The Company’s 2004 Report coincides with the tenth anniversary of its pioneering Environmental Decalogue, which sets out public targets for the Company’s contribution to sustainable development. ST was one of the first enterprises to set measurable, time-defined goals for environmental performance and to commit to them in public and the Report’s design theme underscores the fact that ST continues to remain on target to achieve its ambitious goals. Since 1994, the Company has made outstanding progress in this respect, reducing its energy consumption by 42 percent, its water consumption by 64 percent and its CO2 emissions by 50 percent, per unit produced. This progress has provided ST with an extraordinary saving of well over US$100M per year, with the 2004 saving of US$135M setting a new record, clearly demonstrating the validity of the Company’s belief that “ecology is free.”

“We are delighted that over the past ten years so many other companies have come to share our vision and we are proud to think that our success played an important role in demolishing the previously widely-held belief that corporate and environmental responsibility could only be a financial burden,” said Georges Auguste, Corporate Vice President, Director of Total Quality and Corporate Responsibility. “The evidence we have accumulated over more than ten successive years demonstrates that ecology is not only free but makes a significant positive contribution to commercial performance. Equally true, and just as important, operating according to the highest standards of wider social responsibility also makes financial sense. Knowing this, we will continue to develop new ways of making even greater contributions to the communities in which we operate and to the world as a whole, including setting ourselves even more ambitious goals than those that are required by local or worldwide legislation.”
The Report covers performance in all major areas of corporate responsibility, including stakeholder engagement, governance and business ethics, economic impact, employee development and empowerment, health & safety, human rights, corporate citizenship, environment, product responsibility and supply chain management. By widening the scope and rigour of its reporting this year (notably in the areas of economic impact, human rights, product responsibility and supply chain management) the Company has further enhanced its long-established approach to continuous improvement in corporate responsibility, which integrates a strong, consistent company culture and an ability to evaluate and respond to emerging themes and concerns.

A signatory of the United Nations Global Compact since its launch in 2000, ST uses the Global Reporting Initiative (GRI) guidelines and indicators to report on its Corporate Responsibility performance. In this year’s Report, these are supplemented by additional internal indicators developed by ST to cover areas where formal reporting standards do not yet exist. The Report also shows which indicators serve to demonstrate the Company’s adherence to the 10 Principles of the UN Global Compact.

Social impact and performance

ST acknowledges its social commitments to numerous communities, including its shareholders and other stakeholders, its employees, local communities and society as a whole. The section of the Report dedicated to the Company’s employees presents performance indicators and initiatives in the key areas of attracting and retaining talent, diversity, training and development (including the activities of the ST University), internal mobility, reward and recognition and employee engagement and empowerment.

As a company operating in an industry that necessarily uses hazardous chemicals, ST is acutely aware of its responsibilities in this area. It is the only semiconductor manufacturer that has certified all of its manufacturing facilities worldwide to the OHSAS 18001 international standard for health and safety and in 2004 it certified four non-manufacturing sites to the same standard. The Report shows a reduction of more than 20% in the already low company’s incidence rate over the last two years and a cut of nearly 50% in the severity rate over the same period. This has resulted in a decrease of 43% in the costs related to injuries and illnesses between 2002 and 2004.

As one of the first companies to sign the UN Global Compact, ST is committed to advancing the principles of human rights within its sphere of influence. During 2004, the Company carried out a review of its human rights policies and procedures, finalized a number of human rights indicators for integration into its existing self-assessment tool, and consulted with two human rights NGOs on a number of internal projects relating to its performance in this area

“Corporate Responsibility, in the widest sense of the term, from minimizing our environmental impact to maximizing the job satisfaction of our people, is an integral part of how business must be conducted in the 21st Century and therefore it requires its own sophisticated tools that optimize how we communicate, how we listen, and how we react to feedback,” said Georges Auguste. “For this reason, we are constantly striving to develop and deploy the most advanced tools and methods for measuring the total impact our business activities have on everybody who is affected by them. Those impacted include our shareholders, who are entitled to expect a good return on their investment; our employees, who are entitled to expect rewarding careers that enable them to fulfill their potential within the ST community; and society as a whole, which is entitled to expect that we operate openly and honestly in a way that makes a positive contribution to every community in which we operate.”

ST is active in many different communities around the world and contributes to each of them through the charitable work of the ST Foundation, local community projects, its work with local suppliers and government, and the economic boost the Company provides for an area. There were 3,875 more people working for the Company in 2004 compared with 2003, despite the fluctuations and overall slowdown in the sector. In 2004, nearly half (48.5 percent) of its employees had worked for the Company for more than 5 years.

In 2004, ST received 21 Citizenship Awards that recognized its work with both local and wider communities: ST people volunteered an increased amount of their time to work on community projects, and the ST Foundation contributed to many different charitable causes. For example, following the Asian tsunami, the Company immediately donated US$50,000 to the International Committee of the Red Cross (ICRC), which was at the forefront of the response, while simultaneously launching a worldwide fundraising campaign among employees in which the Company agreed to match the amount employees pledged. As a result, US$900,000 was raised, which was also donated to the ICRC.

Environmental impact and performance

Financial responsibility and a passion for environmental protection continued to define ST’s progress in 2004, and the Company has won many awards for sustainable development. Most significantly, while increasing production, ST continued to reduce energy consumption per unit produced. In every area – including energy efficiency, alternative and renewable sources of energy, reduction of waste, water conservation, and the use of hazardous chemicals – ST found ways to improve on its previous impressive performance. In 2004, capital investments in environmental activities amounted to US$15.3M, or 0.75 percent of the Company’s capital investments, demonstrating once again that relatively small but wisely employed capital investments in this area can lead to substantial gains to all of the Company’s stakeholders.

ST’s objective is to measure its global impact worldwide and to do all that it can to become environmentally neutral, while continuing to deliver value to its stakeholders. In 2001, the Company began to use the Environmental Burden Method, which quantifies its environmental performance as a single ‘ecosystem,’ accurately estimating the potential impact of air emissions and waste water releases, rather than simply giving information on quantities in relation to local limits. In doing so, the Company has gone well beyond mere compliance with local regulations, which at times requires companies only to stay below relatively unchallenging limits. The Company surveyed all its manufacturing sites for the fourth time in 2004 to evaluate performance with respect to corporate goals.

Confirming its determination to continually renew and extend its commitment to environmental and social responsibility, ST is currently preparing the third edition of its Decalogue, which will not only consolidate the lessons and achievements of the past ten years but will also broaden its scope to encompass all aspects of EHS (Environment, Health and Safety).

The full report is available for download as a PDF file from ST’s website at www.st.com/environment

About STMicroelectronics
STMicroelectronics is a global leader in developing and delivering semiconductor solutions across the spectrum of microelectronics applications. An unrivalled combination of silicon and system expertise, manufacturing strength, Intellectual Property (IP) portfolio and strategic partners positions the Company at the forefront of System-on-Chip (SoC) technology and its products play a key role in enabling today's convergence markets. The Company's shares are traded on the New York Stock Exchange, on Euronext Paris and on the Milan Stock Exchange. In 2004, the Company's net revenues were $8.76 billion and net earnings were $601 million. Further information on ST can be found at www.st.com.