The Importance of Economic Sustainability

Only through sustainable economic performance and growth can PotashCorp generate long-term value for all its stakeholders – investors, customers, suppliers, host governments, employees and communities.

The company knows that being sustainable in a commodity business requires a long-term view. This means managing natural resources responsibly and maintaining stakeholders' respect and support. Generating consistent, positive, long-term financial returns ensures that sustainability objectives can be met. PotashCorp also takes steps to minimize the inherent volatility of its businesses and position itself as the leader in the products it sells and the markets it serves.

In pursuing economic sustainability, it contributes to local, regional and national prosperity through taxes and royalties and by providing ongoing direct and indirect employment to employees and suppliers, who in turn contribute to the tax base.

Economic Policy Commitments

PotashCorp has adopted policies, including its Core Values and Code of Conduct (Code), that outline its commitment to sustainable economic performance. These state:

• We will comply with the law, rules and regulations in the countries and communities in which we operate.
• We will manage our financial performance to maximize long-term value for our shareholders through the strategic investment of financial and human resources.
• We seek constant improvement and are proactive, regularly reviewing our practices to ensure such improvement. Our Best Practices program takes production and management processes that are successful at some PotashCorp facilities and develops them as company-wide best practices, putting them to work throughout our operations.
• We contribute to sustainable human progress and the generation of economic activity in the communities where we operate.
• We are committed to supporting local programs and initiatives in the communities where we work and live.
• We work to create mutual advantage in all our relationships.

The company also has a comprehensive Purchasing Policy that links procurement to sustainability considerations. These include implications for local community development and the safety, health and environmental performance of the supplier.

Competitive Strengths

PotashCorp has an unmatched position in potash. In 2007, sales were a record high of 9.4 million tonnes, reflecting stronger sales particularly in key offshore markets such as China, Brazil and India. Pulled by strong consumer demand for improved diets by a growing and wealthier population in these and other Asian countries, prices for key grain and other agriculture products ramped up strongly over the year. This in turn encouraged farmers to increase crop yields, raising fertilizer sales and prices. With the ability to expand existing operations at less cost and in less time than greenfield projects, PotashCorp is uniquely positioned to meet rising global demand for potash.

Major expansion announcements were made for PotashCorp's New Brunswick and Rocanville mines in the second half of 2007, following previous announcements for expansions at Lanigan, Cory and Patience Lake. The company anticipates that potash operational capacity will reach 15.7 million tonnes by 2012 and 17.2 million tonnes by 2015. Its large, low-cost Canadian facilities are complemented by strategic investments in Jordan, Israel, Chile and China.

The company also has strengths in nitrogen and phosphate. Long-term, lower-cost natural gas contracts in Trinidad provide a competitive advantage in serving the US nitrogen market. In phosphate, high-quality rock gives PotashCorp the ability to produce a diverse group of products, including high-margin industrial and feed products outside the fertilizer sector.

Economic Strategy

To provide stakeholders with superior value, the company's strategy is to generate long-term growth while minimizing the natural volatility of its business. It focuses on its highest-margin products, which aligns with its Potash First strategy. By using its capital internally to expand capacity and externally in global investments, it prepares for expected long-term growth in world demand for potash.

In nitrogen and phosphate, PotashCorp leverages its strengths by focusing on products and locations with the greatest gross margin potential while minimizing volatility.

Management Responsibility

Final management accountability for PotashCorp's economic performance rests with the CEO, who is responsible for:

• developing and recommending to the Board of Directors a long-term strategy and vision for the company that leads to creation of shareholder value;
• developing and recommending to the board annual business plans and budgets that support long-term strategy; and
• consistently striving to achieve financial and operating goals and objectives.

The plant General Manager at each production site is responsible for implementing business practices and identifying opportunities to advance the plant's production goals.

Management Approach

Key elements of PotashCorp's approach to managing its economic performance include:

Targets: The company establishes corporate sustainability goals and targets each year. Individual production sites set annual site-specific key performance indicators and targets.

Training: PotashCorp has long-standing training initiatives to ensure that its workforce has the required skills to competently perform its tasks in a safe, healthy and environmentally sound manner. New or transferred employees, contractors and other visiting personnel undergo appropriate site orientation/induction training.

Best Practices: The Best Practices program takes initiatives that have proven successful at some PotashCorp facilities and develops them as company-wide best practices.

Performance Monitoring, Review and Rewards: PotashCorp has ongoing processes for monitoring and reviewing the performance of its employees. The underlying principle of the company's compensation plan is "pay for performance." Compensation is often variable, fluctuating based on individual and corporate performance.

Risk Management: The company employs careful analysis of all risks associated with PotashCorp's goals and objectives. Based on their likelihood, severity and ability to adversely affect the company, the company prioritizes the risks and selects the ones to manage, and, through mitigation responses, accepts, controls, shares, transfers, diversifies or avoids each.