We are pleased to report continued progress on the nine sustainable development commitments that ConocoPhillips made to our stakeholders in 2003. We subsequently published our first baseline report in 2005, followed by an update on our achievements in 2006 and now a 2008 Sustainable Development Report. This new report offers further insight into our efforts to meet the expectations of stakeholders in terms of good corporate citizenship and the long-term sustainability of the company’s operations.

To be truly sustainable, ConocoPhillips must return value to shareholders and supply the energy required to drive global economic engines, while at the same time providing responsible stewardship of natural resources and contributing to social and economic development. We continue to make progress on our commitments, despite an extremely challenging industry operating environment characterized over the past year by a global economic crisis, extreme commodity price volatility, rising costs and increasingly complex governmental policies.

In order to ensure the sustainability of society’s energy supplies, we believe that a variety of energy resources must be developed. Even with anticipated growth in production from alternative and renewable sources, most energy industry experts believe that fossil fuels must still provide the majority of the world’s energy for decades to come.

While substantial supplies of these traditional energy resources remain, gaining access to them has become increasingly challenging. Much of the world’s conventional oil and natural gas are located in countries that reserve development opportunities for their own national oil companies. In addition, geopolitical, legal, tax and economic barriers, as well as social instability, have, in many cases, further complicated entry and increased the risks inherent to new ventures. Other areas remain off-limits to exploration due to opposition to development. We recognize that the energy industry’s ability to gain expanded resource access depends, to a great extent, on its ability to alleviate stakeholder concerns on a number of issues.


Consequently, at ConocoPhillips we are working to produce our hydrocarbon products in ever-cleaner forms while ensuring the long-term viability of our energy production through active research and development on traditional oil and gas, as well as on biofuels and promising sources of nonfossil-fuel alternative and renewable energy.

Additionally, in keeping with our commitments, we strive to protect the environment that we all share and have achieved significant success in minimizing the “footprint” of our operations in terms of emissions, discharges and physical presence on the surface. ConocoPhillips also intends to conduct our operations while meeting the highest legal and ethical standards – crucial attributes in the current era of widespread public mistrust of business.

During 2008, the total recordable incident rate for the safety of our combined work force improved by 16 percent, versus 2007. Our 2008 rate represents the fifth continuous year that the recordable incident rate has improved. Rigorous training and audit programs are in place to drive further improvement in both personal and process safety.

ConocoPhillips is dedicated to helping the communities in which we operate improve their capacity to create jobs and meet the needs of their citizens. We believe that stronger communities better serve their residents and build a more capable infrastructure that can, in turn, facilitate business. In addition to providing economic benefits through our local business expenditures, we make community investments that strengthen educational and youth services, health and social services, civic and arts initiatives, environmental and industrial safety programs, and emergency response capabilities. Also, each year ConocoPhillips employees volunteer thousands of hours of their personal time to assist worthy charitable and civic initiatives, further enhancing the positive impact of our presence.

During 2008, our community investments totaled more than $95 million. Among these were donations to assist disaster relief efforts in a number of communities impacted by hurricanes that struck the U.S. Gulf Coast.

For our employees, we strive to promote a positive work environment, with recent employee opinion survey results indicating important advances in a number of areas.

Even with such steps, we recognize that much remains to be done to address the concerns of stakeholders. Therefore, we seek through positive and productive engagement to find common ground and identify possible solutions. We assess and report on the sustainability impact of our operations; meet the demanding standards set by the Extractive Industries Transparency Initiative and other programs; and perform our work while protecting human rights, as well as public safety, health and well-being.

Further, we are taking positions on vital issues and engaging in public dialogue. For example, we believe that climate change is one of the most challenging energy-related issues of our time. In 2007, ConocoPhillips joined the U.S. Climate Action Partnership, a group of diverse businesses and environmental nongovernmental organizations that has called for prompt enactment of national legislation to slow, stop and then reverse the growth of greenhouse gas (GHG) emissions. We were the first U.S.- based integrated energy company to call for a mandatory national framework to address GHG emissions.

We believe that the U.S. government must enact a comprehensive national energy policy, and that energy security and climate change issues must be addressed together in a coordinated manner. Indeed, we feel that any effort to address one will fail to garner public support unless it also addresses the other.

During 2008, we implemented a comprehensive climate change plan to build our organizational capability to succeed in a low-carbon business environment, reduce our emissions and leverage technology while using carbon trading to manage compliance obligations.

These are only some of the many initiatives and actions taken to meet our sustainable development commitments. A broader sampling is detailed in this report, and on our sustainable development Web site at http://www.conocophillips.com/en/susdev. Please visit this site to learn more about our efforts and to submit comments.

Sincerely,

J. J. Mulva
Chairman and Chief Executive Officer


John A. Carrig
President and Chief Operating Officer