Philips Corporate Strategy in Response to Climate Change

Dr. Wolfgang Richter

25th October 2007

Philips Corporate Strategy in Response to Climate Change

General Manager Governmental AffairsPhilips GmbH

2Dr. Wolfgang Richter, Philips GmbH

Agenda

1. Sustainability as part of Philips global strategy

3. Energy saving and business opportunities through efficient lighting technologies

2. Marketing / Communication: www.asimpleswitch.com


Agenda









AwarenessPolitical, Corporate & Public Awareness


Economically viable

Socially responsible Environmentally sound

The role of business in a sustainable world

Advancedmarkets

Emerging markets

Developing markets

Product development/ technology


Paradigm changes


Sustainability is part of our heritage

Ever since our company was founded, 116 years ago, we have dedicated ourselves to improving the quality of life through meaningful innovation.

Anton and Gerard Philips, 1891



Philips recognized as sustainable entrepreneur


Huge investments in green technologies

Investments of about 400 Mln Euros for R&D of green lighting solutions within last 5 years

Extension of SSL-business

Significant investments in OLED-Technology

Philips is setting the pase in the industry

Wasserreinigung mit UV-Licht

LED für schönereStädte

LED für angenehmereUntersuchungen


Green products: creating value

• Green Focal Areas:– Energy consumption– Packaging– Hazardous substances– Weight– Recycling and disposal– Lifetime reliability

• Turnover of Green products EUR 4 billion in 2006


Communicating to our customersThe Philips Green Logo

• Consumers will find the Philips green logo on our most environmentally friendly products, enabling them to make the right environmental choice.

• Green logo products have been certified by external auditors that they are more than 10% more efficient than other products on the market within a given product category.

• The Green logo programme enables consumers to make informed decisions about Philips products within the context of their environmental considerations.


Activities in „Green“

• Lightmaster

• Eco-Calculator (C02, €)

• Energy-Efficiency-Projects with the cities of Hamburg and Bremen

• Projects with municipalities

• Cooperation with energy suppliers

• Activities as part of the European lighting industry to force phase out of inefficient lighting solutions (incandescent lamps, concentinal gears,

high-pressure mercury lamps…) via European directives (Eco-Design and Energy Service Directive)

• …


LightMASTER successfully used by…


Projektbeschreibung

• Pitch with luminaires• Inclusions of TL-D Eco lamp• 18,883 integrated Lampen• Each room is recovered in the

LightMASTER‘s strucutre

General Information

• Europe‘s state-of-the-art hospital

• 500 rooms• 676 beds• New building of 2 years• Asklepios Chain: 21,000 beds• 15 operating rooms• 35,000 stationäre und• 40,000 ambulant

cares/treatments

LightMASTER – Best Practice Project:Hospital: Asklepios Clinic Barmbek (Hamburg)


Energy Savings / Environmental Aspects

Energy costs kwh CO2 (kg) Car (km) Energy costs kwh CO2 (kg) Car (km)

5 years 1,147,896 €12,754,405 7,652,643 47,829,017 1,040,900 €11,565,560 6,939,336 43,370,852

1 year 229,579 € 2,550,881 1,530,529 9,565,803 208,180 € 2,313,112 1,387,867 8,674,170

1 month 19,132 € 212,573 127,544 797,150 17,348 € 192,759 115,656 722848

Costs % kwh CO2 (kg) Car (km) Trees p.a.

5 years 106,996 € 1,188,844 713,306 4,458,165 35,665

1 year 21,399 € 237,769 142,661 891,633 7,133

1 month 1,783 € 19,814 11,888 74,303 594

Effort for lighting

9.3%

Before renovation After renovation

Savings through more efficient illuminants


Outdoor: Street Lighting - a global success

• CosmoPolis globalisation projects today in Anyang City, Seoul, Shang Hai, Singapore, Jakarta, Perth, Melbourne, Panama City, Kiev and Recife

• CosmoPolis European sales spread over 35 OEMs design-inover 75 luminaire families availableover 50 european cities applied CosmoPolisover 50,000 systems currently installed


Best Practice Outdoor-Projects around the globe

Milan, Italy Vechta, Germany An-yang city, Korea

South Tyneside, UK Madrid, SpainHolbæk, Denmark


Ambisound SoundBar Home Theatre System HTS8100Energy 50% less than closest competitor

Green Flagships: green products in every PD

Cosmopolis, energy efficient street lighting

Achieva 1.5 T R2 MRI system: Smarter products with lower

operating costs

2GB* Flash audio video player SA5125

42” LCD Widescreen FlatTVwith Pixel Plus 2 HD 42PFL7562DEnergy 36% & Packaging 15% less than closest competitor


Agenda





Launch: in July 2007


Tracking user participation

I II III IV

Clicked on ad Pledge to switch Register as user Invite friends

I am interested I participate I care as a participant I promote the cause, I am an ambassador

# of clicks-on logo’s-On banners-On video ads-on emailed links

# pledges# switches

# registrations # emails out-total of all email addresses that were left on the site by registered users

0

# of impressions-Logo’s -Banners-Video ads-Received emails

Exposed to ads

I saw / could have seen

535 mioimpressions

800 kclicks

845 kpledges

3,3 mioswitches

16kregistrations

14kinvitations


Comparing to other ‘switch’ sites we have attracted more people to pledge/switch

Nr. Of people making these pledges ~ 650.000


Live Earth – The Media Event for the Environment

• 7 concerts…at ecologically responsible & politically important venues

• 6 continents… each with its own environmental concerns

• 150+ artists…performing in support of a global call to action

• 60+ films…& PSAs messaging critical environmental issues during the show

• Live Earth’s “SOS” online community…engaged by rich content & interactivity before and after the concerts

• 2 million audience members… across all Live Earth shows will be inspired by the event experience

• 2 billion viewers…mobilized to take action with corporate partners


Awareness campaigns:Mr. Al Gore recognizes leading role of Philips

Dr. Wolfgang Richter, Philips GmbH

New legislation:Climate Change is now at the top of political agenda

BRUSSELS EUROPEAN COUNCIL8/9 MARCH 2007 PRESIDENCY CONCLUSIONS

The European Council: invites the Commission to rapidly submit proposals to enable increased energy efficiency requirements on street and office lighting to be adopted by 2008 and on incandescent lamps and other forms of lighting in private households by 2009;


Partnerships will change the business models• Utility Funded Schemes (Public Energy Suppliers)• Exploring public & private funding for street lighting

– PFI: Private Finance investment– PPP: Public Private partnership

• Carbon Trading methodology

Partnerships: PPP contract with VINCI – Example: City of Rouen

• 120 000 inhabitants (Area: 450 000 inh.); Normandy Regional Urban Pole

• VINCI’s PPP contract amount: 100 M€ , a large 18-years Design, Build, Finance, Operate & Maintain contract in the area of:

– Public lighting (15 000 public lighting points)– Wireless local lop in the old center– Traffic management equipments


PES Business: Two ways to the customer

Cooperation Retailer/PES Public Energy Supplier (PES)distribution partner direct distribution

Domestic Household


New Product Concept: MASTER TL-D Eco

• Simplicity Change of lamp

• Result:>10 % energy savings

TL-D ECO

TL-D Super 80 (840/865)

58W 51W

36W 32W


TL5 Campaign, WWF partnering

Campaign:

• July - Mid-September

• Throughout Europe

• The NGO WWF as campaign partner:

Philips donates 5Euro-Cent per TL5 lamp sold

The new lighting product: MASTER TL5 Lamp


Solid State Lighting business development towards general lighting

Special applications

(traffic lights, backlights, automotive backlight etc.)

Projects

(outdoor, stage, etc.)

Customized general and special lighting

(‘design-in’, e.g. surface/wall washing)

General lighting mass market

(new LED products, ambience, retrofit lamps)

1995 2000 2005 2010

Innovation Philips


Agenda

1. Sustainability as part of Philips global strategy & Green Flagship Approach




How much energy can we save?

Photograph: NASA


Power consumption per market segment

Total power use per segment

27%

10%

5%23%

15%

11%

9%Homes

Retail

Hospitality

Office

Industry

Outdoor

Other

source: GLiMF 070118


• Electrical drive systems 39 Million t CO2

• Office appliances, in private and

service sector 34 Million t CO2 Lighting 24 Million t CO2

• Consumer electronics 14 Million t CO2

• Heat production 12 Million t CO2

• Domestic appliances 12 Million t CO2

• Commercial heating, ventilation, air condition 8 Million t CO2

Kyoto-Target: radical reduction in CO2-emission

Lighting14%

Others86%

Share of electric powerconsumption in Europe

This target can already be reached by using energy efficient lighting solutions in domestic households within the EU:

Annual savings of 25 Mio t CO2 possible !** Calculations based on:10 Euro-Cent/kWh370g CO2/kWhBy using innovative technologies

Kyoto-target for the EU


Saving potentials for Lighting

More than 30 % of all streets in Europe are still equipped with old, inefficient technology from the 1960s - installed over 20 years ago

Saving potential cost savings p.a. energy savings p.a. ecological savings p.a.

3 billion €* 15 power plants à 2 TWh 10 million tons of CO2Street/City

6 billion €* 30 power plants à 2 TWh 20 million tons of CO2Office

10 billion €* 35 power plants à 2 25 million tons of CO2Private Households

More than 75 % of office lighting in Europe is notstate-of-the-art

More than 50 % of lighting is old, inefficient technology

* Calculation based on:10 Euro-Cent/kWh370g CO2/kWhBy using the most innovative technology


Calculation based on a CO2-emission of 420 g/kWh

The technologies do already exist

80%


• More than 50 % of lighting is old, inefficient technology

• Example street lighting: 3 % switch rate p.a.• Example office lighting: 6 % switch rate p.a.

• => switch takes > 1 Generation!

… but switch rates are too low…• Lacking awareness of economical and ecological potential

• Technical uncertainty

• Shortage in financing

• Contractual commitments

Reason for slow switch over rate


We focus on Outdoor, Indoor and Home lighting Potential Energy Savings through Energy Efficient Lighting

Segment ProductRealistic Savings

Ambitious Savings

HID 25% 35%

Office & Industry TL 20% 35%

Homes GLS 50% 70%

40%

SegmentMain

Product

Potential savings in segment *

HID 35%

Indoor: Buildings TL 35%

Homes GLS 70%

Lighting total

Outdoor: Street lighting

Biggest opportunity Professional applications

% of total CO2

emission18%

45%

25%

* Savings takes % of segment that uses old technology into account


Outdoor: street lighting

• 56 Mio street-lighting light points in Europe

• 18 Mio still using 1930`s technology– High-Pressure Mercury Lamps (HPL)

• Alternatives available:– High Pressure Sodium– Ceramic Metal Halide (Cosmopolis) 100 lm/W

50 lm/W


0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

0,10 0,12 0,16 0,2 0,24

Energy Price

Pay

bac

k

Pay back in years; systemrenovation

Pay back in years system +controlled dimming

Pay back in years; lamp&gearonly

Number of lamps 100 Burning hours 4000

• Acceleration of renewal rate at shorter pay back periods• Pay-back times are becoming more attractive with increasing energy prices

Outdoor: street lighting - Pay Back improvementHigh Pressure Mercury 125W vs Cosmo White 60W


We take initiatives to increase switch-over ratee.g. street lighting: current changeover rate 3% per year; office lighting 7%.

Acceleration of switch over via:

• Awareness Campaigns (public / private)

• New legislation (e.g energy-certification for buildings)

• Partnerships (public / private / NGO`s / utilities)

• Innovation of product portfolio

Hurdles for target groups• No pressure to switch• Lack of awareness• Investment (initial; renovation)


Summary: New, higher quality, lighting technology available

This energy saving technology offers a unique triple win

1. Users / tax payers save costs & have better light quality

2. The environment benefits from lower energy/CO2-emissions

3. European competitiveness is being strengthened

A triple effort needed

1. Accelerate the switch to new energy saving lighting solutions2. More awareness and partnership between stakeholders including

financial institutions3. Implement new legislation


Thank you for your attention!Thank you for your attention!


Back Up

56Dr. Wolfgang Richter, Philips GmbHPage 5ELC ref.nr. 070531 DIM Strategy

Time Phased Approach Phasing out inefficient

incandescent lamps

2009 2011 2013 2015

Phase 1 – (>100W single coil & long life)

Phase 2 – (75W+)

Phase 3 –(60W+)

Phase 4 –(25W+)

50%

Total sales volume in EU27 1.8 billion inefficient incandescent lamps per annum.

Quantity of lamps in pieces

Years

100%


B2B promotion proposalPersonalized email, application area specific leading to a website. Offering chance to win tickets “Make a simple switch and win”

Product depends on target group, e.g. Outdoor customers this could be CosmoPolis

Personalized


Venues


Venues

COPACABANA BEACH

GIANTS STADIUM

AUSSIE STADIUM

TOKYO DOME


Venues

WEMBLEY

PEARL TOWER


Venue Capacity

City Venue Capacity

Sydney Aussie Stadium 50,000

Tokyo Tokyo Dome 50,000

Shanghai Pearl Tower 5,000

Johannesburg Marapeng 7,000

Rio de Janeiro Copacabana Beach 1,000,000

London Wembley 60,000

New York City Giants Stadium 52,000

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Philips Corporate Strategy in Response to Climate Change

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