Caterpillar’s Commitment to Sustainability: Doug Oberhelman's Remarks from the 2014 Annual Shareholders Meeting

In remarks at the Caterpillar Inc. Annual Shareholders Meeting today, Chairman and CEO Doug Oberhelman emphasized Caterpillar’s commitment to sustainability, providing multiple product, operational and philanthropic examples of that commitment in action. The meeting took place at Caterpillar’s flagship U.S. remanufacturing facility in Corinth, MS. Over the last 10 years, through remanufacturing, Caterpillar has returned more than 500,000 tons of material to productive use, material that might have otherwise been scrapped or sent to a landfill. Read the full text of his remarks here.

Remarks by Chairman and CEO Doug Oberhelman
Annual Shareholders Meeting
Corinth, Mississippi
June 11, 2014

“Caterpillar has been on this sustainability journey for decades and won’t ever stop. We will continue to build, develop and power the world, and make sustainable progress possible.”  

Since we’re here at our flagship remanufacturing facility, I’m going to take this opportunity to talk about Caterpillar’s commitment to sustainability.

We’ve had this remanufacturing facility in Corinth for more than thirty years. But what do we mean by remanufacturing? Is it just another term for recycling or rebuilding?  No, not at all – it’s much more extensive.

Remanufacturing is taking a product or part – from a crankshaft to an engine, to a water pump to a final drive – that’s at the end of its life. We completely disassemble the old, down to its “core” material, and it loses all of its original product identity.  Then we use our advanced, proprietary salvage techniques to clean and inspect that core.  And then, depending on what’s needed, we machine, clad, weld, metal spray and/or engineer it, and update the technology.

Remanufactured products and parts are as strong, as advanced and as useful to the customer – with the same warranty -- as if they had bought them brand new.

Over the last ten years, our U.S. and overseas remanufacturing facilities have returned more than 500,000 tons of materials -- materials that might have otherwise been scrapped or gone to a landfill.

How much is 500,000 tons? Our largest bulldozer, the D-11, weighs 151 tons -- so it’s equivalent to about 4,300 D-11s.  Or think about the Empire State building -- it weighs 365,000 tons.  We’ve returned that amount, plus another 135,000, and we’ve kept over 1,000,000 tons of greenhouse gas out of the atmosphere through remanufacturing alone.

Those numbers are pretty impressive.  We can be very proud of our sustainability record, and we’re going to keep improving.   

We’ve continued to make our operations safer. We’ve got a great example right here -- the Sawyer facility core processing team has gone seven years with zero injuries.  That’s a great record.  Congratulations and let’s keep it up.

World leadership in safety and remanufacturing are two examples of how sustainability is integral to Caterpillar, and it has been ever since our company was formed promising to deliver durable and reliable tractors.

So, why is it important to talk about sustainability now?

• It’s important because the world’s middle class is projected to more than double from 2 billion today to 4.9 billion by 2030.  They will expect – and deserve - higher standards of living.  
  
• It’s important because nearly one billion people in the world today lack access to clean water.
  
• It’s important because energy demand is expected to double between now and 2050.
  
• It’s important because Caterpillar is uniquely positioned to help meet these demands for energy, water, and higher living standards.  
  

And if we can help meet those needs, and meet or exceed shareholder expectations at the same time -- then, of course, we should.  And we all win.

We’re best known for making huge machines, so sometimes it’s hard for people to make the connection between our business and our commitment to sustainability.

To help make that connection, I can tell you that producing sustainable solutions has long been part of our Code of Conduct, and that earlier this year we recognized Sustainability as one of our core values.  

And I can tell you about the words we use to talk about sustainability.  

But, I think it will be more meaningful to tell you about what we’re actually doing.  

Sustainability is often defined as a three-legged stool, and each leg -- economic, environmental and social -- has to be equal, or the entire system will be out of balance.  

Let’s talk about Caterpillar sustainability one leg at a time – starting with the economic.  

There has to be a solid business case for sustainability.   

That’s an easy one, because the road to progress -- begins with a road.  

Caterpillar machines grade and pave those roads.

Caterpillar power systems light those roads, and provide back-up power for emergencies.  

Caterpillar engines power the ships and locomotives that deliver food, medicine and supplies to the four corners of the world.  

Caterpillar products support the oil and gas industry as they develop new fuel sources to meet the demands of a growing world population –seven billion people today, and nine billion by 2050.  

Progress requires access to energy, and here’s one example of how Caterpillar is lighting the world.  In Western China, Solar turbines and Cat generator sets transport nearly six billion cubic meters of pure natural gas annually across one of the highest pipelines in the world, more than three thousand meters above sea level, from the Three River Headwaters Region to thousands of rural and urban homes.

Everything we invent, design and manufacture has one primary purpose: To help our customers succeed. Our products help our customers get the job done, with the lowest owning and operating costs possible.  

Our customers want to reduce costs, and they also care about sustainability. Put those two together and we have customers demanding fuel efficiency and lower emissions.

We’re meeting their needs now, and will do even more in the future.  

Our customers can turn to our Job Site Solutions team for site-specific fleet and management services. The Cemex Lyons cement plant limestone quarry in Colorado did just that, and now the site is using nearly 8% less equipment but productivity has increased.  They’re using our latest Tier 4 machines, with extremely low emissions and clean diesel engines. Fuel efficiency has improved over 20% and -- with fewer machines and a more systematic site operation -- dust emissions are down considerably.

Just think about the reduced carbon footprint that comes with a 20% increase in fuel efficiency.

More than 18% of our revenue comes from offerings with significant sustainability benefits, like the 300 Combined Heat and Power operations producing power around the world right now.  These operations reduce greenhouse gas emissions by over three million tons a year compared to conventional energy sources. That’s equivalent to removing 600,000 cars from the road.

Many of our products are fueled by alternative energy sources, including gas collected from landfills, livestock and mines.  

Waste Management, Inc. relies on Caterpillar to produce energy from landfill gas to provide electricity to hundreds of thousands of homes.  

A customer in Australia called on our expertise for a renewable energy solution, and now they’re using some biodiesel fuel in place of traditional diesel for their mobile equipment fleet.  

And I can’t leave Cat Financial out of our sustainability story -- because Cat Financial provides financing for renewable energy, biogas and cogeneration projects throughout the world.

I can’t leave out Cat dealers, either.  They are not only our strongest competitive advantage; they are sustainability innovators, too. They rebuild products and recycle filters, parts and batteries every day.

And with the leadership of the Caterpillar Enterprise System Group, we are engineering an innovative, end-to-end Lean value chain, to continue to reduce defects, improve quality, use fewer resources -- and use those that we do, more efficiently.

This leads us to the second leg of sustainability – environmental – the efficient and responsible use of resources.  

Let me give you a few more numbers.  Since 2006 our operations have --

• Reduced energy intensity by over 25%;
• Reduced water use intensity by over 35%; and
• Reduced greenhouse gas intensity by over 35%.
  

We are investing in more energy-efficient operations all over the world.

By improving their air compression system, our Thiruvallur, India facility reduced power usage by over 900 kilowatt hours per day, and greenhouse gas emissions by more than 200 metric tons per year.

Almost 20% of the energy we use in our operations comes from renewable sources, including our Desford, England facility, which relies on wind farms as its primary source of electricity.

Over one six month period alone, sustainability innovations at our Athens, Georgia facility saved over 2,000,000 gallons of water, 16,000 pounds of waste and almost 6,000,000 kilowatt hours of electricity. That’s equivalent to preventing almost 5,000 tons of greenhouse gas from entering the atmosphere.

We leverage innovation and technology to reduce resource consumption, emissions and their associated costs.  In fact, sustainability is an intended consequence of innovation at Caterpillar.   

Right here, Corinth leads our global salvage technology efforts, finding new ways to give new life to old materials.

Dynamic Gas Blending and High Pressure Direct Injection offer great examples of dual fuel engine technologies that will burn both natural gas and diesel in high horsepower applications.

We’re very proud of our breakthrough machines, like the 336E H Hydraulic hybrid excavator, the 966K XE wheel loader and the D7E bulldozer.  

And we will continue to unveil machines that meet EPA mandated Tier 4 emissions.  These machines not only run cleaner, they’re more fuel-efficient and offer historic, high reliability.

Those are a few examples about Caterpillar and two of the three legs of sustainability. Now, some details about the third leg: Social.

I was glad to recognize the Sawyer facility team’s zero-injury record and we have seen strong results across the board because of our focus on safety. Since 2003, our recordable injury frequency rate has decreased by 90%.

We’ve focused on work processes and tools – everywhere -- but here’s an example from Caterpillar Brazil.  By addressing ergonomic risks, the Piraciacaba team reduced employee-reported discomfort by 69% and absentee hours by 64%.  Now, not only do we have a healthier workforce in Piraciacaba, we are saving thousands of dollars per year.

Caterpillar has more than 110,000 employees, speaking at least 17 different languages.  We know we must continue to improve our diversity and inclusion efforts. We’re using the survey results from our first inclusion survey to enhance diversity, and ensure all employees feel they are included at their workplace.

And one of the oldest and strongest parts of our sustainability commitment is our support for the Caterpillar Foundation.  Since 1952, the Foundation has invested over $550 million to help create opportunity and prosperity.  

Just since 2010, the Foundation has committed over $28 million to projects in Africa and the Middle East, including $4.5 million to provide training and employment opportunities to over 5,000 unemployed youth in the Middle East.  In Iraq, the West Bank and Gaza this program addresses the key constraints facing young people, like quality of education.  

Over half of current Foundation investments are outside the United States, and are focused on girls and women.  

The Foundation is focusing there, because when a girl is educated, she’s more likely to be a civic leader. She’ll reinvest her income at a higher rate than a boy will, and she’ll make sure her children are educated, too.  

Think about this –when school attendance by girls increases 10%, a country’s GDP can increase by 3%.  

That’s why the Foundation is focusing on girls and women.

I could talk for another hour, at least, and cite example after example of how sustainability drives Caterpillar, and how that commitment creates shareholder value.  

I haven’t had time to talk about –

• Our research and development effort on carbon capture and storage;
• The autonomous mining trucks and Cat MineStar at work in Western Australia;
• Or that Caterpillar was the first multinational company to receive the Best Employer Award from the China CSR Summit.  
  

More facts and examples are in our 2013 Sustainability Report and Year in Review.  And they are also in our first-ever report on Sustainability in China, which we published earlier this year in both Chinese and English.

Caterpillar has been on this sustainability journey for decades and won’t ever stop. We will continue to build, develop and power the world, and make sustainable progress possible.

Caterpillar is -- and will remain:

• A company our employees are proud to work for,
• A company our customers are proud to do business with; and
• A company our shareholders are proud to own.