The focus of our resource conservation program is to merge the three E's (Energy, Environment, and Economics) in order to help us develop, manufacture, distribute and sell our products as efficiently as possible. To do this we look at ways to calculate our material/energy use, find ways to reduce and conserve this usage and lastly, look for ways to offset our usage.

Energy Conservation

In 1998, The Estée Lauder Companies Inc. signed a Memorandum of Understanding with the United States Environmental Protection Agency to join the Energy Star Program. As part of this program, the Company has agreed to make Operations’ buildings energy efficient by reducing the lighting load and increasing the efficiency of motors and engines. Monthly electricity, heating and water use are tracked for all facilities to ensure that as operations expand, the Company continues to maintain efficiencies.

Global Operations’ energy use increased over fiscal year 2007 due to the further automation of our product lines and an increase in the heating needs at our facilities. Energy costs continued to increase due to the global rise in fossil fuel costs. Overall energy use across Operations increased 9.23% to 448,540 million BTU equivalents in FY2008. This value includes electricity and natural gas consumption and the quantity of oil purchased. When compared to FY07 and corrected for currency, energy costs increased approximately 9.11% to $10.67 Million, this includes the additional money spent to purchase Green Power at our facilities. The Total Energy costs per million dollar sales decreased 2.8% to $1,393.

Energy conservation projects completed since 1998 have led to an annual savings of approximately $1.85 million per year through the reduction in electricity consumption (15.9 million kWh) and natural gas consumption (135,000 Therms). These savings equate to the removal of approximately 20 million pounds of carbon dioxide from the atmosphere each year.

Projects launched have included Lighting and Building Envelope upgrades, the installation of Cool Roofs and the purchasing spec of Energy Efficient office and HVAC equipment.

Renewable Electricity

Estée Lauder Companies realizes that no matter how stringent our energy conservation programs are, we will always need to utilize energy to power our facilities and fuel our distribution. In this light, the Company has started an aggressive program to install on-site renewable electricity where feasible and purchase green electricity offsets where it is not. We feel that by encouraging the growth of the renewable power industry, these technologies will become more readily available and will push the world toward a sustainable society.

In Fiscal Year 2007, both of the company’s fragrance facilities had solar panels installed on their rooftops. Our New Jersey facility partnered with DT Solar to install one of the largest non-utility solar energy systems in the United States. More than 3,200 solar panels, which are designed to supply half of the plant’s daytime energy needs (650 kW); will offset the production of 10,000 tons of carbon dioxide over the life of the system. We have also installed smaller solar systems in our Swiss Fragrance Manufacturing facility and will be completing the installation of a 63 kW system at Aveda’s West Coast distribution facility in early FY09.

In FY08, ELC purchased green electricity offsets for all of its Global Operations facilities, Origins (North American Retail Stores and third party organic manufacturing) and Bumble and Bumble's (New York offices). Including the commitment previously made by Aveda Corporation, this has led to an annual renewable electricity purchase of 77,744,651 kWh of electricity. These purchases reduce 34,959 metric tonnes of CO2 equivalent from the atmosphere each year. This commitment led to the Estée Lauder Companies being honored by the United States EPA Green Power Partner as a Purchaser of the Year in 2008.

The charts below compare electricity sources for FY07 and FY08.

Emissions Intensity

The Energy Conservation program and the switch to cleaner electricity have helped Estée Lauder decrease the Greenhouse Gas intensity of our products 44% in Fiscal Year 2008. This figure is calculated by looking at the Scope 1 and Scope 2 greenhouse gas emissions in comparison to the number of products that we are manufacturing internally.