Honeywell's Health, Safety, Environmental and Remediation Programs

Honeywell's businesses are subject to comprehensive government requirements that are designed to protect or restore the environment. We manage our businesses in ways that are sensitive to the environment, striving to meet or exceed all applicable regulatory requirements and our own extensive performance standards governing health, safety, environmental and remediation (HSER) matters. In cases where local laws are less environmentally sensitive, we employ the company's own strict standards. We believe that, as a general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage or personal injury, and of resulting financial liability. Our remediation approach protects human health and the environment while seeking to return remediated properties to uses that are beneficial to their surrounding communities.

Honeywell's Health, Safety, Environmental and Remediation (HSER) Team, Management System and Core Standards

The company's HSER matters are managed by a global team of approximately 450 trained professionals with extensive knowledge of the use and disposal of toxic substances, and hundreds of years of collective experience in occupational health, hydrology, geology, engineering, safety engineering, industrial hygiene and remediation.

The company utilizes a comprehensive HSER Management System based on recognized third-party-certified standards, including ISO 14001 and OHSAS 18001, and industry best practices. The system is fully integrated into the Honeywell Operating System, the company’s blueprint for continuous, sustainable operational improvement. Compliance with standards and regulatory requirements is monitored through a company-wide HSER-led audit process. The timely development and implementation of process improvement and corrective action plans are closely monitored.

Honeywell's HSER Management System is based on 15 core standards, which require the company's businesses to identify HSER matters and legal requirements, set clear objectives for improvement, and maintain programs designed to achieve those objectives. These laws and standards regulate virtually every aspect of the transportation, management, handling and disposal of hazardous substances in products, waste and packaging. When environmental contamination is discovered, either from past or current operations, strict procedures require investigation of the conditions, evaluation of appropriate remediation techniques, and implementation of remedies that protect human health and the environment, and promote reuse.

To reduce the effect of our future operations, by 2012 Honeywell will reduce hazardous waste generated per dollar of revenue by 15%. We also will maintain our company-wide global Total Case Incident Rate (the number of occupational injuries and illnesses per 100 employees) at less than half of the combined U.S. averages of the businesses in which we operate.

Honeywell's Proactive Remediation Approach

Honeywell has grown significantly over the course of its history, including through numerous mergers and acquisitions. For more information about Honeywell’s corporate history go to http://www.honeywell.com/sites/honeywell/ourhistory.htm.

Substantially all of the company's material environmental liabilities relate to its historical operations and those of predecessor companies. Honeywell takes a proactive approach to remediation of historic contamination. Where we have legacy responsibilities, or when evidence of damage from past or outdated practices is found, Honeywell acts with responsible remediation, practical solutions and sophisticated technological capabilities.

The company designs effective remediation solutions and works with communities to evaluate sites, and identify and design solutions that result in thorough remediation. The chosen remedy must be protective of human health and the environment - a requirement that is non-negotiable. Honeywell strives to achieve remedies that allow properties that may have lain dormant because of past contamination to be returned to productive use in the community ("brownfields").

The company's remediation activities are overseen by Honeywell’s HSER remediation team, which has extensive training and experience in the remediation field. Select top-tier outside environmental consulting and engineering firms are used to study, design and implement effective solutions. Together, this team of internal and external experts addresses these remediation matters with a strong mix of technical, brownfields redevelopment, and risk management expertise.

Each remediation project is assigned to a manager responsible for the development and implementation of a strategic remediation plan for that site. The plan must evaluate all technical, community, regulatory, political and redevelopment aspects of the project. The plans are systematically reviewed by HSER management, with input from a specialized Honeywell brownfields group, and senior leaders from Honeywell’s Communications, Government Relations and Legal departments to ensure a strategy that achieves human health, environmental and community goals.

Remediation project planning is also coordinated with Honeywell’s annual and five-year planning processes. HSER remediation managers review current technical data and regulatory requirements relating to projects, and report on potential remediation activities that may occur in the following year and over the subsequent five-year planning horizon.

Risk Mitigation

Prior to 1970, there was virtually no environmental legislation or regulation. Given our compliance with the regulations enacted over the last 35 years, and the work and investigation performed by the Company to comply with those regulations, it is unlikely that previously undiscovered sites that are material to Honeywell’s financial position will be identified. As the corporation has expanded, our HSER due diligence practices help ensure that we are not acquiring material new liabilities and that we are designing our new facilities in a way that prevents the release of hazardous substances into the environment.

Honeywell's environmental management system and practices are designed to minimize the chance that currently unknown material liabilities will emerge:

	The HSER management system requires strict compliance with hazardous material use, storage and disposal requirements, as well as the auditing of that compliance. This minimizes the risk of new environmental liabilities arising from existing operations, and keeps the company informed on the need for modifications to material or waste management practices.
	HSER department specialists have extensive institutional knowledge about the company’s past operations and the use and disposal of hazardous or toxic substances. They are alerted to locations where potential exposure to Honeywell exists, whether by the nature of the operation, materials utilized or discharges.
	All acquisitions are subject to corporate procedures for environmental due diligence, including an appropriate combination of document review and site visits.
	When information arises on potential new remediation obligations, it is promptly transmitted to the Remediation and Evaluation Services group so that plans can be developed to address these obligations proactively.

Accounting and Disclosure

Liabilities for environmental remedial efforts or damage claim payments are recorded when amounts are probable and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress, or as additional technical or legal information is available. We expect to fund expenditures for these matters from operating cash flow. The timing of cash expenditures depends on a number of factors, including the timing of litigation and settlements of remediation liability, personal injury and property damage claims, regulatory approval of cleanup projects, remedial techniques, and agreements with other parties.

Honeywell includes an estimate of annual expenditures and cash outflows for environmental remediation in the guidance it provides to the public. Additionally, each SEC periodic report contains tabular disclosure regarding aggregate environmental liabilities, including accruals established and payments made in the relevant periods. Honeywell also provides timely and clear narrative disclosures of potential material environmental responsibilities, which comprise approximately 70% of the company’s environmental reserves.

For a more complete discussion of our accounting disclosure on environmental matters, please see our periodic SEC filings at http://phx.corporate-ir.net/phoenix.zhtml?c=94774&p=irol-sec.