2011 Annual and Sustainability Report Innovation ......2011 Annual and Sustainability Report Innovation – Customer focus – Efficiency Social responsibility – Innovation – Customer

2011 Annual and Sustainability Report Innovation – Customer focus – Efficiency

Social responsibility – Innovation – Customer focus – Efficiency – Social responsibility

Innovation – Customer focus – Efficiency – Social responsibility – Innovation

Customer focus – Efficiency – Social responsibility – Innovation – Customer focus

Efficiency – Social responsibility – Innovation – Customer focus – Efficiency – Social

responsibility – Innovation – Customer focus – Efficiency – Social responsibility











Efficiency – Social responsibility – Innovation – Customer focus – Efficiency

Social responsibility – Innovation – Customer focus – Efficiency – Social


Veolia Environnement

Profi le

Veolia Environnement off ers a complete range of creative solutions for the environment: supplying water and recycling wastewater; collecting, treating and recovering wastes; supplying heat and cooled air; and optimizing industrial processes.These solutions are designed to fi nd a balance between human development and environmental protection. In 2011, Veolia Environnement’s 330,000 employees around the world provided 103 million people with drinking water and 73 million with wastewater services, managed 60 million metric tons of waste and met the energy needs of industrial, municipal and individual customers at 120,000 facilities.Innovation, effi ciency, customer focus and social responsibility are strong values for Veolia Environnement and keys to its success.

28 OUR ACTIVITIES

31 Interview with Jean-Michel HerrewynChief Executive Offi cer of the Water Division

39 Interview with Jérôme Le ConteChief Executive Offi cer

of the Environmental Services Division

47 Interview with Franck LacroixChief Executive Offi cer

of the Energy Services Division

55 Interview with Jérôme GallotChief Executive Offi cer of Veolia Transdev

02 Interview with Antoine FrérotChairman and Chief Executive Offi cer

of Veolia Environnement

08 Governance

15 Interview with Pierre-François RiolacciChief Finance Offi cer

19 Interview with Jean-Marie LambertHead of the Group’s Human Resources

Department

20 Human Resources

22 Research & Innovation

24 Clients

58 OUR RESPONSIBILITY

60 Sustainable development

66 Institut

67 Foundation

VEOLIA ENVIRONNEMENT2011 ANNUAL ANDSUSTAINABILITY REPORT

2

Interview with Antoine FrérotChairman and Chief Executive Offi cer of Veolia Environnement

Building the New Veolia

Why have you launched such a vast

transformation plan for Veolia and what are

its essential components?

Antoine Frérot: The economic environment in

which we operate has changed dramatically.

The crisis has aff ected numerous governments

and local authorities as well as our industrial

clients and slowed economic growth in many

of our host countries. Concurrently, reductions

in public expenditures have contributed to

pressure on prices and margins while the

fi nancial crisis has compelled companies to

reduce their debt. At the same time, demand

for high value-added environmental services

is growing, in both emerging and developed

countries. People everywhere want a better

environment and development that is

sustainable. To take full advantage of the

growth opportunities in front of us, we must

adapt to this new economic context. This

means creating new off ers and improving

our organizational agility to react more

quickly and eff ectively to market changes.

The transformation that we will be accelerating

for the remainder of this year and the next

is focused on four major areas: reducing

debt (5 billion euro divestiture program) and

refocusing our business activities in order to

concentrate resources on the most promising

geographies and market segments; adapting

our off ers and business models; simplifying

our organization to increase its eff ectiveness

and responsiveness (through our Convergence

plan); and reducing costs. The New Veolia will

be refocused on three divisions with strong

mutually reinforcing synergies. It will have

reduced debt and restored fi nancial fl exibility,

enabling implementation of a strategy of

selective, disciplined and profi table growth.

The New Veolia will be a company more attractive

to its investors, customers and employees.

How will the transformation plan aff ect the

way the company operates?

AF: Convergence will change both our

organization and our ways of working. The

plan’s name underlines the need to improve our

ability to work together and more effi ciently.

In particular, it means learning to work

collaboratively, across divisions in order to fully

leverage the expertise and resources of Veolia

Environnement on behalf of our clients. This

cultural change is underway. An example is

the success of energy diversifi cation solutions

proposed by the energy and waste management

divisions to industrial clients seeking to control

costs and reduce consumption of fossil fuels

and greenhouse gas emissions.

“More than any other factor, I am confi dent in our ability to succeed because of the professionalism and perseverance of our people.”

3

and on the large (PFI) concession contracts in

the UK where our new contract wins include

Hertfordshire and the city of Leeds. In energy,

we are well positioned in managing local

energy cycles – the core of Dalkia’s business –

and managing large public networks for which

we commit to improving energy effi ciency

and reducing consumption. When Warsaw

sought to privatize the management of

the world’s third largest heating network

– with its 1,700 km network serving 80%

of the city’s buildings –, Veolia was one

of very few companies with the resources

necessary to respond. Finally, our priorities

include supporting industrial clients in their

international expansion, enabling them to

meet stringent environmental standards

through our advanced services.

Won’t reducing your geographic presence

and divesting one of your four businesses

be detrimental to Veolia?

AF: Just the opposite! This strategy will

strengthen our leadership position in

environmental services. It will give us the

solid financial base to accelerate growth

in our three core businesses of water, waste

management and energy. Our company will

be more concentrated following this evolution

but more profitable! The decision to withdraw

from our transportation activities was

based on two considerations: the significant

investments required by this business,

which our company is not in a position to

make, and the more limited synergies with

our other businesses. This was a significant

consideration at a time when we are moving

forward to increase the collaboration

between our business activities, leveraging

the full power of our expertise.

What are Veolia’s priority markets and

geographic areas?

AF: We are focusing on business sectors

in which there is growing demand for high

value added environmental services and

that require the technologies and processes

in which Veolia Environnement already

has signifi cant competitive advantages.

Examples include comprehensive water

and wastewater management contracts

for large cities such as our contract to renovate

the Seine Aval biological wastewater treatment

plant in Achères near Paris, the world’s second

largest wastewater treatment plant. In

waste management, we are focusing on the

treatment and recycling of hazardous waste

“The New Veolia will be a company more attractive to its investors, customers and employees.”


4

“This is not the fi rst time our company has had to transform itself. The fact that we are still here after 160 years of existence testifi es to our ability to successfully renew ourselves.”

Interview with Antoine FrérotChairman and Chief Executive Offi cer of Veolia Environnement


In terms of geography, we are focusing

on high growth areas where there is strong

demand for essential services, which offer

a stable legal environment and where we

already have a strong historical presence.

This process of refocusing our investments

on the business/geographical mix offering

the most profitable opportunities is

already occurring: today, we are positioning

ourselves in growing markets, leveraging our

competitive advantages and strengthening

our leadership position.

How will Veolia Environnement respond

to the challenges it faces, particularly

renewal of water and wastewater

service contracts?

AF: The market for services provided by all

sectors is undergoing profound change.

Cost pressures, exacerbated by the credit

crunch that has hit local governments,

is a reality for most service companies.

In addition to the constraints on the financial

resources of our clients, the economic crisis

has adversely affected the purchasing

power of populations, which has increased

pressure to reduce prices. Our water division

felt the full force of these effects in 2011,

including during the renewal of our contracts;

this situation has also spread to our other

activities. The financial constraints are going

to continue and we need to respond in two

directions. First, we need to reinvent our

offers and how we are compensated and

become even more client-focused. Our clients’

expectations are changing more quickly

and, as they become more varied, so must

our offers. This requires innovation both in

technology and in our contractual approach:

• our commitment to technological

innovation, always one of our major

strengths, continues such as with the new

process for recycling lithium developed

by our researchers;

• in terms of commercial innovation, our

contract with Val Europe is a good example.

We soon will provide heating for 600,000 m2

of offices using heat recovered from the

Natixis Data Center, energy previously

unused and thus lost. In deriving value from

this resource, the new economic model that

we have created enables municipalities to

respond to the demands of their populations

at less cost.

The second area of our work involves

reducing the costs of our activities. It is

not a new requirement but we need to do

more and additional savings will come from

our economy plan. In addition, while the

5

Convergence plan is focused on streamlining

our organization, it will also produce savings

through reduced costs.

How will this transformation aff ect Veolia

employees?

AF: Each year, 7,000 to 8,000 employees

leave the company in France, mainly

departures for retirement, and some will

not be replaced. But, more than the number,

it is the way we work that needs to evolve.

We need to learn to collaborate more closely,

our objective being to tap into all of the

resources of Veolia Environnement

to leverage our competitive advantages.

The streamlining of our organization will

accelerate decision-making and decisions

will be applied swiftly and efficiently.

Veolia’s announced transformation plan

has been clearly welcomed by the fi nancial

community. But, will you be able to execute it?

AF: This is not the first time our company

has had to transform itself. The fact that

we are still here after 160 years of existence

testifies to our ability to successfully

renew ourselves when needed. I know we

will do so again this time. More than any

other factor, I am confident in our ability

to succeed because of the professionalism

and perseverance of our people. Aside

from technology and innovation, it is

the women and men of Veolia who make

the true difference. In transforming Veolia,

we are making it a better performing, more

innovative and more attractive company.

Of course, this is a process that does not

happen overnight. It requires determination

and consistency. But already, we are seeing

the initial results: the refocusing of our

activities is well advanced; our recent

commercial successes reflect the progress

made in reinventing our offers; our debt

is being reduced. We can see that Veolia’s

transformation is underway and that very

soon, it will be able to apply the full force of

its size, diversity and talent.

2011 key fi gures

€29.6 billion(1)

revenue.

331,266(2)

employees worldwide.

+3.1%revenue growth.

77(2)

countries.

(1) Excl. Veolia Transdev. (2) Incl. Veolia Transdev.


1Refocus

activities and reduce debt

3Reduce costs

2Simplify

the organizationThree priorities

Strengthenpositions

in high growthmarkets

Increasesynergies between

businesses

Fully leveragecompetitiveadvantages

Reinforceleadership

position

Four main objectives

7

A strategic plan to improve performance

On December 6, 2011, Veolia Environnement presented its strategic plan and medium- term outlook. The restructuring of the company’s business portfolio is intended to provide greater fi nancial fl exibility and increased focus on high added-value service solutions and technologies in order to capture profi table growth opportunities.

Veolia Environnement’s transformation is based

around three main elements: the restructuring

of its business portfolio and enabling

the reduction of debt; simplifi cation and

streamlining of its organization; cost reduction.

ACCELERATION OF PORTFOLIO

RESTRUCTURING AND DEBT REDUCTION

The company has established a €5 billion

divestment program for 2012-2013. In addition

to its geographical refocusing, the company

announced a series of divestitures, the most

signifi cant of which are the transportation

business, regulated water operations in the

United Kingdom and solid waste operations

in the US. The proceeds from the divestments

will be mainly used to reduce net debt

to €12 billion (1) by the end of 2013.

SIMPLIFICATION AND STREAMLINING

OF THE ORGANIZATION

Veolia Environnement’s transformation

includes standardization of processes, enhanced

operational controls and monitoring, and

organizational simplifi cation. This transformation

is being implemented through the “Convergence”

plan, to rationalize organizational structures

and share certain functional resources,

including procurement, infrastructure systems,

information technology and marketing.

COST REDUCTION PROGRAM

Continuation of the company’s effi ciency plan

will contribute to gross savings of €225 million

in 2012 (1) and €270 million per year, beginning

in 2013 (1). The Convergence plan will result

in short-term savings, mainly from a reduction

in administrative, functional and operational

costs, and long-term savings resulting

from the transformation of the organization.

The company’s objective is to achieve a growing

net impact on operating profi t.

CAPTURING PROFITABLE GROWTH

OPPORTUNITIES

With increased fi nancial fl exibility, the company

will apply a strict and disciplined development

policy, focused on profi table organic growth

opportunities. Priority areas for investment will

be those identifi ed under the transformation

plan: treatment and recycling of the most

diffi cult to manage pollutants, proposing

solutions to address the increasing scarcity of

resources, effi cient management of large public

services and providing advanced solutions

to the most complex challenges facing public

and industrial clients. Geographically, Veolia

Environnement will continue its development

in the European Union, North America and

northern Asia, where it already has a strong

presence. The company will also support

large industrial clients in their international

development, particularly in emerging countries

and Australia.

At the end of 2013, the New Veolia, with three

divisions – water, waste management and

energy services – will be a more agile, responsive

organization, with the fi nancial fl exibility and

cash fl ow needed to seize the best growth

opportunities in target countries.

(1) Excl. currency impacts of closing.

transformation

to achieve

Anorganization

reconfigured

9

On February 29, 2012, the Board of Directors of Veolia Environnement reaffi rmed the strategic direction of the company communicated in the second half of 2011, including implementation of the transformation plan. It renewed its confi dence in the Chairman and CEO, Antoine Frérot.

During fi scal year 2011, the Board of Directors

met 12 times (compared with 11 times in 2010)

and Board meetings lasted an average of three

hours. The average attendance was 84.2%

(83.6% in 2010). The Board’s work continued

to focus in particular on review of budgets

and accounts, dividend policy and proposed

allocation of income. The Board also approved

the fi nal terms of several signifi cant operations,

particularly investments by Dalkia in Poland.

In 2011, the Board was regularly informed

of key developments and commercial action

plans decided by senior management.

The Board is regularly informed of developments

in the shareholding, the company’s fi nancial

situation and cash position and its contingent

liabilities, including through reports of the

Audit Committee.

For the fi rst time, the Board met at one of the

waste management division’s operating sites.

In addition to providing an opportunity for the

directors to visit the site, the meeting included

a review of the company’s policy with regard

to hazardous waste. Similarly, prior to the

investor day held on December 6, 2011,

the Board met for a strategic seminar, in

which a portion of the Executive Committee

participated, for an in-depth discussion

of the major strategies proposed by senior

management. The Board discussed and

approved the long-term plan for this strategy.

On February 29, 2012, the Board of Directors of

Veolia Environnement reaffi rmed the relevance

of the strategic initiative communicated in the

second half of 2011 and renewed its confi dence

in the Chairman and CEO.

On March 15, 2012, the Board reconvened

and recognized the conclusion of the terms of

offi ce of four directors – Jean-François Dehecq,

Esther Koplowitz, Serge Michel and Georges Ralli

– and proposed a series of resolutions relating

to the Board’s composition for consideration at the

Annual Shareholders’ Meeting on May 16, 2012,

including:

• the cooptation of Caisse des Dépôts et

Consignations CFO Olivier Mareuse as his

company’s representative on the Board,

replacing Augustin de Romanet de Beaune;

• renewal of the appointment of

Serge Michel as director;

• appointment of four new directors –

Jacques Aschenbroich, Maryse Aulagnon,

Nathalie Rachou and Groupama SA,

represented by Georges Ralli.

If these proposals are approved, the Board

of Directors will have 17 members and

one censeur.

Governance: the first steps to reshape the company


10

The Board of Directors of Veolia Environnement(as of March 31, 2012)

(1) As of March 15, 2012, Caisse des dépôts et consignations represented by Olivier Mareuse was co-opted by the Board

of Directors of Veolia Environnement as a director to replace Augustin de Romanet de Beaune. The term of offi ce of the Caisse

des dépôts will expire at the end of the remaining initial term of offi ce of Augustin de Romanet de Beaune, i.e. at the close

of the Annual Shareholders’ Meeting convened to vote on the accounts for the fi scal year ending on December 31, 2012.

The approval of this cooptation will be submitted to the next Annual Shareholders’ Meeting of May 16, 2012.

(2) Duration of appointment reduced to 2 years following the Board of Directors meeting of August 5, 2010.

* Independent director.

Board Committees (as of March 31, 2012)

AUDIT AND ACCOUNTS

COMMITTEE

Daniel Bouton (Chairman)*

Pierre-André de Chalendar*

Paul-Louis Girardot*

Marcel Dassault company*,

Represented by

Olivier Costa de Beauregard

NOMINATIONS AND

COMPENSATION COMMITTEE

Serge Michel (Chairman)

Daniel Bouton*

Louis Schweitzer*

Marcel Dassault company*,

Represented by

Olivier Costa de Beauregard

RESEARCH, INNOVATION

AND SUSTAINABLE DEVELOPMENT

COMMITTEE

Philippe Kourilsky (Chairman)

Paul-Louis Girardot*

Pierre-André de Chalendar*

* Independent member.

Antoine Frérot,

Chairman and Chief Executive Offi cer

Louis Schweitzer*,

Vice-Chairman of the Board of Directors

of Veolia Environnement;

Chairman of the Board of Directors

of Astra Zeneca (United Kingdom)

Daniel Bouton*,

Chairman of DMJB Conseil;

Senior Advisor of Rothschild & Cie Banque

Caisse des dépôts et consignations(1),

Represented by Olivier Mareuse,

Financial Director of Group Caisse des dépôts

Pierre-André de Chalendar*,


of Compagnie de Saint-Gobain

Jean-François Dehecq*(2),

Honorary Chairman of Sanofi -Aventis;

Chairman of Fondation d’Entreprise

Sanofi Espoir

Paul-Louis Girardot*,

Chairman of the Supervisory Board of Veolia Eau

– Compagnie Générale des Eaux

Groupe Industriel Marcel Dassault*,

Represented by Olivier Costa de Beauregard,


of Groupe Industriel Marcel Dassault (GIMD)

Esther Koplowitz*(2),

President of the Esther Koplowitz Foundation;

Vice-Chairman of the Board of Directors

of Fomento de Construcciones y Contratas SA

(FCC) (representing B 1998,SL) (Spain)

Philippe Kourilsky,

Professor at the Collège de France;

Member of the Académie des Sciences

Serge Michel(2),

President of Sofi cot SAS

Henri Proglio,


of Électricité de France (EDF)

Baudouin Prot*,

Chairman of the Board of Directors

of BNP Paribas

Qatari Diar Real Estate Investment Company*,

Represented by Dr. Mohd Alhamadi,

Chief Corporate Improvement Offi cer of

Qatari Diar Real Estate Investment Company

Georges Ralli*(2)

President of Maison Lazard SAS

Paolo Scaroni*,

Chief Executive Offi cer of ENI (Italy)

Thierry Dassault,

Censeur;

Chairman and Director of Keynectis SA;

Deputy Chief Executive Offi cer and Member

of the Supervisory Board of Groupe Industriel

Marcel Dassault SAS

11

The Board of Directors is supported by an

Audit and Accounts Committee, a Nominations

and Compensation Committee and

a Research, Innovation and Sustainable

Development Committee.

THE AUDIT AND ACCOUNTS COMMITTEE

meets at the initiative of its chairman or at the

request of the Chairman of the Board at least

fi ve times a year. In 2011, it met seven times.

Its work focused on reviewing the annual and

interim accounts as well as the main accounting

decisions, impairment testing of assets and

at-risk contracts. The Committee examined

summaries and internal audits conducted

during 2010 and the fi rst half of 2011 and

approved the internal audit program for 2012.

It also conducted other reviews, including

the deployment of the Agora information

system, the system of risk management

and the fi nancing of planned transactions.

THE NOMINATIONS AND COMPENSATION

COMMITTEE met three times in 2011 and

focused primarily on the evolution of the

Board’s composition and the selection of new

directors, proposals and recommendations

to the Board regarding the remuneration

of the CEO and Executive Committee and

evaluation of the independence of directors.

THE RESEARCH, INNOVATION AND

SUSTAINABLE DEVELOPMENT COMMITTEE

met six times in 2011. It interviewed the

directors of sustainable development and Veolia

Environnement Research and Innovation (VERI).

It reviewed the evolution of several themes

within the company including the human and

budgetary resources allocated for innovation

and sustainable development, communication

between VERI and the divisions and/or

operating teams and the identifi cation

and advancement of innovations.

The Ethics Committee

The mission of the Ethics Committee is to present

recommendations concerning the fundamental values of

Veolia Environnement. It verifi es that the “Ethics, Commitment

and Responsibility” program is accessible to all. The committee

may be requested by any employee or undertake itself to review

any matter relating to ethics. It can make “visits related to ethical

objectives” to any of the company’s operations. The aim of this

approach is to provide an appreciation, through interviews

with as representative a sample as possible, of the operation

visited, the level of ethical maturity, employee awareness of the

company’s values and ethical issues that they may confront, and

ethics training provided. In 2011, the Ethics Committee continued

to ensure company standards through several site visits, including

in Germany, the United Arab Emirates, Norway and Japan.


12

THE EXECUTIVE COMMITTEE

In order to speed up the implementation

of the company’s strategic plan approved

by the Board of Directors, Antoine Frérot,

announced on March 16, 2012 a series of

decisions, eff ective immediately, with regard

to the Executive Committee, which now

includes the following members: Antoine Frérot,

Sylvain Boucher, Jérôme Gallot, Jean-Michel

Herrewyn, Franck Lacroix, Jean-Marie Lambert,

Jérôme Le Conte and Pierre-François Riolacci.

This fully-committed Executive Committee

is determined to successfully implement the

strategic plan, which is designed to:

• simplify the company’s organization around

the headquarters of Veolia Environnement

and its divisions, its operational business units

and its geographic or country delegations(1);

• refocus the roles of Veolia Environnement’s

headquarters and its divisions;

• simplify key functional processes involving

the headquarters, the divisions and operational

business units to expedite decision-making and

develop synergies by sharing resources and skills

between organizational levels and businesses;

• defi ne and implement, at all levels of the

organization, standard methods and rules in

business and functional processes to improve

effi ciency;

• clarify the tasks assigned to delegations,

including reinforcing the sharing of resources

and skills within their geographic area in order

to increase effi ciency and synergies;

• specify rules for executive management

to increase career mobility between

occupations, functions and international units

and renew the commitment of all managers

to comply with the code of conduct (see box).

As part of its transformation plan, Veolia

Environnement is developing a new business

model based on providing value added services

that deliver solutions to complex problems

faced by clients and that are compensated

based on the performance of these solutions.

To support these new service off erings, Veolia

continues to invest in research and innovation,

with research priorities defi ned around business

and operational needs.

(1) Twelve countries or zones have been defi ned: Australia,

China, the Czech Republic, France, Germany, the Gulf Council

Countries (including Qatar), India, Israel, Poland, Slovakia,

the United Kingdom and the United States.

Managers’ Code of Conduct

Veolia Environnement’s fundamental values – Responsibility,

Solidarity and Respect – underline the foundation of its economic,

social and environmental performance. The example set by

managers in their actions plays a crucial role in reinforcing

these values with employees throughout the company. A code

of expected behavior by managers relative to the company’s

values has been published and distributed. It applies to all

Veolia Environnement entities worldwide, which must respect

and apply these rules locally.

13

Distribution of capital as of March 31, 2012

Risk Management: increased attention

In late 2011, Veolia Environnement reinforced

its country-risk evaluation unit, created in

2010. This unit is responsible for monitoring

and consolidating information relating

to country risk, assessing country risk and

making recommendations and evaluating the

company’s exposure against the indicators

of country risk, presence and business

performance. It is also responsible for making

management more aware of risks through

the dissemination of analyses, including via

a country-risk bulletin and the intranet.

A number of additional actions involving

employee health and safety have been taken

including establishing an immediate reporting

process for occupational accidents and

the most serious incidents, involvement of

operational businesses in the analyses of the

causes of accidents, internal communications

on accidents, management of major risks and

monitoring of results. The objectives are to

further involve line management and raise

awareness among operators of the risks they

face in their daily activities.

Other actions, such as managerial safety

visits, were prepared in 2011 and will be

launched in 2012.

In 2011, Veolia Environnement

completed three capital

increases, two related to the

exercise of stock options

on January 26 and August 3

and the third in cash to secure

the payment of the dividend,

on June 15. Following these

transactions, the capital

of the company stood at

2,598,264,800 euros divided

into 519,652,960 shares with

a nominal value of 5 euros.

As of March 31, 2012,

the Veolia Environnement Executive Committee

is composed of eight members:

Antoine Frérot,


of Veolia Environnement

Sylvain Boucher,

Secretary of the Executive Committee

Jérôme Gallot,

Chief Executive Offi cer of Veolia Transdev

Jean-Michel Herrewyn,

Chief Executive Offi cer of the water division

Franck Lacroix(1),

Chief Executive Offi cer

of the energy services division

Jean-Marie Lambert(1),

Head of the Group’s Human

Resources Department

Jérôme Le Conte,

Chief Executive Offi cer

of the environmental services division

Pierre-François Riolacci.

Chief Finance Offi cer

(1) Eff ective August 4, 2011, Franck Lacroix replaced

Olivier Barbaroux and Jean-Marie Lambert replaced

Véronique Rouzaud on the Executive Committee.

Executive Committee

2012 Financial Agenda

March 1: 2011 Annual Results

May 4: Quarterly information

as of March 31, 2012

May 16: Annual Shareholders’ Meeting

at the Carrousel du Louvre (Paris)

June 18: Dividend distribution

August 2: Interim Results

November 7: Quarterly information

as of September 30, 2012

67.36%Public and other investors

9.21%Caisse des dépôts

6.33%Marcel Dassault company – GIMD

5.65%Groupama

2.74%Veolia Environnement

3.96%EDF

4.75%Velo Investment

(Qatari Diar)

For more information, the 2011 Veolia Environnement Registration Document

is available on www.veolia.com

2011adjusted

operating income

€1.7 bn

2011 adjusted net

income

€290 M

2011revenue

€29.6 bn(1) See page 17.

VEOLIA WATERrevenue

€12.2 bn2010 re-presented(1)

€12.6 bn2011

VEOLIA ENERGYrevenue


€7.3 bn2011

VEOLIA ENVIRONMENTAL SERVICESrevenue


€9.7 bn2011

15

Interview with Pierre-François RiolacciChief Finance Offi cer

“The company effi ciency plan contributedsavings of €259 million to growth in adjustedoperating cash fl ow.”

Debt reduction has become a signifi cant issue.

What changed in 2011?

Pierre-François Riolacci: The fi nancial crisis has

brought with it a global aversion to debt and a

major movement toward deleveraging. In this

new context, we need to recognize that our

debt levels are too high compared with market

expectations and we are attacking the debt issue

to bring our gearing in line with our sector. Under

our transformation plan, we are accelerating

the restructuring of our activities through

the divestment of €5 billion in assets over the

next two years, including Veolia Transdev,

the regulated water operations in the United

Kingdom and our solid waste operations in the

US. We also are continuing the rationalization of

Veolia’s geographic footprint and maintaining

strict investment control. The proceeds from

our increased divestment program will primarily

be used to reduce net fi nancial debt below

€12 billion(1), by the end of 2013.

How has Veolia Environnement addressed the

operational problems that impacted it in 2011?

PFR: Our 2011 results refl ect not only

the impact of the crisis but also problems

that we experienced in operations, problems

that we are resolving. In response to

contractual diffi culties in North Africa,

we terminated our bus contract in Rabat

and the waste management contract in

Alexandria. We are in the process of divesting

our Marine Services business in the US. In Italy,

the voluntary liquidation process related to

the waste-to-energy operations in the Calabria

region commenced and we are restructuring

operations in the energy services division

in Italy and Spain. The changes we are

putting in place under the Convergence

plan, such as increased standardization

and discipline in our processes, will also

help prevent unforeseen diffi culties from

arising unexpectedly.

What are your priorities for 2012?

PFR: They align naturally with the Convergence

plan, which should enable Veolia to reduce its debt

and restore its profi tability during the fi rst two

years, 2012-2013. In 2012, we will fi rst address

the problems of business units in diffi culty,

particularly in southern Europe in the energy

services and waste management divisions. In

addition, numerous actions will have been taken

to reduce costs by the end of this year, totaling

at least €100 million, in gross. A large part of

the €5 billion in asset divestitures over the two

years should be completed by the end of 2012,

with a signifi cant reduction in net debt.

Finally, from an operational standpoint, the

generation of free cash fl ow remains the objective.

A dividend of €0.70 per share will be proposed

in 2013 for the 2012 fi scal year.

(1) Excluding currency eff ects.

Veolia Transdev divestiture

On December 6, 2011, the company

announced the progressive withdrawal

from its transportation activities.

This process led the company to

classify its ownership in Veolia Transdev

as a group of assets and liabilities

held for sale. The net income and

expenses from transportation activities

were recorded in a separate income

statement line, “Net income from

discontinued operations.”

In 2012, Veolia Environnement entered

into exclusive neg otiations with an

investor for its gradual withdrawal from

Veolia Transdev.

For more information, the Veolia

Transdev Annual Report will be available

on www.veoliatransdev.com


16

Transition year

VEOLIA ENVIRONNEMENT’S 2011

CONSOLIDATED REVENUE increased 2.0% at

constant consolidated scope and exchange rates

(+3.1% at current scope and rates) to €29,647

million, versus re-presented €28,764 million

for the year ending December 31, 2010. This

evolution was mainly due to the increase in

the price of recycled raw materials and the

improvement in activity levels, particularly for

the treatment of hazardous waste; growth in

water division revenue, mainly related to the

good contribution of operating activities in

Europe and in Asia, despite the negative impact

of contractual erosion in France and unfavorable

summer weather conditions; and in the energy

services division the increase in energy prices

despite a context of unfavorable weather

conditions, in the waste management division

and a downturn in Works activities, and the

cessation of new installations in the photovoltaic

sector in southern Europe.

ADJUSTED OPERATING CASH FLOW declined

4.9% to €3,152 million, compared to 2010

re-presented fi gures. It was impacted by the

downturn in activities in southern Europe,

particularly in Italy, and in the Marine

Services operations in the US; restructuring

measures and contract terminations tied to

the acceleration of the company’s refocusing

and the downturn in the environment in

southern Europe and north Africa; a fall in

operational performance in the water division,

primarily related to contractual erosion in France

and increased asset maintenance costs in the

United Kingdom in the fi rst quarter of 2011 and

expenses relating to the implementation of cost

reduction plans. Conversely, adjusted operating

cash fl ow benefi ted from the favorable impact

of the increase in recycled raw materials prices

and activity levels and favorable volume eff ects

in the waste management division; the positive

impact of energy prices, off set by weather

conditions that were overall less favorable

than in 2010, in the energy services division;

and activity growth in the water division in

Europe and Asia.

OPERATING INCOME declined 48.7% to

€1,017.2 million, compared to re-presented

operating income of €1,982.1 million for 2010.

In addition to the change in adjusted operating

cash fl ow, the change refl ects impairment

losses on goodwill and non-current assets of

–€782.7 million, primarily on company activities

2011 was a year of transition for Veolia Environnement, given the economic and fi nancial crisis and the evolution of the company’s historical markets. Despite these challenges, the company generated a 3.1% increase in revenues and a 7% increase in free cash fl ow.

€28,764 M

2010 re-presented*

€29,647 M

2011

Revenue

€1,700 M

2011

€1,891 M

2010 re-presented*

Adjusted operating income

17

in Italy, Morocco and the United States; the

eff ect of changes in discount rates applied

to site remediation provisions for –€7 million

for the year, compared to +€26 million for 2010

in the waste management division; capital gains

on industrial and fi nancial asset divestitures

of €85.3 million compared to re-presented

€206.8 million in 2010 (including a non-recurring

capital gain of €89.0 million on the divestiture of

Usti Nad Labem in the energy services division).

ADJUSTED OPERATING INCOME declined 10.1%

(–10.3% at constant exchange rates) to €1,700

million compared to re-presented €1,891 million

for 2010. In addition to the negative impact on

adjusted operating cash fl ow of the downturn

in operations and asset impairments, notably

in North Africa, in southern Europe and in the

Marine Services business in the US, charges

corresponding to impairments of non-current

assets impacted adjusted operating income by

an additional –€128.3 million. It also includes

capital gains on industrial and fi nancial asset

divestitures of €85.3 million.

Net income from discontinued operations

was –€2.4 million, refl ecting the capital gain

of €430 million realized at the time of the

combination of Veolia Transport and Transdev

on March 3, 2011, and an impairment charge

relating to Veolia Transdev as of December 31,

2011, for the amount of –€440 million which

resulted from the deterioration of operational

performance and market conditions observed

since the combination.

Net income attributable to non-controlling

interests was €173.2 million for 2011, compared

to €290.5 million in 2010.

ADJUSTED NET INCOME ATTRIBUTABLE

TO OWNERS OF THE COMPANY was

€289.8 million, compared to re-presented

€474.0 million in 2010. The net loss attributable

to owners of the company was –€489.8 million,

compared to a re-presented net income of

€558.5 million in 2010.

NET FINANCIAL DEBT. The company generated

free cash fl ow of €438 million, versus

€409 million in 2010. The change refl ects

a reduction in operating cash fl ow; control

over maintenance-related investments in 2011

and a selective growth investment policy;

a €1 billion divestiture program to which must

be added the impact of the Veolia Transdev

combination which reduced the company’s net

fi nancial debt by €550 million, relative stability

of working capital requirements; and a larger

percentage of the dividend paid in shares in

2011 compared to 2010. Net fi nancial debt

amounted to €14,730 million at December 31,

2011 compared to €15,218 million for 2010

after an unfavorable foreign exchange eff ect

of €64 million and the reclassifi cation into

assets and liabilities held for sale of external

fi nancing and net cash of Veolia Transdev

in the amount of €205 million.

2012-2013 OUTLOOK. For the period 2012-2013,

Veolia Environnement has an objective to divest

€5 billion in assets, reduce net fi nancial debt

below €12 billion, achieve €220 million in gross

cost reductions and €120 million in net cost

reductions in 2013, and to distribute dividends

in 2012 and 2013 of €0.70 per share for fi scal

years 2011 and 2012. After 2013, and assuming

a mid-cycle economic environment, the company

targets annual organic revenue growth of more

than 3%, annual adjusted operating cash fl ow

growth of more than 5%, attainment of a net

fi nancial debt leverage ratio of 3.0x and a return

to a dividend payout ratio in line with the

company’s historical average.

€290 M

2011

€3,152 M

2011

€474 M

2010 re-presented*

€3,315 M

2010 re-presented*

Adjusted net income attributable to owners of the company

Adjusted operating cash fl ow* To ensure the comparability of periods, the 2010 fi nancial

statements have been re-presented to include:

– the impact of the reclassifi cation into “net income from

discontinued operations” of the transportation division as a whole,

Habitat Services (“Proxiserve”) activities in the water and energy

services divisions, and Citelum activities in the energy services

division;

– the impact of the reclassifi cation into continuing operations

of the activities in Gabon in the water division and the “Pinellas”

incineration activities within the Montenay International entities

in the United States in the waste management division;

– the impact of the fraud discovered during the second quarter

of 2011 in the Marine Services business in the United States (a unit

of the waste management division). The impact in 2010 was not

material, but the adjustment was made in application of IAS8

“Accounting Policies, Changes in Accounting Estimates and Errors.”

Research & Innovation

Budget invested in 2011

ClientsHuman Resources

Employees as of Dec. 31, 2011

€135 million

Public authority and industrial clients

Veolia Water 96,651 employees

Veolia Transdev101,798 employees

Veolia Environmental Services 77,421 employees

Veolia Energy – Dalkia52,698 employees

19

Interview with Jean-Marie Lambert,Head of the Group’s Human Resources Department

“In this period of transformation, Human Resources is one of the keys to successfully creating the New Veolia.”

What is Veolia Environnement’s vision of its role

as an employer?

Jean-Marie Lambert: Our role as an

employer is defi ned by the fundamental

qualities that characterize our business.

Veolia Environnement is directly involved

in designing, building and operating

the services we provide to clients around

the world. This means our operating units,

located in close proximity to our clients,

are engaged in the hands-on execution

of our off er. We strive to maintain the right

global-local balance between decentralized

decision-making and maintaining the

industry-leading standards that our

stakeholders expect of us. Human Resources

provides the overall framework and standards

that our local management teams translate

into specifi c actions to optimize human

resources performance.

What is the role of Human Resources in the

transformation process that Veolia Environnement

is undergoing?

JML: Our priority is to support Veolia

Environnement’s businesses as the structural

and streamlining changes are being

implemented. This includes assisting in the

transformation, continuing to actively engage

employee representatives in ongoing dialogue

and helping to guide the change management

process. For example, the HR department

had major input into the Convergence

plan through working groups dedicated

to subjects such as managerial behavior. It also

is important that we provide continuity for

our employees during this time of change,

remaining focused on employee retention and

talent. Our emphasis on employee training

and skills enhancement, both for career path

development and ensuring the highest quality

customer service, is as strong as ever: 70%

of our employees participated in training sessions

last year, which totaled eight million hours.

What human resources policy is needed for the

“New Veolia?”

JML: Some believe that human resources

management is simpler when times are good

but I’m convinced that challenging times are

important opportunities to have a meaningful

and enduring impact on our organization.

Constrained resources force us to prioritize and

focus on what’s important: ensuring a safe and

healthy workplace; preparing our employees

through training for tomorrow’s challenges;

fostering diversity; maintaining trust through

frank and transparent dialogue. In imposing

a more rigorous, disciplined approach to the

application of Veolia Environnement’s HR

policy, we are able to drive our standards and

performance higher as we provide our operating

teams with the tools they need to succeed.

Promoting cross-company mobility

With the signing in February 2011

of the agreement on management

of jobs and skills (GPEC in French),

Veolia Environnement in France

reinforced its ability to anticipate

and adapt its employment policy to

changes in its business environment.

The agreement takes on added

importance in the context of the

transformation process, helping to shape

Veolia Environnement’s approach to

internal mobility, training, management

and employability, key factors in

constructing the “New Veolia.”


20

Human Resources

At the center of the “New Veolia”

PROTECTING HEALTH AND SAFETY

Veolia Environnement further reinforced

its actions in 2011 to prevent accidents,

protect employee safety and physical and

psychological health, and ensure the safety

of its sites. Improvements in processes for

coordinated response to risks and crisis events,

and increased exchanges of best practices

help ensure that Veolia Environnement’s full

resources are being applied to meet health and

safety challenges. The company committed

itself anew to optimizing safety performance

to quickly reach a level comparable to that

of the best industrial companies. Specifi c

actions adopted include increasing

line manager and operator awareness

of everyday risks, implementation of immediate

reporting of occupational accidents and

incidents, and increased internal communication

on accidents and risk management monitoring.

Reinforcing a strong safety culture through

visible leadership at all management levels

continues to be a top priority as does training:

in 2011, nearly 50% of employees participated

in safety training. Veolia also took steps to

increase security in higher risk regions in which

it operates around the world, continuing to

formalize risk mapping processes, training

employees, monitoring short-term expatriation

assignments and systematically applying the

precautionary principle in cases of potential

threats to employee well-being.

REINFORCING EMPLOYEE DIALOGUE

Constructive relations and dialogue with its

employees has always been a central element of

Veolia Environnement’s human resources policy.

2011 was a year for ongoing implementation

of the agreement reached with European

employee representatives in October 2010,

including reinforcement of the formal structure

for information sharing between Veolia and

employee representatives, strengthening

training and providing for greater information

sharing between countries. February 2011

also saw the signing of the agreement for the

proactive management of jobs and skills (GPEC)

to anticipate changes in Veolia’s business (see

page 19). Veolia Environnement places a high

priority on constructive dialogue as underlined

by the close consultations with employee

representatives in France and elsewhere

As Veolia Environnement continues on the path of transformation, the fundamental elements of its human resources policy are being maintained and reinforced.

21

in Europe related to the transformation process.

In addition to detailed explanation by senior

management of the impact and rationale of the

strategic choices being made, discussions also

focused on the company’s emphasis on ensuring

the employability of employees, its continued

commitment to training and the promotion

of internal mobility.

HARMONIZATION OF HR PROCESSES

Consistent with the objectives of the

transformation plan to increase the

organization’s effi ciency and responsiveness,

human resources processes are being aligned

and discipline reinforced. These actions are

designed to optimize use of existing tools,

simplify and accelerate decision-making and

improve consistency in applying HR policies

across the company.

PROVIDING OPPORTUNITIES THROUGH

MOBILITY AND SKILLS MANAGEMENT

Veolia Environnement is committed to attract, train,

develop and retain employees at all skill levels and in

all employment areas in which it operates. Among

the necessary measures, Veolia Environnement

has decided to reduce costs and strict limitations

on external hiring. To continue to develop the talent

needed to meet new demands from its clients,

priority attention is being paid to maximizing

opportunities for internal mobility, providing

training to provide needed skills to employees.

The annual performance assessment is used to

defi ne the requirements needed to develop the skills

and defi ne future plans with each employee.

IMPORTANCE OF EMPLOYEE TRAINING

Another longstanding, key component of Veolia

Environnement’s HR policy is training.

Originating as a means of enabling employees

to earn diplomas for skills training, the

company’s commitment is embodied today

by the 21 Campuses and learning centers in

12 countries around the world. Veolia’s training

policy is focused around three objectives:

increasing employee skills in professions in

which the company operates; supporting

the company’s performance and business

development; contributing to the development

of Veolia Environnement’s culture. Safety training

and new employee integration are two of the

major focus areas for training. In 2011, more

than 660,000 training courses were conducted

for a total of eight million hours. The company

also actively promotes apprenticeship contracts

to provide a gateway to employment for recent

graduates and to continue to develop the

skill base needed for the challenges of today

and tomorrow. In 2011, Veolia Environnement

provided 4,459 apprenticeship positions

in a wide variety of fi elds.

COMPENSATION AND BENEFITS EQUITY

Veolia Environnement compensation policy

is set to ensure competitive fi xed and variable

compensation for employees, equitable

remuneration in relation to local practices,

reinforced social benefi ts, secure retirement

programs and access to savings programs.

The company manages its compensation and

benefi ts programs to take into account trends

and changes in the public social protection

policies of countries in which it operates

around the world.

Exchanging best practices internationally

In 2011, more than 300 social and societal innovations

were identifi ed that have been implemented since 2007

by Veolia Environnement businesses around the world. These

best practices directly contribute to the well-being of employees,

customers and the people served by Veolia Environnement each

day. A compendium of the leading innovations will be published

in 2012 and awards presented to recognize best practices.

Veolia Environnement also introduced an initiative to enable

the sharing of best practices on social/societal responsibility

and health and safety at the European regional level. Working

groups on both themes are being launched within the European

Works Council in 2012.

For more information the brochure “Ideas for Progress”

is available on www.veolia.com

Fostering a culture of diversity

Veolia Environnement continued to progress in its eff orts to foster

a culture of diversity throughout its businesses. In France, Dalkia

earned the three-year diversity certifi cation in July 2011 following

an independent, multi-site audit of the company’s actions to prevent

discrimination, provide equal opportunities and promote diversity.

Today, 133 Veolia Environnement companies in France have

obtained this certifi cation, demonstrating the company’s ability

to unite its employees in the eff ort to ensure the fundamental

rights of each individual. It also illustrates the eff ective

performance of Veolia Environnement’s social model and

the company’s commitment to demonstrate best practices

with its partners and customers.

16,613 employees benefi ted from

internal mobility opportunities in 2011.

16% increase in number

of non-manager participants in 2011 training

sessions over 2010.

331,266 employees

as of Dec. 31, 2011

691,312 employees attended

training sessions, consisting of 523,853 men and

167,459 women.

6,603,960 hours of training

including 2,400,515 hours dedicated to safety.


22

INNOVATING FOR A BETTER TOMORROW

The activities of Veolia Environnement Research

and Innovation (VERI) focus on several of the

most signifi cant environmental challenges facing

today’s world, including rapid urbanization and

exploding population growth, scarcity of natural

resources, access to water and climate change.

The company’s expertise and technological

capabilities are a source of diff erentiation; their

combination allows Veolia Environnement to

play a unique and leading role in designing

services for the environment of tomorrow and

provides the company with a critical competitive

edge. To meet these and other environmental

challenges, Veolia Environnement research

teams work to develop innovative solutions

that are practical, eff ective and cost-accessible.

Major areas of work involve intelligent energy

buildings and smart grids, water recycling,

new seawater desalination membranes,

treatment of new waste materials,

eco-neighborhoods and bioresources.

SHAPING THE FUTURE AT THE CROSSROADS

OF OUR BUSINESSES

To meet these challenges and achieve

breakthrough solutions, VERI focuses its

resources on the synergies between scientifi c

disciplines that are at the crossroads of

Veolia Environnement’s businesses. The VERI

organization works in close collaboration

with the operating divisions in a results-

oriented approach to maximize and accelerate

deployment of research to meet current and

future issues facing Veolia Environnement’s

clients. Several examples illustrate the proximity

between researchers and business managers.

In conjunction with Veolia Environmental

Services, VERI developed the Revodyn® process,

a highly innovative system for automatically

regulating the volume of waste on conveyors

at waste sorting centers to increase infl ows,

while controlling the risk of clogging and

saturation of the sorting equipment.

Conveyor speeds are automatically adjusted

based on the level of waste transmitted from

ultrasonic detectors. In the fi eld of water,

Facing the challenges of population growth, urbanization and economic crisis, Veolia Environnement Research & Innovation creates technology solutions for the future of our cities and natural environments. Its mission: provide practical, innovative solutions.

Research & Innovation

Preparing today’s environmental services for the challenges of tomorrow

23

the researchers developed a new version

of the Actifl o® clarifi cation process used

in the treatment of surface and groundwater.

Even more competitive and more compact,

Actifl o Turbo® has a footprint half the size; in

addition, VERI researchers replaced the previously

used synthetic polymers with “green” starch-

based polymers, marketed by Veolia Water.

Finally, eff orts by researchers to convert

wastewater sludge into energy are paying off

with deployment by Veolia Water of the Exelys™

and Biothelys™ thermal hydrolysis solutions.

Combined with anaerobic digestion, biogas

production is increased by as much as 40% and

sludge volumes are reduced by up to 35%.

AN OPEN SYSTEMS APPROACH

In addition to working closely with Veolia

Environnement’s operating units, VERI also

maintains strong relationships with outside

experts. Ongoing networking through more

than 200 academic and industrial partners,

three research chairs, and participation

in numerous governmental sponsored

collaborative projects around the world helps

ensure that Veolia Environnement’s researchers

have access and contribute to the latest

information on cutting edge technologies and

innovations. The Smart Water Active Resource

Management (SWARM) project is an example.

VERI works with nine other partners in France,

Germany and Switzerland to design and build

a complete solution for real-time monitoring

of water resources.

Open innovation model continues to expand

The “Veolia Innovation Accelerator” (VIA) program launched in 2010 continues to expand

with additional start-up partnerships, a new presence in Japan and the establishment

of an innovation hub in the US. The initiative aims to detect, evaluate and deploy the most

promising environmental technologies being developed by start-up companies.

Following the fi rst fi ve partnerships announced in May 2011, two new agreements

were signed in the second half of 2011 with start-up companies ISD (water consumption

projection) and Hara (environmental footprint management). VIA also continues to expand

internationally, opening a website in Japan. To support the City of Milwaukee in achieving

its goal of becoming an international hub for water technology, Veolia Water North America

is working closely with the Veolia Innovation Accelerator to identify and evaluate promising

water technology start-ups. Mayor Barrett has made the City’s water assets available

to demonstrate selected technologies and the Milwaukee Water Council will construct

a building to house selected start-ups starting in 2013.

200 university and company

partnerships.

7 partnerships signed as part

of Veolia Innovation Accelerator.

3 research chairs.

900 researchers.

www.thecitiesoftomorrow.com: future solutions for our citiesThe world is changing faster now than at any time in the history of humanity. Urbanization

is a major trend in our societies and calls for new ways of thinking. This website developed

by VERI presents a vision, approaches and solutions for the city in 2020. The future of

sustainable urban development, technological innovations, the circular economy, the social

fabric and attractiveness: for Veolia, all are major areas for refl ection… today.


24

Clients Public authority clients

A win-win approach

Veolia Environnement’s approach is focused on generating productivity gains to improve the economic and environmental performance of contracts. It is an approach based on ongoing dialogue with local public authorities.

A TRIPLE CHALLENGE

Demand for sustainable solutions is an increasing

preoccupation for local public authorities

with a continued focus on inventorying their

resources and assessing their environmental

footprint to optimize management of water,

energy and waste. In energy, for example, part

of the compensation of operators is now based

not on the volumes sold, but on the generation

of energy savings. Clearly, the issue of carbon

footprints is central to the requirements of public

clients. For large emerging cities, in particular,

there is a triple challenge ahead: economic

effi ciency, environmental control and achieving

social balance.

COMPENSATION BASED ON CLIENT BENEFITS

Communities expect operators to be able to

act as partners and provide comprehensive

solutions. To respond to growing demand for

high added-value environmental services in

both emerging and developed economies,

Veolia Environnement ensures that sustainable

development principles are fully integrated

within its business off er worldwide. Veolia is

implementing an increasingly fl exible, customer-

oriented approach that clearly demonstrates

tangible benefi ts to the client and consumers and

ties compensation to measured delivery of these

benefi ts and improvements in environment

and social performance. Veolia Environmental

Services’ pioneering role in creating long-term

public-private partnerships (PPP) to support

clients in achieving their recycling and energy

recovery objectives is a leading example. In a

PPP partnership agreement, a win-win approach

prevails with the private operator seeking

permanent productivity gains over the life of the

contract. For example, Veolia Water is evaluated

by a qualifi ed agency on its overall managed

services performance, highlighting the quality

and performance of long-term services and

the value that a company specializing in the

management of a public service can provide.

INCREASING DEMAND FOR MANAGEMENT

SERVICES

In the face of complex economic,

environmental and social issues, public

authorities express increasing demand for

“Veolia also engages in ongoing dialogue on issues related to access to basic services, the environment and public health with all stakeholders.”

25

expertise. Veolia Environnement’s response relies

on its leading capabilities in its diff erent business

activities and its experience and multiple skills

in managing networks. Veolia Environnement

also adapts contractual relationships to respond

to priority concerns. Ensuring water services

for low-income households and structuring

long-term public-private partnership agreements

for waste recovery and recycling facilities are just

two examples. In rapidly growing municipalities

where provision of basic, essential services

is a key concern of public authorities, Veolia

Environnement works with clients to devise

solutions that ensure access, service quality and

economic aff ordability for the local population.

PUBLIC SECTOR DIALOGUE

Veolia Environnement is a member of key

European trade federations and associations

in Brussels and participates in a wide range

of meetings and forums with national

government bodies, the European Union

and international institutions to provide input on

policy decisions. Veolia Environnement actively

monitors regulatory and policy initiatives that

infl uence its business and its ability to respond

to the major challenges facing the clients

and communities it serves. By virtue of the

nature of its business, Veolia Environnement’s

expertise is particularly recognized in the areas

of preserving natural resources, combating

climate change and ensuring sustainable

growth. Veolia Environnement also engages

in ongoing dialogue on issues related to

access to basic services, the environment and

public health with all stakeholders, including

citizens’ groups, NGOs, trade associations

and think-tanks.

PARTNERSHIPS WITH INTERNATIONAL

ORGANIZATIONS

Veolia Environnement continued its cooperation

with the main UN agencies and public interest

organizations in helping to achieve the

Millennium Development Goals and fulfi ll

the commitments made in signing the UN

Global Compact. The company is focusing its

partnership eff orts on the exchange of expertise

and approaches between cities to encourage the

exchange of best practices. Veolia Environnement

has served for eight years as an expert offi cial

on the working group directed by the

UN-Habitat agency that is developing

international guidelines on decentralization

and universal access to basic services (water,

wastewater, transport and energy).

Sustainable Development:a guide for operating teams

A new sustainability development guide supplies operating teams with tangible examples

of environmental actions by Veolia Environnement entities for use in communications

with clients and prospects. The guide’s 50 fi les provide practical, hands-on information

addressing the environmental concerns that are increasingly a priority for clients in their

contracts with Veolia Environnement.

Responding to customer expectations on major environmental issues

Veolia Environnement’s consulting practice on sustainable urban planning, 2EI, continues

to develop with several projects in France, including: helping build a regional energy climate

plan for the Lille metropolitan area; analyzing the cumulative environmental eff ects of

development projects for the city of Nice and tracking environmental impacts for the city of

Annecy’s newly created 17 hectare eco-zone.


26

Clients Tertiary and industrial clients

Responding to industrial clients with an integrated approach

IMPROVING ENVIRONMENTAL – AND

COMPETITIVE – PERFORMANCE

Veolia Environnement off ers industrial clients

a wide range of integrated management

solutions customized to meet specifi c needs.

Industrial companies increasingly are looking

to increase their competitiveness in outsourcing

the management of activities that are outside

their core business to multinational companies

that can ensure the same quality of service

throughout the world. Provision of utilities

required for industrial processes, such as water,

energy, steam or waste management is one

such area. In response to growing demand,

Veolia Environnement is reinforcing its

capabilities to better serve industrial

clients and set an objective to increase

revenues from the industrial sector from

30% to 40% within three years. Tomorrow’s

“Veolia Environnement solution” will be based

on two inseparable elements: anticipating

the real needs of the client and providing

a clear, reproducible, lowest cost solution,

adapted to each situation’s specifi c conditions.

A customized response, drawing upon the

expertise of the company’s three businesses,

such as the contract with Portuguese chemical

company, Artlant. Among the services provided,

Veolia provides steam production, supplies

electricity to the network, treats water

and wastewater and produces biogas while

reducing waste volumes.

MANAGING RISKS, IMPROVING PERFORMANCE

Reducing their environmental impact and

the consumption of natural resources is an

important priority for many industrial clients.

One driver behind the quest for improved

sustainability is obviously increasing stakeholder

expectations for improved environmental

performance by industrial companies,

expressed in the form of public pressure, new

regulatory requirements and contractual

provisions. Veolia Environnement’s ability

to provide comprehensive management of

all environmental issues thus becomes a key

priority for many industrial clients. By applying

environmental footprint methodology, which

assesses the pressures on freshwater resources

and ecosystems throughout the life cycle of the

product or service, Veolia Environnement is able

to provide clients with a detailed road map for

improving their environmental performance.

Already a leading provider of multi-service solutions to industrial clients, Veolia Environnement has reinforced its range of services and set an objective of increasing the portion of revenues generated from industrial clients from 30% to 40% over the next three years.

27

There also is increasing attention to the

opportunities to improve competitiveness

and operational effi ciency through reduced

consumption of energy, water and natural

resources and optimized management of

waste streams. With the growing complexity

of control technology processes, industrial

companies are looking for a single partner

capable of providing complete solutions,

allowing the client to concentrate on its

core business.

SEGMENT-FOCUSED STRATEGY

Veolia Environnement’s industrial strategy

is focused on identifi ed segment categories,

including high-volume and resource-intensive

industries, those with valuable effl uent or

waste streams and/or with high-profi le

environmental agendas. Standardized

sector-specifi c solutions are being developed

based on Veolia Environnement proprietary

technologies and a more integrated approach

is being implemented by a new marketing

organization to fully leverage expertise across

all company divisions. As a partner to industrial

clients, Veolia Environnement is increasingly

proposing contractual approaches based on

measurable improvement in environmental

performance, tying its own compensation

directly to the added value its services

contribute to client-identifi ed priorities.

The complementary expertise of Veolia

Environnement’s divisions enables the

company to off er expanded environmental

services through a single point of contact.

Veolia Environnement’s international presence

also makes it one of the few companies

capable of guaranteeing a consistent level

of professionalism and quality for a client

at multiple sites throughout the world.

Automaker PSA recognizes Veolia’s sustainability contributionPSA Peugeot Citroën extended its contract with Veolia Environnement in 2011 at three

production sites in eastern France (Sochaux, Mulhouse and Vesoul) for an additional fi ve years.

The quality of the relationship, fi rst established in 2003, was highlighted through Peugeot’s

presentation to Veolia of its 2011 “Supplier Award”, the fi rst time that a service company has

received the recognition. Veolia has helped its client reduce consumption of energy by 22% and

water by 50% while also recycling or recovering 100% of waste generated.

A multi-site contract with Bristol Myers Squibb

Bristol Myers Squibb (BMS) has chosen Veolia Environnement as its partner to manage a range

of technical services at several sites in Europe. The fi ve-year contract includes 10 sites with

a variety of functions (factory, research center, administrative building) in six countries.

In drawing upon expertise from Veolia’s three core businesses, the contract covers a wide

scope of activities, including “hard services” (utilities, water cycle, waste management, safety

and management of specialized equipment such as solvent recycling facilities), “pharma

services” (laboratory services and HSE procedures) and “soft services” (reception, catering

and document management) as well as investment management and work implementation

at the sites. To meet the challenge, the company has established a specifi c organization,

Veolia Environnement Industries Services, which will provide BMS with a single point

of contact at the site and global levels as well as unifi ed, consolidated reporting.

Managing outsourced services at defense base in CreilA joint venture between Veolia and DCNS, a European specialist in naval defense systems,

has taken over responsibility for managing services outsourced on a French military base

in Creil. The fi rst multiservice outsourcing operation includes management of technical

maintenance, passenger transport, concierge services and catering. Key objectives include

improving effi ciency and quality of service, achieving savings of around 20% compared to

previous operating costs and a commitment to exemplary environmental performance.

The operation is part of the French Defense Ministry’s reform of structures and modes of

operating, which will be eventually extended to 60 bases.


28

29


Ouractivities

96,651employees worldwide

69 countries

10.1 billioncubic metersof drinking water

distributed

103,127,519people provided

with water services

346,744 kmof drinking water

networks

805,798 MWh renewable energy

produced

Energy

Water services

171 million cubic meters

of wastewater treated and recycled

Wastewater

7.1 billioncubic meters

of wastewater collected

73 millionpeople provided with wastewater

services

Urban wastewater

treatment plant total capacity

100.7 Meq. inhabitants

Wastewater services

31

Veolia Water has redefi ned its business by

integrating the concepts of Service, Value and

Responsibility. Is this new SVR approach well

adapted to the current economic environment?

Jean-Michel Herrewyn: SVR is becoming a natural,

intrinsic refl ex for how we think about our business

and how we present our off er. It is a frame of

reference that enables us to respond eff ectively

to our clients’ priorities, including: the need for

cost-eff ective, high-quality services; the ability

to constantly fi nd new ways of creating value in

a highly-competitive economic environment; and

the ability to demonstrate that we are responding

to stakeholder expectations by making responsible

decisions to ensure a sustainable future. These

three elements enable us to maximize benefits

for our clients. In this challenging economic

environment, more than ever, SVR provides

a relevant framework for our off er.

Is your business model evolving?

JMH: In the municipal market, we continue

to invest in the infrastructure of the water

networks we operate. We also are seeing

increased demand from clients for our service

expertise. In these situations, it is our capacity

to optimize management of assets and

improve operational effi ciency and customer

services that is our added value. Our contract

with the City of Winnipeg, Canada, to design,

build and operate the city’s wastewater and

sludge treatment plants is just one example.

Likewise, in New York, the City’s Department

of Environmental Protection called on our

expertise in its eff ort to provide residents

with better water and wastewater treatment

services. We will be working with them to

recommend measures to increase productivity

and improve reliability while reducing costs.

Part of our compensation is linked to the

recurrent savings achieved. These and other

new opportunities refl ect the exceptional

strengths of our technologies, our network

optimization capabilities and our service

expertise.

What are your overall prospects for the coming

year?

JMH: We will continue to develop in France,

Eastern Europe, the US, India and China. In 2011,

we took a number of actions to refocus our

expertise and core technical competencies

on the most promising markets, laying the

foundations for future growth. With our ability

to adapt, to innovate and to deliver industry-

leading performance, we should see the

fi rst results from the implementation of our

strategy in 2012.

Interview with Jean-Michel HerrewynHead of the Water Division, Chief Executive Offi cer of Veolia Water

€12.6 bnrevenue

“Value begins with a change of mindset: instead of considering pollution a nuisance, Veolia Water views it as a resource from which value can be extracted.”

36%France

32%Rest of Europe

15%Asia

9%Americas

8%Africa –

Middle-East

Revenue breakdown by geographic area


32

The global leader in water and wastewater services, Veolia Water delivers outsourcing services, designs technological solutions and constructs and operates facilities for municipal and industrial customers.

Veolia Water operates at all stages of the

water cycle: extraction, treatment, storage

and distribution of drinking water; collection,

transportation, treatment, recycling and

restitution of wastewater. The strength

of Veolia Water is its water expertise. With

150 years of experience, Veolia Water has

acquired a unique knowledge of water. It is what

gives it the ability to imagine new treatment

solutions, to create solutions to accelerate

the replenishment of groundwater, to adapt

water quality based on its use, to improve the

effi ciency of distribution and continuously

control its quality. Throughout, Veolia Water

saves energy, controls costs and limits the

environmental impact of its actions. It is

through the continued strengthening of its

expertise and signifi cant investments in R&D,

that Veolia Water has become a leader in

technology and networks. Today, Veolia Water

produces and delivers the best quality water

to more than 100 million people worldwide.

STRENGTHENING SERVICE PERFORMANCE

The “S” of SVR refl ects the company’s ability

to continuously improve service performance

to provide its customers with more security and

comfort at the best price. Service encompasses

all actions taken to improve operational

performance. In 2011, Veolia Water broke

new ground and laid the groundwork for

future development. Its business activities

in France were reengineered with the traditional

organization of regional agencies replaced

with three business sectors – operations,

development and clients – allowing elimination

of a hierarchical level.

Each sector is able to leverage dedicated

resources and develop cutting-edge services.

Operations, for example, set up 35 planning

centers to optimize the 20 million annual

customer calls, which were previously

managed locally. This commitment

to performance responds to the expectations

of communities and their stakeholders.

In Bucharest, Veolia Water’s solutions enable

the city to proactively manage assets and

optimize capital expenditure, as well as renew

its wastewater system. In Kuwait, work is

underway to design, build and operate a reverse

osmosis desalination plant to serve the Az-Zour

South power plant.

Veolia Water

Service, Value, Responsibility is a new vision for responding to our clients’ challenges

33

CREATING VALUE

Value begins with a change of mindset: instead

of considering pollution a nuisance, Veolia

Water views it as a resource from which value

can be extracted. The company combines its

technological and operational expertise to

recycle and reuse resources, recover energy and

extract valuable composites.

Generating green energy. In the French town of

Roquebrune-Cap-Martin, Veolia was chosen to

install thermal exchangers for the wastewater

system to provide heat for its Cap Azur eco-

neighborhood. In the Paris region, the company

creates the energy necessary to operate a

wastewater sludge treatment plant by using

steam recovered from incinerating the plant’s

own sludge.

Recycling wastewater. In Fairfi eld, in the

suburbs of Sydney, a newly-started wastewater

recycling plant is the fi rst managed by a private

operator in Australia. The four billion cubic

meters of recycled water are resold to industrial

companies at a lower price than the previously

used drinking water. In France, Veolia applied

technological expertise on behalf of the world

leader for corrective lenses, Essilor, to build a

plant capable of recycling water within the

company’s production cycle using a biological

reactor and CeraMem™ ceramic membranes.

Material value. In Belgium, Veolia Water built

the world’s fi rst pilot plant capable of producing

bioplastics from wastewater. Veolia Water

has demonstrated its expertise in extracting

value from waste materials on behalf of clients

from all types of processes; the priority now

is to accelerate and multiply this capacity.

HONORING OUR RESPONSIBILITY COMMITMENT

As a multi-local company, Veolia Water is a

partner to the regions it serves. Acting locally

to maintain jobs, support environmental

actions and improve daily lives is part of

Veolia Water’s responsible approach to taking

care of residents, employees, communities

and the environment.

In Nagpur, India, Veolia Water and its local

partner were selected to provide 24/7 water

services to 2.7 million inhabitants, 36% of

which live in impoverished neighborhoods

(see page 37). It is through a commitment

to responsibility that Veolia Water makes the

diff erence. In Perpignan, France, Veolia Water

launched a “Water for All” program to ensure

universal access to essential water and

wastewater services. Under these contracts,

the company donates 2% of revenues to a fund

to support local assistance and off set carbon

emissions. At L’Oréal’s plant in Suzhou, China,

application of Veolia Water’s technologies

helped reduce carbon emissions by 43%.

Montauban selects Veolia Water to manage servicesAs part of a nine-year public service delegation contract, Veolia Water will operate public

water services for the city of Montauban, France, assuming all service risks. As part of Veolia

Water’s commitment to results, performance indicators will be monitored, such as improved

network performance, water quality and management of customer payments. Innovations

include installation of remote water meter readers to allow customers to better manage their

consumption, with real-time alerts sent in case of abnormal usage patterns.

Veolia Water-led consortium wins €776 million contractIn February 2012, a consortium led by Veolia Water’s OTV subsidiary was awarded the

contract to renovate the Seine Aval biological wastewater treatment plant in Achères near

Paris, the world’s second largest wastewater treatment plant. The €776 million contract

is the biggest ever signed by OTV, which is responsible for coordinating the work of the

members of the consortium as well as designing and building the structures and providing

the treatment process.


34

PXP, high quality waterIn North America, Veolia Water is designing, building and will operate a produced water reclamation facility at a PXP (Plains Exploration and Production Company) oilfi eld. Using proprietary Veolia Water OPUS® II technology, water will be treated to high-quality standards. Approximately half will be reused in the production process with the remainder released back into the natural environment.

Water and wastewater services contracts renewed in Perpignan

In renewing contracts with the French metropolitan area of Perpignan,

Veolia Water committed to an ambitious “water for all” program to

ensure universal access to essential drinking water and wastewater

services. The contracts include several innovative provisions including

reduced tariff s for those with very limited water consumption to assist

low-income households. In addition, the services are designed to be

carbon neutral through the reduction of energy consumption and the

production of renewable energy with solar panels and a cogeneration

unit. Under the 12-year contract, Veolia also will install remote metering

devices for the community’s 44,500 customers.

GrowingBlue.comIn the US, Veolia Water launched the GrowingBlue.com website,

providing information on water management issues and best

practices for public water authorities, industrial clients and customers.

The site uses animated maps, graphics and case studies to provide

a visually-compelling, user-friendly portrait of current water

conditions in 180 countries – as well as on possible water availability

scenarios in 2050.

Veolia Water

100,000 inhabitants

=500 tons of bioplasticsThe volume of bioplastics that can be produced from the organic

matter in the municipal wastewater of a city of 100,000 inhabitants.

35

Water Impact IndexDeveloped by Veolia Water and Veolia Environnement

Research and Innovation, the indicator goes beyond

existing volume-based tools to incorporate variables

such as volume, water stress, water quality, competing

demands, and the quality and quantity of water extracted.

Optimizing water services in New YorkNew York City’s Department of Environmental

Protection (DEP) chose Veolia Water to provide

expert consulting services to help optimize

its water and wastewater services networks

that delivers one billion gallons (3.8 billion

liters) of water each day to nine million

people. To support the DEP’s drive to improve

operational effi ciency and become one of the

world’s most reliable and transparent public

water systems, an integrated Veolia and DEP

team are making recommendations in 2012 for

productivity improvements and cost reductions

over four years. A portion of the company’s

compensation will be based on savings

achieved by the city.

$100-200 million: targeted savings from DEP’s

current $1.1 billion annual maintenance and

operations budget.

380 kmThe length of pipe being

laid by Veolia Water’s team

in Senegal to supply drinking water

to the city of Tambacounda.


36

Wastewater services contract in Bucharest

Veolia Water subsidiary Apa Nova Bucharest was selected to provide

integrated management of wastewater services for the Romanian capital.

The contract includes an initial phase of renovating the wastewater

system including the principal sewer, “La Cassette,” located under

the Dambovita River. The €39.27 million modernization project includes

a number of adaptations, including upgrading facilities to signifi cantly

increase the quantity of wastewater discharged into the treatment plant

at Glina.

Durban: recycling to reduce use confl icts

Veolia Water has just celebrated 10 years of success of a recycling project

that allows South Durban industrial clients to use recycled water to meet

their production needs instead of drinking water. The 40,000 cubic meters

of drinking water per day previously used in manufacturing processes are

now released for the consumption of the city’s inhabitants, responding

to a longstanding supply problem. The fi rst and only public-private

partnership water services project of its kind in South Africa benefi ts both

industrial manufacturers, who now pay 60% less for their water than for

drinking water, and the community, where more people are provided with

access to drinking water. In addition, environmental impact is reduced,

as 98% of wastewater is recycled for industrial use.

Veolia Water

French national gendarmerie partnership

Veolia Water became France’s fi rst water company to partner with France’s gendarmerie nationale national police force on a program to place trainees into public safety positions, an example of how the company contributes locally to the development of Veolia’s host communities. Each year, France’s National Gendarmerie police force trains 14,000 assistant volunteers from disadvantaged neighborhoods. As part of a commitment to fostering job creation in local communities, Veolia Water signed an agreement with the National Gendarmerie to facilitate volunteer retraining and to help meet its recruitment needs.

37

Photo en attente

Nagpur meeting the challenge of water for all

COMMUNITY SUPPORT

Veolia Water’s local partner, Orange City Water (OCW) has made a number of commitments to support the community as part of this project in areas such as local employment, training and skills transfer. OCW, the largest private employer (direct or indirect), provides training for 100% of the public water company’s employees, subcontractors and local offi cials, and supports skills development of students from India’s leading business school.

Expansion of the water services contract in Nagpur, India, at the end of 2011 testifi es to Veolia Water’s long-term commitment to ensuring universal access to essential services.

Nagpur, a rapidly growing city of 2.7 million

inhabitants, will soon become the first

city in India with tap water access for all

dwellings, 24 hours per day, seven days

a week. The contract, the first Public-Private

Partnership for drinking water in India,

includes upgrading the city’s infrastructure

for water production and distribution and

delivery of services over a 25-year period.

Upon completion of the five-year renovation,

the city’s 2,500 kilometer network and

six plants will meet international standards,

including increasing the quantity of water

available for inhabitants on a daily basis

from 90 liters to 130 liters. Total investment

of €18 million includes the installation

of 300,000 to 450,000 water sensors.

In addition to the technical challenges,

the project included important cultural

and humanitarian considerations: 36% of the

city’s population resides in slums, disconnected

from the drinking water network. To meet its

commitment of 100% accessibility to

water services, Veolia Water and its local

partner have adopted a close-to-the-

customer approach, with a particular focus

on disadvantaged residents. Actions included:

– door-to-door surveying to determine

the precise number of inhabitants and

understand customer needs;

– 10 local customer care centers;

– customer relations teams who meet

with residents before and after the work

is performed;

– a network of volunteers in each

neighborhood to assist local residents.

In fi gures

36% of the population in Nagpur

lives in urban slums.

5 years needed to renovate the infrastructure

and extend the network.

750 millioneventual liters per day production capacity

of Nagpur’s installations.

6,000 to 8,000the average number of meters installed every

month over fi ve years.

Focus

Projected quantity of water available to Nagpur inhabitants

90 liters/day

130 liters/day

2011 2016

36.1million metric tons of waste

collected


treated

7.4million MWh of electricity and thermal energy sold


recovered as organic, inorganic matter

and energy

€9.7 billionin revenue

More than

70,000employees

worldwide (1)

(1) Excl. Proactiva.

39

How is the business of Veolia Environmental

Services evolving?

Jérôme Le Conte: Three of the four billion

tons of waste produced in the world today

still contain value, which represents an

enormous potential. Meanwhile, raw materials

are becoming scarcer and energy needs are

increasing. Veolia Environmental Services

made a strategic decision several years ago,

well ahead of the market, to turn waste into

a resource. Today, this is a reality, as we have

become producers of raw materials and energy.

Clients look to us to implement solutions that

enable them to improve their environmental

and energy performance, while maintaining

profi tability. Veolia Environmental Services is

mobilizing on all fronts, taking into account

the constraints of each country, to reduce the

environmental impact of our operations, to

increase our capacity to extract value and to

establish new recycling streams. For example,

we’ve gone from the pilot phase to industrial-

scale recovery of lithium, a rare metal necessary

for recycling electric vehicle batteries.

What were some of your other important recent

innovations?

JLC: In a few weeks, Veolia Environmental

Services will open two development centers

for used motor oil in France and Canada. The

project, in partnership with Total, represents

a signifi cant achievement in the development

of a new recycling stream. The plants will

advance technologies that enable more than

80% recovery of this resource at a time of

record petroleum prices. We also are working

on upstream solutions that integrate new

technologies to enable incentive pricing

for waste collection, which supports local

authorities in their waste reduction policies.

Installation of the fi rst fi xed vacuum collection

system for household waste in Romainville,

France, marks another real change in collection

methods and represents a growth driver for the

company. In the current economic crisis, these

technological advances signal our vitality and

the ability of our teams to execute our business

plan and maintain our leadership in delivering

sustainable solutions.

Does the economic crisis call your innovation and

development strategy into question?

JLC: The economic crisis has forced us to adapt

our organization and to focus on markets

and businesses with the best prospects.

We responded quickly, demonstrating our

resilience and agility, for example, through

the successful turnaround of our business in

Germany. These eff orts are a prerequisite for

returning to growth as the economic recovery

takes hold. The eff ects from the crisis are still

present but I am convinced that our strategy

is well aligned with market conditions. Not

making the most of the potential value of

resources represents a cost to our customers;

our industrial expertise in treating all categories

of waste has made us the benchmark reference

and we can rely on the commitment of our

employees as our greatest asset in meeting

the challenges we face.

Interview with Jérôme Le Conte,Head of the Waste Management Division, Chief Executive Offi cer of Veolia Environmental Services

“Veolia Environmental Services made a strategic decision several years ago, well ahead of the market, to turn waste into a resource.”


40

Become a materials and energy producer and convert waste into a resource.

Veolia Environmental Services is the only

company in the world that operates across

the entire waste management spectrum.

Its innovative solutions help municipal and

industrial clients improve their environmental

performance through effi cient management

and recycling of solid, liquid, non-hazardous

and hazardous wastes.

The market for the company’s services is huge:

globally, over four billion tons of waste is

produced every year, only a quarter of which is

recovered. Increasing environmental awareness,

rising energy prices and concerns about the

depletion of natural resources are creating

major opportunities for Veolia Environmental

Services with its capacity to extract value from

wastes and establish new recycling streams.

CENTERS OF EXCELLENCE

To leverage the worldwide expertise that

exists within the company, fi ve centers of

excellence were established in 2011, gathering

leading experts from around the world on

selected priority subjects: safety and health;

waste separation and sorting; environment;

incineration; storage. The centers draw on the

power of the company’s collective international

expertise, resulting in exchanges on best

practices, the pooling of knowledge to resolve

problems faced by clients around the world and

reinforced competitive advantage.

2011 also was marked by several business

successes. The company continued to grow

in the strategically important UK market with

its selection as preferred bidder to build and

operate advanced waste recycling and energy

recovery facilities in Leeds and Hertfordshire

(see article on page 45) under 25-year Private

Finance Initiatives (PFI).

NEW COLLECTION MODES

In partnership with Envac, Veolia Environmental

Services continued to pioneer new waste

collection methods, implementing automated

vacuum collection of household waste in the

Paris suburb of Romainville, with two more

communities following shortly. The new

collection method reduces vehicle traffi c,

saving on fuel and greenhouse gas emissions

and reducing odors and noise. The company

also continued to innovate by “reinventing”

horse-drawn waste collection (see page 43) and

implementing “intelligent collection” approaches

that enable incentive pricing: sensors in waste

Veolia Environmental Services

Innovative, high quality waste management

41

bins transmit information to a collection center

regarding the weight or level of materials in the

bin allowing truck pick-ups to be optimized and

providing an incentive to users to reduce the

quantity of waste disposed by better sorting.

MANAGING SPECIAL MATERIALS

In Europe, the company continued to develop

networks of hazardous waste management

facilities, combining its treatment and recovery

systems to optimize the wide variability of

wastes. Veolia Environmental Services also

continues to develop new tools to extract

value to help clients respond to new economic

and environmental challenges such as the

new Osilub motor oil and lubricants recycling

plant in France or the new process for recycling

batteries and mercury-containing catalysts

opened in Switzerland in October 2011.

SERVING INDUSTRIAL CLIENTS

Veolia Environmental Services continued

to innovate on behalf of its clients to help

them improve their environmental

performance. In the UK, the company’s

assistance helped Unilever reach its “Zero

to landfi ll” objective, part of its Sustainable

Living plan. Its agreement with Veolia

requires that 97% of Unilever’s non-hazardous

waste are recycled, with the remaining

3% converted into usable energy. In Bordeaux,

the company helped Michelin reduce its

reliance on fossil fuels by providing it with

steam captured from waste handling

operations. For Shell, the company is

dismantling the well pads at a gas fi eld,

in the North Sea, a project that will also

revitalize a former shipyard and create a

substantial number of local jobs (see page 44).

PROMOTING HEALTH AND SAFETY

Safety continues as Veolia Environmental

Services’ highest priority, as refl ected by

the fact that it is one of the fi ve centers

of excellence. Safety awards presented in

November 2011 recognized best safety

practices throughout the world.

Veolia Environmental Services is able

to maintain its leadership in innovation as

a result of the commitment and dedication

of its employees. The diversity of the

workforce, composed of 101 nationalities,

is an important contributor to the creation

of an innovative environment. The “Diversity

Cookbook,” produced by the company,

illustrates the breadth of cultures and

backgrounds that help in customizing

solutions to local conditions and needs.

Veolia Environmental Services also

established a women’s network for dialogue

and exchange, part of its eff orts toward

achieving gender balance. The company

also continues in its commitment to actively

recruit and integrate individuals with

disabilities, renewing its partnership in 2011

with the Agefi ph association in France.

807,000business clients.

763treatment plants worldwide.

More than 60 millionpeople served.

Key fi gures

Helping New York managehazardous wastesThe company’s reputation for effi ciently and safely managing hazardous wastes was

confi rmed with New York City’s award of a 10-year citywide contract to remove, handle

and process electronic, lighting, mercury and medical sharp waste. Under the contract,

Veolia Environmental Services will be responsible for providing the labor, equipment,

material and support to properly manage the waste generated by city agency facilities

throughout New York’s fi ve boroughs, including ballasts, batteries, electronic waste,

mercury-containing equipment and mercury-containing lamps.

Australia: sustainability education recognizedFor the second consecutive year, Veolia Environmental Services won the 2011 Australian

Business Award for Environmental Sustainability. The award recognized the company’s

leadership in delivering innovative educational services for Australian businesses on

the importance of recycling and resource recovery and encouraging behavioral changes

to reduce the environmental impacts from waste.


42

Pioneering incentive pricingVeolia Environmental Services is helping French municipalities prepare for a

new law that requires incentive pricing for waste collection. Through analysis of

data collected on the frequency and number of collections, as well as on waste

quantities, Veolia optimizes logistics and collection rounds and encourages

separation at the source in order to limit environmental impacts and reduce

waste volumes. Individual invoices provide an incentive to users to sort their

wastes and so reduce the volume. A pioneer in this fi eld, Veolia signed a new

contract in 2011 with the Loir-et-Sarthe public authority in France bringing to

700,000 the number of people it serves through an incentive pricing program.

Putting Fiat on the road

In Serbia, Veolia Environmental Services signed a contract for the recovery of a brownfi eld site, on which will be built an assembly plant for the automaker Fiat. The project involves the treatment of 200,000 metric tons of earth.


Biopôle Angers, a first in FranceVeolia Environmental Services manages the new waste recycling

center for the Angers Loire community, including a mechanical

biological processing unit, a composting unit and a biogas plant

to maximize waste recycling.

The brand new treatment center, with annual capacity of

90,000 metric tons, separates the biodegradable from other

waste to extract value through biogas and composting.

The cutting edge facility produces 23,000 metric tons of

compost/year, 15,000 MWh of thermal energy and 15,400 MWh

of electricity.

43

Safety at work: objectives and actions

For Veolia Environmental Services, protecting the health and safety

of its employees is an absolute imperative. The company’s safety policy

is implemented on an ongoing basis through reporting, recording and

follow-up of accidents, corrective actions and the involvement and

empowerment of employees in ensuring health, safety and prevention

at all levels of the company.

6%The portion of Veolia Environmental Services’ workforce

in France who have disabilities. In 2011, the company

hired 229 individuals with disabilities, (compared

to an original goal of 200) and 226 employees attained

disabled-worker status.

Waste collection at a trotCombining the old with the new, Veolia Environmental Services introduced horse-drawn household waste collection

services in September in the French city of Hazebrouck, featuring a specially-designed lightweight receptacle based on

sophisticated aircraft technologies. In addition to the environmental benefi ts of a lower carbon footprint and less noise

than traditional waste collection by truck, the service has proven immensely popular with residents, many of who bring

their children with them to the curbside to deposit their trash.

Second life for used batteries2011 saw the opening of Veolia’s

battery recycling center in Wimmis,

Switzerland. The new center’s

innovative process recovers

mercury from spent industrial

catalysts and activated carbon

which then can be cleaned and

prepared for reuse. The plant has

an annual capacity of 1,000 metric

tons of catalysts and 3,000 metric

tons of activated carbon.


44

Vacuum your neighborhood

An automated vacuum waste collection system moves municipal waste

through underground tunnels from stationary collection terminals

to a central unit. The compacted waste is then transported by truck

to a facility for treatment. In addition to the convenience, long-term cost

savings and environmental benefi ts, the system enables individualized

pricing. With several systems already installed in France, Veolia was

awarded the fi rst contract in Paris to design, build and operate a vacuum

waste collection service for the future Clichy-Batignolles neighborhood.

The project will ultimately provide service for a population of

19,000 people and will be shared between residential units and offi ces,

shops and public facilities.

Dismantling expertise

Veolia Environmental Services UK is continuing its partnership with

Peterson SBS on the dismantlement of gas platforms in the North

Sea, a market with considerable potential. Following its work on six

platforms, Veolia signed a new contract with Shell to dismantle platforms

at a gas fi eld. The project also benefi ts local community development

in revitalizing a former shipyard and creating a substantial number

of local jobs. In the port of La Rochelle on France’s Atlantic coast, Veolia

Environmental Services dismantled a large bulk cargo vessel under

a comprehensive environmental plan, including reuse/recycling of

material. In applying its expertise in recycling and management of end-of-

life products, the company was able to recover 95% of the ship’s materials.

UltrasoundThe Revodyn® process uses two ultrasonic detectors

to measure the level of waste on a waste conveyor,

automatically adjusting its speed. The innovation enables

increases of more than 10% in the capacity of waste sorting

plants and improves working conditions.

50The number of employees who contributed to the

“Diversity Cookbook,” produced to illustrate the breadth

of cultures and backgrounds in France. All participants,

who work in a country in which they were not born,

provided a recipe from their home country.


45

“We off er a sustainable approach to increase recycling and extract value from residual waste by converting it into energy; we develop high performance facilities that minimize environmental impact and are well-integrated into the local environment.”

Jérôme Le Conte,

CEO of Veolia Environmental Services

Key fi gures

352,000metric tons of residual waste.

28,000 metric tons of recyclable ferrous

and non-ferrous metals, plastics

and other materials.

26 MW of electricity to be fed

to the national electricity network.

Focus

Under the contract, Veolia Environmental Services will combine recycling with energy

recovery, generating fi nancial savings and environmental benefi ts for the community

and its residents over the contract period. Through front-end pre-mechanical treatment,

28,000 metric tons of recyclable ferrous and non-ferrous metals, plastics and other materials

will be extracted from the residual waste, providing a benefi cial boost to recycling rates.

The remaining 352,000 metric tons of residual waste will be processed using high-effi ciency

energy recovery technology, producing 26 MW of electricity for the National Grid – suffi cient

to power 50,000 homes, with the further potential to distribute heat to suitable local users.

An extensive consultation and community engagement process was undertaken as part

of the development of the design concept and development proposals. In addition to

signifi cant employment and economic activity created during the construction period,

52 long-term jobs will be created for the period of operation.

In brief

The site will produce suffi cient energy to power

50,000 homes

52 long-term jobscreated

Length of the contract:

25 years

In the UK, Hertfordshire County Council designated Veolia Environmental Services as preferred bidder under a 25-year PFI residual waste treatment contract

Increasing consumption of energy, decreasing fossil fuels.

Energy supplied for an increasing population and industrial development.

Decreasing CO2 emissions as a result of renewable energy

and improved effi ciency.

TodayYesterday Tomorrow

47

What are the key elements of your strategy?

Franck Lacroix: Our goal is to be the global

benchmark reference in off ering sustainable

energy solutions to public and private sector

clients. We continue to help clients reduce energy

consumption through effi ciency and optimization

measures. As a local energy provider, we are

leading the development and modernization of

heating and cooling networks, combined heat

and power plants, geothermal energy, biomass,

photovoltaic solar power and smart grids.

Our relationship with EDF is also crucial and our

strengthened ties will help accelerate Veolia

Energy – Dalkia’s growth internationally, as well

as achieving operational synergies.

Tell us more about the three components

of your off er.

FL: District heating and cooling networks

include design, build and operation of cities’

heating, cooling and distribution networks,

network management and local energy

production. Our industrial off er includes

local production of industrial energy utilities

and the design, build and operation of

energy facilities for industrial clients. Energy

services include local energy production,

energy management and production of

technical energy solutions for buildings and

design, build, operation and maintenance

of energy facilities. Our three off ers are very

complementary; for example, optimizing

a city’s heating network and recovering the

heat for a nearby industrial site. We off er

clients comprehensive, customized solutions

for their energy needs and are capable

of supporting them from design through

long-term operation, with guaranteed results.

Our ability to aggregate energy resources

enables us to optimize energy purchasing

and fi nd the best balance between national

and regional markets.

Can you give us some examples of how Dalkia

is helping create the “smart” energy city?

FL: First, by reducing the energy consumption

of buildings, whether residential, hospitals,

offi ces or industrial sites. This is an area in

which Dalkia has unique expertise to make

existing buildings more energy effi cient

while improving occupant comfort. Then,

by “de-carbonizing” residual consumption

in replacing fossil fuels with alternative energy.

This of course includes biomass and wood

energy, where Dalkia is clearly the leader in

Europe, as well as agro-industry products (such

as coff ee grounds or distillation residues). Dalkia

also has recognized expertise in geothermal

energy through our integrated solutions,

studies, drilling and operating, with guaranteed

long-term performance. More recently,

extracting the value of energy recovered from

data centers or wastewater has opened new

possibilities. The intelligent city encompasses

the concept of the “smart energy city.” Dalkia

has been investing in “smart heat grids,” which

are intelligent district heating and cooling

networks. With Veolia Environnement Research

and Innovation (VERI), we will be experimenting

with creative solutions for network control.

Dalkia is also a partner in the European

SmartHeat4Cities collaborative project

through which complementary experiences

are being developed and shared on fi ve sites.

Also in the fi eld of smart grids, we are working

together with VERI on France’s Project Refl exe

– responsible and fl exible electricity – and

the development of networks and intelligent

electrical systems.

Interview with Franck Lacroix,Head of the Energy Services Division, Chief Executive Offi cer of Dalkia

“For Veolia Energy – Dalkia, the main goal is to be the benchmark reference in energy savings by providing sustainable energy solutions to our public and private sector clients.”


48

Dalkia (Veolia Energy – Dalkia) is a European leader in delivering energy services to public authorities and industrial companies.

Dalkia designs, implements and manages energy

solutions that support the sustainable growth

of cities and businesses. It meets customer

expectations through customized, end-to-end

solutions that ensure comfortable living and

effi cient energy supply.

The company creates value through its three

complementary off ers:

– production of heat and urban networks;

– production for industrial clients;

– energy-effi ciency services, to help clients

reduce consumption.

Dalkia’s capacity to leverage economies

of scale in order to aggregate energy resources,

supply the national electricity network and

fi nd the best balance between regional needs

and energy resources is a major source of

competitive advantage. With the experience

gained at more than 120,000 sites, Dalkia

is well positioned by virtue of its involvement

throughout the local energy cycle and its

capability to directly implement the solutions

it creates and support client needs over

the long term.

REDUCING CO2 EMISSIONS

By increasing use of renewable energy sources

such as biomass and geothermal energy and

lowering the consumption of energy through

effi ciency and optimization measures, signifi cant

environmental benefi ts are generated; Dalkia is

moving closer to its 2015 objective of 13 million

metric tons of CO2 emissions avoided as a result

of implementation of its projects.

Despite the turbulent economic environment

in 2011, Dalkia achieved a number of important

successes. In Warsaw, the company began

operating the largest district heating network

in Europe, covering more than 1,700 kilometers.

The contract allows Dalkia to reinforce its

leadership in heating networks and energy

services in Central Europe. In France, which

continues to be one of the world’s leading

markets for energy services, the company

continues to expand its capabilities in biomass

Veolia Energy – Dalkia

A leader in energy services in Europe and around the world

49

cogeneration with three new projects added

to the portfolio. Dalkia also won the contract

to construct and operate the new biomass-fi red

district heating system for the Greater Dijon

metropolitan area and signed several signifi cant

energy performance contracts.

ADDING VALUE FOR INDUSTRIAL CLIENTS

Industrial clients continued to turn to Dalkia for

solutions to lower their costs through reduced

energy consumption, a priority increasingly

important in the economic crisis. Dalkia also

provided value-added solutions that enable

clients to reduce CO2 emissions an d improve

their environmental footprint.

Dalkia’s ability to forge close relationships

is an essential factor in the value-added

solutions the company creates. In Hungary, the

company will design and operate the Bonduelle

Nagykőrös biogas plant. In France, Dalkia signed

an energy services management contract

with Schneider for its sites in Grenoble. Other

successes included ArjoWiggins and Seyfert

Paper (to build-operate a biomass cogeneration

plant to provide process steam and produce

green energy). Dalkia also helped Sara Lee double

its production of instant coff ee while reducing

its carbon footprint with a more effi cient on-site

waste-to-energy system, using spent coff ee

grounds and biogas produced from wastewater.

ENERGY OPTIMIZATION, REAL RESULTS

In partnership with EDF Optimal Solutions,

Dalkia is ensuring optimized energy

performance for 20 schools and three museums

in northern France as well as the regional

governmental headquarters. Similar contracts

have been won elsewhere, including in Spain

and the US. Dalkia continued its development

in the healthcare market in several countries,

including contracts with Southampton Hospital

in the UK and the hospital center of Saintonges,

France.

SMART ENERGY CITY

Dalkia is a partner in the “SmartHeat4Cities”

project, in collaboration with other industry

representatives and leading European scientists,

including COWI, Vattenfall, MVV, Euroheat and

Power. The project will combine experience

sharing from fi ve district heating demonstration

sites in Upssala, Sweden; Swansea, UK;

Mannheim, Germany; Aarhus, Denmark;

and La Rochelle, France. As the project leaders

of the demonstration in France, Dalkia and

Veolia Environnement Research and Innovation

will conduct experiments using innovative

solutions to run the heating network, including

intensifying interaction with clients and end

users to develop and evaluate the concept of

Smart District Heating.

The UN has designated 2012 as the year of

sustainable energy for all. With its expertise

in biomass and geothermal energy, Dalkia is well

positioned to play a leadership role in this area

as it continues to develop sustainable solutions

for clients – and for society.

€8.3 billionmanaged revenue.

107 TWhof energy managed.

6.6 millionmetric tons of CO2 emissions avoided.

Almost 52,700employees.

123,500energy facilities managed worldwide.

Key fi gures

Smart grid project in FranceVeolia Environnement is leading a consortium of companies in building a smart grid

demonstration project being sponsored by the French government under its “investing

in the future” program. Smart grids must integrate multiple sources of decentralized energy

generation, storage and consumption; the considerable amounts of information generated

must be managed in real time using a parallel communications network. The project, located

in Nice, will assess the grid’s technical feasibility on a large scale and its various energy,

business and environmental management benefi ts.

Data center = energy centerDalkia is leading the development of a huge potential source of energy: recovery of heat from

data centers, the offi ces used to house computer equipment, which need to be constantly

cooled by air conditioning units. Using recent technological advances, Dalkia recovers the

high volume of hot air, which is then transmitted via a heat exchanger to a heating network

that supplies green energy to buildings. A newly opened 600,000 square meter business

park at Marne-la-Vallée, France, will soon be heated using green energy recovered from data

centers, avoiding 5,400 metric tons of annual CO2 emissions.


50

Renewable energyContinuously regenerated energy derived from natural

processes. The defi nition includes energy generated by solar,

wind, biomass and geothermal sources. Among numerous

examples, conversion to biogas enabled coff ee producer,

Sara Lee, to avoid 14,000 metric tons of CO2 emissions.

More than

€200 millionThe value of Dalkia’s contract to design, build and

operate for 25 years a new district heating network

for the city of Dijon, France. Renewable energy will

be used to meet 80% of the network’s needs.


Biomass for Brest, FranceDalkia will build a “wood”

cogeneration plant in Brest,

in western France. The main

benefi ciaries will be heating

network users, Cargill and Entrepôts

Frigorifi ques Brestois. The project

also will contribute signifi cantly to

the city’s energy climate plan, with

approximately 70,000 metric tons

of CO2 per year avoided.

100% recovery of biogas in HungaryDalkia will design and operate a biogas

plant for Bonduelle Nagykrös in

Hungary. The company will recover

100% of the biogas produced at the site,

eventually supplying up to 20% of the

plant’s energy. Among the benefi ts for

Bonduelle: a 15%-reduction in energy

costs.

51

A breath of fresh air forHong Kong’s Kai Tak airport

In Asia, Dalkia was awarded an eight-year design-build-operate

contract for the cooling network at Kai Tak Airport in Hong Kong

as part of the airport’s renovation. Dalkia will deliver a 284-MW

capacity cooling plant and two seawater-supplied district cooling

facilities for the 1.7 million square meter site.

Energy effi cient in Hempstead, New York

In Hempstead, New York, Veolia Energy – Dalkia is providing support

for the town’s energy effi ciency program and implementation

of several sustainability and conservation initiatives. Designed

to lower the town’s carbon footprint, achieve major energy savings

and improve the facilities for residents, program elements include

a wind turbine, solar panels, a GHG inventory, a light-bulb exchange

and a public outreach campaign.

20%Percentage improvement in Dalkia’s

safety performance between 2010

and 2011, with a reinforced focus during

Health and Safety week in November 2011.

2.6 millionmetric tons of biomass consumed in 2011

at more than 390 Dalkia facilities

worldwide. Dalkia commissioned biomass

power plants for Trelleborg in Sweden, Dairy

Crest in the UK and the hospital center

of Saintonges, France.

Diversity commitment recognized

Dalkia France’s commitment to promoting diversity, equal opportunity and discrimination prevention was recognized through the award of the “Diversity Label,” received from French association Afnor. The certifi cation recognizes the work done by all company stakeholders, including the Campus Veolia Environnement organization.


52

285 cubic meters of water per hourAverage fl ow from drilling carried out by Dalkia in the towns of Torcy

and Lognes in the Paris region as part of a double-well geothermal installation.

Temperature level: 71 °C.


Improving energy effi ciency at Southampton Hospital

Dalkia will design, build, operate and maintain a power plant through

a contract with University Hospital of Southampton, UK, one of the

largest energy-effi ciency contracts to date. The 20-year contract will

result in power output of 2 MW (combined, heat and electricity),

with a reserve capacity of 4 MW.

Measured energy optimization

Under a pioneering Energy Performance Partnership, Dalkia is ensuring

optimized energy performance for 20 schools and three museums

in northern France as well as the regional governmental headquarters.

In partnership with EDF Optimal Solutions, Dalkia commitments include

a 58%-reduction in CO2 emissions in renovated buildings, a guarantee

of 32%-energy savings for 15 years and improved comfort for facility

users. A similar agreement was signed with the schools in France’s

Aquitaine region.

53

CONVERTING TO BIOMASS IN POLAND

With 14 years of experience in Poland, Dalkia produces and distributes local energy for 40 cities, including Łódź and Poznań. Dalkia is deploying its expertise for each of the facilities entrusted to it to off er competitive heating prices and improve service quality.

Dalkia reinforced its leadership in the heating networks market in winning the contract for the European Union’s largest district network in Warsaw, Poland.

In October 2011, Dalkia Polska, a 60%-owned

subsidiary of Dalkia International and

IFM – Industry Funds Management (40%),

purchased an 85%-stake in SPEC SA (Stołeczne

Przedsiębiorstwo Energetyki Cieplnej), which

manages the city of Warsaw’s district heating

network. This major foothold in Central

Europe bolsters Dalkia’s leadership in heating

networks and energy services.

When the city initiated the contracting out of

its 1,700-kilometer district heating network

to the private sector in February 2011, very

few companies had the means of responding.

Dalkia was selected based on its recognized

expertise in the operation and optimization

of heating networks in Central Europe. The

network supplies 80% of Warsaw’s buildings,

which are mainly multi-family housing units,

as well as Poland’s Parliament, the Presidential

Palace, a number of industrial buildings and

cultural and sports facilities, including the

stadium that will host the opening match of

the Euro 2012 football tournament.

System improvements being implemented

by Dalkia include installation of a sensor

system to provide a complete picture

of the system’s operations in real time

and allow rapid response to system

breakdowns. Planning also is underway

for an intelligent heating network

to optimize the system’s functioning and

reaction times. Energy and environmental

performance objectives are monitored

and improvement actions are being put

in place including applying controls

to reduce CO2 emissions, increasing the use

of biomass and linking the network with

cogeneration facilities.

Key fi gures

1,700 kmnetwork.

80%of city buildings supplied.

10,000benefi ciaries.

Warsaw: major acquisition in Poland for Veolia Energy – Dalkia

Focus

Competitive heating prices:

70% cheaper than electricity

55% cheaper than heating fuel

33% cheaper than natural gas

13

transit modes

3.3 billion

passengers transported/year

60,000vehicles

27countries

€7.8 billionin revenue

in 2011

102,000employees worldwide

55

How is Veolia Transdev positioned to respond

to today’s transportation market?

Jérôme Gallot: Veolia Transdev’s expertise

and resources make us an ideal partner for

cities and public authorities, one capable of

delivering innovative, cost-eff ective solutions

customized to respond to local needs. Mobility

demand is increasing rapidly and will continue

to grow in coming decades with the rapid pace

of urbanization around the world. Local public

authorities facing constrained budgets and the

need to maintain and improve transport services

for travelers are looking for reliable partners

who are able to deliver. Our clients’ confi dence

in Veolia Transdev as a global benchmark

reference was underlined by the more than

three billion euros in value of contracts wins and

renewals we received in the 4th quarter of 2011.

What are the diff erentiating strengths

of Veolia Transdev?

JG: Our strengths today refl ect the powerful

reasons for the merger of Veolia Transport and

Transdev, which have lost none of their validity.

We have the combined advantage of being our

industry’s most international, yet most locally-

based company, enabling us to leverage global

resources and expertise to deliver customized local

solutions. The 13 transit modes that we deliver

is also the world’s broadest service platform.

We also have the resources to support our clients

on a long-term basis, partnering to share risks and

ensure the continuous improvement of services

for the traveler. Finally, our ability to innovate

and share best practices keeps us at the cutting

edge to respond to customers’ new mobility

expectations – today and tomorrow.

What are your priority areas for development?

JG: We are focusing on three areas because

of their growth and profi tability and their role

in reshaping public transportation: rail, for which

markets are opening in Europe and elsewhere

in the world; transportation on demand, which

responds to the growing need for individualized

transit solutions; and digital services, which has

major implications for public transportation

and the overall economy. At the same time, our

teams continue to perform with professionalism

in our core businesses – bus, coach, metro and

light rail – in which we currently generate 75%

of our revenues. We also will continue to develop

our services to travelers such as taxis, long-

distance transportation, by rail or on-road, and

transportation on demand and to further establish

Veolia Transdev as a mobility integrator.

Interview with Jérôme GallotChief Executive Offi cer of Veolia Transdev

“Veolia Transdev’s expertise and resources make us an ideal partner for cities and public authorities, one capable of delivering innovative, cost-eff ective solutions.”


56

Nice, France – Electric car sharing

The “Autobleue” electric car-sharing network launched in Nice, France,

in April 2011, attracted more than 1,800 subscribers in its fi rst eight

months of operation. In addition to off ering a more environmentally-

friendly approach to mobility, the service off ers some of the latest advances

in digital services with contactless ticketing, mobile NFC payment,

personalized booking on the Web and an “intelligent” re-charging system.

With a 24/7 customer care center, the service off ers mobility packages for

all means of transportation (public transit, car sharing and cycling) and has

earned customer satisfaction scores of 80%. The network plans to expand

to 210 electric cars and 70 stations by the end of 2012.

Chile – Santiago chooses Veolia Transdev to upgrade its bus systemVeolia Transdev was awarded the three-year contract, with a possible

18-month renewal, to operate the 600-bus system serving Santiago’s

northern and northeastern suburbs. With 100 million passengers

transported annually, Veolia Transdev’s Chilean subsidiary, Redbus,

now operates one of the company’s largest bus systems in the world

in the fast-growing country.

Thello: a strong foothold in the European rail marketThello, created by Veolia Transdev in partnership with Trenitalia,

is the new entry to the rail market between France and Italy. With

tickets starting at €35, Thello’s overnight service between Paris, Milan

and Venice off ers daily departures in both directions serving Dijon,

Milan, Brescia, Verona, Vicenza and Padova. The service off ers three

levels of comfort on board.

Sustainable mobilitySustainable mobility makes a positive contribution to the

environmental, social and economic sustainability of the

communities served. Transport systems exist to provide social

and economic connections and are able to attract increased

ridership by off ering new opportunities for increased mobility.

94%Bus passenger satisfaction rates in Sydney,

Australia, for public transportation in areas served

by Veolia Transdev.

Veolia Transdev

57

Transportation on demand

Already the leader in transportation on demand in Europe and the US,

Veolia Transdev has created a new global business unit to accelerate

its development. In the Netherlands, the company provides services for

the elderly and disabled under a national contract and operates 30% of

Dutch taxis. Many of its ambulances have been equipped with cameras

and monitors enabling physicians to make a preliminary diagnosis

while the patient is en route to the hospital. In the US, the company’s

transportation on demand contract was renewed last year with the City

of Seattle, Washington, for seven years.

Close-up: Nassau Inter-County Express (NICE)In January 2012, Veolia Transdev

began operating the bus service

for Nassau County, New York,

through an innovative fi ve-

year Public Private Operating

Partnership (PPOP) contract.

Under the contract, the largest

for public transit in the US, Veolia

is responsible for all operations in

transporting 100,000 passengers

every day; the County retains the

assets and approves the annual

plan, budget, rates and service

levels.

Nancy, France: urban transit network

Veolia Transdev’s contract to manage the bus and light rail urban transit system for the city of Nancy, France, was renewed for seven years in November 2011.

Airport management

Veolia Transdev manages the Perpignan-Rivesaltes airport in France under a seven-year contract.


58

59


Ourresponsibility


60

In a world of dwindling natural resources, insuffi cient access to essential services for many populations and multiple threats to our planet’s health, the imperative for responsible corporate behavior has never been stronger. Setting a goal to be the global benchmark in sustainable performance is a demanding ambition – and one that Veolia Environnement fully embraces.

Achieving this standard requires a shared

strategic vision and an eff ective, consistent

management approach. It means being

accountable to all stakeholders as well as

engaging them in Veolia’s sustainability

commitment. Every one of the company’s

employees plays a role in helping Veolia advance

on its path of continuous improvement. Its

capabilities for innovation, training, extracting

value and measuring performance are the

foundations on which Veolia’s Corporate Social

Responsibility (CSR) program is built. Most

of all, it means living up to our commitments,

setting the example for sustainable behavior

in its programs, processes and site operations

throughout the world. Not just some of the

time. All of the time.

Being a leader in sustainability means

being exemplary in performance. Veolia

Environnement strives to set an example

through its capacity for innovation, the rigor

of its evaluation practices, its commitment

to continuous improvement and

by reinforcing key CSR messages with

its employees and other key stakeholders.

MEASURING PROGRESS

The Environmental Management System (EMS)

is the tool developed by Veolia Environnement

to measure its environmental, human resources

and sustainable purchasing performance.

Established in 2002, this rigorous approach

to social and environmental reporting sets

quantifi able objectives and action plans within

existing management systems and contributes

to ongoing performance improvement. Used

across all divisions, the EMS also enables

analysis of the environmental impact of

company activities, compliance with internal

and external standards and the establishment

of actions necessary to improve performance.

In 2011, EMS was deployed throughout 85% of

the company (in terms of revenue) measuring

priority areas of air emissions, discharges into

water and consumption of water and energy.

Our responsibility Sustainable Development

Becoming the benchmark for sustainable development

61

This monitoring can be complemented by

additional specifi c actions at the local site level.

In addition, Veolia Environnement has developed

an expertise in biodiversity management and

works in partnership with the French Committee

of the International Union for Conservation

of Nature. To share this expertise throughout

the company, Veolia Environnement published

a guide to ecological site management in 2011.

SUPPORTING EMPLOYEES

Veolia Environnement’s human resources

policy emphasizes skills development, ensuring

social equity, reinforcing health and safety and

providing support throughout the company for

all employees (see pages 20-21 of the report).

Veolia monitors the results of its practices

company-wide through annual reporting

on 200 indicators.

PROMOTING SUSTAINABLE PROCUREMENT

Veolia Environnement’s sustainable

purchasing policy helps to improve

its economic performance, anticipate

and prevent risks and build long-term

relationships with suppliers. The company’s

purchasing offi cers have the responsibility,

and are trained to manage their specifi c

areas in accordance with CSR principles.

They are expected to consider environmental

certifi cation, eco-design and total cost

of ownership in managing purchases

and to ensure that suppliers are conducting

their business in a manner consistent with

Veolia’s CSR principles. Procedures for

supplier evaluation and audits are used

to measure suppliers’ CSR performance

and implement improvement plans

where necessary.

Reinforcing CSR with employeesThe Veolia Spirit information kit was developed by Veolia Environnement to help employees

meet the sustainability challenge in their ongoing business development eff orts. The kit presents

the challenges and benefi ts of implementing sustainable development at all levels of the company

and the importance of a shared vision of setting the standard for exemplary CSR performance.

Wild honeybees Setting an example also extends to safeguarding

biodiversity. It is an area in which Veolia

Environnement has a long history of innovating

and working to improve understanding of the

importance of ecosystems and of proposing

solutions that promote development of

biodiversity in cities and protect ecological zones.

Wild honeybees are a striking example. The bees’

(actually more than 1,000 species) existence

is being threatened by pollution. To provide a

more favorable environment for pollination,

Veolia Water in France adapted the maintenance

schedule for the 75 green spaces it manages in

the region around Paris. These changes result in

the sites becoming home to large nesting colonies

of bees (who are harmless to humans), helping

to re-establish a critical link in the ecosystem.

Meanwhile, up to 130,000 bees housed in three

hives on the green roof of Veolia’s biomass plant

in Vandœuvre-lès-Nancy (France) are helping

to pollinate the surrounding urban environment.

The urban refuge is well suited to their activity since

bees can produce four to fi ve times more honey in

towns when provided with the right environment.

Promoting CSR best practices internallyUnder the banner “Working together to make a diff erence,” employees of Veolia

Water Solutions & Technologies in Australia and New Zealand have set an objective

of achieving a 5% reduction in waste generation and consumption of water, energy

and paper.

The “Sustainability 5” action plan includes provision of educational materials to

employees on how to reduce their environmental footprint by altering their everyday

routine in the workplace. One of the performance measures uses online monitoring

to track paper consumption by department.


62

Living by the principles of sustainable development includes “doing more with less,” in recognition of the need to derive maximum value from each precious natural resource. Veolia Environnement innovates constantly to create value for stakeholders, whether to protect the environment, improve competitiveness, reduce risk or contribute to the economic and social development of host communities.

MEASURING AND REDUCING

MANUFACTURERS’ ENVIRONMENTAL

FOOTPRINT TO IMPROVE COMPETITIVENESS

AND REPUTATION

In 2010 and 2011, Veolia Environnement

developed a methodological approach to

measure an activity’s impact on four major

environmental components: climate (carbon

footprint), freshwater resources (water

footprint), fossil fuels, mineral, timber and arable

land (resources footprint) and the ecosystem

(ecosystems/biodiversity footprint). The

measures provide a simple, robust picture

of the direct and indirect environmental impacts

of a product or service. The environmental

footprint is a useful tool for decision-making and

risk management that contributes to improving

the competitiveness of Veolia’s clients.

Locally, the environmental footprint can be

used to help ensure sustainable economic

development by businesses and investors and

preservation of quality of life, essential to an

area’s attractiveness and competitiveness. For

industrial clients, the environmental footprint

tool can be applied throughout its value chain to

reduce risks related to the availability and prices

of resources (water, raw materials and energy).

It can also establish commercial diff erentiation

with competitors through the provision of

products and services that minimize carbon and

water impacts and waste generation.

ACCESS TO ESSENTIAL SERVICES: AN EXPERTISE

EXPECTED BY OUR CLIENTS

In addition to creating new economic solutions,

innovation also must serve people, including

the most fragile populations. In Africa, the

Middle East, Asia and Latin America, millions

of people have gained access to water

and/or wastewater services with the help

of Veolia Environnement. By leveraging its

research and innovation capabilities, the

company has worked with client communities,


Creating value

63

international organizations and local NGOs

to implement solutions to provide access

to public services for every family and every

individual. In the area of water and urban

wastewater treatment, for example, the

expertise developed by Veolia’s ACCESS,

based on 10 years of experience in emerging

markets, has contributed to projects for

providing connections for low-income

households, safe and reliable community

services, implementation of innovative pricing

policies and information campaigns on good

consumption practices.

The company also partners with internationally-

renowned independent laboratories such

as the Abdul Latif Jameel Poverty Action Lab

(J-PAL, Laboratory of Massachusetts Institute

of Technology, led by Esther Dufl o) to assess

the impacts on human development of new

services. In addition, Veolia has pioneered

testing with the World Bank and the Global

Partnership on Output-Based Aid (GPOBA)

of the fi rst output-based aid project, applied

to water and wastewater services access

in urban areas.

This new mechanism, in which funding for

the service is contingent upon independently

verifi ed achievement of goals, is an alternative

to traditional public development support.

IN SENEGAL, THE VEOLIA ENVIRONNEMENT FOUNDATION SUPPORTS AN ECOLOGICAL

RESTORATION PROGRAM conducted by the Observatoire Homme-Milieux (OHM) of France’s

CNRS, based at Tessékéré. Senegal’s water and forestry department, with support from the

University Cheikh Anta Diop in Dakar, has launched a campaign to plant diff erent wood plants

species on 80,000 hectares, while providing socio-economic support to the region’s 30 rural

communities.

France: partnership reinforced with National Association of PIMMS(1) PIMMS are local associations whose purpose is to facilitate access for residents of disadvantaged

urban neighborhoods to the services necessary for daily life (including energy, water and waste

management). They were created in 1995 by major utilities including Veolia Water, which was

represented in half of the PIMMS existing in France as of the end of 2011. In June 2011, Veolia CEO

Antoine Frérot signed an agreement extending the 15-year partnership to all Veolia businesses

to maintain links to regions and ensure localized management tailored to the needs of residents.

(1) Points of Information and Multi-Mediation Services.


64


Sharing our commitments

Communicating, listening, working together, welcoming external evaluation… Veolia Environnement is committed to sharing its sustainability objectives and results. The company’s continued progress relies on meaningful, ongoing interaction with its stakeholders, including customers, employees, suppliers and interest groups, to help drive improved performance.

WITH CLIENTS

In France, Veolia Environmental Services has

undertaken a series of local sustainability

actions in partnership with its municipal client,

Sictom. These initiatives include establishing

a fund to fi nance initiatives to support local

communities and generating green electricity

produced from biogas at non-hazardous

waste facilities (certifi ed for the issuance and

sale of green energy certifi cates). Similarly, in

Poland, Dalkia also is sharing its sustainability

commitment with its stakeholders through the

launch of the website biocity.pl (see page 65).

WITH EMPLOYEES

Internally, Veolia Environnement shares it

CSR commitment with employees through

a consistent focus on establishing and

reinforcing a sustainable development culture

throughout the company. Its Sustainable

Development Observatory regularly organizes

conferences to encourage discussion and the

sharing of information on sustainability themes.

The meetings are open to all of the company’s

managers, experts and communicators and

are transmitted over the intranet. Observatory

notebooks are widely distributed.

WITH REGIONS

Veolia Environnement also is a member

of the World Urban Campaign and the

“100 Cities” initiative, both launched by

UN-Habitat at the World Urban Forum

in Rio de Janeiro, Brazil. In partnership with

the city of Rabat, Morocco, Veolia participates

in these initiatives aimed at enabling

many of the world’s largest cities to improve

their environmental performance and

benefit from the exchange of experience

and knowledge in a decentralized framework

of cooperation between developing countries.

The company is also a member of the “R20”

Climate Action Coalition composed of the

world’s 20 largest regions and headed

by the United Nations Development

Program (UNDP) and the United Nations

Environment Program (UNEP).

65

The coalition is working on the establishment

of Regional Climate plans for subsequent

implementation. In France, Veolia

Environnement supports the partnership for

French cities and regions (PFVT), enabling the

company to play an active role in international

urban cooperation. Veolia Environnement

is a member of the Institute for International

Communities Cooperation created by the

United Cities of France (CUF) association.

Veolia Environnement also actively engages

in the ongoing discussion about the future

of the greater Paris metropolitan region

and has created a think-tank that

contributes to the public debate through

publications and participation in the

organization of conferences (including

the Cité de l’Architecture in Paris, held

in September 2011).

WITH INTERNATIONAL ORGANIZATIONS

Veolia Environnement continued its

cooperative approach with international

institutions in 2011 including contributing

to the achievement of the Millennium

Development Goals and meeting

its commitments as a member of the

United Nations Global Compact.

Through its development partnerships,

Veolia promotes the exchange of experiences

and knowledge between the communities

and regions in which the company operates.

For example, Veolia Environnement serves

as official expert to the UN-Habitat working

group that prepared the International

Guidelines on Decentralization and

Access to Basic Services for All.

For more information, the 2011 CSR

Performance Digest is available on

www.veolia.com

Extra-fi nancial ratings help drive CSR performanceAs a company listed on the Euronext CAC 40 index, Veolia

Environnement is rated for its extra-fi nancial performance

based on published information and statements. Veolia’s CSR

performance has been recognized externally through its inclusion

in the FTSE4Good, ASPI and Ethibel Sustainability indices and

in the premium category by the Oekom agency.

This information allows the company to see where it stands

and serves as a guide for continuous improvement across key

sustainable development areas, including governance, human

resources management, environmental performance, ethics,

human rights, client/supplier relations and stakeholder dialogue.

External views and judgments of Veolia’s performance are an

important input to its process of continuous improvement in CSR.

Supporting Biosphere 2In the US, Biosphere 2, a 1.27-hectare experimental site established by the University of Arizona, is home to the

world’s largest artifi cial closed ecosystem. Among the diff erent ecosystems that have been re-created for scientifi c

study at the site are a tropical rain forest, an ocean with coral reefs, mangrove wetlands, savanna grassland and

a desert, providing scientists with unique working resources.

The Veolia Environnement Foundation provides support for the site and is creating a joint scientifi c collaboration

program and research projects on “water and climate” and “energy and sustainable development.”

biocity.pl: everything about sustainabilityAs part of its commitment to engaging

stakeholders, Dalkia in Poland launched

a website focussing on sustainable

development. The “lifestyle” site contains

texts, fi lms, games, articles, cartoons

and learning aids to stimulate interest

and interactivity.

Stakeholders were invited to participate

in a brainstorming session to help choose

the name for the site.


66

2011 was a year of increasing impact for

Institut Veolia Environnement, an independent

organization dedicated to anticipating and

exploring interaction between society and the

environment. The 6th edition of its conference

program held in Paris in June 2011 on future

environmental issues provided visibility for

a study of interactions between Poverty and

Environment. The involvement of partners

AFD(1), IUCN(2), WBCSD(3), IDDRI(4), FERDI(5),

IPRCC(6) and the HEC Social Business Chair(7),

and the sponsorship of the French government

confi rmed the importance of the conference’s

topic and contributed to the quality of the

presentations and the level of the speakers,

including two Nobel laureates, Harvard

economist, Amartya Sen, and Wangari Maathai,

former environmental minister and founder of

the Green Belt Movement in Kenya. A total of

70 key speakers from 15 countries presented to

an audience of 600 participants (see “Poverty-

Environment: from Paris to Rio+20”). In July 2011,

the Institut partnered with the United Nations

Environment Programme on a study measuring

the environmental performance of cities (see

“Sustainable Cities”).

The international scientifi c journals SAPIENS

and FACTS Reports have seen their distribution

grow and diversify through the development

of editorial partnerships. SAPIENS published

articles in 2011 from the 3rd conference of

the Wuppertal Institute (Germany) on green

growth. FACTS Reports is fi nalizing an issue

on “The fi ght against poverty: between

donations and markets”, which will be

published through a partnership with French

daily Le Monde.

(1) Agence Française de Développement. (2) International

Union for Conservation of Nature. (3) World Business Council

for Sustainable Development. (4) Institut du Développement

Durable et des Relations Internationales. (5) Foundation

for International Development Study and Research.

(6) International Poverty Reduction Center in China.

(7) Chaire Social Business, Entreprise et Pauvreté, HEC.

Conferences, partnerships, publications: the work of Institut Veolia Environnement gains new recognition in 2011.

Our responsibility Institut

Increased visibility for major themes

Sustainable CitiesThe Institute continues its work on

sustainable cities, following the 2009

study with the College of Europe on

carbon balance methods in European

cities, which was considered in 2010

within the World Bank / UN-Habitat /

UNEP working group.

Its 2011 study with UNEP focused

on measuring cities’ environmental

performance and looked at sectors

to be integrated and an inventory of

existing or missing indicators needed

to establish appropriate measures. The

fi ndings were presented at the Green

City, Better City Summit in Gwangju,

South Korea, at the end of 2011.

Poverty-Environment: from Paris to Rio+20In preparation for the June 2012 UN Summit on Sustainable Development in Rio de Janeiro,

Brazil, the Institute wished to contribute the results from the “Poverty-Environment”

Conference. With the intervention of Brice Lalonde, Executive Coordinator of Rio+20, articles

from the Conference were included as contributions to the United Nations Secretariat’s

preparatory documents that will serve as the basis for the formal negotiations in Rio.

Through opportunities such as this, the Institut works with its partners to contribute to the

refl ections of international bodies on issues relating to a sustainable common future.

67

In 2011, the Veolia Environnement Foundation

continued its engagement in all aspects

of sustainable development: environmental,

professional re-entry, support for individuals

in need and emergency missions, with

numerous projects initiated or continued.

To highlight projects that truly stand out in

terms of scope or innovation, the Foundation

published an “integration survey,” updating

all actions promoting economic integration

undertaken since the Foundation’s creation

in 2004 (over 250 projects supported).

A summary report assessed the impact of

seven years of support from the benefi ciary

institutions and recognized the tremendous

work done by its partner organizations, to who

the Foundation has provided total funding

of €4.5 million since 2004.

Supported organizations include the French

association Adie, which supports the creation

and management of micro-enterprises

and provides counsel to entrepreneurs.

The Foundation also contributes to supporting

the re-employment of disadvantaged individuals.

A number of new projects involve sponsorship

of Veolia employees who lend their skills

to helping others in need. In Cameroon,

volunteers are working to improve access

to drinking water and wastewater services,

which will ultimately benefi t more than

150,000 people. The action focuses on

technical studies and water supply systems

in ten villages and the construction of latrines

for schools and market places.

In Congo, the Foundation has joined a national

strategic campaign against cholera through the

expertise of 20 Veoliaforce volunteers. Drinking

water supplies are being rehabilitated in two

of the locations that were sources of epidemic

outbreaks (Kalemie and Uvira), to provide

access to 500,000 people. To continue to fi ght

to raise awareness, the Foundation created the

Global Alliance Against Cholera (GAAC) in 2011,

through which experts from Africa, Europe and

the US, researchers and NGOs combine forces

to fi ght against this still very real menace.

The Veolia Environnement Foundation focuses its actions on supporting and sponsoring the eff orts of employee volunteers who contribute their expertise to helping others.

Our responsibility Foundation

Veolia Environnement Foundation – support and sustainability

The French Red Cross and the Veolia Environnement Foundation renew their partnershipIn January 2012, the Veolia Environnement Foundation and the French Red Cross renewed their partnership through

a new fi ve-year agreement. For the past 14 years, the two organizations have joined together to respond to humanitarian

emergencies and their aftermath, restoring access to basic services for vulnerable populations such as water and

wastewater services, energy and waste management. The Foundation provides support to Red Cross teams in making

available its equipment, technical expertise and volunteers. More than 80 Veoliaforce volunteers have accompanied the

Red Cross on missions since the partnership began, representing more than 1,700 days in the fi eld.

Two Aquaforce 5000 units sent to FukushimaFollowing the catastrophe that hit Japan in mid-March 2011,

the Veolia Environnement Foundation took actions that included

opening a special “Solidarity Japan” contributions fund and

sending two mobile Aquaforce 5000 water treatment stations

to Minamisanriku in mid-April where many refugees were living

in temporary housing. The deployment of these units was made

possible thanks to the volunteer eff orts of Japanese employees

of Veolia Water, trained by a Foundation member.


36-38, avenue Kléber – 75116 Paris Cedex, France – Tel.: + 33 (0)1 71 75 00 00

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This document was produced by the Veolia Environnement Communications and Sustainable Development

Departments.

Communications Director: Florence Mairal.

Editorial oversight and coordination: Tania Kieff er; Adriana Lerman-Launay; Christophe Valès.

Authors: Didier Le Gorrec / Madras Editing, William Mengebier / Alto.

Photo library: Laure Duquesne, Gilles Hureau.

Photo credits: Asylum; Craig Connor / NNP; Jumper / Photodisc; Caroline Moreau; Torsten Proß; Tetra Images.

Veolia photo library : Salah Benacer; Samuel Bigot / Andia; Connexxion; Francis Demange; Rodolphe Escher;

Philippe Eranian; Olivier Guerrin; Stéphane Harter / VU; Darren S. Higgins; Robert KING and Bruno Stevens /

Interlinks Image; Stéphane Lavoué; Jean-Luc Luyssen; Christophe Majani d’Inguimbert; Jean-Philippe Mesguen;

Jean-Marie Ramès; Marc Roger; John Spaulding / Veolia Transportation, Inc.; LE SQUARE / F. Benausse / A. Desvaux /

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Designed and produced by:

Illustrations: Datagif / Florent Guerlain.

Production manager: Jean-Claude Le Dunc.

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Tel.: +33 (0)1 71 75 00 00

www.veolia.com

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