Opinion of the Independent Visiting Committee

The Reality of Climate Change

Climate change is an overriding concern. It is likely to result in more frequent and extreme droughts, storms, and floods.
It will generate considerable health challenges; it may well lead to serious conflicts; and will certainly have increasing consequences for business activity.

The urgency of combating its dangers will become an ever more insistent demand upon governments, the European Union, and international organizations. We can expect the pricing of carbon emissions and rising price of energy to drive up costs and increase demand for efficiency savings. This will also have significant implications for the transportation sector in terms of vehicle efficiency, fuel prices and public transportation provision. All will lead to additional pressures and opportunities for Veolia's operations and services. Effective management of its own and its clients' GHG emissions is therefore essential.

To this end, Veolia will need to adopt both mitigation strategies and adaptation measures to take full advantage of its role in the fight against climate change. Some of those mitigation measures already exist but new technologies will be needed as will the development of the means to transfer and broadcast them. Veolia will want - and need - to play a central role here. This should involve strategies, systems, and services that support adaptation to climate change for Veolia's own operations, clients, and stakeholders. Critical areas include infrastructure, information, and capacity of stakeholders to respond to the environmental as well as the human dimensions of a changing climate.

The Management of Resources

The human ecological footprint has tripled since 1961 and now exceeds the world's ability to regenerate by 25%.
The global population is expected to reach 8.1 billion by 2030 and growth in world GDP point towards higher standards of living particularly in developing countries. Inevitably, therefore, Veolia will be faced with global competition for scarce and increasingly expensive resources, particularly energy and water, and will therefore need to substantially reduce its own ecological footprint. However, its expertise and experience puts it in a strong position to handle these problems and turn them into opportunities.

At the same time, consumer preferences and government regulation are changing in response to environmental concerns.
Local authorities are becoming aware of these issues and of their responsibilities, though Veolia must also overcome weak governing processes that require it to engage effectively with citizens and opinion formers outside formal political structures.
Climate change will be an accelerator of change.Veolia will need to keep ahead of the pack and be an exemplar of a company, that, by reducing its own emissions and developing lower-emission products, will gain competitive advantage. The stakes are high and their measure is perhaps best exemplified by the opportunity in the energy service markets, which alone is now estimated to be worth €5-10 billion.

Energy

Primary energy demand is expected to increase by more than one half by 2030 and fossil fuels will account for 83% of that overall increase. It is therefore a business necessity that Veolia reduces its own and its clients'dependence on fossil fuels.
Reducing energy consumption is a key factor in minimising carbon emissions and Veolia needs to set appropriate targets around these, e.g. metric tons of CO2 per thermal MWh produced.
One solution is to explore more technical options for Veolia's buildings including efficient appliances and heating and cooling devices, improving insulation and installing active and passive solar energy. There are opportunities provided by CHP and decentralised energy.
Veolia is also well positioned to move into second and third generation biofuels, and has the necessary expertise to promote the scaling down of technologies to produce biogas for rural communities in developing countries.
Veolia could also look to provide carbon offsetting opportunities for its clients.

Water and sanitation

Water management, particularly reducing consumption and pollution, is an important challenge.
The effects of climate change make that inevitable. Conflicts based on access to water will multiply, fuelled by food insecurity and health concerns. The world's poor will be particularly vulnerable to the disruption caused by changes in the climate.
The Group must become the natural choice for modern water services with the lowest possible water footprint. It must also show that it has grasped the urgency of the problem and is ready to meet the pace of change.

In this regard, Veolia should seek to influence the creation of environmentally and socially effective pricing systems and regulations. It should also emphasise the development of water saving, replenishment and sustainable supply initiatives.Veolia could look to develop more cost effective processes for separation of black and grey water, pre-treatment or limitation of industrial wastes, and efficient smallscale wastewater treatment, involving lower capital costs and infrastructure for wastewater management in developing countries.
Sanitation and waste management in particular are key issues for developing countries.
2008 is the International Year of Sanitation and all the indicators show that this component of the Millennium Development Goals will not be met. This calls for urgent global leadership from businesses such as Veolia operating in this sector.

Waste

Veolia's role in the waste industry should lead it to pioneer innovative ways of reducing GHG emissions through landfill and incineration gas recovery and improved landfill practices, together with state of the art waste to energy systems and anaerobic digestion.
The company should also seek to lead in waste minimisation, recycling and re-use and in the diffusion of these mature technologies into developing countries.

The Challenge of Development

Deprived communities in developing countries will be faced with some dramatic changes over the next decades.
Veolia's position in these countries, and particularly its exposure to regions experiencing very rapid urbanisation, will provide opportunities for Veolia to play an active role in contributing to social and economic development.
It will need to adapt its business model for developing countries and contribute to global awareness raising, behavioral changes and development of innovative solutions. A key area of focus will be the long term adaptation of client communities to climate change and to the formulation of disaster risk reduction strategies.
"Doing business with the poor" will be an important growth area for Veolia.

Regulation

Veolia's strong presence in the European Union means that it is close to the heart of an organization that, in many ways, is setting environmental standards for the world. These are the standards increasingly accepted in developing countries and hugely influential in the standards being prepared in the US.
The company therefore needs to play a proper part in influencing the EU regulatory framework to ensure that its targets are as challenging as possible while its requirements are cost effective and unprescriptive. In engaging actively in this process of public standard-setting, Veolia must ensure that it subscribes to the highest standards of transparency.

Technology Opportunities

The market for efficiency innovations is substantial and Veolia should have a clear strategy for ensuring that it makes the most of this potential. In particular it should be at the forefront of finding and investing in simple, ways to help the consumer reduce their water and energy use and their production of waste.

By adopting a long-term, cross-sectoral vision, integrating environmental and social concerns and involving all stakeholders in business activities Veolia will be in a position to further lead by example, create a strong corporate identity and anticipate regulation and societal expectations.

We believe Veolia has the expertise and the vision to play a major role in tackling some of the world's great challenges.