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 if there are no other options, 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 becomes more efficient.

Global Operations’ energy use increased over fiscal year 2005 due to the construction of 3 new distribution centers, reduction in batch sizes, continued automation and the further need for air conditioning in the summer and heat in the winter. Energy costs skyrocketed due to the global rise in costs of fossil fuels. Overall energy use across operations increased 2.76% to 448,408 million BTU equivalents in FY2006. This value includes electricity and natural gas consumption and the quantity of oil purchased. The associated energy costs increased over 21% to $10.6 Million. The total energy cost in relation to $1million sales increased 20.17% to $1,646.

Energy conservation projects completed to date, have led to annual savings of over $1.5 million through the reduction in electricity consumption by over 15.9 million kWh and natural gas consumption by 135,000 therms each year. These energy savings are the equivalent of removing about 52,000 tons of carbon dioxide from the atmosphere since the programs inception or the amount of carbon stored is equal to that of planting approximately 1.9 million trees in 1998. During FY06, a number of projects and studies were performed to improve the energy efficiency of our operations while utility contracts have been renegotiated to help lower costs. This work includes: T-5 Octron Lighting Upgrades—As a follow-up to a pilot study conducted in FY05 at our Pennsylvania distribution center, 13 facilities launched projects to upgrade metal halide lamps to T-5 octron lighting in Fiscal Year 2006. These projects will result in annual electricity savings of 1.1 million kWh (~ $186,000). Bristol Pennsylvania White Roof—The Bristol facility installed an Everglade TPO white roof in FY06. This increased the insulation and solar reflectance of the building reducing summer heating loads significantly. Corporate Construction Guidelines—The Company has recently adapted corporate green construction guidelines to increase green building design and lower operating costs.

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 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. The Aveda Corporation partnered with Xcel Energy’s Windsource Program become the first beauty company to purchase 100% of its electricity from wind power to offset the electricity used at its manufacturing facilities. The Origins brand has partnered with Community Energy Inc. to provide wind power to their North American retail and manufacturing facilities in early 2007. The Estée Lauder Companies Global Operations division has signed formal partnerships with electricity providers in Belgium, Canada, Switzerland, the United Kingdom and the United States to ensure that renewable energy will be placed in to the utility grid on our behalf to ensure that all of our Global Operations’ facilities (Manufacturing, Research & Development, Major Distribution Centers) will receive 100% of their electricity from renewable energy sources starting in December, 2007.

Water Use The Estée Lauder Companies mainly utilizes water as an ingredient in our products and in our cleaning processes. We have implemented many conservation measures to improve the efficiency of our water use including the use of spray ball technology in the cleaning of our kettles and the adaptation of water free cleaning methods in our powder facilities.