Corporate Environmental Report

General Principles and Management System

The ST Environmental Policy goes beyond the principle of Customer Satisfaction and aims for stakeholder satisfaction through initiatives and programs based on the ST Decalogue for the Environment. First published in 1995, the revised 1999 edition set even more aggressive targets with objectives up until the year 2010. (See page 39).

OUR VISION
To be recognized by all our stakeholders as a leader in environmental care by following our Environmental Decalogue and by exceeding regulatory requirements in both degree and timing wherever possible.

OUR MISSION
To strive for sustainable development in minimizing the impact of our processes and products on the environment by maximizing the use of recyclable or reusable materials and, where possible, adopting renewable sources of energy.

OUR POLICY
To aim for ambitious improvement of our environmental performance with a view to reducing our impact on the environment to levels which do not exceed those corresponding to the Economically Viable Application of the Best Available Technology (EVABAT).

Our objectives are:

	to ensure management commitment to a culture of environmental protection throughout the Company;
	to design products and processes to minimize their environmental impact from “cradle to grave” and to inform customers on recycling and safe disposal of ST products at the end of their life;
	to strive for continuous reduction of waste and pollution and in the consumption of water and energy, in a quest for sustainable development and as proof that ecological methods are both responsible and profitable;
	to benchmark ST against leading companies the world over, so as to equal or exceed the best performing companies;
	to apply the most advanced statistical and environmental tools to environment parameters so that environmentally responsible manufacturing processes are developed and implemented;
	to promote an open dialogue with workers and the communities in which ST operates; cooperate in a positive spirit with industrial and scientific communities, governments and non-governmental organizations to develop laws, regulations and guidelines for the continuous improvement within these communities, promoting a global and healthy competitiveness.

ENVIRONMENTAL MANAGEMENT
Environmental protection is a key element of our corporate culture. In a fast-changing world our global success depends on our ability to react quickly. We do this through independent operational units that are bonded by a strong common culture of Total Quality Management. Teamwork, the empowerment of individuals and a focus on continuous improvement, help us pursue our Decalogue goals across the Company.

ORGANIZATION
Environmental care is a high-level concern. The Corporate Environmental Steering Committee is chaired by our CEO. A Corporate Vice-President heads our Total Quality Environmental Management organization.

The Corporate Environment Support Group promotes a company-wide culture of environmental protection and the implementation of our vision, mission and policy. It defines the strategies enabling the Company to approach environmental neutrality by minimizing the impact of our processes, products and behavior. It also establishes the programs and the roadmaps to implement these strategies, with a special focus on greenhouse gas mitigation. The group promotes a culture of continuous improvement and knowledge sharing and controls the global implementation of the programs.

Locally, an Environmental Steering Committee and a Site Environmental Champion (SEC) are active in all environmental initiatives. They provide a link between the Corporate Environment Support Group and Site Management (Purchasing, General Services, for instance), as well as with other functions such as R&D and Operations.

Several strategic teams (Corporate Environmental Working Groups) ensure environmental consistency at ST sites around the world, providing guidance and support.

At the beginning of 2002, 16 of ST’s 18 manufacturing sites are EMAS validated and ISO 14001 certified. One recently acquired site in Tuas, Singapore will be certified in mid 2002 and our new plant in Bouskoura, Morocco which was inaugurated in 2001 will be certified next year. As a prerequisite to obtaining EMAS validation, every site prepared and published a detailed environmental statement outlining its consumption of natural resources and releases. All sites update this statement annually, as required by EMAS.

To maintain ISO 14001 certification and EMAS validation, all sites are independently audited. EMAS revalidation and ISO recertification (every three years) of all ST manufacturing sites was completed successfully before November 2000.

Our product design plant in Grenoble, France, was the first non-manufacturing site to achieve certification to EMAS and ISO 14001 at the beginning of 2001. There remains in Europe one more non-manufacturing site to be EMAS and ISO 14001 certified.

REGULATIONS
The Corporate Environmental Working Groups, assisted by external resources when necessary, closely monitor environmental regulations worldwide, in order to keep our environmental standards updated.

MEASUREMENT
Measuring drives behavior. Without measuring our performance, we cannot achieve excellence.
Environmental data from each site is measured against the relevant Decalogue target. This process is managed through the Environmental Database, which enables environmental indicators to be compared, site by site. Internal benchmarking and sharing of information are done through the dissemination of best practices.

Our Environmental Decalogue calls for cooperation with international organizations to define and implement eco-efficiency indicators. ST has worked closely with the World Business Council for Sustainable Development (WBCSD) on the definition of these indicators and their implemenation at ST, and we are measuring the environmental burden approach in several categories of air and water emissions.

In addition, we have developed a new tool to allow a fast, fact-based evaluation and a comparison among sites. The ratio of actual performance versus standard (where “standard” is typically the best-in-class achievement) is plotted on a radar chart to indicate the “footprint”. Obviously a footprint equal or below 1 means that we are performing well. The smaller the footprint, the better the performance. We apply two footprints: one for input (electricity, water, chemicals, paper, material intensity) and one for output (waste, global warming, PFC, VOC, acidification, eutrophication, oxygen demand, heavy metals). An example of a calculation relating to one of our wafer fab manufacturing sites is shown in the figures below.

ENVIRONMENTAL BURDER
We have begun to use a method - called environmental burden - to measure the potential of a group of substances that exert effects on a particular environmental impact category, such as acidification or aquatic eco-toxicity.

This is an informative and scientifically sound way of quantifying the environmental performance of a global company and to set and monitor targets to improve. It draws on developments in environmental science to estimate the potential environmental impact of emissions and wastes, rather than merely stating quantities. Our 10 impact categories are among those used in environmental management. We have chosen those that help us reduce our main impacts. Six categories deal with emissions to air and four with water.

AIR

	Global Warming: includes direct greenhouse gases emissions from our plants, indirect emissions from energy consumption and transport and reported in tonnes of carbon equivalence (MTCE);
	Ozone Depletion: deals with marginal releases of ozone-depleting substances and measured as Ozone Depleting Potential (ODP);
	Total VOC Emissions: reported as net volatile organic compounds emissions in tonnes;
	Atmospheric Acidification: total acidic emissions expressed in sulphur dioxide (SO2) equivalence;
	Photochemical Ozone Creation: deals with potential to form low-level ozone;
	Air Emission Toxicity: emissions of substances are considered with threshold limit values below 3 ppm, expressed in Phosphine equivalent.

WATER

	Aquatic Oxygen Demand: total Chemical Oxygen Demand (COD) released to water in mass;
	Eutrophication: deals with Phosphorous and Nitrogen emissions;
	Heavy Metals: total heavy metals emissions;
	Aquatic Eco-toxicity: includes mass emissions of various metals expressed in copper equivalent.

We have surveyed all our manufacturing sites to establish our overall burdens. These are summarized in the table below.

AUDITS
Corporate Environmental Audits are conducted every 18 months at every site. Each audit ends with an action plan and scoring of the audited site. Audits are verified during EMAS and ISO 14001 certifications.

SUPPLY MANAGEMENT
Our supplier audits include questions on environmental performance, which account for 10% of the total score. We also strongly encourage our suppliers and subcontractors to become EMAS validated or ISO 14001 certified and assist them to do so.

Our goal was for 80% of our key suppliers to be certified to either of these standards by the end of 2001. We have met 87% of our goal and evaluation of new suppliers is ongoing.

ENVIRONMENTAL AWARENESS AND TRAINING
Training is provided at each site to increase the environmental awareness of employees and outside contractors. A variety of training modules covers:

	key environmental issues;
	how we affect the environment;
	how ST achieved its environmental lead in its sector.

Training course include:

	a detailed commentary on the Decalogue and the site’s environmental statement;
	an overview of the Corporate and Site Environment Manual;
	an explanation of the role and responsibility of each new employee in the site’s environmental management system;
	a tour of the site’s main environmental facilities;
	an environmental session in the induction training for new employees.

Local trainers, with support from the Site Environment Champion, offer specific instruction on the control of the potential environmental effects listed in the relevant site register.

This applies to all personnel operating, supervising, monitoring or maintaining environmental infrastructure, such as wastewater treatment, scrubbers, chemical and waste stores. Employees working with or around chemicals are trained in the use of protective equipment and how to respond to incidents.

The training is part of our job certification program. ST personnel are given a yearly refresher course or whenever there are major changes. In addition, an advanced environmental awareness seminar on a CD-ROM, designed and developed at ST University has recently been updated and is available to ST’s suppliers and customers.

INVESTING IN THE ENVIRONMENT
We believe that in the long term companies investing in environmental protection have a significant advantage over those who delay. This is because any investment will be largely repaid if production processes are pollution free and the use of natural resources and energy is reduced.

We have already proved that business can be both environmentally responsible and profitable. None of our investments in energy conservation has taken longer than three years to pay back with an average of two years. Environmental measures represented more than 2% of ST’s capital investments in 2001, roughly in line with the previous year.

ENVIRONMENTAL ACCOUNTING
It is important to fully understand the costs related to environmental activities - to evaluate the necessary investments and calculate the cost of environmental protection. We have started to use an index we devised to get a more accurate picture of our environmental efficiency and to correlate our economic and environmental activities.

There are no standard definitions for environmetnal accounting, and we are therefore moving in stages. We have started our evaluation using data from 2000, splitting the costs into two categories: pollution prevention, including conservation and recycling activities; and environmental management. This information will enable us to be more efficient in our understanding of the costs, to improve and to be more open about our performance.

Total environmental costs for 2000 were around $29 million, (about 0.97% of the total production value). The 2001 figure amounts to M$30 (1.1% of the total production value).

Environmental conservation and recycling led to these major savings:

B	2000 M$	2001 M$
Energy	38	5
Water	8	4.5
Chemicals	31	19.5
TOTAL	77	29

The 2001 figure reflects the dramatic downturn in the semiconductor market during the year.

PAYBACK FROM ENVIRONMENTAL INITIATIVES
Increasingly, investors - including banks and socially-responsible funds - are choosing companies that deliver an excellent environmental and financial performance. Good environmental and social performance indicates the company is actively managing its reputation and is forward looking. As well as attracting investment, environmental improvements can help us save money through efficiency gains.

ST continues to be highly ranked among the leading companies pursuing sustainability. In the semiconductor industry, the Dow Jones Sustainability Group Indexes (DJSGI) rank us as leader in the integration of sustainability in a comprehensive Total Quality Management System.

ST is represented in the following main financial indexes based on sustainable development and ethical issues:

	SAM: DJSGI created in 2000, including about 200 companies on a worldwide basis;
	ASPI: Arese Sustainable Performance Index created in June 2001, including 110 Euro-zone companies;
	FTSE 4 GOOD launched in July 2001. We are present both in FTSE 4 GOOD Global 100 index and in FTSE 4 GOOD Europe 50 Index.

STAKEHOLDER DIALOGUE
We have a long history of being good community citizens. We want our neighbors to know about our environment successes and challenges. Good community relations - built on excellent performance, genuine dialogue and trust - bring benefits to our stakeholders and to our Company.

As a leader in environmental issues, we are better placed to attract young talent and the top human resources we need to maintain our performance in this fast-moving business.

Since 1994, ST has coordinated the European participation in the International Semiconductor Conference on Environment, Safety and Health sponsored by the Semiconductor Industry Association (SIA), the European Semiconductor Industry Association (ESIA), the Electronic Industry Association of Japan (EIAJ), and the Korean Semiconductor Industry Association (KSIA).

ST is also on the Executive Committee of the World Business Council for Sustainable Development (WBCSD), and the World Semiconductor Council ESH (Environment Safety and Health) Task Force where priority projects include reductions in perfluorinated compound (PFC) emissions, energy use and chemicals. We are also involved with a wide range of national and international trade and non-governmental organizations worldwide.

PROBLEMS AND CHALLENGES
At our Phoenix site in Arizona, an overflow at the reverse osmosis water treatment plant was diverted to drywells. The water did not contain any harmful or regulated chemicals. We reported this and the State authorities ordered us to do a study of the drywell, including samples of the soil and water. Although no chemicals of concern were found we still received a violation for the practice, because our site does not have a permit to discharge industrial water to a drywell. We have taken measures to ensure that the site can handle such overflow in the future.