — Tax

Janet F. DuderstadtAssistant Secretary

Franklin L. FederVice President — Analysis andPlanning

Veronica M. HagenVice President — Alcoa and ChiefCustomer Officer

Brenda A. HartAssistant Secretary

Cynthia E. HollowayAssistant Treasurer

Rudolph P. HuberVice President — Alcoa GlobalBusiness Services and ChiefInformation Officer

Barbara S. JeremiahExecutive Vice President —Corporate Development

Richard B. KelsonExecutive Vice President and ChiefFinancial Officer

Denise H. KlutheAssistant Controller

William E. Leahey, Jr.Executive Vice President — Alcoaand Group President, AlcoaPackaging, Consumer, Construction& Distribution Group

Mario LonghiVice President — Alcoa andPresident and CEO, HowmetCastings

Charles D. McLane, Jr.Vice President and CorporateController

Thomas J. MeekAssistant General Counsel

Colleen P. MillerAssistant Secretary

L. Richard MilnerVice President — Alcoa andPresident, Alcoa AdvancedTransportation Systems

Joseph C. MuscariExecutive Vice President — Alcoaand Group President, Asia and LatinAmerica

Judith L. NocitoSecretary and Senior Counsel

William J. O’Rourke, Jr.Vice President — Environment,Health & Safety and Audit

Dale C. PerdueAssistant General Counsel

A. Hamish PetrieVice President — People andCommunications

11

William B. PlummerVice President and Treasurer

Russell W. Porter, Jr.Vice President and Deputy GeneralCounsel

Lawrence R. PurtellExecutive Vice President andGeneral Counsel; Chief ComplianceOfficer

Bernt ReitanVice President — Alcoa and GroupPresident, Primary Products

Ricardo B. M. SayaoAssistant Treasurer

Richard L. (Jake) Siewert, Jr.Vice President — GlobalCommunications and Public Strategy

Paul D. ThomasVice President — Alcoa and GroupPresident, North AmericanFabricated Products

Kurt R. WaldoAssistant General Counsel

Robert G. WennemerVice President — Pension FundInvestments and Analysis

John M. WilsonVice President and Deputy GeneralCounsel

Russell C. WisorVice President — GovernmentAffairs

Mohammad A. ZaidiVice President and Chief TechnicalOfficer

Executive CompensationWe believe our compensation proce-dures and practices are in line withcurrent corporate governance stan-dards and practices. Our executiveshave an opportunity to increase theircompensation by performing well.Our total cash compensation targetsare established to pay at the medianof our selected markets within eachcountry or region. Our stock optionprogram rewards executives whenthe company stock is rising, butexecutive compensation declineswhen the company’s stock price hasdeclined or when financial and non-financial performance objectives arenot fully realized. We have neverrepriced stock options, and our plan,which was approved by the share-holders in 1999, prohibits repricing.

The company is moving away fromthe use of stock options only to ablend of stock options and restrictedstock units. Units at the top manage-ment level will be 100% contingentupon company performance as com-pared with that of an external com-parator group. In addition, thereload feature of the company’s pre-vious option grants is being limited;

and as to future grants, it is beingeliminated.

We believe these performance-baseddesigns and practices have served theinterests of the shareholders well inthe past, and we will review ourdesigns and practices going forwardto ensure that they continue to do sowhile enabling the company toattract and retain the talent neces-sary to run this increasingly complexglobal company.

Responsibility for all aspects of exec-utive officers’ compensation, includ-ing approval of any officer employ-ment, retention, and severance agree-ments, lies with the Compensationand Benefits Committee of the Boardof Directors. This committee is com-prised solely of independent directors.

In September 2003, our Board ofDirectors adopted a policy to seekshareholder approval for any futureseverance agreement with any seniorexecutive officer of the companywhen any such agreement wouldresult in payments to the officer inexcess of 2.99 times his or her salaryand bonus. This policy resulted fromBoard of Director discussions thatbegan following the April 2003annual shareholders’ meeting, atwhich a majority of the shareholderswho cast votes (although not amajority of shares outstanding)


12

approved a resolution requesting thatthe Board consider such a policy.

Even prior to the Board’s response tothe shareholder vote, it had beenAlcoa’s longstanding practice and pol-icy that any severance agreement witha senior executive officer requiredapproval by the Compensation andBenefits Committee of the Board ofDirectors. It should also be noted thatseverance agreements approved bythe Compensation and BenefitsCommittee prior to adoption of thepolicy had not resulted in cash pay-ments or negotiated benefits thatexceeded the 2.99 limit in the policy.

Audit ProcessOur goal is the same through bothour internal and external auditprocesses: to maintain world-classtransparency and accountability inAlcoa operations.

Independent AuditorsOver the last several years, Alcoahas significantly reduced its ratio ofnon-audit to audit fees. In 2003,audit and audit-related fees totaled$9.1 million, while fees related totax services totaled $4.8 million andnon-audit-related fees were $0. Overthe last three years, total non-audit-related fees were $0, reflecting thecompany’s desire to limit the scopeof the independent auditor to auditand tax work only.

In accordance with resolutions adopt-ed by the Audit Committee, the leadaudit and review partners of the inde-pendent auditor will be rotated atleast every five years.

Internal AuditAlcoa has long had an independent,global Internal Audit Department(IAD). The vice president — auditmeets privately with the AuditCommittee at least four times peryear.

The IAD is responsible for provid-ing financial, information technolo-gy, environmental, and health andsafety audits in all Alcoa locationsacross the world. The group’s focusis to assess risk across the company,apply audit resources to addressthose risks, and develop recommen-dations to close any gaps that aredetected as a result of an audit. IADis also charged with implementingthe Alcoa Self Assessment Tool, atype of self-audit that is required tobe performed at least once every 18months by every Alcoa location andadministrative process worldwide.

Alumar Ranked Best in Worldfor Health, Safety,Environment, and Community

Following an extensive 2003 health,safety, environment, and communityaudit by consortium partnerBHPBilliton, the Alcoa-managedAlumar refinery and smelter in SãoLuis, Brazil, was ranked the bestamong 55 locations around the worldaudited by BHPBilliton.

The Alumar refinery is owned by con-sortium partners BHPBilliton (36%),Alcoa Aluminio do Brasil S.A. (35.1%),Abalco S.A (18.9%), and Alcan S.A.(10%). The smelter is owned by AlcoaAluminio do Brasil S.A. (53.66%) andBHPBilliton (46.34%).

Every three years, BHPBilliton conducts apeer review process at each of its facilities.Audit teams are drawn from operationspersonnel, line management, and externalsources. The formal audit results in thedevelopment of performance improvementplans that help a facility come into fullcompliance with BHPBilliton’s 15 compre-hensive standards.

Following its 2003 audit, Alumar posted anoverall score of 4.3 on a five-point scale.The average for sites already audited byBHPBilliton was 3.4, making Alumar thehighest ranked of all plants. In addition,the facility’s occupational health, industri-al hygiene, and industrial wastes man-agement programs ranked the best everaudited by BHPBilliton. Areas identifiedfor improvement included better integra-

tion of community activities with envi-ronment, health, and safety.

Alcoa also conducts an extensive inter-nal audit on each location at least everythree to four years. The audit team con-sists of Alcoa employees from the com-pany’s internal audit department as wellas employees from other locations orbusiness units who have special skillsneeded for a particular audit. The teamspends an average of three to five daysat a location to verify it is meeting Alcoa’sminimum expectations in the disciplinesof environment, health, and safety.

During Alumar’s last Alcoa audit in 2002, the facility received the highestrating possible for its environmental performance.

13

Ethics and ComplianceProgram Alcoa’s Ethics and ComplianceProgram is designed to ensure thatall Alcoa employees understand andfully comply with the letter and spirit of the company’s business conduct policies and guidelines. Tohelp them do this, the programincludes globally published work-place standards and behavior expec-tations, an inclusive education program to put them into practice,and a worldwide network of Ethicsand Compliance Lines. These toolsare available to Alcoa employeesworldwide in 18 languages.

We added three components to thisprogram in 2003. First, we deployedmandatory, job-specific, web-basedethics and compliance training toapproximately 10,000 employees. In addition to corporate officers andbusiness unit leaders, employeesselected to participate in this initialwave of online training were general-ly those who negotiate with cus-tomers and suppliers, can contractu-ally commit the company, or haveaccess to confidential information.This training program will beexpanded in 2004.

We also began quarterly distributionof materials dealing with businessethics and proper conduct to allAlcoa locations with the objective ofmaintaining and further developingoverall employee awareness of current ethics and compliance topics.

Lastly, in conjunction with the provi-sions of the U.S. Sarbanes-OxleyLaw, we have developed anddeployed a financial investigationprocess under the leadership ofAlcoa’s chief compliance officer. Theexistence of this process will ensureconsistent handling, proper commu-nication, thorough investigation, andtimely action in the event issuesrelating to accounting, internalaccounting controls, or auditingmatters are brought to the attentionof management.

The Compliance Advisory Council,made up of the chief executive officer, chief financial officer, generalcounsel, director of global compli-ance, and director of ethics and compliance, continues to meet on aregular basis to review programeffectiveness, assess strategic direc-tion, and provide tactical support for this process.

Ethics and Compliance LineOur global Ethics and ComplianceLine provides employees and otherconcerned parties an anonymouschannel for asking questions,expressing concerns, and raisingissues about workplace activities and business practices.

The compliance line is available toAlcoa employees worldwide, withthe local toll-free compliance linesanswered in the caller’s native language. In 2003, we added anethics and compliance e-mail address(anonymous, if desired) and a postalmail address for submission of written inquiries.

Shareholder Engagement Alcoa has a dedicated shareholderrelations group that engages withboth institutional and individualshareholders to hear their concernsthroughout the year. The group facil-itates discussion with managementabout the strategy and tactics of thecompany along with emerging corpo-rate governance issues and the com-pany’s corporate governance policies.

Shareholder engagement occurs atquarterly analyst workshops, theannual shareholder meeting, individ-ual and group meetings with institu-tional shareholders on a monthlybasis, global investor conferences(usually one per year), and viaphone, e-mail, and in-person contact.

Shareholders also elect the membersof the Board of Directors, andAlcoa’s Governance and NominatingCommittee considers any share-holder recommendations for directornominees.


A Personal Look atCommunity Consultation

Community members near Alcoa’sVictorian mining and smelting facilitiesin Australia actively participate in thedevelopment of the facilities’Environmental Improvement Plans(EIPs) and add their signatures to thefinalized plans. Andrew Govanstone,Portland community member, conveyshis experience with the process.

When I put my hand up to be a com-munity participant in the PortlandAluminium EIP process, I was slightlyskeptical of the potential outcomes.

But after having participated in theprocess for two years now, I am pleasedwith our achievements on several fronts.

I am pleased with the amount of input thecommunity representatives have had iden-tifying issues relevant to both our localcommunity and to Portland Aluminium.

I am even further pleased that the issuesraised during the EIP process by the com-munity representatives at the open EIPmeetings, where senior smelter staff andmanagers participate, have been viewedseriously by Portland Aluminium and havebeen “taken on” by smelter staff. Insteadof lip service, I have seen the mattersraised incorporated into the EIP for all toread, and the sign-off process has consoli-dated everyone’s understandings, commit-ments and proposed actions into blackand white on paper.

My confidence in Portland Aluminium, as a large company operating in my

region, has risen, because I nowbelieve that the company genuinely listens to community concerns and aprocess has been developed thatallows this to work in a non-intimidatingenvironment.

In my two-year involvement, I have alsowitnessed the words of the EIP planbecome actions. Of course, there havebeen occasions when issues raisedneeded to be further explored andsometimes wrestled with, but wherechanges were identified as necessary,they have either been made or arebeing phased in as circumstances allow.

Overall, I have found the process per-sonally interesting, satisfying, andworthwhile; and I am pleased that Ibecame involved.

14

STAKEHOLDERENGAGEMENT

Stakeholder IdentificationA stakeholder is defined as anygroup or individual affected byAlcoa’s operations or that has thecapacity to influence our operationsor future prospects.

Stakeholder ConsultationAlcoa has deployed a communityframework through which eachoperating location is expected toengage the local community in themost appropriate means for thatcommunity. These include forums,workshops, advisory panels, pub-lished reports, projects, and openhouses.

Stakeholder ConsultationOutcomesSome examples of the type of infor-mation and initiatives that resultfrom stakeholder engagements arecontained throughout this report viacase studies.

OVERARCHING POLICIESAND MANAGEMENTSYSTEMS

Alcoa Business SystemAlcoa’s overarching operating systemis known as the Alcoa BusinessSystem (ABS). It is characterized bythree overarching principles: make touse; eliminate waste; and peoplelinchpin the system.

In practice, this means:

● Defining precisely our customers’requirements.

● Pre-specifying the activities, thepathways, and the connectionsnecessary for meeting those cus-tomer requirements and refusing tovary from them.

● Safeguarding what we have pre-specified with built-in tests to iden-tify and prevent problems thatmight threaten our predeterminedoutcomes.

● Enabling every Alcoan to recognizeand trace problems back to theirroot cause and eliminate them; notthrough the use of elite, discreteteams of problem solvers, butthrough the disciplined, immedi-ate, relentless participation of thepeople occupying the affectedpathway.

This system provides the most effi-cient way for eliminating waste byenabling us to supply customers, ondemand, with defect-free products atthe lowest cost and with the highestdegree of safety.

Helping NGOs Become MoreViable and Sustainable

In the past several years, two conflict-ing forces have converged to drivechange in the nonprofit world: an ever-increasing need for services combinedwith a decline in availability of publicand private funds. This paradoxicalenvironment means philanthropic non-governmental organizations (NGOs)need to learn new ways to operate andpartner in order to thrive.

Through a series of workshops withexperts in NGO sustainability andeffectiveness, Alcoa Foundation hashelped more than 450 leaders fromcommunity-based NGOs in sevenAlcoa communities in the UnitedStates and Jamaica. Participantslearned about the following:

● Corporate citizenship and the increas-ing expectations that stakeholdershave for organizations in the communi-ty, and how that affects philanthropy.

● How funders assess an NGO to deter-mine the potential effects of a grant.

● How NGOs can conduct an audit oftheir organizations to identify strengths,weaknesses, community need, staffand board viability, and overall health ofthe organization; and how they shoulduse the audit results to develop aroadmap for change.

● Collaboration with other NGOs andcommunity partners to maximize com-munity impact.

● What NGOs should do to becomemore relevant to community need.

● How NGOs can partner with corpora-tions to improve local communities.

Follow-up surveys showed that nearlyall participants learned new skills andideas that they could use in their organ-izations immediately. In fact, 38.5% ofsurvey respondents made changes ineither their organizations or how theydo work as a result of attending theworkshop. More than half have alreadyseen success with these changes.

The surveys also revealed that 88% ofparticipants were interested in learningmore about fiscal sustainability, 82.5%for social enterprise, and 72.4% forboard governance. Alcoa Foundation iscontinuing to integrate new relevanttopics into these workshops and plansto conduct additional sessions at otherAlcoa locations in 2004.

15

External Principles andInitiativesAlcoa subscribes to or endorses thefollowing externally developed prin-ciples or initiatives.

● The Business RoundtablePrinciples of CorporateGovernance

● International Aluminum InstituteSustainability Principles

● International Council on Mining& Metals Principles

MembershipsAlcoa is a member of numerousorganizations. These include majoraluminum associations and metalcouncils throughout the world andorganizations like the BusinessRoundtable, the Pew Center onGlobal Climate Change, the WorldBusiness Council for SustainableDevelopment, and the WorldResources Institute Green Power

Market Development Group. Wechoose memberships where we cansee a significant role for business inadvancing sustainability.

Programs and ProceduresSome examples of Alcoa’s programsand procedures pertaining to eco-nomic, environmental, and socialperformance are contained through-out this report via case studies.

Certification StatusAs of December 31, 2003, Alcoa had152 locations certified to the ISO14001 Environmental ManagementSystems (EMS) Standard, with 154

locations actively working towardcertification within two years. Weare also currently pursuing a corpo-rate-wide certification to theISO14001 EMS Standard.

All of our locations are required tohave written environmental manage-ment systems based on the continu-ous improvement principle — whichis the major thrust of the ISOStandard and is aligned with theprinciples of Alcoa Business System— but certification is not required.

We have four locations that are certi-fied to the Occupational Health andSafety Management System standard(OHSAS 18001). They are Poços deCaldas, São Luis, AFL do Brasil, andTubarão Extrusions — allAluminio/Latin America locations.


16

MATERIAL USE

Total Materials UseWe use a variety of raw materials toproduce semi-finished and finishedproducts. Although a significant partof our activities are designed to pro-duce high-quality aluminum metal,semi-finished aluminum products formanufacturers, and finished productsfor consumers, we also produce a widevariety of products made from plastics.

To produce aluminum, we use baux-ite, lime, caustic soda, aluminum fluo-ride, carbon, and several other mate-rials. The requirements for thesematerials depend on the initial qualityof the bauxite and the process tech-nologies used to convert the materi-

als. In general, approximately twometric tons of bauxite are required toproduce a metric ton of aluminumoxide, and approximately two metrictons of aluminum oxide will yield onemetric ton of aluminum metal.

We also use plastic resins, includingpolypropylene, PVC, and polyethyl-ene, to produce packaging materials,transportation applications, andarchitectural products for home andcommercial use. Resins have becomean important part of our materialssupply, and we pay significant atten-tion to processing and internal scrapmanagement to ensure that all resinsare used effectively. The amount ofwaste associated with plastic use isextremely low, with almost no plasticmaterials going to landfill from ouroperations.

Although the total amount of wastegenerated in our metals process areahas increased as a result of the

growth of Alcoa, our processes aregenerally among the most efficient inthe world, with several benchmarkplants in terms of process efficienciesand low emissions. At our major alu-minum smelter in Portland, Australia,concerted efforts have reduced thesolid waste disposed of in landfillsfrom more than a thousand metrictons per month to less than threemetric tons per month between 1990and 1996. We achieved this throughpollution prevention, recycling, andreuse programs. The waste-to-landfillnumber has remained within 2% to3% of this figure since 1996 throughto 2003, demonstrating the sustain-ability of these programs.

Returning Wasteland to Nature

What once was a disposal area forbauxite residue, a waste generated bythe aluminum refining process, is now a26-hectare (64-acre) rehabilitated areathat supports native Brazilian trees, othervegetation, and reemerging animal life.

By 1990, the Poços de Caldas refin-ery’s bauxite residue area #3 reachedits storage capacity of 1.7 million metric tons. After numerous studies,construction began in 2000 to remedi-ate the surface of the area accordingto Alcoa bauxite disposal standards.

“All of our targets have been achieved,”said Geraldo Paes, refinery engineering

supervisor for Poços de Caldas. “The rain-water falling on the area is returned to theenvironment without the need for treat-ment. We’ve eliminated the use of irriga-tion water to suppress caustic dust, saving130-million liters of fresh water a year.And, we have a supply of caustic sodaheading back to the refinery for reuse.”

The latter brings an economic benefit tothe refinery because it previously had topurchase caustic soda to replace thatlost in the residue areas.

Completed in 2001, the area now sup-ports 20,000 native trees, other vegeta-tion, and returning animal life, includingbirds, frogs, and snakes. The reclaimedland is also serving as a natural researchlaboratory, with an amphibian survey

underway as well as studies related tobauxite mine rehabilitation methods.

“This project is an example other com-panies should follow since it will reducethe environmental impact of bauxiteresidue,” said Nilton Granato, directorof Poços de Caldas’ EnvironmentalProtection Department. “In terms ofwhat Alcoa could be doing better, I suggest finding ways to recycle bauxitewaste for use in other industries.”

In late 2002, Alcoa signed an agree-ment with Brazil’s Ceramics Center toresearch ways in which bauxiteresidue could be used by the country’sgrowing ceramics industry. Researchbegan in early 2003 and is expected tobe completed in 2005.

Environmental Performance Indicators

Waste Materials UsedWe use recycled materials within ouroperating locations to reduce wastesand costs. Scrap aluminum is re-melted, and scrap plastic materialsare reused when quality and colorrequirements allow. We currently useapproximately 20% purchased scrapfor the metal supply to support ourbusinesses, and we have a goal toincrease this scrap utilization rate to50% of the aluminum products thatwe make, except for raw ingot thatis sold to others, by 2020.

The current aluminum scrap avail-ability limits our opportunities toreach this target, but we anticipatethat scrap availability will increasedue to the rapid growth of aluminumapplications in the construction,transport, and consumer productssectors over the last two decades.Improved scrap collection, sorting,and processing technologies will alsohelp increase available scrap.

We see the benefit in reusing alu-minum to the highest degree possibleand will strive to achieve this 50%recycled aluminum goal as rapidly aspossible. We also recycle the polyeth-ylene, polypropylene, and polyvinyl

ENERGY

PVC UseWe produce a variety of polyvinylchloride (PVC) films, and an important part of our operation isthe recycling of PVC. Wheneverpossible, we recycle PVC scrapmaterial back into our products. We are careful to segregate filmsthat are approved by the U.S. Foodand Drug Administration (FDA)from those that are not. If there is PVC scrap we can’t use, we sell that material to recyclers whocan use it.

Renewable Energy As we search for stable and long-term energy supplies, we are com-mitted to decreasing our reliance onfossil fuels by increasing, where pos-sible, our use of natural, renewableenergy sources that help us lowerour carbon dioxide emissions andcontribute to the efforts to addressglobal climate change.

17

chloride materials used in our con-struction, automotive, and packag-ing processes.

0 20

2003

40 60

59.6

10 30 50

Purchased Electricity(billions of kilowatt hours)

2001

2002

2000 55.6

56.7

57.9


EnvironmentalPerformance Indicators

Includes all purchased and self-generated electricity plus all fuel used1Purchased electricity where the source of the power is not fully known

Total Energy Used (percent)

Oil Gas Coal Hydro Grid1

2000 8.2 17.8 24.8 33.8 15.22001 8.3 17.0 24.9 32.3 17.42002 7.2 19.3 26.0 32.4 15.02003 8.3 15.9 32.5 33.7 9.6

Aluminum Metal Recovered from Purchased Scrap

(thousands of metric tons)

2001

2002

2000 712

7371

768

0 200

2003

400 600 800

696

1Estimated

The Challenge of Hydropowerin Iceland

Alcoa’s agreement to build its first pri-mary aluminum facility in more than 20years — in Iceland — is consistent withits commitment to renewable energy. Aswith any new development, one of thechallenges lies in ensuring that thefacility delivers net long-term benefits toboth Alcoa and Iceland’s economic,social, and environmental structures.

Power for the new smelter will be pro-vided by a 630-megawatt hydropowerstation being built and operated byIceland’s national power company.

Although the majority of Icelanders sup-port this project because it will strengthen

and diversify the Icelandic economy, it hasgenerated some controversy. Most opposi-tion has centered on aspects of the hydroproject, which is essential for the construc-tion of the smelter. The Icelandic Parliamentapproved the project in March 2003, with 41members from a wide range of the politicalspectrum in favor and nine opposed.

The hydro project will change the environ-ment, but the project’s EnvironmentalImpact Assessment — the most compre-hensive in Iceland’s history — shows thatthe ecosystem in the glacial highlandsnear the facility can be protected.

The smelter, located on the settled eastcoast of Iceland near the town ofReydarfjordur, will create about 750 jobs. Itwas granted an Environmental Operating

Permit by Iceland’s Environment andFood Agency on March 14, 2003. It iscurrently being designed by a multi-discipline sustainability team that isusing extensive local environmentalmodeling to help guide the incorporationof lessons and technology developedover the past 20 years. The smelter willoperate under the most restrictive ambient air quality standards in theworld and will achieve air quality stan-dards far better than European andNorth American ambient air require-ments. Detailed work is also being doneby Alcoa and local authorities to planthe integration of the enterprise into thelocal community.

Extensive discussion of this projectcan be found on alcoa.com.

Development Group will help usachieve this objective.

In 2003, we and other Green PowerMarket Development Group membercompanies participated in the largestrenewable energy certificate purchaseto date in the United States. Renew-able energy certificates are a newtype of renewable energy productthat consumers can buy to reducethe environmental impact of theiractivities. The certificates representthe environmental attributes oravoided emissions when electricity isgenerated from renewable resourcesinstead of from fossil-fuel sources.The certificates we are purchasingessentially mean that four of ouradministrative centers are now oper-ating 100% on electricity generatedby projects that produce power fromlandfill gas, avoiding the emissionsof more than 6.3 million kilograms(13.9 million pounds) of carbondioxide annually.

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Hydro energy has proven to be anexcellent power source for our elec-trolytic processes, and we continueto seek additional hydro-basedpower. In Brazil, we are involved asa minority partner in hydroelectricprojects, such as the Machadinhoand Barra Grande dams. We are alsocommitted to be the principal cus-tomer for a new hydroelectric damin Iceland. We offer a detailed reviewof the Iceland project elsewhere inthis report and on alcoa.com.

A recent upgrade at one of ourhydro facilities in the United Statesimproved the power generation percubic meter of water flow throughthe turbine by almost 30%. Thisresulted in more efficient use of thewater resource — more power withno increase in water flow throughthe turbine. We plan to make similarimprovements in other facilities andbelieve that this upgraded technolo-gy can be used by others to increasehydro efficiency worldwide.

We acknowledge the complex eco-nomic, social, and environmentalinterrelationships often associatedwith hydropower projects. We alsoagree that open and transparentprocesses, such as those outlined inthe guidelines produced by TheWorld Commission on Dams, areneeded when new hydro projects areconsidered.

We are currently pursuing thereturn of a concession granted to usby the Brazilian government as apartner to build a dam on theAraguaia River called Santa Isabelbecause the environmental reviewsconducted by the agencies involveddetermined that the dam wouldhave environmental impacts thatwould be unacceptable.

We are committed to increasingour use of renewable energy beyondhydropower, and we are exploringother energy options, such as windenergy. We are confident our contin-ued active involvement and supportof the Green Power Market

Investments Reduce ProcessWater Discharge by 96%

Through the investment of US$14.6million in new technologies andprocesses implemented since 1994,Alcoa’s Davenport Works in Iowa(USA) decreased the amount of waterit discharges to the Mississippi Riverby 96% on dry days.

Prior to these projects, the facility dis-charged an average of 37,850 liters-per-minute (10,000 gallons-per-minute)of process water to the MississippiRiver. This amount surged in wetweather as it was joined by stormwaterrunoff. Faced with these volumes,Davenport embarked on a series ofmajor projects designed to reduce

water use and recycle as much water aspossible onsite.

One project enabled mill water to bepumped back to the facility reservoir toallow suspended solids to settle out. Italso included major changes to the plantchemical control systems, construction ofwater return sumps, changes to pumpingcapacity at the river intake, new coolingtowers, and several other improvementsthat reduced the total water discharge

from 37,850 liters-per-minute (10,000gallons-per-minute) to 1,514 liters-per-minute (400 gallons-per-minute).

A separate project created a treatmentfacility to remove suspended solids,metals, oils, greases, and otherunwanted chemicals from water divert-ed from the recycle system for dis-charge to the river.

The final project separated thestormwater and process water returnsfor the ingot plant, improved chemicalfeeds to the ingot water recycle system,and created a new stormwater outfall.

Davenport is currently consideringprojects to reduce process dischargesfurther, especially those associatedwith wet weather.

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WATER

BIODIVERSITY

Alcoa’s Position onConservation of BiodiversityConsistent with Alcoa’s environmen-tal policy and our published positionon sustainable development, weactively endorse the concept of con-servation of biodiversity by operat-

ing worldwide in a manner whichminimizes impacts on natural habi-tats and biological resources.

Our operations can play a positiverole in conserving biodiversity byadopting appropriate land manage-ment practices and rehabilitatingland disturbed by the operations inan appropriate manner.

New or expanding operations shoulddocument the level of ecosystem andspecies diversity within their area ofinfluence by applying techniques, pro-cedures, and information generallyaccepted by the international scientificcommunity. Measures to minimizeadverse impacts on ecologically signif-icant ecosystems or species should beadopted. Particular attention shouldbe paid to the conservation of rarebiological communities and rare,endangered, or threatened species.

Where relatively extensive opera-tions, such as bauxite mining, are

Total Process Water Use(millions of cubic meters)

2001

2002

2000 115.5

108.5

105.5

0 40

2003

80 120

97.1

20 60 100


Total Process Water Use by Region (millions of cubic meters)

Asia Pacific Europe North America South America Total

2000 15.7 22.3 71.0 6.5 115.5 2001 14.0 22.5 66.0 6.0 108.52002 15.4 21.9 62.2 6.0 105.5

2003 10.7 20.3 61.4 4.7 97.1



Wastewater before (right) and after treatmentat Davenport.

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Alcoa Frog Watch

Frogs are sensitive environmentalbarometers, thriving when conditionsare clean and declining in numberswhen contaminants, parasites andother factors are introduced into theirhabitats. Because it’s easy to hear iffrogs are present, they become audibleindicators of environmental conditions.

In 1994, Alcoa partnered with theWestern Australian Museum to create acommunity frog monitoring and conser-vation program. Called Alcoa FrogWatch, the program expanded toVictoria in 2002 through a partnershipwith the Amphibian Research Centre.Due to the program’s activities, morethan 30,000 people are activelyinvolved in frog monitoring and conser-vation initiatives throughout Australia.

Alcoa Frog Watch solicits frog-monitoringassistance and raises awareness throughcommunity and school presentations, dis-plays, workshops, internet sites, mediacoverage, and ongoing communications.The program encourages participants tohelp conserve frog life in their areas, frombuilding frog habitats to regularly monitor-ing frog populations in their backyardsand ensuring local landcare projectsencourage frog populations.

“Our declining frog population is telling usthat our environment is degrading,” saidGerry Marantelli, manager of theAmphibian Research Centre in Victoria,Australia. “We can alter these degradingeffects and use frogs as our monitors and

our reason for changing the environ-ment. Most people can’t see or heartoxins, but they can see and hearfrogs. That’s why they are such goodvehicles to get people involved incleaning up the environment.”

Although frog populations continue todecline, some areas where the AlcoaFrog Watch program is strong see thistrend being reversed.

“Alcoa’s involvement and support hasallowed us to expand our reach andcontact with the community,” saidMarantelli. “Prior to the Alcoa’s involve-ment, we were struggling to educateAustralians that frogs are a very goodvehicle for environmental manage-ment. In protecting frogs, we’re pro-tecting everything else that sharestheir habitat.”

ued. The rehabilitation process mustbe monitored and reported, and wedesign metrics to ensure that progressis made and that our biodiversitygoals will be achieved. Please seealcoa.com for our bauxite mine reha-bilitation standards and guidelines.

Our mines have been recognized foroutstanding reclamation in Brazil,Jamaica, the United States, andAustralia. For example, the SquawCreek Mine (coal) in the UnitedStates earned the 2002 IndianaExcellence in Mining andReclamation Award from theIndiana Department of NaturalResources, Division of Reclamation.

In addition, our Western Australiamining operation earned the 2003Model Project Award from theSociety for Ecological RestorationInternational.

carried out in natural habitats, reha-bilitation of the disturbed landshould in most circumstances favorthe return of the pre-existing vegeta-tion and fauna communities. Suchrehabilitation should aim to re-estab-lish the broadest practicable geneticbase using local genetic material andprovenances wherever possible.

Mining Reclamation ProcessAlcoa has a strict set of mine recla-mation standards that require mineplanning to fully incorporate recla-mation and biodiversity into the pro-gram. Mine activities must bedesigned to prevent erosion, segre-gate topsoil where feasible, make useof native seeds where possible, utilizenative species for reclamation, andrestore the area in a way that allowsthe previous land use to be contin-

7,318

2001

0

2002

1,200 2,000

2003 1,221824

400 1,600800

7,002

■ Area Disturbed (annual)■ Area Rehabilitated (annual) Open Mine Area (cumulative)

2000 9951,172

7,626

974834

1,310

2,0000 10,0006,0004,000 8,000

8617,177

Mining Land Disturbed/Land Rehabilitated

(hectares)

Area disturbed means annual land used in each reported year for mining or for mining infrastructure (roads, shops, crushing equipment, conveyors). Area rehabilitated means annual land returned to nature or to productive use (such as farming) after mining in each reported year. Open mine area is the cumulative area of land that has not been rehabilitated (including active mines and land used for mining infrastructure). One hectare equals 2.5 acres.

South American numbers for 2003 exclude rehabilita-tion at the Paranam area, where current mining operations are run by BHPBilliton. South American data reported for other years have remained unchanged and include the Paranam area.

Jamaican data include areas from the Breadnut Valley and Harmon Valley mines. Harmon Valley mine is a joint venture that is not operated by Jamalco.

Alcoa Frog Watch member Vivien Elanta inher garden, which features a frog pond.

Open Mine Area (hectares)

Asia Pacific Europe/Africa North America South America Total

2000 2,870 1,084 1,179 2,493 7,6262001 2,489 1,192 1,031 2,465 7,1772002 2,404 1,359 1,077 2,478 7,3182003 2,549 1,564 955 1,935 7,002

Cumulative figures. One hectare equals 2.5 acres.

Area Disturbed for Mining (hectares)


2000 598 109 205 83 9952001 548 108 152 53 8612002 527 178 185 85 9742003 641 248 243 89 1,221

Annual figures. One hectare equals 2.5 acres.

Area Rehabilitated (hectares)


2000 704 0 410 58 1,1722001 929 0 301 80 1,3102002 612 11 138 73 8342003 431 43 236 113 824

Annual figures. One hectare equals 2.5 acres.

21

Wetlands Project EngagesCommunity

Expansion of existing wetlands atAlcoa’s Massena East Plant in NewYork (USA) resulted in more than anenhanced environmental outcome. Thelocal community did not lose valuabletax-producing land since the wetlandswere contained within the Alcoa prop-erty, and a local Native American tribegained new resources from the pro-ject’s tree-planting activities.

The project began to mitigate lingeringeffects in the area’s wetlands fromAlcoa’s site remediation efforts, whichlasted between 1991 and 2001 andaddressed 18 inactive hazardouswaste sites on 48.2 hectares (119acres) at the Massena West Plant.

In addition to expanding the wetlands,the project’s design increased and diver-sified area wildlife and created educa-tional and recreational opportunities.

Commissioned in 2003, the wetlandsinclude a public viewing area thatencourages visitors to observe the wet-lands and the life they hold. In this area,250 artificial nest sites are beginning toattract bats and such varied bird speciesas ducks, screech owls, bluebirds, wood-peckers, great blue herons, and ospreys.

In 2003, Alcoa and local communitygroups planted 4,000 black ash and3,000 companion species in the wetlandsto celebrate Alcoa’s successful OneMillion Trees program. The plant selectedthe black ash because of its major cultur-al importance to the nearby Akwesasne

Mohawk Community. Once matured,the Alcoa black ash plot will be amongthe largest stands of such trees everplanted and will provide the tribe withmaterial for basket-making and medici-nal purposes.

“This is a model for what can be accom-plished when a corporation listens andunderstands the true needs of its neigh-bors,” said Les Benedict, assistant direc-tor of the St. Regis Mohawk TribeEnvironmental Division. “It is also amodel for working with Native Americanson a level that probably hasn’t ever beendone before, and it will add to the knowl-edge base for black ash restoration.”

EMISSIONS, EFFLUENTS,AND WASTE

The Alcoa Business System recog-nizes that all wastes are costs. Weare focused on waste reduction as away to improve our processes,reduce costs, and reduce our envi-ronmental impacts.

Over the last 20 years, Alcoa locations have made significantprogress. Some smelters havereduced fluoride emissions by morethan half, using improved operatingpractices, dual volume exhaust systems, and equipment upgrades.Significant gains have been made inextending the effective life of


Newly created wetlands and black ash stand.

Indirect Greenhouse Gas Emissions Associated with Purchased Electricity(million metric tons of CO2 )

Indirect CO2 data were impacted by using updated local emissions factors for purchased electricity in accordance with the WRI/WBCSD GHG Protocol.

Indirect CO2

1990 21.42000 23.22001 24.82002 24.02003 25.2

22

Moving Beyond CurrentReduction Targets forGreenhouse Gases

Alcoa’s Climate Change Strategy team,a group of 15 experts on climate issuesbased at Alcoa locations around theworld, is responsible for reviewing howAlcoa’s programs and products are partof the solution to climate change.

In late 2003, the team reviewedprogress on cutting emissions andstarted working on plans and programsfor meeting and maintaining the com-pany’s current 2010 goal of a 25%reduction from 1990 levels for green-house gases — a target that has beenmet by Alcoa locations.

Alcoa’s strategy team, which meets sever-al times a year, also reviewed progress onAlcoa’s greenhouse gas inventory man-agement systems. In 2004, Alcoa’s currentglobal greenhouse gas tracking programwill be directly linked to a new greenhousegas information system for Alcoa PrimaryProducts. The Primary Products green-house gas information system estimatesgreenhouse gas emissions from 40 majorfacilities consistent with established proto-cols. The system is integrated with produc-tion databases to provide monthly feed-back on emission reduction performanceat each location. These system improve-ments will allow for more active manage-ment of greenhouse gas emissions andmore real-time communications within thecompany on progress and opportunities.

The climate strategy team alsoemphasized the importance of a world-wide database of greenhouse gasesand compatible reporting protocols forall governments and reviewed Alcoa’srole in these protocols. These includeprotocols developed by the WorldResources Institute, World BusinessCouncil for Sustainable Development,and the government of Quebec as wellas those being developed by theInternational Organization forStandardization, Climate Leaders, theU.S. Department of Energy, and others. Alcoa is also a participant inthe World Economic Forum’s GlobalGreenhouse Gas Register.

Direct Greenhouse Gas Emissions1 (million metric tons of CO2 equivalents — CO2 e)

1Direct GHG emissions are the emissions from the facilities where Alcoa has at least a 50% ownership and/or management control.


Direct CO2 PFCs SF6 Total

1990 32.0 17.0 2.2 51.22000 33.2 7.4 1.1 41.72001 32.6 4.2 0.7 37.52002 32.4 4.6 0.0 37.02003 33.6 4.0 0.0 37.6

smelting pot lining, thereby reducing the amount of spent potlining that must be managed.Greenhouse gas emissions associatedwith smelting pot operations havebeen reduced by more than 75% atmany locations, and water dischargehas been reduced by 80% at severallarge facilities. Landfilled waste alsohas been reduced significantly atmany locations.

We have identified significant energysavings opportunities (currentlymore than US$59 million), and wehave captured over US$16 millionper year in these energy savings todate. We have planned more work inthe next few years, with over $50million in annual energy cost reduc-tions expected by 2007.

Ozone-depleting SubstancesAlcoa has eliminated ozone-depleting substances from processoperations. In newly acquired facilities, elimination of these sub-stances becomes a high priority. Wedo continue to use halon gas as a fire suppressant in 71 sensitive loca-tions throughout the world, andthese systems will continue to bephased out. There was one releasefrom a halon system at an Alcoalocation in 2002, but none in 2003.

23

NOx Emissions(thousands of metric tons)

2001

2002

2000 67.1

59.1

52.2

0 20

2003

40 60 80

53.9


0 5

2002

2003

10 15 20

2001

13.7

VOC Emissions(thousands of metric tons)

2000 19.1

16.1

16.1


NOx Emissions by Region (thousands of metric tons)


2000 10.2 2.6 52.1 2.2 67.12001 9.4 2.7 49.7 2.2 59.12002 6.8 2.4 43.1 2.2 52.22003 8.9 2.5 40.3 2.2 53.9


VOC Emissions by Region (thousands of metric tons)


2000 1.5 2.5 14.8 0.3 19.12001 1.4 1.8 12.1 0.8 16.12002 1.5 1.8 12.1 0.7 16.12003 1.3 1.9 10.0 0.5 13.7


3.35

0 1

2002

2003

2 3 4

2001

3.46

Mercury Emissions(thousands of kilograms)

2000 3.98

3.11


Mercury Emissions by Region (thousands of kilograms)


2000 0.64 0.38 2.59 0.37 3.982001 1.06 0.44 1.39 0.46 3.352002 0.93 0.26 1.46 0.45 3.112003 0.98 0.45 1.54 0.48 3.46



SO2 Emissions by Region (thousands of metric tons)

1Alcoa operates two large coal-fired power plants in the United States.


Asia Pacific Europe North America1 South America Total

2000 43.6 19.5 226.2 13.4 302.82001 44.5 19.6 210.2 12.2 286.52002 50.2 21.0 192.6 12.9 276.72003 48.1 15.5 211.9 13.6 289.1

0 100

2003

200 300 400

289.1


SO2 Emissions(thousands of metric tons)

2001

2002

2000 302.8

286.5

276.7

Total Wastes Landfilled(thousands of metric tons)

2001

2002

2000 990.2

562.6

560.0

0 750500250

2003

1,000

551.6


Production Up, EmissionsDown in Smelter Project

An emissions reduction project atAlcoa’s Deschambault smelter inCanada underscored the feasibility ofwhat may seem a contradictory sustainability achievement — increasethe facility’s future production capacitywhile concurrently decreasing its environmental effects. This proved achallenge since the facility was alreadyamong the best performing smelters inthe world.

In 2000, a team began studyingoptions to reduce by 50% the intensity

of the smelter’s fluoride emissionsreleased through potroom roof vents. The goal was to protect the vegetationwithin the smelter’s buffer zone and prepare for an upcoming amperageincrease and eventual plant expansion.

Between September 2001 and August2002, the smelter installed additional filters. These adsorptive alumina-basedsystems capture emitted fluoride — anexpensive and essential raw material —and recycle it back into the smelting pots.Also installed concurrently with the filterswere three kilometers (1.9 miles) of newductwork, two stacks, and other peripher-al items. These items and the dual-exhaust system were necessary toincrease the ventilation rate at the pots

during pot-tending operations to bettercapture the fumes at the source. Thegeneral exhaust rate per pot was alsoincreased to ensure minimal emissionsat all times.

In conjunction with streamlined workpractices and high levels of commit-ment to emissions reduction among potroom operators, the system becameoperational on schedule in September2002. Initial results demonstrated thatthe targeted 50% reduction in fluorideemissions through roof vents wasachievable. From start-up to September2003, emissions decreased by 52%compared to the same period in 2000.

24

Total Wastes Sold or Recycled(thousands of metric tons)

2001

2002

2000 879

986

1,025

0 1000500

2003

1,500

1,388


0 0.2

2002

2003

0.4 0.6 0.8 1.0

2001

0.84

Fluoride Emissions(kilograms per metric ton of aluminum produced)

2000 0.95

0.92

0.89

Total Wastes Generated(millions of metric tons)

2001

2002

2000 1.79

1.93

1.88

0 0.5

2003

2.5

1.70

1.0 1.5 2.0


Spent Pot Lining per Ton of Aluminum Produced

(kilograms per metric ton)

2001

2002

2000 20.67

21.85

23.09

0 15105

2003

20 25

20.801

1Estimate

Alcoa’s cell life continues to increase, resulting in fewer cell failures and fewer cells that need the lining removed and replaced. This pollution prevention effort reduces operating costs and will result in less spent pot lining for disposal. However, since the proportion of Pechiney-design cells has increased through the acquisition of a number of plants that use this technology, the actual weight of SPL continued to increase even as the number of cell failures decreased. (Pechiney cells use more insulation than Alcoa-designed cells.) This trend has reversed since the proportion of heavily insulated cells in the Alcoa system has not increased since 2000. Alcoa’s efforts to extend cell life have been very successful and are expected to continue to result in significant improvements in cell life and reductions in the amount of SPL that will be generated. For example, Alcoa locations experienced 1,548 cell lining failures in 2002. In 2003, the number of failures was reduced to 1,463.

Does not include bauxite residue.


Total Wastes Landfilled by Region (thousands of metric tons)


2000 165.3 132.7 667.2 24.9 990.22001 65.3 84.0 387.5 25.8 562.62002 53.5 83.1 397.6 25.8 560.02003 98.6 72.9 353.0 27.1 551.6

Recycling the PreviouslyUnrecyclable

A highly efficient Alcoa recycling plantin Avilés, Spain, handles aluminumproducts previously unrecyclable dueto environmental concerns caused bythe burn-off of paints and lacquers.

Opened in 2001 with a remeltingcapacity of 46,000 metric tons peryear, the plant remelts painted and lacquered aluminum scrap and thermal

brake products from Alcoa extrusionplants in Spain as well as scrap pulledfrom old buildings throughout Spain andPortugal. Its emission processing system, unique to Europe, prevents therelease of volatile organic compounds(VOCs) to the atmosphere from thepainted scrap.

The facility, which requires only one person to operate, uses a furnace thatconsumes one-third the gas of a conven-tional furnace. This furnace handles asignificant portion of the available scrapin the country and has made it possiblefor scrap previously sent outside Spain tobe used internally to meet that country’srapidly growing demand.

“Increasing recycling is a priority of our regional government and in agreement with the environmental policy of the European Union,” said Dr. Herminio Sastre Andrés, formerhead of the environmental departmentof the Principado de Asturias. “TheAlcoa recycling plant contributes toreducing the energy and raw materialsconsumption in an industrial sectorwith a great environmental impact.”

The plant received ISO-14001 certifica-tion in 2002.

25

Aluminum Institute has reportedthat each kilogram of aluminum onaverage used in the construction ofan automobile has the potential tosave 20 kilograms of greenhouse gasemissions over the life of the car.Aluminum-intensive vehicles notonly perform better and consumeless fuel, they also offer improvedsafety over comparable steel vehiclesbecause of the superior strength andenergy-absorption capabilities of alu-minum automotive alloys.

The formability and strength of themetal make it efficient for a widearray of applications. These includefood and beverage packages that aremore effective, lighter to ship, andeasier to recycle. Demand for thispackaging is growing worldwide,with Europe posting a 7% annualgrowth rate for aluminum cans.1

Other aluminum applications includearchitectural products that requireless maintenance and are strong,


Discharges to WaterAlcoa’s wastewater discharges arerelatively small with the exception ofonce-through cooling water dis-charges, which are extensive. Thelevels (concentrations) of specific pol-lutants in specific water dischargesare important locally, and they arecarefully managed and monitored.

Recycling Rates for ProductsAluminum is recycled extensively.Recycling rates for aluminum cansexceed 80% in many countries,including Brazil, Switzerland, Japan,and Sweden. In the United States, thealuminum can recycling rate has been

as high as 66%, but now stands near50%. Of the 100 billion cans soldeach year in the United States, morethan 50 billion are collected and re-melted to make new cans.

It is estimated that the recyclingrates for automotive componentsapproaches 90%, and the rate foraluminum in construction applica-tions is recycled at about 85%.

PRODUCTS AND SERVICESSignificant EnvironmentalImpacts of Principal Productsand ServicesAluminum stands out as one of themost valuable materials for creatingand maintaining a sustainable world.For example, the International

1990 1995 2000 2001 2002

Aluminum Can Recycling Rate (percent)

Western EuropeUnited KingdomUnited StatesAustralia

Aluminum industry estimates; 2003 data not available. Australia data from Aluminum Can Group.

0

20

40

60

80

100

Customer Need DrivesBrazilian Recycling Solution

In 2003, Alcoa signed an agreementwith three other companies to developa technologically advanced recyclingplant to recover aluminum from post-consumer aseptic packaging from customer Tetra Pak. Aseptic packagingis sterilized packaging used to protectand extend the shelf life of foods andbeverages.

In addition to funding 25% of the plant’sUS$3.5 million cost, Alcoa has commit-ted to purchasing 100% of the recycled,high quality aluminum for use in TetraPak’s foil packaging. Improved recy-cling rates and additional employmentopportunities will flow from the project.

Tetra Pak had been implementing alterna-tives for post-consumption recycling of itsaseptic packaging for some time. Thiseffort received more emphasis in recentyears due to the company’s voluntaryglobal commitment to constantly increaserecycling of its packaging. The new plantshould increase by up to 30% the valueof aseptic cartons in the recycling market.

“By doing this project, we hope toencourage sorting centers to collect thematerial, making the Tetra Pak packagesvery good business for everyone,” saidFernando von Zuben, environmentaldirector for Tetra Pak.

Recycling is a very important withinBrazil’s economic and social fabric sinceit employs thousands of people who

would have difficulty finding other work.Alcoa’s involvement in the Tetra Pakproject stems from the company’s customer focus and long-term strategyto eliminate waste and increase therecycling of aluminum.

The recycling plant will be located at afacility owned by project partner Klabin,a US$1 billion Brazilian pulp and papercompany. With annual capacity of8,000 metric tons, the facility will usean innovative plasma reactor that willtransform Tetra Pak’s foil packaging(75% paper, 20% polyethylene, and 5%aluminum) into highly pure aluminumand paraffin, which also can be sold.

The plant is expected to be operationalin 2004.

26

durable, and corrosion resistant; andaerospace components that result insafe, reliable, and affordable air andspacecraft. Compounds of aluminumalso find uses in improving humanhealth and hygiene.

Manufacturing primary aluminumfrom raw materials is energy inten-sive. On average around the world,it takes some 15.7 kilowatt hours ofelectricity-enough to light 150 one-hundred-watt light bulbs for anhour-to produce one kilogram (2.2pounds) of aluminum from alumina2.This means energy conservation is a

critical issue for aluminum producerssuch as Alcoa.

Recycling aluminum saves 95% ofthe energy it would take to makenew metal from ore, and it lessensthe need for solid waste disposal.The metal is almost endlessly recy-clable, with about two-thirds of thealuminum ever produced still in use.This equals about 480 million metrictons of a total 690 million metrictons manufactured since 1886.

1European Aluminium Association2http://www.world-aluminium.org/production/smelting/index.html

ENVIRONMENT, HEALTH,AND SAFETY COMPLIANCECompliance with all the laws andregulations in every location wherewe operate is a requirement for us,but we do not use compliance as ourtarget. Our Values lead us to aspireto be beyond compliance and dowhat is right for society — todayand tomorrow. In many instances,we are performing beyond compli-ance and leading the establishmentof new, higher standards. In theevent that performance falls short ofour goals, we initiate rigorous reviewand corrective processes. We trackour progress by calculating the rateof environmental incidents1 per loca-tion per year.

1An incident is any unpredicted event withcapacity to harm human health, the environ-ment, or physical property. Some incidents canlead to an imposition of fines and penalties byvarious EHS regulatory bodies.

27

CAPITAL EXPENDITURES Capital Expenditures ProcessAlcoa has established a review processto evaluate all capital expenditures forenvironment, health, and safety toensure that the appropriate level ofattention is being directed to these areas.

A multidisciplinary team reviews plansat an early stage and assists the loca-tions in risk evaluations and technolo-gy transfer. Learnings from Alcoalocations throughout the world arequickly applied to similar situationsthrough this review process.

Alcoa Signs Clean AirSettlement in Texas

In 2003, Alcoa settled a long-runningdispute with citizens groups in Texas(USA), clearing the way for a new minenear Rockdale that will help make itsaluminum plant there more competitiveglobally.

As part of the agreement reached withthe U.S. government, the State ofTexas, and the three citizens groups,Alcoa will continue its work to reduce

sulfur dioxide (SO2) and nitrogen oxide(NOx) emissions from its Rockdalepower generators.

Alcoa had already voluntarily reducedNOx emissions by approximately 50%and committed to further reducing SO2

emissions by 90%. The 2003 settlementextends that commitment, with Alcoaeither shutting the units down beginningin April 2007 or reducing NOx emissionsby approximately 90% and SO2 by 95%.These reductions will eliminate 52,000metric tons of SO2 emissions and 17,000metric tons of NOx emissions annually.

In addition to the settlement’s emissionreductions, Alcoa also agreed to payUS$1.5 million and to spend US$2.5 mil-

lion on additional environmental miti-gation projects. These includeUS$1.75 million for land and habitatpreservation and US$750,000 forschool bus emission reductions in thelocal area.

With the agreement reached, Alcoahas begun work on its Three OaksMine. This mine will supply lignite coalfor power operations at its RockdaleOperations, which employs 1,135 andproduces metal for the aerospace,automotive, and industrial markets.

1Spills over 2,000 liters are classified as major incidents in the Alcoa Environmental Incident Management System. The requirements to report major environmental incidents began in 2002, the first year the data were available. 2As of December 31, 2003. Improved assessments and administrative processes can result in the number of spills and the environmental incident rate increasing or decreasing in subsequent years, as they have for the previous years reported on this chart.

Alcoa requires any spill of oils or other liquids in excess of 20 liters to be reported internally as an incident — whether or not they are contained within our facilities, and whether or not they are required to be reported to external agencies. The environmental incident rate includes all categories of incidents reported into the Alcoa Environmental Incident Management System.

Environmental Incident Rate

Spills Over Spills Over Environmental Incident Rate 20 Liters 2,000 Liters1 per Location per Year

2000 1,038 Not available 9.32001 1,146 Not available 8.02002 1,219 96 8.12003 9592 512 7.62

Environmental Capital Expenditures(millions of US dollars)

2001

2002

2000 96

80

115

96

80

115

0 8040 6020

2003

100 120

37

Capital expenditure for environmental purposes in the period 2000-2002 reflects the upgrading of environ-mental standards at facilities of newly acquired companies — Reynolds (2000), Cordant (2001), Ivex (2002), and Fairchild (2002). Concurrently, significant expenditures also occurred as a result of bringing aluminum smelters to new regulatory standards in the United States. Spending in 2003 is reflective of the success in previous years to upgrade acquired loca-tions to Alcoa standards as well as a greater emphasis on non-capital solutions to environmental issues through the use of the Alcoa Business System, which engages people at the operating level to develop and implement solutions.


In the case of large expenditures, suchas the new aluminum reduction plantplanned for East Iceland, a sustainabil-ity team has been formed and is devel-oping extensive recommendations onenvironmental, health, safety, social,and community issues associated withthe new facility. The design team, withinput from a number of outsideresources that include Icelandic archi-tectural firm TBL and Carnegie MellonUniversity’s Center for BuildingPerformance and Diagnostics, is nowworking to incorporate the recommen-dations into the plant. This work willcontinue throughout the constructionperiod in the lead up to operations.

EndnoteAlcoa’s Environmental Metrics System is a dynamic reporting tool that allowslocations to update their data as morecomplete information becomes available.Modifications to data prior to 2003 reflect an improvement in data quality aslocations revise their data measurementtechniques in accordance with Alcoastandards and guidelines for reporting,thus eliminating the need for estimates.

Alcoa Women’s Network

In an effort to help Alcoa improve itsrecruitment, retention, and promotion ofwomen leaders, a group of seniorwomen executives within the company is leading the development of the world-wide Alcoa Women’s Network. An earlysuccess stemming from their efforts hasbeen the introduction of programs toidentify and address issues that affectthe company’s women leaders.

The group’s work is primarily aimed atdeveloping women who can compete forand be successful in director and execu-tive level positions. However, 2003 initia-tives to develop local networks and cre-

ate a mentoring program are cascadingthe effort throughout the varying layersand businesses of the global organization.

“The local networks are an opportunity forwomen leaders within the same regionbut perhaps within different businesses orresource units to get to know each othervia face-to-face meetings and conferencecalls,” said Barbara Jeremiah, Alcoa’sexecutive vice president of corporatedevelopment and a founder of the AlcoaWomen’s Network. “The local networksalso bring in guest speakers to coverissues that are significant to them. Ourgoal in 2003 was to create five of thesenetworks, and by year’s end we had 11 invarious stages of formation. Theseinclude networks in the United States,Brazil, and Europe.”

Launched as a six-month pilot in 2003,the mentoring program connects high-potential women nominated bytheir group president or resource unitleaders with a senior leader. Goals for2004 include increasing the number ofwomen being mentored and expand-ing the mentor base to include maleleaders.

In the early stages of its formation, thegroup conducted benchmarking onnetworks within other companies toidentify potential successful strategiesfor Alcoa. Goals for 2004 include fol-lowing up on this initial benchmarkingand having a new sub-team explorework/life balance issues.

28

At Alcoa, the health and well-beingof the communities where we oper-ate is vitally important. We measureour success as a company by the suc-cess of many stakeholders, includingour employees and the people in ourcommunities.

Despite their importance to us, mean-ingful social metrics at a global levelremain the most challenging to identi-fy. In this report and in other commu-nications, you will see what we meas-ure in work environment, communityengagement, community investment,community progress, and social im-pact. We consider our commitment inthese areas to be longstanding andlong-lasting, but the way we measureand report our social performancewill evolve over time.

WORK ENVIRONMENT

Equal Opportunity StatementAlcoa is an Equal OpportunityEmployer, supporting a diverse workenvironment that fosters communi-cation and involvement, while pro-viding reward and recognition forteam and individual achievement. Allqualified individuals seeking jobopportunities with the company willreceive consideration for employ-ment without regard to race, color,religion, sex, physical impairment, ornational origin.

DiversityDiversity and inclusiveness withinour organizational culture are cen-tral to our aspiration of being a val-ues-based and value-creating enter-prise. Our Alcoa Business Systembegins with a fundamental respectfor the contributions of each of ouremployees, respects individual differ-ences as strengths, and nurturesopportunities to achieve professionaland personal success. We seek to

ensure that no employee is ever mar-ginalized and that the work climatepromotes inclusiveness.

One of the challenges that we face isdetermining the appropriate modelsof diversity within the cultural com-plexity of our global family and thencollecting data to reflect our progresstoward those models. We view ourongoing efforts as a core part of ourValues and constantly strive to createan inclusive environment whereverwe operate. We still have much workto do in this area, but we are makingprogress. Our leadership group andBoard of Directors reflect the globalnature of our enterprise with repre-sentation based on gender, regional,and disciplinary diversity.

SocialPerformance Indicators

Improving Gender BalanceDialogue with external stakeholdersemphasizes gender balance as anarea of mutual interest.

We have focused our efforts toimprove the representation ofwomen in our top 1% of corporateleadership positions. Since 1998, wemore than doubled the actual num-ber of women in key leadership rolesand increased their representation to12% — an almost 40% increase.

Through the initiative of some of ourwomen leaders, we have created theAlcoa Women’s Network to provide a

Earthwatch Expeditions:Partnerships in Conservation

For Veronique Ansermet, an Alcoaemployee from Lausanne, Switzerland,helping scientists working to save theleatherback turtles in St. Croix broughta new perspective.

“This experience has really been thetime of my life — not only because Iwas able to be in close contact with anabsolutely fascinating animal, but alsobecause I had the occasion to meetwonderful people and real friends,”said Ansermet. “Being in contact withnature is an eye opener about theresponsibility we all play in protectingour environment. We cannot only relyon scientists who have decided to ded-icate their life to this kind of project; we

must also rely on ourselves to do the tinythings that will make the difference.”

Alcoa’s support for the Earthwatch Institute,which engages people in scientific fieldresearch and education to promote theunderstanding and action necessary for asustainable environment, enables effectivepartnerships to be established betweenbusiness, employees, and conservation-based organizations. Through these part-nerships, Ansermet and six other Alcoaemployees had the opportunity to partici-pate in Earthwatch expeditions around theworld in 2003 (an eighth could not partici-pate due to a broken leg prior to departure).

The Alcoa expeditioners were all volun-teers who nominated themselves forselection. Earthwatch and Alcoa selectedthe expeditioners on merit, andEarthwatch paid all travel and accommo-dation costs. The expeditioners used theiravailable vacation time for participation,and all shared their experiences throughdiaries posted on Alcoa’s website.

While helping add to the knowledgeneeded to build a sustainable future, this hands-on support for scientific fieldresearch offers a rich opportunity forpersonal development, nurtures relationships between environmentaland business organizations, and helpsraise awareness and appreciation of the Earth’s ecosystems.

Sixteen Alcoa employees will be partici-pating in Earthwatch expeditions in 2004. 29

catalyst for the further developmentand advancement of women leadersin Alcoa. This year, we feature a casestudy outlining the network’s activi-ties and achievements to date.

Labor/Management RelationsWe recognize and respect the free-dom of individual Alcoans to join, orrefrain from joining, legally author-ized associations or organizations.

Employees by Region

1Includes Caribbean, Mexico, and South America2Includes Middle East and Africa

U.S. Other Americas1 Europe2 Asia Pacific

2000 61,600 46,500 27,400 6,5002001 56,500 38,700 27,700 6,1002002 53,500 38,200 28,300 7,0002003 49,300 35,300 27,700 7,700

Employees in North America in 2003

United States 64%

Mexico 29%

Canada 7%

Labor Costs(billions of US dollars)

0 2 4

2003

86 10

6.1

2001

2002

2000 5.2

5.7

5.5

Includes salaries plus employee expenses for external training, transfer and relocation, expatriate costs, workers’ compensation, travel, recognition and rewards, medical expenses, meals, recruitment, transportation, education, work clothes, and other employee-related expenses. Excludes contract and temporary labor.

2000 figure includes six months of labor costs of mid-year acquisition of Reynolds Metals. 2003 figure includes $345 million in labor costs for Fairchild acquisition. Increase in labor costs per employee due to rising U.S. health care costs and the effects of currency translation.

0 50,000 100,000

2003

150,000

120,000

Number of Employees

2001

2002

2000 142,000

129,000

127,000

Alcoa does not aggregate global data differentiating part-time from full-time employees.

Social Performance Indicators

Alcoa’s Andrew Elliott (right) helps surveythe butterflies of Vietnam.

Achieving SustainabilityThrough Leadership

Education and development of leader-ship skills are critical enablers for theintegration of sustainability principlesinto traditional business practice. Withthat in mind, Alcoa supports majorexternal and internal initiatives to fosterleadership development.

Alcoa and Alcoa Foundation continue tosupport the World Resources Institute’sBusiness-Environment Learning andLeadership (BELL) program, whichassists MBA programs worldwide to bet-ter integrate sustainability principles intotraditional business courses.

Each year, the BELL program produces areport called Beyond Grey Pinstripes thatassesses the programs and professorsleading this integration. A copy of the2003 report is available online athttp://www.beyondgreypinstripes.org/results/index.cfm.

Internally, Alcoa launched advanced general manager and location managereducation and development courses in 2003. Each extends over nine month and draws on individualizedlearning and development processes toensure that these managers have theskills, knowledge, and leadership capabilities to advance sustainablepractices within their businesses andoperating locations.

30

HEALTH AND SAFETY

Health SummaryIn 2003, we continued our progresstoward eliminating workplace healthhazards. At year’s end, 100% of ourreporting locations had identifiedand described these hazards. Quanti-tative assessments, which are thenumber of workplace health hazardsassessed compared to the hazardsthat need to be assessed, reached alevel of 88% versus a target of 95%due in part to recent acquisitions andcontinuous hazard reassessments.

Our reduction in the number ofchemical hazards that exceededAlcoa standards from the established1999 baseline was 61% versus a tar-get of 40%. The 40% reduction tar-get was achieved in 2002.

By year’s end, 96% of our locationshad occupational medical services pro-grams in place, and our rate for com-pleting required medical evaluationswas 93% versus a target of 100%.

The identification and management ofergonomic (ergo) risks continue to behigh priorities. Of our established locations, 99% had identified their top10 ergonomic risks by year’s end. Inaddition, 58% of the top 10 ergo riskshad been eliminated versus a year-endtarget of 50%. Ergonomic self-assess-ment scores of good or better wereachieved in 78% of our plant loca-tions, and this performance is reflectiveof the comprehensive deployment ofplant ergonomic programs.

These ergonomic initiatives con-tributed significantly to our improve-ments in lost workday and totalrecordable rates for 2003. Not onlyhave our overall incident ratesdeclined, but the percentage of inci-dents attributable to ergonomic con-cerns has also declined at a higher rate.In 2003, the percentage of lost work-day and total recordable incidents hav-ing an ergonomic causality wasreduced to 28% and 27% respectivelycompared to 32% and 36% in 2002.Over the past two years, Alcoa has

achieved a 55% reduction in the num-ber of ergo-related total recordableincidents and nearly a 60% reductionin number of ergo-related lost work-day incidents. For 2003, the totalrecordable ergo-related incident ratewas 29% lower and the lost workdayergo-related incident rate was 40%lower than those rates for 2002.

While we have achieved goodprogress in ergonomics, we haveplanned more aggressive programsfor 2004 and 2005. Our new targetfor eliminating ergonomic risks callsfor a 50% reduction in all significantergonomic risks within the corpora-tion — not just the top 10.

In alignment with our healthy work-force initiatives, nine out of 10 loca-tions worldwide now have in placehealth promotion activities as well asemployee assistance-type services.Moving forward, we will be expand-ing our efforts in this area. Key pro-grams to be deployed in 2004 and

31

0 20 40

2003

8060

96

100

The number of reporting locations reflected in the dataincreased between 2001 and 2002 due to acquisitions.

Occupational Medicine Programs Established

(percent of reporting locations complying)

2001

2002

2000 69

91

88

0 20 40

2003

8060

93

100

The number of reporting locations reflected in the dataincreased between 2001 and 2002 due to acquisitions.

Occupational Medical Evaluations(percent of annual required evaluations completed by reporting locations)

2001

2002

2000 98

94

89

Industrial Hygiene Assessments — Qualitative

(percent of assessments completed by reporting locations)

2001

2002

2000 85

95

99

0 20 40

2003

8060

100

100

Qualitative refers to workplace health hazards identified and described.

Industrial Hygiene Assessments — Quantitative

(percent of assessments completed by reporting location)

2001

2002

2000 61

75

75

0 20 40

2003

8060

88

100

Quantitative refers to workplace health hazards adequately measured.

Lowering Workplace Exposureto Hexavalent Chromium

Following the release of new, crediblestudies on the long-term health risksfor people exposed without protectionto hexavalent chromium, Alcoa tookaction to reduce the workplace expo-sure limit for this material.

In early 2003, Alcoa reduced the limitfor both soluble and insoluble hexava-lent chromium to 0.25 micrograms percubic meter as a time-weighted aver-age — a limit that is about 200 timeslower than that currently required bythe U.S. Occupational Safety andHealth Administration (OSHA).

Chromium is a naturally occurring ele-ment found in rocks, animals, plants, soil,volcanic dust, and gases. While the hexa-valent form of this material is used fordyes and pigments, leather tanning, andwood preserving, Alcoa uses it primarilyfor chrome plating and paint pretreatment.Locations that used the material had twochoices — take the necessary steps toreduce workplace exposure or completelyeliminate the material’s use.

Alcoa’s Southern Graphic Systems choseto ensure every location that manufacturedchrome-plated cylinders for printing press-es met the new limit. Ongoing monitoringof workplace exposure limits showed thatall but two locations were operating belowthe new chromium limit prior to it beingimplemented. Investigations revealed

mechanical problems with the fume con-trol systems at these two locations.Following adjustments, the facilitiescame in below the new limit.

In 2003, Alcoa’s Lancaster Works inPennsylvania (USA) finished a 20-yearquest to completely eliminate hexava-lent chromium from its manufacturingprocess. The facility used the materialas a paint pretreatment for high-endexterior building panels because of itsadhesion and corrosion resistance prop-erties. Working closely with the cus-tomer, paint supplier, and pretreatmentcoating supplier, Lancaster developed apretreatment system that does not usechrome yet provides the same amountof corrosion resistance and adhesion.


2005 include smoking cessation, fluvaccination, and reducing lifestylerisk factors. These include obesity,high cholesterol, and others that areassociated with chronic diseases. Wewill also strengthen our efforts inassisting employees with chronic dis-ease to achieve their full employmentpotential.

We were not successful in achievingour 40% reduction in the number ormagnitude of the top 10 noise haz-ards at each location that exceededAlcoa standards from the established1999 baseline. At year’s end, westood at 26%. We will continue tofocus on achieving this 40% reduc-tion in 2004 and 2005. We will alsofocus on strengthening our hearingconservation efforts in order toreduce and ultimately eliminatework related noise induced hearinglosses. We have targeted a 25%reduction in the incident rate fornew work-related hearing shifts inemployees by year-end 2005 from abaseline of year-end 2003.

58

0 20

2003

40 60 80 100

2002

99

34

19

Top 10 Ergonomic Risks

(percent of reporting locations)

200170

93

■ Risks Identified■ Risks Eliminated

Cumulative Noise MagnitudeReduction

26% reduction in the magnitude of the top 10noise sources by reportinglocations

Cumulative ChemicalMagnitude Reduction

33% reduction in the mag-nitude of chemical hazardsexceeding Alcoa standardsby reporting locations

Cumulative Chemical NumberReduction

61% reduction in the num-ber of chemical hazardsexceeding Alcoa standardsby reporting locations

Health and Safety ManagementSystemOver the years, a comprehensiveframework for continuous improve-ment efforts has evolved into what istoday known as the Alcoa Healthand Safety Management System.This is a comprehensive system usedto proactively manage health andsafety at all Alcoa locations.

Each location has various task, depart-ment, ad hoc, and other committees todevelop and implement health andsafety programs based on the loca-tion’s strategic health and safety plan.These leadership groups include a mixof personnel from the facility.

Locations with a Good or BetterAlcoa Self Assessment Tool Scorein Ergonomics

2002 61

0 20 40

2003

8060

78

100

The Alcoa Self Assessment Tool is a type of self-audit that is required to be performed at least once every 18 months by every Alcoa location or administrative process worldwide.

32

Our health and safety managementsystems include recording and notifi-cation of occupational accidents anddiseases. Our internal standardsmeet, and in many cases exceedcountry legislative requirements. Ourpractices are consistent with the ILOCode of Practice on Recording andNotification of OccupationalAccidents and Diseases. Any differ-ences are of a minor nature.

Over the next two years, the AlcoaHealth and Safety ManagementSystem will be aligned to conformwith ISO 14001 and OHASA 18001.This initiative will further strengthenour health and safety managementinitiatives in such key areas as roles/responsibilities and action plans withclosure timelines.

Healthy Workforce InitiativesZero injuries and zero work-relatedillnesses are Alcoa’s long-standinggoals, but we also believe that it ispossible to go further — for peopleto go home healthier than when theycame to work.

Consequently, one of Alcoa’s sixstrategic health and safety objectives isthe deployment of healthy workforceinitiatives. In each case, these initia-tives rely on the most efficient combi-nation of community and companyresources. The specific type and natureof the initiatives at any given Alcoalocation are dictated by local work-force and community expectations.

In 2002, we completed an inventoryof our global healthy workforce ini-tiatives. In 2003, we began trackingplant location activity as it relates tocommunity health initiatives (seepage 40).

1999-2003

1999-2003

1999-2003

1999 baseline

1999 baseline

1999 baseline

Health and Safety Capital Expenditures(millions of US dollars)

2001

2002

2000 79

102

112

0 20 40

2003

8060 120

50

100

Capital expenditure for health and safety purposes in the period 2000-2002 relates to the upgrading of standards at newly acquired companies — Reynolds (2000), Cordant (2001), Ivex (2002), and Fairchild (2002). Spending in 2003 is reflective of the business condition, success in previous years to upgrade acquired locations to Alcoa standards, as well as a greater emphasis on non-capital solutions to health and safety issues through the use of the Alcoa Business System, which engages people at the operating level to develop and implement solutions.

Year 2000 and, to a lesser extent, 2001 information on ergo-relatedness is incomplete due to inconsistent capturing of information in Alcoa’s Incident Management System.

Ergonomic Incidents

Total Number of Percent of TRR Total Lost Number of Percent of LWDRecordable Ergo-related Incidents Workday (LWD) Ergo-related Incidents

(TRR) Incidents TRR Incidents Ergo-related Incidents LWD Incidents Ergo-related

2000 5,081 1,460 29% 367 125 34%2001 4,904 1,560 32% 417 149 36%2002 2,931 933 32% 212 77 36%2003 2,497 701 28% 223 60 27%

33

Management of Chronic Illnessin the Workplace StandardAlcoa maintains a worldwide health standard that enables andsupports employees living withchronic diseases, including life-threatening and transmittable dis-eases like HIV/AIDS, to continue topursue active careers so long as theyare physically capable of doing so,can perform their assigned duties inan acceptable manner, and do notpresent a direct threat to the healthand safety of themselves or others at work.

Reasonable accommodations to thephysical needs of such personnel willbe made on a case-by-case basis andwill, at a minimum, meet all applica-ble legal requirements. The standardalso addresses issues of reasonableaccommodation, coworker educationand counseling, and confidentiality.

Safety SummaryIn 2003, Alcoa’s global lost workdayrate of 12 lost workday injuries per10,000 people in our workforce wasthe best in Alcoa’s history. Each day,we see more evidence that our goalsof zero injuries and zero fatalities arewithin reach. Globally, more than99.8% of our employees went home

Safety in Suriname

Alcoa’s Suralco alumina refinery inSuriname received the InternationalAluminum Institute’s “Best SafetyPerformance in the World” award in2003. Behind this honor is the beliefthat all incidents can be prevented anda safety program that requires totalinvolvement from all people who enterthe facility.

Key to Suralco’s success in reducing all incidents from 66 in 1997 to 22 in2003 — a 67% reduction — is a sys-tematic and consistent safety approach.Monthly safety meetings create anopen forum for discussing workplaceissues, providing managers with anunderstanding of the safety issues

being faced by employees. Critical needscan then be addressed more quickly.

Five years ago, the facility started a safe-ty program based on peer observationsof work being completed. Properly trainedpeople watching can often see potentialfor injury or improvement that can escapepeople actually doing the work. The totalworkforce was trained in observing safebehavior, and 1,900 job safety observa-tions are now made monthly. Anonymousdata gathered from the observations areused to identify priorities for improvementin various operating areas.

The facility also has an effective safetyaward system that matches other tradi-tional performance appraisal systems,such as financial and customer satisfac-tion. In addition, the refinery’s permanent-

ly employed medical staff of 18 active-ly supports health and safety pro-grams that include medical care foremployees, their families, andretirees.

“Reducing the number of incidentsfrom 200 a year to 75 a year is theeasy part,” said Jan Vandenbergh,environment, health, and safety man-ager for Suralco. “Reducing the num-ber of incidents from 19 to 12 a yearand on from there is the difficult part.”

He adds, “The award from theInternational Aluminum Institute is sig-nificant for Suralco. It shows we’remaking progress and earning successthrough systematic and consistentcommitment to safety.”


and were able to return to work thenext day in 2003.

Four people, however, were fatallyinjured at work. These were threeAlcoa employees and one contractor.As with all fatalities, we have ques-tioned every aspect of these incidentsto identify steps that might have pre-vented this unfortunate and unneces-sary loss of life. While there is nosingle common cause for the fatali-ties, it becomes clear that humanerror has played a major role. Thisis not an excuse but instead is a callfor the addition of renewed empha-sis on two aspects of safety manage-ment: the detection and eliminationof low probability events withpotential for serious injury or death,and countermeasures to protectagainst the distractions, stress, emo-tional influences, boredom, and

34

fatigue that inevitably creep into anyhuman organization.

Another safety development in 2003was the appointment of our corporatesafety director, Rick Williams, to thenewly convened NASA AerospaceSafety Advisory Panel. He will assistthe U.S. space agency in its ongoingreview and improvement of safetysystems, operations, and culture.

HUMAN RIGHTS Alcoa is a global enterprise that does business in many distinct localmarkets. In order to do so success-fully, we rely on all Alcoans livingour Values and supportingPrinciples. We also work under anexplicit statement of human rightsthat creates a coherent language fordefining leadership across multicul-tural boundaries.

Values provide the common frame-work for our decisions, actions, andbehaviors. They are our universallanguage — transcending culture andgeography. Living our Valuesrequires us to meet the highest stan-dards of corporate behavior in allaspects of business — in all regionsof the world. The foundation of ourValues is dignity and mutual respect,which are fundamental to our enter-prise.We have a global Ethics andCompliance Line (see page 13) toenable employees to anonymouslyreport, in their native language, anyconcerns they may have. We followup on every reported issue.

Alcoa’s approach to issues involvinghuman rights is guided by our Valuesand Principles.

Children and Young Workers As a fundamental principle, we donot employ children or support theuse of child labor. We do encouragethe creation of educational, training,or apprenticeship programs tied toformal education for young people.

Freedom of Engagement We believe that people should workbecause they want or need to, notbecause they are forced to do so. We prohibit the use of prison labor,forcibly indentured labor, bondedlabor, slavery, or servitude.

Equality of OpportunityWe recognize, respect, and embracethe cultural differences found in theworldwide marketplace. Our work-place is a meritocracy where ourgoal is to attract, develop, promote,and retain the best people from allcultures and segments of the popula-tion, based on ability. We have zerotolerance for discrimination orharassment of any kind.

0

2002

2003

2 4 6 8 10

2001

1

3 1

Total Fatalities

2000 3 6

1

1

■ Employee■ Contractor

0.12

0 0.5

2002

1.0 1.5 2.0

2001

2003

1.7

2.0

0.16

0.18

Lost Workdays

2000

1.8

■ Lost Workdays■ US Industry Average


0.15

9.0

0 2

2002

4 6 8 10

2001

2003 1.69

7.2

Total Recordable Injuries

20002.89

2.55

2.22

8.1

■ Total Recordable Injuries■ US Industry Average


35

CompensationWe ensure that compensation meetsor exceeds the legal minimums andis competitive with industry stan-dards. Our compensation philosophyis clearly communicated to employ-ees and is in full compliance with allapplicable laws.

Freedom of AssociationWe recognize and respect the free-dom of individual Alcoans to join, orrefrain from joining, legally author-ized associations or organizations.

Relationships with IndigenousPeopleWithin the framework of our Values,we respect the cultures, customs, andvalues of the people in communities

where we operate and take intoaccount their needs, concerns, andaspirations.

Supplier and ContractorRequirementsAlcoa has a comprehensive Ethicsand Compliance Program thatrequires adherence to our policiesand guidelines, which include envi-ronmental and social responsibilities.Available in 18 languages, the mate-rials are provided to all employeesand long-term contractors through-out the world.

The materials are also available toall current and potential suppliersvia alcoa.com. Beginning in 2003,these materials — and training asappropriate — were provided direct-ly to our major suppliers to ensurethat they are aware of our require-ments for business conduct.

SOCIETYMore than 50 years ago, Alcoa insti-tutionalized its ability to invest inAlcoa communities by establishingan asset-based foundation. Since1952, Alcoa Foundation has beenthe primary instrument for our com-munity investments, granting morethan US$371 million in over 30countries since its founding. Thesegrants have taken many forms andbenefited thousands of non-govern-mental organizations (NGOs), hun-dreds of communities, and countlessindividuals striving to improve theirquality of life. (The foundation’spolicies, practices, and priorities can


Bringing Social Responsibilityto the Supply Chain

Supply management professionals arein an ideal position to contribute to therefinement of social responsibility bothinside their companies and with theirsupply chains. That reality led theInstitute for Supply Management todevelop its Principles and Standards ofSocial Responsibility, which will be officially released in April 2004.

Alcoa employees participated in thedevelopment of the principles and standards in three ways: serving on theorganization’s board, which made thedecision to pursue the project; being amember of the commission that devel-oped the actual principles and stan-

dards; and serving on the ongoing com-mittee that will deliver and explain theprinciples and standards.

“The Alcoa representatives brought expe-rience and knowledge in the area ofsocial responsibility and its importance tobusiness,” said Scott Sturzl, C.P.M., vicepresident of educational developmentresources for the institute. “This wasshared with the commission to helpmembers understand the direction thatshould be taken, the information thatshould be incorporated in the final stan-dards and principles, and the culturalchallenges that might be faced when talk-ing about social responsibility around theworld. All of this input helped the commis-sion develop a document that uses carein its wording but also takes a stance onthe importance of social responsibility.”

The principles and standards coverseven areas of social responsibility:community, diversity, environment,ethics, financial responsibility, humanrights, and safety. The institute plans toask Fortune 500 companies to adoptthe new principles and standards orshow that a comparable documentalready exists. The organization willalso conduct ongoing research tomeasure whether it is influencing posi-tive change and to provide companieswith a means to benchmark their socialresponsibility work.

In 2003, Alcoa convened an internalteam to examine its social responsibili-ty initiatives and formally develop thecompany’s positions on the institute’sseven areas of social responsibility.

Alcoa Community Giving (US dollars)

2000

2001 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 21,284,784 15,029,312 948,750 209,200 196,892 99,500 100,000 167,000 1,306,781 1,897,350 1,330,000Other Related Foundations 658,951 189,250 8,000 461,701Alcoa 18,088,028 11,090,743 3,240,453 9,799 699,904 64,508 2,229,606 753,015Excess FMV of 12,600,000 12,600,000Donated Property

Total Combined Giving 52,631,763 38,909,305 948,750 3,457,653 196,892 109,299 799,904 231,508 3,998,088 2,650,365 1,330,000

Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 20,103,977 15,385,392 456,528 204,500 25,000 148,284 1,250,290 1,508,683 1,125,300Other Related Foundations 1,348,333 868,002 45,500 434,831Alcoa 3,286,315 1,493,338 83,825 197,390 694,808 56,489 498,014 262,451Excess FMV of Donated Property

Total Combined Giving 24,738,625 17,746,732 456,528 333,825 0 222,390 694,808 204,773 2,183,135 1,771,134 1,125,300

36

be found in the Community sectionof alcoa.com.)

Our social commitment is evidencedin more than grantmaking.Employee volunteerism offers agrowing and global aspect of ourengagement with communitiesthrough company-supported butAlcoa Foundation-managed pro-grams like ACTION and Bravo!grants. The giving of products and

property provide additional Alcoaassets for community enhancement.The sharing of knowledge andinsight and the development of com-munity partnerships and methods tosustain NGOs offer still otherdimensions of our work. These arereflected, in part, in our communityadvisory and community frameworkdata and in the case studies present-ed throughout this report.

Alcoa Community GivingThe following data reflect the addi-tion of cash, product, and property-related gifts from Alcoa that began in2001 to supplement AlcoaFoundation’s grantmaking. Theseadditional resources reflect our desireto maintain an appropriate and lead-ing level of investment in our commu-nities as we expand to new markets,countries, and communities.

Building StrongerCommunities in Australia

Strong communities emerge from theactive collaboration of individuals, insti-tutions, governments, and businessesin developing strategies for dealingwith change and seizing opportunitiesfor growth. In 2003, Alcoa and CurtinUniversity of Technology launched aunique program to strengthenAustralian communities that have beenweakening in recent years due to tech-nological and societal changes.

The Alcoa Research Centre forStronger Communities, under the aus-pices of Curtin’s Division of Humanities,provides a multi-disciplinary research

environment that encourages coordinatedresearch to resolve the complexities ofdeveloping stronger communities.

The center is monitoring communitytrends and will provide policy makers,practitioners, and researchers with toolsand language for creating policies andprograms that can improve the quality oflife in Australian communities. The centeris closely linked with similar Australianinitiatives, including the federal govern-ment’s Stronger Families andCommunities Project.

Strong communities involve people of allages and embrace cultural diversity. Theyhave shared commitments with local gov-ernment, workplaces and community serv-ices, and they recognize the fundamentalimportance of sport, recreation, and the

arts. They also have strong and naturallinks with schools and colleges.

Throughout Australia, communities arefacing the challenges of new technolo-gy and the development of “virtual”communities. Increased work demandslimit the time people can engage intheir communities, and a populationshift to large cities is further disinte-grating Australia’s rural communities.

“By working toward stronger communi-ties at family, local, and state levels,we lay the foundation for strong andharmonious communities at nationaland global levels,” said ProfessorLance Twomey, vice chancellor ofCurtin. “That’s why this work is soimportant.”

Alcoa Community Giving (US dollars) continued


Alcoa Foundation 17,211,415 11,464,815 840,800 229,285 196,394 20,000 135,000 167,085 1,088,834 1,879,201 1,190,001Other Related Foundations 536,022 44,783 6,000 485,239Alcoa 11,355,071 6,273,962 723 178,829 44,239 1,156,334 102,057 2,679,971 918,957Excess FMV of 5,650,000 5,650,000 0Donated Property

Total Combined Giving 34,752,508 23,433,560 841,523 414,114 196,394 64,239 1,291,334 269,142 4,254,044 2,798,158 1,190,001


Alcoa Foundation 14,970,191 8,808,555 620,387 205,500 234,500 75,000 236,500 105,000 1,241,430 1,233,140 2,210,179Other Related Foundations 517,000 517,000Alcoa 11,069,967 7,481,969 122,755 485,078 72,284 2,096,064 (4,729) 393,934 422,612Excess FMV of 265,405 170,453 94,952Donated Property

Total Combined Giving 26,822,563 16,460,977 743,142 690,578 234,500 147,284 2,332,564 100,271 2,247,316 1,655,752 2,210,179

Global grants can be awarded in any country for purposes that benefit multiple countries, including the United States.

37

Social Performance Indicators

Helping Communities Copewith Emergencies

Throughout the world, people who arethe first to respond to emergencies ofany kind within their community arereceiving free training on how to pre-vent injury, facilitate the flow of goodsand services, and reduce confusionand loss of life.

Alcoa’s First Responder TrainingInitiative flowed from the Alcoa ReliefFund, originally a fund of nearly $2.5million established following theSeptember 11th terrorist attacks in theUnited States. A portion of the moneyprovided immediate relief for the people, small- and medium-sized busi-nesses, and communities affected bythose events. The remaining funds are

supporting first responder training in Alcoacommunities around the world to enhancecommunity preparedness to cope withemergencies and natural disasters.

Training support, delivered by qualifiedorganizations within each community, isavailable for professional or volunteeremergency medical personnel, police officers, firefighters, or others trained tobe on site first during an emergency.

The program builds on Alcoa’s commit-ment to safety and health and the convic-tion that prior analysis, planning, training,and communication can help ease theeffects of an emergency. The initiative also

reinforces the idea that everyone has arole to play in keeping communities safeand that every citizen, if trained in basicmedical and/or civil response proce-dures, can lend solid support to profes-sionals in the field and foster communitypreparedness for emergencies.

Up to US$1.7 million was available fortraining, with US$200,000 awarded forfirst responder education in New YorkCity and US$100,000 given toPennsylvania (site of the Shanksvilleplane crash). The remaining funds aredesignated for Alcoa location requests,educational materials, and publicawareness activities.

In 2003, 107 Alcoa locations requestedfunding for first responder training. Of these applications, 54 were interna-tional and 53 were U.S.-based.

First responder training in Piedras Negras,Mexico.

ACTION Grants

2002 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 234 105 17 18 3 36 3 24 28U.S. Dollar Value $702,000 $315,000 $51,000 $54,000 $9,000 $108,000 $9,000 $72,000 $84,000Number of Hours 19,669 7,218 816 1,423 173 5,615 120 2,422 1,882Number of Employee Volunteers 4,106 1,496 200 245 51 1,392 30 331 361Average Number of Hours per Project 84 69 48 79 58 156 40 101 67


Number of Grants 341 166 25 18 1 44 33 54U.S. Dollar Value $1,023,000 $498,000 $75,000 $54,000 $3,000 $132,000 $99,000 $162,000Number of Hours 25,257 11,158 3,367 1,299 40 2,522 3,223 3,648Number of Employee Volunteers 4,461 2,031 485 195 10 598 492 650Average Number of Hours per Project 74 67 135 72 40 57 98 68


Number of Grants 110 67 10 3 8 3 12 7U.S. Dollar Value $330,000 $201,000 $30,000 $9,000 $24,000 $9,000 $36,000 $21,000Number of Hours 9,340 5,048 524 328 488 120 1,552 1,280Number of Employee Volunteers 2,332 1,259 131 82 122 30 388 320Average Number of Hours per Project 85 75 52 109 61 40 129 183

38

Bravo! GrantsAlcoa’s Bravo! program, whichbegan worldwide in 2002 after apilot phase in 2001, recognizesemployees who can make a substan-tial time commitment to a nonprofitor NGO. When an Alcoan volun-

ACTION Grants

Since 2001, Alcoans ComingTogether In Our Neighborhoods(ACTION) has recognized Alcoansfor designing community projects asa team. When 10 Alcoans organize aproject and contribute a day of serv-

ice for a nonprofit organization,ACTION increases the benefit byawarding the nonprofit $3,000.

ACTION began as a pilot in fourlocations in 2000 and grew to 110projects representing 60 Alcoa loca-tions around the world in 2001.

These figures more than doubled in2002, with 234 employee-directedcommunity service projects complet-ed in 119 Alcoa locations. In 2003,341 ACTION projects occurred.This figure was bolstered by TakingActions — Alcoa’s Worldwide Weekof Service in November 2003.

teers at least 50 hours a year at acharitable organization, Alcoaawards the organization $250.

Applications for community serviceperformed in 2002 were acceptedthrough late spring of the next year— 2003. The following data includethe number of Bravo! grants award-

ed by December 31, 2003, for both2002 and up until year’s end 2003.Additional 2003 Bravo! awards willbe granted through the 2003 appli-cation deadline of March 31, 2004.

Taking Action — Alcoa’s Worldwide Week ofCommunity Service

Taking Action — Alcoa’s Worldwide Weekof Community Service in November 2003matched employee volunteer time withAlcoa grants. Nearly 45% of the projectsundertaken during the Week of Servicehighlighted conservation and sustainabili-ty, an Alcoa Foundation Area ofExcellence and a focal point for Alcoa’ssustainability initiatives.

From working side-by-side with stu-dents in Romania to clean the CrisRiver to converting an illegal garbagedump into a community garden inJamaica, Alcoa employees logged thou-sands of volunteer hours in their com-munities to help make a difference. A

complete listing of activities by countryand the employees who received specialrecognition and one-time $1,000 grantsfor their NGOs is available on alcoa.com.The following illustrate the range of activi-ties and their worldwide reach.

San Ciprian, SpainStudents at the Vista Alegre School canenjoy a nature walk from their school to agreenhouse thanks to the hands-onefforts of Alcoan volunteers, who cleareda trail and planted vegetation as anACTION project. Following the event,more than 400 students, parents, teach-ers, Alcoans, and civic leaders celebratedwith a lunchtime fiesta.

Pennsylvania, USA A group of 29 Alcoa employees, familymembers, and friends worked with theManheim Township Overlook Foundationto improve wetlands. They developed astormwater filtering system and plantedtrees and native plants to attract wildlifeand fowl back to the area. The activitycombined ACTION, Life! and the 10Million Trees initiatives in this riverbankimprovement.

Itajuba, BrazilMore than 250 students and teacherswere on hand and on horseback for aworkshop given by an Alcoa ACTIONteam. The workshop included a classroomlecture followed by an environmental horse riding event to learn more about theenvironment and to plant tree seedlingsdonated by Alcoa to the local community.

2002

Bravo! Grants


Number of Grants 1,795 369 92 140 358 613 223U.S. Dollar Value $488,750 $92,250 $23,000 $35,000 $89,500 $153,250 $55,750Number of Hours 169,136 45,339 5,196 19,634 45,774 30,692 22,501Average Number of Hours per Volunteer 94 123 56 140 128 50 101

Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 437 143 19 161 2 55 57U.S. Dollar Value $109,250 $35,750 $4,750 $40,250 $500 $13,750 $14,250Number of Hours 35,758 8,644 966 20,275 100 2,750 3,023Average Number of Hours per Volunteer 82 60 51 126 50 50 53

39

Taking Action — Alcoa’s Worldwide Week ofCommunity ServiceAs a capstone to Alcoa Foundation’s50th anniversary yearlong celebra-tion, Alcoa launched its first everworldwide week of serviceNovember 17-23, 2003.

Taking Action — Alcoa’s WorldwideWeek of Community Service provid-ed a unified timeframe for Alcoans to

work in teams or individually at non-profits and to help nonprofits attractvolunteers to their efforts. More than150 Alcoa locations participated at

over 235 events that ranged widelyfrom volunteer fairs and employeerecognitions to the planting of nativeplants and vegetation, environmentalawareness, and the cooking anddelivery of food bank meals.

The Week of Service focused on the theme of conservation and sus-tainability to underscore our values and to encourage location and


Environmental horse ride in Itajuba, Brazil.

40

employee engagement with NGOs inthis area. More than 6,000 Alcoansvolunteered in projects during theweek, and over 15,000 Alcoans par-ticipated in Week of Service events.We plan to make this an annualevent and focal point for employeeengagement.

Community ConsultationThe Alcoa Community Framework isdesigned to build strong relationshipswith employees, their families, com-munity leaders, and government offi-cials. The framework allows for greatlocal flexibility and results in com-munity engagement through a varietyof events. These range from simplebriefings, issue discussion forums,open houses, plant tours, and treeplantings to active participation bycommunity members in the develop-ment of our locations’ environmentalimprovement programs.

In the United States, for example,implementation of the AlcoaCommunity Framework is mandato-ry, and we created a seven-personPublic Strategy Group to work withevery location to implement theframework. In 2003, this team begana formal process with more than 130

U.S. locations so that each plant canconduct a community assessment toassure that it speaks and listens to itslocal community. This process willassure that other aspects of theframework related to governmentand media relations, effective com-munity consultation, and employeeengagement are directly linked to thelocation’s business strategy and willhave a positive contribution to thebottom line.

About 30% of our worldwide oper-ating locations have some type ofestablished community program tomeet with community leaders,engage residential members of thecommunity, and/or address areas ofshared concern.

The inaugural Alcoa GlobalLeadership Award for BestCommunity Engagement recognizedAlcoa Rigid Packaging as the Alcoabusiness unit that, in 2003, created anenvironment to make all of its loca-tions the best in their communities byeffectively combining communityactivities to achieve the goals andobjectives of both Alcoa Foundationand the Alcoa CommunityFramework simultaneously.

Community Health InitiativesThe safety and health of the peoplewho live in Alcoa communities remainof vital concern to us. We reinforceour Values and demonstrate our com-mitment to our neighbors when wefocus on health in the community andshare information that can lead toinjury and disease prevention, healthi-er lifestyles, and better life prospectsfor community residents.

In 2003, we instituted new trackingand reporting methods to capturedata on the number of Alcoa loca-tions that have engaged their com-munities through health-related ini-tiatives. Our first year of reportingindicates that more than 115 Alcoalocations have already linked withtheir communities through 251 com-munity health programs — engaging258,093 individuals worldwide.

Bribery and CorruptionAlcoa has a corporate-wide policyand zero tolerance for bribes. Ourcorporate approach is one of strictcompliance with all laws focused onanti-bribery and corruption, such asthe provisions of the ForeignCorrupt Practices Act (FCPA).

Alcoa’s policy in this regard clearlystates that all directors, officers, andemployees shall comply with all lawsand regulations that are applicableto the company’s activities. Theseprovisions of Alcoa’s BusinessConduct policy are further rein-forced and specifically addressed inAlcoa’s Guide to Business Conduct,which has been translated into 18languages and deployed globally toall employees and contractors.

1Due to Alcoa’s revised standards for community programs, locations are now reporting better data related to the number of individuals directly impacted instead of those indirectly impacted by means of newsletter circulation or event sponsorship.

Number of Locations Number of Number of Holding Community Programs Programs Community Participants

2001 65 231 430,9982002 109 501 369,6081

2003 105 575 436,844

41

Political ContributionsPursuant to Alcoa’s business conductpolicies, the use of company funds,property, services, and things ofvalue for or in aid of (or in opposi-tion to) any political parties or can-didates for public office is prohibit-ed. Similarly, the policies dictate thatno such corporate asset may be used,without the prior written approvalof Alcoa’s Chairman of the Boardand the general counsel, for or in aidof (or in opposition to) any commit-tee whose principal purpose is toinfluence the outcome of a referen-dum or other vote of the electorateon a public issue.

Employees may volunteer their owntime to assist a candidate or cam-paign committee. However, companyfacilities, employee work-time, sup-port services, office supplies, elec-tronic mail access, etc., may not,under any circumstances, be utilizedin such an effort. Nor does the com-pany allow the formation of politicalaction committees (PACs).

Similarly, corporate funds cannot beused to purchase tickets or otherwisepay for the admission fee (or otherexpenses) to fundraising activities ofany candidate, potential candidate,political committee, or political party.

PRODUCTRESPONSIBILITY

Customer Environmental,Health, and Safety ActivitiesIn response to increasing requestsfrom customers and suppliers, Alcoaconducted three daylong benchmark-ing sessions in North America duringwhich we openly shared ourapproach to environment, health,and safety. Topics include integrationof EHS into manufacturing process-es, fatality prevention, occupationalhealth initiatives, environmental pro-grams, internal audit programs, andmetrics systems.

Product Information andLabelingProduct labels and material safetydata sheets are made available to allcustomers, with some available inmultiple languages. For a completelisting, visit alcoa.com.

Online Privacy Statement(Worldwide)Alcoa is committed to safeguardingprivacy online. From time to time,Alcoa may make changes to this pri-vacy statement to reflect changes inits business or to serve users better.Alcoa will use reasonable efforts topublish any such changes in the pri-vacy statement.

Alcoa protects privacy on alcoa.comthrough four basic principles:

1. Users will always be advised whenAlcoa is collecting informationabout them or their online prefer-ences and expectations and it willbe made clear how that informa-tion is to be used.

2. Users will be able to choosewhether or not they want to pro-vide that information.

3. Any information collected aboutusers will be secure and not sharedwith any third parties unless usersgive prior permission for thatinformation to be shared.

4. Users will have access to any per-sonal information Alcoa collectsand keeps about them, and theywill be able to securely change ordelete that information at anytime.

Because Alcoa offers a wide range ofonline business opportunities for itscustomers, the amount of informa-tion the company needs to collect inorder to serve them in a particularbusiness transaction will sometimesvary from case to case. Regardless ofthe amount of information collected,the four principles listed above willapply. Wherever Alcoa collects per-sonal information, users will find alink to this privacy statement. Ifusers choose not to provide someinformation, for example to enableconfirmation of credit status, it maynot be possible for them to proceedwith their chosen business activitywith Alcoa.


Airbus and Alcoa

Perhaps the best recognition of ateam’s work is when a customer citesits efforts. According to Airbus, “Alcoasought — and won — a strategic posi-tion on the A380 by applying its inte-grated product approach.”

“Alcoa applied all of its aviation indus-try experience to the A380 program,developing new alloys specifically for

the 555-seat aircraft as part of thelargest and fastest development program ever undertaken by the metalsmanufacturer.”

The A380 features more new Alcoamaterials and products than any otheraircraft on which the company has beeninvolved. Alcoa products are literallyused from nose to tail, beginning withforward landing gear support structure toforgings for the horizontal and verticalstabilizers.

Working closely with Airbus’ design team,Alcoa Fastening Systems developed theXPL® Lockbolt with a titanium collar thatis both strong enough to handle thewing’s great size and compatible with thecomposite and aluminum materials it has

to link. As a result, the A380 will useabout one million Alcoa Lockbolts onevery aircraft.

A new, highly damage-tolerant alloycalled A6013 HDT is used for the A380fuselage skins, while the largest dieforgings ever made by Alcoa will serveas the aircraft’s 21-ft.-long 6-ft.-widewing spars.

On the A380’s upper wing, skins meas-uring up to 112 ft. in length are beingproduced from A7055 alloy, and Alcoais manufacturing lower wing skins withthe A2024 HDT alloy that also provideshigh damage-tolerant qualities.

42

One of the cornerstones of Alcoa’sVision is our focus on creating supe-rior economic value for our stake-holders while living our Values. This,we believe, is a key component ofour contribution toward sustainabledevelopment.

Our goal to create superior economicvalue is underpinned by three finan-cial goals: joining the first quintile ofS&P Industrials in return on capitalperformance and return greater thancost of capital through the cycle; sus-tained cost reduction; and a strongbalance sheet. These financial goalshave at their foundation our commit-ment to live by our Values.

LONG-TERMSHAREHOLDER VALUEOur commitment to our Values andour performance against our finan-cial goals has resulted in superiorshareholder returns. We delivered atotal shareholder return1 of 18%over the last 10 years and 17% overthe most recent five years comparedto the S&P 500 Index of 11% and–1% and the Dow Jones Industrials

Index of 13% and 5% respectivelyover the same period.

In 2003 alone, we posted a totalshareholder return of 71%, farexceeding the S&P 500 Index (29%)and the Dow Jones Industrials Index (28%).

1Represents the annualized return a giveninvestment in a stock would have deliveredover a given period with the assumption thatall dividends are reinvested in that stock.

0

100

200

300

400

500

600

Dec 93 Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03

Source: Bloomberg

Alcoa Share Price Performance

■ Alcoa■ S&P 500 Index■ Dow Jones Industrials

EconomicPerformance Indicators

2000 2001 2002 1Q 2003

2Q2003

3Q2003

4Q2003

Return on Capital

Top Quintile S&P IndustrialsAlcoa

Indicators are based on Bloomberg return on capital methodology

S&P Industrials data not available for 4Q 2003

0

10

20

30

Boeing and Alcoa

The latest and longest-range version ofBoeing’s 777® airliner features wingpanels produced with Alcoa’s 2324-T39Type 2 aluminum alloy.

Using this alloy in its first productionapplication, Boeing maximizes the 777-300ER’s performance as a resultof Alcoa’s extensive metallics experi-ence. The 2324-T39 Type 2 alloy pro-vides important weight savings, which

translates into increased range for thelong-haul Boeing airliner.

The 777-300ER wing uses three largeunderwing panels manufactured with this latest Alcoa alloy. The alloy’sstrength, combined with heat-treatmentand stretching used in the productionprocess, enable the panels to be thinner while still providing the supportneeded for the aircraft’s massive wingstructure.

With a maximum range of 7,705 nautical miles, the 777-300ER can flynon-stop between such destinations asNew York-Tokyo, Johannesburg-London,and Frankfurt-Singapore.

since 1939. Currently, we pay a divi-dend four times a year. The Board ofDirectors determines the amount ofdividend paid, taking into accountvarious factors that include opera-tional performance and capitalrequirements. Our dividends havegrown at a compounded annual rateof 12% for the last 10 years.

1Alcoa currently has secondary listings onexchanges in Australia, Belgium, Germany,Switzerland, and the United Kingdom. Ourpreferred shares are listed on the AmericanStock Exchange.

Return on Capital — Progress Toward First QuintileAlcoa’s return on capital (ROC) for thefull year of 2003, as measured byBloomberg, was 7%, up from 4.2% in2002. The entry point of the first quin-tile of the S&P Industrials, as of thirdquarter 2003, was 15.9%. Alcoaremains committed to the goal ofachieving first quintile return on capital.

43

Alcoa has been listed on the NewYork Stock Exchange1 (ticker symbol:AA) since 1951 and currently has anestimated 278,400 common share-holders that owned, on average, 853million common shares in 2003.

Our returns to shareholders havebeen delivered through a combina-tion of capital growth and dividends.Alcoa is committed to continuallydistributing some of its earnings toshareholders through dividends,which have been paid uninterrupted

1Includes dividends to both common and preferred shareholders

Distribution to Shareholders

Dividends1 Dividends Paid(millions of US dollars) per Common Share

(US dollars)

2000 418 0.502001 518 0.602002 509 0.60

2003 516 0.60

Economic PerformanceIndicators

44

Positioning for Growth — A Strong Balance Sheet A strong balance sheet — reflected interms of the relationship betweendebt and total capitalization — iscrucial to enabling profitable growththrough both the general economicand aluminum cycles. Alcoa’s targetdebt-to-total capitalization is definedas between 25% and 35%.

In 2003, Alcoa made significantprogress in strengthening its balancesheet, moving debt-to-total capitaliza-tion from 43.1% as of the end of2002 to 35.1% as of year-end 2003.This was achieved by improved oper-ating performance and cash fromoperations, capital discipline resultingin lower capital expenditures, andgreater working capital efficiency cou-pled with rising shareholder equity.

Ford and Alcoa

Ford’s F-Series™ pickup trucks are themost popular vehicles in the world.The F-Series has been America’s best-selling truck for 27 years and the country’s best-selling vehicle for 22

years in a row. So, when Ford beganwork on its all-new 2004 Ford® F-150®

pickup, it stood to reason they would becareful in whom they would choose to be part of the project.

Alcoa worked with Ford to help engineerand design a solution where Alcoa sup-plies the aluminum sheet used for thehoods of the new F-150 — the widest-width aluminum closure produced in theNorth American automobile market … atestament to Alcoa’s ability to meet thesupply challenges associated withAmerica’s highest-volume vehicle.

Alcoa also supplies heat shields forthe 2004 Ford F-150 to help manageheat away from critical components.Alcoa’s automotive products featuredon Ford trucks include closures panels, wiring harness and electricaldistribution systems, and aluminumwheels.

Ford, F-Series and F-150 are trademarks of Ford Motor Company.

2001

2002

2000 38.6

35.8

43.1

Debt as a Percent of Invested Capital

2003 35.1

0 10 20 30 40 50

Defined as (Short-term borrowings + Long-term debt, due within one year + Long-term debt, less amount due within one year) / (Short-term borrowings + Long-term debt, due within one year + Long-term debt, less amount due within one year + Minority interests + Total shareholders’ equity).

LME 1 (US dollars per metric ton)

0 1,000 2,000

Cash fromOperations

(millions of US dollars)

0 1,000

2003

2,000 3,000

2,430

1Average three-month aluminum price on the London Metal Exchange

2001

2002

2000

1,839

2,851

2,411 2001

0

2002

1,000 1,500

20031,110

500

■ Capital Expenditures■ Depreciation Capital Expenditures

% of Depreciation

2000 1,1041,003

1,044

1,004

0 15050 100

1,172

Capital Expenditures


1,264

863

2001

0

2002

10,000 25,000

2003 3,06921,504

5,000 15,000 20,000

■ Working Capital1

■ Revenue Working Capital

% of Revenue

2000 3,95922,755

3,15420,351

22,576

100 4020 30

3,192

Working Capital


1Defined as Receivables from customers, less allowances + Inventories – Accounts payable, trade

45

partnerships, and moved forwardwith the expansion and repositioningof our global refining, smelting, andenergy generation systems. Duringthe year, we also completed twosmall, bolt-on acquisitions in thepackaging and building and construc-tion markets.

As part of the portfolio restructuringprogram, our Latin American PETbusiness and our investment in theLatin American aluminum can busi-ness (LATASA) were successfullydivested in 2003. We also reachedagreement for the sale of theSpecialty Chemicals business, whichis expected to close in the first quar-ter of 2004. In January 2004, we soldour packaging equipment business.These divestitures help bring focus toour portfolio and strengthen our bal-

ance sheet. We are on track to com-plete the portfolio restructuring pro-gram in the first half of 2004.

In August 2003, we realigned ourpartnership with the CamargoCorrea Group, acquiring the remain-ing 40.9% shareholding in our SouthAmerican operations in exchange for17.8 million shares of Alcoa com-mon stock, with an agreed value ofapproximately US$410 million. Thistransaction increases our stake inone of the lowest-cost, integratedpower generating, refining, andsmelting facilities in the world.

In August, we also announced therealignment of our alliance withKobe Steel Ltd. (Kobe) of Japan.This alliance, which was initiallyformed in 1992, involved joint ven-tures in the development of alu-minum products for automotiveapplications as well as in the manu-facture of can sheet. Alcoa and Kobe

Our strong balance sheet hasallowed us to retain an investmentgrade rating with major agencies,such as Standard & Poor’s (S&P)and Moody’s, for more than 26years. As of the end of 2003, we arerated “A-” by S&P and “A2” byMoody’s.

Acquisitions, Expansions,and Divestitures — A Platform for GrowthIn 2003, we successfully progressedon our portfolio restructuring pro-gram announced in January 2003,realigned two of our international

China and Alcoa

The Nanjing Olympic Sports Centre, inJiangsu province, China, will be themain stadium for the 10th NationalGames in 2005 and is to become thelargest sports architectural complex —with the most comprehensive functions — before Beijing hosts the2008 Olympic Games.

Occupying a total of 89.6 hectares ofland, with 400,000 square meters offloor area, the Nanjing Olympic SportsCentre will feature a main stadium,

gymnasium, swimming stadium, tenniscenter, news center, and auxiliary proj-ects, such as communications, engineer-ing, and energy centers.

The designers of this state-of-the-artfacility, HOK Sport + Venue + Event, theworld’s leading public assembly designfirm, sought to create an exceptionalfacility worthy of being at the center ofthe world stage. For part of the roofing ofthe massive project, they tapped AlcoaEurope Building and Construction for its

experience, expertise, and its ability todeliver, in short lead times, Reynolux,a unique prepainted product fromAlcoa that uses coil-coating techniquesto enable one or more coats of paint tobe applied. Reynolux is known theworld over as an excellent multipur-pose material for roofing, façadecladding, and many indoor and out-door uses. It provides exceptionalresistance against UV light and protec-tion against weathering for high dura-bility and long life expectancy. Theoptimal adherence of its paint allowsthe Reynolux product to be bent intomany complex shapes.

Economic Performance Indicators

2002

2003

2001

352

0 100 200 300 500400

2000 388

418

329

Cash Interest Paid(millions of US dollars)

Addressing Employee,Community Needs DuringPlant Transitions

When Alcoa needs to close, idle, orcurtail work at one of its facilities forcompetitive reasons, the companyworks to help minimize adverse effectson the surrounding community andmaximize opportunities for each Alcoanaffected by the situation. Three facili-ties in the state of Washington (USA)provide examples of this work.

In the months before closing itsNorthwest Alloys smelter in Addy, Alcoaapplied for and received federal assis-tance to provide up to two years of finan-cial support and retraining for the facili-ty’s 325 employees. Alcoa also provided

additional funding for outplacement supportservices for all displaced employees.

An Alcoa smelter located in Wenatcheehas been idle since 2001. About 400employees at the Wenatchee Works con-tinue to receive a regular wage and bene-fits, coming to work on a full-time schedule.If there is not sufficient upkeep work at theplant site, employees are paid to work onvolunteer assignments in the community,engage in health and fitness programs,and pursue educational opportunities withlocal community colleges and adult educa-tion programs. By year’s end 2003, thefacility’s employees had contributed morethan 80,000 hours of community service.

Alcoa Intalco Works, an aluminum smelterin Ferndale, Washington (USA), saw its

employee base decline from 700 to 400in 2003. Before the reduction, Alcoaestablished a partnership committeewith state agencies, union members,Intalco management, and communityeducation representatives to identifyemployee needs and plan and imple-ment action plans for those who wouldbe displaced. The state organizationsare providing comprehensive outplace-ment services, and federal assistanceis providing training and support lastingup to two years per person.

In each of these three communities,Alcoa Foundation continued to providesupport for established communityengagement as well as Alcoan volun-teer efforts through ACTION andBravo! grants.

46

will now broaden their cooperationin the automotive market but discon-tinue their association in the KAALcan sheet joint ventures. Alcoa has,therefore, acquired from Kobe theremaining 50% interest in the KAALAustralia can sheet business andremaining 20% interest in the KAALAsia distribution business. In turn,Kobe has purchased a 47% interestin the KAAL Japan can sheet busi-ness from Alcoa.

In 2003, we received final approvalto embark upon the construction ofa $1.1 billion, 322,000-metric-ton-per-year smelter in East Iceland. Thislow-cost, greenfield smelter is sched-uled to begin production in 2007. Tofurther enhance our low-cost posi-tion in primary metals, we signed amemorandum of understanding on alow-cost smelter project in Bahrain

and embarked on a feasibility studyon a smelter project in Brunei.

In alumina production, the 250,000-metric-ton expansion at the Jamalcoalumina refinery was completed in2003, and production will com-mence ahead of schedule. We contin-ue to take measures to strengthenour leadership position in global alu-mina and have announced majorbrownfield expansion projects atfacilities in Pinjarra (Australia) andSuriname.

In energy generation, we continuedour investment program to increaseour renewable self-generated energysources. In Brazil, the Machadinhohydroelectric project was completedin 2002, and the construction of theBarra Grande generating facility pro-gressed in 2003.

In January 2004, we acquired anadditional 44 million shares inAluminum Corporation of China’s(Chalco) new share placement. Thispurchase will maintain Alcoa’s 8%

shareholding in Chalco which is thesole producer of alumina and thelargest producer of primary alu-minum in China — the fastest grow-ing market for aluminum in theworld.

Cost Savings Initiatives — Drive for ProductivityIn December 2003, we completedand exceeded by US$12 million athree-year US$1.0 billion cost chal-lenge. This was the second three-yearcost challenge over the past sixyears. The first one, covering the1998 to 2000 period, targetedUS$1.1 billion in annual costs. Thesecost savings are sustainable innature, excluding components suchas energy and currency. We will con-tinue to widen the application of theAlcoa Business System throughoutthe company in a continuous effortto drive down costs.

47

CUSTOMERSIn 2003, Alcoa generated revenues ofUS$21.5 billion in 41 countries. Thisrepresents a compounded annualsales growth of 9% over the last 10years and 7% over the most recentfive years. The growth rate over thelast 10 years in global primary alu-minum consumption was approxi-mately 4% per year, as estimated byCRU Group.

Alcoa serves customers across anarray of markets. Our products andcomponents are used worldwide inaircraft, automobiles, beverage cans,buildings, chemicals, sports andrecreation, and a wide variety ofindustrial and consumer applica-tions. At every level in the organiza-tion, we seek to strengthen our rela-tionship with our existing customerswhile developing new ones.

We work closely with many of ourcustomers, leveraging our knowledgeof our products to develop applica-tions that generate value to themand their customers. Supporting this objective, Alcoa created a newrole of chief customer officer in 2003 to lead the strategic co-ordina-

tion of customer service and rela-tionships. This role will spearheadthe efforts that are currently beingmade by our different Market SectorLead Teams in developing industry,market segment, and specific cus-tomer strategies by working acrossall of Alcoa’s multiple businesses.Our objective is to exceed customerexpectations in quality, delivery, and service.

2003 Revenue Share by Market

Packaging & Consumer 25% Commercial Transportation 5%

Building & Construction 10%

Aerospace 10%

Aluminum & Alumina 24%

Industrial Products & Other 13%

Automotive 13%

Nestlé and Alcoa

When it comes to Nestlé® — theworld’s largest food company, based inVevey, Switzerland — Alcoa business-es, from Southern Graphic Systemsand Alcoa Flexible Packaging to AlcoaAluminio in South America and AlcoaClosure Systems International, workclosely together to ensure Nestlé’svast array of brands look their best.

Household names the world over suchas Nestlé Nesquik®, Nestlé Maggi®,

Nestlé Coffeemate®, Nestlé BakingChocolates — not to mention pet foodslike Purina® Whisker Lickin’s® and LecheMoustaches® — feature shrink-sleevelabels, foil packaging, and foil/paperoverwraps from Alcoa FlexiblePackaging and Alcoa Aluminio for con-sumer eye appeal to help drive growth.

Nestlé frozen food brands such as LeanCuisine®, Skillet Sensations™‚ andnumerous ice cream products, in addi-tion to a wide range of confections, arehelped to market by Alcoa’s Southern

Graphic Systems, which implementspre-press graphics work prior to theprinting and development of packag-ing. Alcoa Closure Systems also pro-vides closures to a wide range ofNestlé beverage brands, includingPoland Spring®.

In all, Alcoa packaging businessesadd impact to dozens of Nestlé prod-ucts … in practically every one of themore than 100 countries in whichNestlé operates.

2001

2002

2000 22.8

22.6

20.4

Sales(billions of US dollars)

2002 21.5

0 5 10 15 20 251Average three-month aluminum price on the London Metal Exchange


LME 1 (US dollars per metric ton)

0 3,0001,000 2,000


Revenues by Segment (billions of US dollars)

Alumina & Primary Flat-rolled Engineered Packaging & Other TotalChemicals Metals Products Products Consumer

2000 2.1 3.7 5.4 5.5 2.0 4.1 22.82001 2.0 3.4 5.0 5.9 2.6 3.7 22.62002 1.8 3.2 4.6 5.2 2.8 2.8 20.42003 2.0 3.2 4.8 5.6 3.2 2.7 21.5


Revenues by Region (percent)

North America Europe Other Americas Pacific

2000 69 17 5 92001 68 20 5 72002 67 21 4 82003 64 22 4 10

Revenues by Market (percent)

Packaging & Aluminum & Industrial Automotive Building & Aerospace CommercialConsumer Alumina Products Construction Transportation

& Other

2000 20 26 21 11 11 6 5

2001 22 24 19 11 11 9 4

2002 25 25 15 13 11 7 4

2003 25 24 13 13 10 10 5

48

context of the overall scale of eco-nomic activity in these economies. Intwo countries in particular —Suriname1 (see case study below) andJamaica2 — we participate in jointventures whose operations represent

a sizeable component of the nationalGDP of these countries. We recognize our role and the responsibilities ofgood corporate citizenship in everyone of the countries in which we operate.

1Alcoa has a refinery and two bauxite mines inSuriname that are owned 45% by BHP Billitonand 55% by Suriname Aluminum CompanyL.L.C. [part of the Alcoa World Alumina andChemicals (AWAC) group of companies andtherefore owned 60% by Alcoa and 40% byAlumina Ltd.]. The Suriname AluminumCompany L.L.C also owns a hydro-electric dam.

2Alcoa has a refinery and bauxite mine inJamaica, which are owned 50% by ClarendonAlumina Production, Ltd. (a wholly owned subsidiary of the Government of Jamaica) and50% by Alcoa Minerals of Jamaica L.L.C. (part of the AWAC group of companies).

Alcoa in Suriname

Alcoa strengthens local and nationaleconomies through well-paying jobs,taxes paid, and local purchases. Thispresence also often results in infra-structure improvements, communitycontributions, health care advances,and educational opportunities — all keyto sustainable development.

A good example is Suriname AluminumCompany (Suralco). In 2002, Suralcoaccounted for roughly 15% ofSuriname’s gross domestic product —more if multiplier effects are taken intoaccount. The company employed1,188 full-time equivalent employees,and payroll totaled nearly US$22 mil-lion. Suralco also provided more thanUS$13 million in pension payments toformer employees. Other economic

contributions included US$21 million spentfor roughly 520 contractors, miscellaneoussupplies from local vendors, and medicalspecialists. The company also boughtabout US$55 million in oil from the StateOil Company and paid nearly US$20 mil-lion in taxes. In addition, Suralco producesabout 75 megawatts of electricity for theSuriname government — roughly 75% ofthe electricity needs of the country’s capitalcity of Paramaribo.

But Alcoa’s involvement went further.Suralco provided approximatelyUS$276,000 in scholarships for children ofits employees. Alcoa Foundation also pro-vided nearly US$200,000 in grants forimprovement projects in education, the envi-ronment, and health services. Alcoa grantswere also used to promote entrepreneurshipamong the indigenous Amerinds and semi-indigenous Maroon populations.

Suralco makes these contributions to theSuriname economy while living Alcoa’sValues. In 2003, Suralco’s refineryearned the International AluminumInstitute’s “Best Safety Performance inthe World” award. Its Moengo miningoperation was also recognized as amongthe four best safety performers in thebauxite and alumina industry category.

In 2003, Alcoa announced a US$65 mil-lion, 250,000-metric-ton expansion to itsParanam alumina refinery in Suriname.This expansion, which will increasecapacity by approximately 12%, isexpected to be completed by mid-2005.Alcoa continues to explore additionaldevelopment opportunities in the country.

Countries with Significant Alcoa Participation in the Local EconomyAlcoa has operations in 41 countries(as of December 31, 2003) withvarying significance within the

Suralco employees help garden atDiakonesse Hospital.

49

SUPPLIER RELATIONSHIPSWe spent US$18.6 billion in operat-ing costs (cost of goods sold; selling,general administrative, and otherexpenses; and research and develop-ment expenses) in 2003. While asizeable proportion of this total is inmetal purchases, energy, andemployee salaries and benefits, wealso spend significant amounts onother goods and services.

While no one supplier representsmore than 10% of the dollar valueof total goods and services we pur-chased in 2003, we have procure-ment relationships with a wide rangeof suppliers in many countries.Working closely with these suppliershelps us in developing the highestquality, cost-effective products forour customers.

Our relationship and conduct withour suppliers is guided by the princi-ples outlined in our Guide toBusiness Conduct. We expect oursuppliers to support our values, andsupplier audits are conducted, asdeemed necessary, by Alcoa operat-ing businesses.

Suppliers are also required to followour environmental and safetyrequirement when at one of oursites, and all suppliers are requiredto follow our equal opportunityrequirements and expectations.

These requirements are specified inour standard purchase order termsand conditions as well as the stan-dard Alcoa construction contract.Further details can be found on ourSupplier Connection on alcoa.com.

Supplier diversity standards are indevelopment and are scheduled to becompleted and deployed within 12months.

PUBLIC COMMITMENTIn addition to our extensive commu-nity engagement (see page 36), wemake tax payments to governmentsin all the countries in which weoperate. In 2003, we paid incometaxes of US$303 million. Thisexcludes the numerous other taxes,such as royalties, sales taxes, exciseduties, levies, and local taxes, thatwe paid in those countries.

EndnoteAlcoa’s financial statements in both2003 and 2002 were significantlyimpacted by activities relating to theplanned divestiture of a number ofAlcoa’s businesses. During the fourthquarter of 2002, Alcoa performed aportfolio review of its businesses andthe markets they serve. As a result ofthis review, Alcoa committed to a planto divest certain non-core businessesthat did not meet internal growth andreturn measures. In accordance with theaccounting requirements, these busi-nesses were classified as either discon-tinued operations or assets held forsale. During 2003, there were a numberof changes to these classifications ofbusinesses that were to be divested.These changes in classification havenecessitated a reclassification of certainamounts in the economic section of the2003 Sustainability Report to conformto the 2003 financial presentation. Fordetails on Alcoa’s accounting policiesand the classification of discontinuedoperations and assets held for sale,please refer to Notes A and B of theConsolidated Financial Statements inthe 2003 Annual Report.

0

2002

2003

100 200 300 400 600500

2001

303

2000 419

548

583

Cash Paid for Income Taxes(millions of US dollars)

2002

2003

2001

24.2

0 10 20 30 40

2000 33.5

31.9

32.3

Effective Tax Rate(percent)


INTERNAL AWARDS AND RECOGNITION

Global Leadership AwardsThe Global Leadership Awards were initiated in 1999 as a way to recognize Alcoa businesses for outstanding results insupport of Alcoa’s values and major initiatives. The awards are linked to our business strategy, and there are defined criteria for each award. The following awards were given in January 2004 for exceptional performance in the year 2003.

Chairman’s Award Alcoa Primary Metals

Best Deployment of Alcoa Business System Alcoa Home Exteriors

Best Customer Excellence Alcoa Closure Systems International

Best Marketing Excellence Alcoa Latin America Primary Products

Best People Excellence Alcoa Fujikura Limited — Automotive

Best Resource Unit Excellence Global Business Services Procurement

Best Community Engagement Alcoa Rigid Packaging

Best Rapid Technology Deployment Alcoa World Alumina

Best Process Quality Excellence Alcoa Closure Systems International

Best Large Business Unit Financial Performance Alcoa Fujikura Limited — Automotive

Best Small Business Unit Financial Performance Alcoa Europe Building and Construction Systems

Best Environment, Health, and Safety Performance Alcoa World Alumina Atlantic

Best Improved Environment, Health, and Safety Performance Alcoa Rigid Packaging

Best Overall Audit Performance Alcoa Materials Management

EHS Achievement AwardsEHS Achievement Awards are earned by business units, locations, teams, or individuals. They are based on submittednominations and selected by a jury of experts.

Casthouse Mechanical Craftsmen Project Alcoa/Aluminerie de Becancour Inc. — Canada

Packing Automation Cressona, Pennsylvania — USA

The Alcoa Schools Safety Initiative Pinjarra — Australia

Ergonomics in Howmet Castings: EHS Challenge — EHS Success/Manufacturing Challenge — Manufacturing Success All Howmet Locations

Safety Kaizen Events to Reduce Injuries Howmet Castings

Improved Safety Performance Portovesme — Italy

Tennessee Primary Metals and Potroom Safety Improvement Tennessee Operations — USA

Injury Reduction in Alcoa Automotive Alcoa Automotive

Health Promotion/Employee Assistance Program Alcoa-Köfém KFT — Hungary

Awards and Recognition

50

51

EHS Achievement Awards (continued)

Instituting Worker Health Protection … More Effectively, More Quickly and at Lower Cost All Howmet Locations

Smokers’ Support Program at Cenesp Sao Paulo Office — Brazil

Waste Elimination Through Ultrafiltration Sidney, Ohio — USA

Pollution Prevention Plan/Program Hampton Howmet Casting — USA

Minimizing Our Footprint Lafayette, Indiana — USA

Waste Minimization Strategy: Improving Business Sustainability Alumar Sao Luis — Brazil

Itapissuma’s Voluntary Reduction of Solid Waste Footprint Itapissuma — Brazil

Anode Effects Greenhouse Gas Reduction Aluminerie de Becancour Inc. — Canada

Quantum Leap in E-awareness Harderwijk — The Netherlands

Tubarao Waste Helps Reduce Environmental Problem in Santa Catarina State Tubarao — Brazil

Dynamic Rainwater Management Deschambault Smelter Plant — Canada

Chrome Free Aluminum Surface Treatment Technology Warrick Operations — USA

Environmental Awareness Promotion Program at Primary Schools Alcoa-Köfém KFT — Hungary

Environmental Education in the Southwest Resource Kit Portland — Australia

Bus Bar Retrofit Portland — Australia

Soda Waste Minimization Through Keeping Dies With Aluminum Noblejas — Spain

Preheat Furnace Energy Efficiency Improvement Warrick Operations — USA

Hot Dross Processing Tennessee Operations — USA

Alcoa Energy Efficiency Network Knoxville — USA

Alcoa Corporate Technology AwardsThe Alcoa Corporate TechnologyAwards honor the company’s finestscientists and engineers for creativity,teamwork, leadership, and persist-

ence in the conception, development,and application of science and tech-nology across our global operations.Our deep capabilities in research,development, and applied engineer-ing are some of the key ways wedeliver solutions to our customers.

The awards acknowledge individualand team contributions, and the2003 recipients are the following:

● The Francis C. Frary Award for alifetime of outstanding individualcontributions to Alcoa science andtechnology — Dr. G. KeithTurnbull, retired executive vicepresident, Alcoa Business System,Pittsburgh, Pennsylvania (USA).


● The Alcoa Chairman’s Award forsignificant individual contributionsto innovation, development andimplementation of materials pro-cessing and systems technologies— Dr. Dhruba J. Chakrabarti, senior technical specialist, AlcoaTechnical Center, Alcoa Center,Pennsylvania (USA); and Dr.Gerald I. D. Roach, technical man-ager, extraction technology, AlcoaWorld Alumina, Kwinana, WesternAustralia.

● The I.W. “Chief” Wilson Awardfor outstanding leadership in themanagement of science and tech-nology throughout Alcoa —Robert C. Pahl, director of appli-cation engineering and processdevelopment, Alcoa ExtrudedProducts — Aerospace, Lafayette,Indiana (USA); and Jerry L.Roddy, director of technology,Primary Metals, Knoxville,Tennessee (USA).

● The Arthur Vining Davis Awardfor outstanding team achievementin Alcoa science and technology —The Dura-Bright® SurfaceTreatment Team, Alcoa Wheel andForged Products, Cleveland, Ohio(USA); and The Release™ Non-Stick Aluminum Foil Team, AlcoaConsumer Products, Richmond,Virginia (USA).

52

Corporate Audit AwardsThese awards recognize Alcoa businesses that demonstrate the best processcontrols as evidenced by 2003 audits, as well as those locations and/or business units (BUs) that have achieved significant process improvement overtheir last audit results.

Group BU Audit PerformanceFinancial & Business Processes Primary ProductsInformation TechnologyEnvironment, Health & Safety

BU Audit PerformanceFinancial & Business Processes Alcoa Materials ManagementInformation Technology Global Business Services (GBS)

Most Improved BUEnvironmental, Health & Safety Southern Graphic Systems

Most Improved LocationEnvironmental, Health & Safety Alcoa Trasformizioni Srl. — Fusina, Italy

Alcoa Australia Rolled Products — Yennora

Certificates of Audit ExcellenceFinancial & Business Processes Alcoa Materials Management

Australia TreasuryGBS Procurement — IT and ServicesGBS Procurement —

Solutions and Leveraged Buy

Environmental, Health & Safety Aluminerie de DeschambaultAlcoa Aluminio Poços de Caldas

Environment Mt. Holly — South Carolina, USA

First-time Audit AchievementFor successful integration of new Alcoa KAMAlocations with a 100% pass rate Alcoa Flexible Packagingfor first-time audits.

53

EXTERNAL AWARDS AND RECOGNITION The following is a partial listing of the awards and recognition Alcoa earned from external organizations in 2003.

Integrated

Dow Jones Sustainability Index Alcoa

Most Admired Companies — Fortune Magazine Alcoa (first in metals category)

Environmental, Health, and Safety

Australia

Prime Minister’s Award for Excellence in Community Alcoa World Alumina Australia and Business Partnerships Greening Australia

Model Project Award — Society for Ecological Restoration International Alcoa World Alumina Australia

MINEX Safety and Health Excellence Award — Western Australia Mining — Minerals Council of Australia Alcoa World Alumina Australia

Alcoa Earns Australian Prime Minister’s Award

A 21-year partnership between AlcoaWorld Alumina Australia and GreeningAustralia to protect and restore the health,diversity, and productivity of the country’sunique landscape earned a 2003 PrimeMinister’s Award for Excellence inCommunity Business Partnerships.

“Alcoa has made an unprecedented con-tribution to rural and regional Australiathrough their support of GreeningAustralia and the landcare movement,”said Carl Binning, chief executive officerof Greening Australia. “It’s imperativethat we partner with the business sector,government, and community to addressthe extensive environmental issues weface in Australia.”

The partnership has contributed in a prac-tical way to repair the Australian land-scape. The Alcoa Revegetation Assistanceprogram in Victoria, which gives farmersand landcare groups access to direct-seeding machinery and equipment, hasresulted in the establishment of more than700 Alcoa landcare sites, the planting ofaround 10 million trees and shrubs, andthe effective treatment of thousands ofhectares of degraded land.

Grow Us a Home, a 10-year environmen-tal education program in Perth and Peel, isestimated to have raised the level of envi-ronmental awareness of 40,000 peoplethrough the involvement of teachers, par-ents, and students. The Alcoa Portlandseedbank collects and stores seeds fromindigenous plants for use in revegetationprojects and provides advice and technical

knowledge to support direct-seedingactivities. Alcoa has also helped providepractical knowledge transfer by support-ing publications and resources for land-holders and rural and urban audiences.

“Our partnership with Alcoa is enduring,changing to suit today’s needs and is afine example of how collaboration canresult in excellent outcomes for all,”said Binning.

The partnership is part of Alcoa’s NationalLandcare Program, which has injectedUS$14.8 million into landscape restora-tion, education, and knowledge sharingacross Australia over the past 15 years.


Community members inspect native grasses at an Alcoa-sponsored landcareeducation center.

54

Environmental, Health, and Safety (continued)

Canada

Waste Minimization Performance Attestation — Aluminerie de Becancour and Recyc-Québec Aluminerie Deschambault

Phénix de l’environnement Award for Know-how in Sustainable Development (Use of processes/technologies) Aluminerie de Bécancour Inc., Quebec

Europe

Quality and Environment Award — Toledo Chamber of Commerce Alcoa Transformacion S.A. — Noblejas, Spain

Japan

Special Excellence Prize for Safety — Japan Aluminum Association KAAL Japan

South America

Annual Safety Contest Performance Prize — Brazilian Association for Accident Prevention AFL do Brasil Ltda.

D. Pedro II Merit Medal — Minas Gerais Military General Fire Fighters Command Alcoa Aluminio — Poços de Caldas, Brazil

Best Safety Performance in the World — International Aluminum Institute Suralco Refinery, Suriname

United States

Business of the Year — Evansville Operation City Beautiful Alcoa Warrick Operations, Indiana

John Biasini Environmental Excellence Award for Energy/Renewable Resources — Metropolitan Evansville Chamber of Commerce Alcoa Warrick Operations, Indiana

John Biasini Environmental Excellence Award for Land Use — Metropolitan Evansville Chamber of Commerce Alcoa Warrick Operations, Indiana

Governor’s Award for Environmental Excellence — Virginia Manufacturing Association and the Commonwealth of Virginia Howmet Castings — Hampton, Virginia

Pretreatment Award — Kentucky-Tennessee Water Environment Association Tennessee Operations

Return on Environment™ Partnership Award — GE Betz Alcoa Mill Products — Lancaster, Pennsylvania

Pollution Prevention P2 Award — Hampton Roads Sanitation District (Commonwealth of Virginia) Howmet Castings — Hampton, Virginia

55

Environmental, Health, and Safety (continued)

United States

Award of Excellence in Recognition of Exceptional Workplace Safety in 2002 — Georgia Department of Labor Alcoa Cladding Systems — Eastman, Georgia

Environmental Stewardship Award — Bio Diesel Promotion Board and the Iowa Soybean Promotion Board Alcoa Davenport, Iowa

A Star Among Stars Award — U.S. Occupational Safety & Health Administration Rockdale Power Plant, Texas

Palmetto Safety Excellence Award — South Carolina Alcoa Fujikura Ltd. Telecommunications — Occupational Safety Council Ridgeview, South Carolina

South Carolina Safety Certificate — South Carolina Alcoa Fujikura Ltd. Telecommunications — Occupational Safety Council Hillside, South Carolina

Safety Achievement Award — Metro Indianapolis Coalition for Construction Safety Lafayette Operations, Indiana

Social

Good Corporate Citizenship and Social Responsibility Award — Figyelö Magazine Alcoa-Köfem, Hungary

2002 Award for Social Commitment and Employment Creation — Province of Lugo Business Federation Alcoa San Ciprián — Brazil

Voluntarios das Gerais — State of Minas Gerais FIEMG and SESI Minas AFL Brazil

Paul Harris Fellow Commendation — Rotary Club AFL BrazilItajuba-Oeste

2002 Wisconsin Manufacturer of the Year Community Alcoa Wheel and Forged Products — Commitment Grand Award — Wisconsin Manufacturers Beloit, Wisconsin (USA)and Commerce

Economic

Best New Non-food Specialty Item — Alcoa Consumer Products (Reynolds Wrap®

Kosherfest New Product Competition Release® Non-Stick Aluminum Foil)

2003 IIASA-Shiba Award — International Institute for Applied System Analysis Alcoa Wheel & Forged Products, Hungary

2003 Visionary Award — Smart Business Network and Anthem Blue Cross and Blue Shield of Ohio Alcoa Wheel and Forged Products

Silver Packaging Award — Dupont Packing Awards Alcoa Flexible Packaging (Sure-Peel™

Cohesive Lidding)


56

Economic (continued)

R&D 100 Award — R&D Magazine AFL Telecommunications

2003 Category Colonel Award — PLBuyer Magazine Reynolds Consumer Products and Presto Products

2002 Most Valuable Product Award — RoadStar Magazine Alcoa Wheel and Forged Products (Dura-Bright® Wheels)

Volkswagen Group Award — Volkswagen of Mexico AFL Automotive

Top 50 Supplier — Automotive Industries Magazine Quest for Excellence Survey Alcoa

Preferred Supplier Award — PACCAR AFL Automotive

Best Product Development Team Stevie Award — Alcoa Consumer Products (Reynolds Wrap® Release®

American Business Awards Non-Stick Aluminum Foil)

2002 President’s Awards — Subaru AFL Automotive

Nifty Fifty Award — Heavy Duty Trucking Magazine Alcoa Wheel and Forged Products (Dura-Bright® Wheels)

2003 Carnegie Science Center Award for Excellence in the Advanced Manufacturing and Materials Category Dr. Ming Li, Alcoa Technical Center

Top 10 of 1,200 World Brands — Harris Interactive® Alcoa Consumer Products (Reynolds Wrap®

Quality Survey Aluminum Foil)

57

The following case studies, which can be found throughout the 2003Sustainability Report, illustrate how Alcoa is acting upon its commitment tosustainable development throughout the world.

EnvironmentalTen Million Trees ............................................................................................3Alumar Ranked Best in World for Health, Safety,

Environment, and Community ..................................................................12A Personal Look at Community Consultation...............................................14Helping NGOs Become More Viable and Sustainable ...................................15 Returning Wasteland to Nature.....................................................................16The Challenge of Hydropower in Iceland......................................................18Investments Reduce Process Water Discharge by 96% ..................................19Alcoa Frog Watch..........................................................................................20Wetlands Project Engages Community ..........................................................21Moving Beyond Current Reduction Targets for Greenhouse Gases ...............22Production Up, Emissions Down in Smelter Project ......................................24Recycling the Previously Unrecyclable ...........................................................25Customer Need Drives Brazilian Recycling Solution .....................................26Alcoa Signs Clean Air Settlement in Texas ....................................................27Earthwatch Expeditions: Partnerships in Conservation .................................29Alcoa Earns Australian Prime Minister’s Award............................................53

SocialAlcoa Women’s Network...............................................................................28Achieving Sustainability Through Leadership................................................30Lowering Workplace Exposures to Hexavalent Chromium ...........................31Safety in Suriname.........................................................................................33Building Stronger Communities in Australia .................................................36Helping Communities Cope with Emergencies ..............................................37Taking Action — Alcoa’s Worldwide Week of Community Service ...............39Addressing Employee, Community Needs During Plant Transitions..............46

EconomicBringing Social Responsibility to the Supply Chain .......................................35Airbus and Alcoa...........................................................................................42Boeing and Alcoa ..........................................................................................43Ford and Alcoa..............................................................................................44China and Alcoa............................................................................................45Nestle and Alcoa ...........................................................................................47Alcoa in Suriname .........................................................................................48

Case Studies

GRI SECTION DESCRIPTION LOCATION

Vision and Strategy

1.1 Statement of the organization’s vision and strategy SR page 3 regarding its contribution to sustainable development.

1.2 Statement from the CEO describing key elements of the report. SR Preface

Profile

2.1 Name of reporting organization. SR page 6

2.2 Major products and/or services. SR page 6

2.3 Operational structure of the organization. Web http://www.alcoa.com/global/en/about_alcoa/listing.asp

2.4 Description of major divisions, operating companies, SR page 6subsidiaries, and joint ventures.

Webhttp://www.alcoa.com/global/en/about_alcoa/listing.asp

2.5 Countries in which the organization’s operations are located. SR page 6

2.6 Nature of ownership SR page 6

2.7 Nature of markets served. SR page 6

2.8 Scale of the reporting organization. SR page 6 (Key Statistics)

SR page 45 (Acquisitions)

AR Inside front cover

2.9 List of stakeholders. Partially Reported

SR page 14

2.10 Contact person. SR page 6

2.11 Reporting period. SR page 6

2.12 Date of most recent previous report. SR page 6

2.13 Boundaries of report. SR page 6

2.14 Significant changes since previous report. SR page 45

58

This index was developed to helpinterested readers compare the infor-mation in Alcoa’s Sustainability Reportand Annual Report and on our web-site with the Global ReportingInitiative guidelines. We also drawupon criteria from other organizationsto frame our sustainability reporting.

In the last column of the chart, wehave indicated what pages the

required information can be found inthe Sustainability Report and theAnnual report as well as the URLsfor relevant information onalcoa.com. “Partially reported” indi-cates that we have provided a por-tion of the information required. Ina number of instances, we’re work-ing toward better data collection tomore fully report this information.

“Not disclosed” means that thisinformation is either not collected on a global basis or kept confidentialfor competitive or other reasons.“Not applicable” means that it does not apply to our operations or2003 reporting.

We have used the abbreviations SR forSustainability Report, AR for AnnualReport, and Web for alcoa.com.

GRI Content Index

59

GRI Content Index


2.15 Basis for reporting on joint ventures, partially owned subsidiaries, etc. SR page 6

2.16 Explanation of the nature and effect of any re-statements Provided as footnotes to individual SR chartsof information provided in earlier reports. where data changed.

2.17 Decisions not to apply GRI principles or protocols in the SR page 58preparation of the report.

2.18 Criteria/definitions used in any accounting for economic, Partially Reportedenvironmental, and social costs and benefits.

SR page 7

AR page 46

2.19 Significant changes from previous years in the measurement methods. Not Applicable

2.20 Policies and internal practices to enhance and provide SR page 7assurance about the accuracy, completeness, and reliability that can be placed on the sustainability report.

2.21 Policy and current practice with regard to providing SR page 7independent assurance for the full report.

2.22 Means by which report users can obtain additional information and reports. SR page 7


3.1 Governance structure. SR page 8

3.2 Percentage of the board of directors that are independent, non-executive. SR page 9

3.3 Process for determining the expertise board members Webneed to guide the strategic direction of the organization. http://www.alcoa.com/global/en/about_alcoa/

corp_gov/nominating.asp

3.4 Board-level processes for overseeing the organization’s Webidentification and management of economic, environmental, http://www.alcoa.com/global/en/about_alcoa/and social risks and opportunities. corp_gov/public_issues.asp

3.5 Linkage between executive compensation and achievement SR page 11of the organization’s financial and non-financial goals.

3.6 Organizational structure and key individuals responsible SR page 12 for oversight, implementation, and audit of economic, (Audit Process)environmental, social, and related policies.

SR page 8 (Structure and Governance)

SR page 9 (Public Issues Committee)

SR page 10 (Officers)

3.7 Mission and value statements, internally developed codes of conduct SR page 4or principles, and policies related to economic, environmental, and social performance and the status of implementation.

3.8 Mechanisms for shareholders to provide recommendations SR page 13or direction to the board of directors.

3.9 Basis for identification and selection of major stakeholders. SR page 14

60


3.10 Approaches to stakeholder consultation. Partially Reported

SR page 14 (Stakeholder Consultation)

SR page 7(Report Profile)

SR page 6(Report Scope)

SR page 34(Human Rights)

SR page 53(Case study: Alcoa Earns Australian

Prime Minister’s Award)

3.11 Type of information generated by stakeholder consultations. Partially Reported

SR page 14(Stakeholder Consultation Outcomes)


3.12 Use of information resulting from stakeholder engagements. Partially Reported

SR page 14(Stakeholder Consultation Outcomes)


3.13 Explanation of whether and how the precautionary approach Not Disclosedor principle is addressed by the organization.

Through its extensive management systems, Alcoa advocates a risk-based approach to its operations. At this stage, however, we do not formally address

the precautionary principle in our Sustainability Report.

3.14 Externally developed, voluntary economic, environmental, SR page 15and social charters, sets of principles, or other initiatives to which the organization subscribes or which it endorses.

3.15 Principle memberships in industry and business associations, SR page 15and/or national/international advocacy organizations.

3.16 Policies and/or systems for managing upstream and Partially Reporteddownstream impacts.

SR page 35(Case study: Bringing Social Responsibility

to the Supply Chain)

3.17 Reporting organization’s approach to managing indirect economic, Partially Reportedenvironmental, and social impacts resulting from its activities.

SR page 48

3.18 Major decisions during the reporting period regarding the location SR page 45of, or changes in, operations.

3.19 Programs and procedures pertaining to economic, environmental, SR page 15and social performance.

61

GRI Content Index


3.20 Status of certification pertaining to economic, environmental, Partially Reportedand social management systems.

SR page 15(Certification Status)

SR page 6(Alcoa Metrics System)

GRI Content Index

4.1 Table identifying the location of each element of the GRI report content. SR page 58

Performance Indicators — Economic

EC1 Net sales. SR page 47

EC2 Geographic breakdown of markets. Partially Reported

SR page 48

EC3 Cost of all goods, materials, and services purchased. Partially Reported

SR page 49

EC4 Percentage of contracts that were paid in accordance with Not Disclosedagreed terms, excluding agreed penalty arrangements.

Processes for collecting the data on a global level do not exist currently.

EC5 Total payroll and benefits. Partially Reported

SR page 29

EC6 Distributions to providers of capital. SR page 43(Distributions to Shareholders)

SR page 45(Cash Interest Paid)

EC7 Increase/decrease in retained earnings. AR page 45

EC8 Total sum of taxes of all types broken down by country. Partially Reported

SR page 49

EC9 Subsidies received broken down by country or region. Not Disclosed

While in some instances these data are commercially sensitive, more reporting of subsidies is

occurring. Alcoa will keep this issue under review.

EC10 Donations to community, civil society, and other groups SR page 36broken down in terms of cash and in-kind donations per type of group.

EC11 Supplier breakdown. SR page 49

Performance Indicators — Environmental

EN1 Total materials use other than water. Partially Reported

SR page 16

EN2 Percentage of materials used that are wastes from sources SR page 17external to the reporting organization.

EN3 Direct energy use segmented by primary source. SR page 17

62


EN4 Indirect energy use. Partially Reported

SR page 17

EN5 Total water use. SR page 19

EN6 Location and size of land owned, leased, or managed Partially Reportedin biodiversity-rich habitats.

SR page 20

EN7 Description of the major impacts on biodiversity associated with Partially Reportedactivities and/or products and services in terrestrial,freshwater, and marine environments. SR page 19

Webhttp://www.alcoa.com/global/en/environment/

position_papers/biodiversity.asp

EN8 Greenhouse gas emissions. SR page 22

EN9 Use and emissions of ozone-depleting substances. SR page 22

EN10 NOx, SOx and other significant air emissions by type. SR page 23

EN11 Total amount of waste by type and destination. Partially Reported

SR page 24

EN12 Significant discharges to water by type. Partially Reported

SR page 25

EN13 Significant spills of chemicals, oils, and fuels in terms of total Partially Reportednumber and total volume.

SR page 27

EN14 Significant environmental impacts of principal products and services. SR page 25

EN15 Percentage of the weight of products sold that is reclaimable Partially Reportedat the end of the products’ useful life and percentage thatis actually reclaimed. SR page 17

EN16 Incidents of and fines for non-compliance. Partially Reported

SR page 27

EN17 Initiatives to use renewable energy sources and to increase SR page 17energy efficiency.

EN23 Total amount of land owned, leased, or managed for production SR page 20activities or extractive use.

EN35 Total environmental expenditures by type. Partially Reported

SR page 27

Performance Indicators — Social

LA1 Breakdown of workforce. Partially Reported

SR page 29 (Employees by Region)

SR page 29 (Improving Gender Balance)

63


LA2 Net employment creation and average turnover segmented Not Disclosedby region/country.


LA3 Percentage of employees represented by independent trade Not Disclosedunion organizations or other bona fide employee representatives.


LA4 Policy and procedures involving information, consultation, and Not Disclosednegotiation with employees over changes in the reporting organization’s operations. Development of policy is planned.

LA5 Practices on recording and notification of occupational accidents SR page 32and diseases, and how they relate to the ILO Code of Practice on Recording and Notification of Occupational Accidents and Diseases.

LA6 Description of formal joint health and safety committees comprising Partially Reportedmanagement and worker representatives and proportion of workforce covered by any such committees. SR page 32

LA7 Standard injury, lost day, and absentee rates and number of work- Partially Reportedrelated fatalities (including subcontracted workers).

SR page 34

LA8 Description of policies or programs (for the workplace and beyond) on HIV/AIDS. SR page 33

LA9 Average hours of training per year per employee by category of Not Disclosedemployee.

Deployment of a new learning management system will help with future collection of the data. There is

a wide array of training available to Alcoa employees.That training includes health and safety, Alcoa Business

System, diversity, and leadership training.

SR page 30(Case study: Achieving Sustainability Through Leadership)

LA10 Description of equal opportunity policies or programs, as well as Partially Reportedmonitoring systems to ensure compliance and results of monitoring.

SR page 28

LA11 Composition of senior management and corporate governance bodies. Partially Reported

SR page 9(Board Committees)

SR page 10(Officers)

HR1 Description of policies, guidelines, corporate structure, and procedures Partially Reportedto deal with all aspects of human rights relevant to operations.

SR page 34

HR2 Evidence of consideration of human rights impacts as part of Partially Reportedinvestment and procurement decisions.

Webhttp://www.alcoa.com/global/en/about_alcoa/

human_rights.asp

HR3 Description of policies and procedures to evaluate and address Partially Reported human rights performance with the supply chain and contractors.

SR page 35

GRI Content Index

64


HR4 Description of global policy and procedures/programs preventing Partially Reportedall forms of discrimination in operations.

SR page 34

HR5 Description of freedom of association policy and extent to which this Partially Reportedpolicy is universally applied independent of local laws, as well as description of procedures/programs to address this issue. SR page 35

HR6 Description of policy excluding child labor as defined by ILO Convention Partially Reported138 and extent to which this policy is visibly stated and applied, as well as description of procedures/programs to address this issue. SR page 34

HR7 Description of policy to prevent forced and compulsory labor and Partially Reportedextent to which this policy is visibly stated and applied, as well as description of procedures/programs to address this issue. SR page 34

HR12 Description of policies, guidelines, and procedures to address the Partially Reportedneeds of indigenous people.

SR page 35(Relationships with Indigenous People)

SR page 28(Equal Opportunity Statement)

SR page 28 (Diversity)

SO1 Description of policy to manage impacts on communities in areas Partially Reportedaffected by activities, as well as description of procedures/programs to address this issue. SR page 46

(Case study: Addressing Employee, Community Needs During Plant Transitions)

SO2 Description of the policy, procedures/management systems, and Partially Reportedcompliance mechanisms for organizations and employees addressing bribery and corruption. SR page 40

(Bribery and Corruption)

SR page 4 (Vision, Values, and Principles)

SR page 13 (Ethics and Compliance Program)

SO3 Description of policy, procedures/management systems, and compliance SR page 41mechanisms for managing political lobbying and contributions.

SO4 Awards received relevant to social, ethical, and environmental performance. SR page 50

PR1 Description of policy for preserving customer health and safety during use Partially Reportedof products and services, and extent to which this policy is visibly stated and applied, as well as description of procedures/programs to address this issue. SR page 41

PR2 Description of policy, procedures/management systems, and Partially Reported compliance mechanisms related to product information and labeling.

SR page 41

PR3 Description of policy, procedures/management systems, and Partially Reportedcompliance mechanisms for consumer privacy.

SR page 41

Some GRI descriptions are edited for length. Reprinted with permission of the Global Reporting Initiative. For the complete SustainabilityReporting Guidelines, please visit www.globalreporting.org.

Thank you for reading Alcoa's Sustainability Report. We believe that it is an important way to provideinformation to a broad spectrum of stakeholders. The report is intended to provide a clear view of what wedo. If we can do this job better for you, we would like to hear your suggestions for improvements. Please help us by rating our report on a scale of 1 (poor) to 10 (excellent).

1. How would you rate the report’s structure in terms of finding information? ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

2. How useful is the report to assess where Alcoa has made progress and where the company has morework to do in the areas of:

Corporate Governance ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Environmental Progress ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Social Progress ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Financial Performance ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

3. a) Compared to other sustainability reports, how do you rate the Alcoa Sustainability Report?■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

b) Which company’s sustainability report did you like best?

c) Why?

4. Rate the usefulness of the case studies in adding value to the information and data on Alcoa’s programs.■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

5. a) What did you like best about the Alcoa report?

b) The report could be improved by:

6. Please specify your relationship to Alcoa:

■■ Employed by Alcoa ■■ Member of a non-governmental organization (NGO)

■■ Shareholder ■■ Member of a community where Alcoa has a presence

■■ Customer ■■ Other, please specify

■■ Supplier

7. Where are you from?

■■ Africa ■■ Latin America

■■ Australia ■■ North America

■■ Europe

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