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How Rio Tinto is Support Sustainable Mining Essay

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Updated: Feb 11th, 2020

Executive summary

For the recent past, Rio Tinto has adopted sustainable mining practices. The need for sustainable practices in Rio Tinto and the mining industry has been driven by the climate change. This is because climate change has presented a big challenge in the business all over the world.

Rio Tinto has always found it crucial to take action now, rather than wait for the worst to happen later. To achieve these objectives, Rio Tinto has charted out scores of policies, for example, those centered on operating and investing in long-term, large, and cost-competitive business and mines.

Its strategies are based on the need to provide an economic value, while running the business in a socially and ethically accountable approach, as well as sticking to lasting and sustainable development.

Introduction

For the last 2 decades, Rio Tinto has been on the global frontline in championing practices of sustainable mining. The need for sustainable practices in Rio Tinto and the mining industry has been driven by the climate change. This is because climate change has presented a big challenge in businesses across the world.

Rio Tinto has always found it important to take action now, rather than wait for the worst to happen in the future. Furthermore, it has been known that the risk landscape as well as the opportunity in the mining industry could be potentially changed by the climate change. This paper seeks to analyze Rio Tinto’s key developments that support its sustainable mining practices.

Global Mining Imitative (GMI)

Rio Tinto has taken urgent actions in order to enhance its understanding of the underlying problems, and come up with ways of addressing the issues of greenhouse gas emissions abatement and the manner in which energy is used across the world.

Rio Tinto tries to take urgent actions to avoid adapting to inevitable climate change (Walsh 2009). In the Global Mining Initiative (GMI) that was held by chief executives of top mining companies, Sir Wilson Robert, the then Rio Tinto Chairman outlined the following proposition as the company’s guidelines for sustainable mining:

Economic growth, the essential condition of sustainable development, depends on the products of the mining industry. It is our responsibility to meet the demands whilst simultaneously addressing the environmental and social implications of our actions. We need to minimize the physical footprint of our activities and mitigate adverse environmental effects (Wilson, 2002, p.4).

The GMI kicked off in 1999 and focused on the following comparable aspects:

  1. A seminar bringing together the stakeholders and industry to chart the way forward.
  2. Review and analysis of challenges of the activities of the mining industry, together with proposals on how these problems could be solved.
  3. Instituting a global watchdog to steer the results forward, and get involved in continuous discussions with the community.

Mining and Minerals Sustainable Development and competitive advantage

The GMI was driven by the Mining and Minerals Sustainable Development project (MMSD), which aimed at reviewing the problems that the mining industry was undergoing. The landscape of the industry was changed in 2002, when MMSD presented its report.

One of its most outstanding findings was that it was critical for miners to ensure participation in a transition towards a sustainable global society. In a bid to support GMI, Rio Tinto alongside likeminded companies backed the formation of the “International Council on Mining and Materials (ICMM) (Marr, 2012, p. 609).

This council was commissioned to lead the industry in adopting sustainable practices, with the reasoning that failure of a single company would affect the entire industry.

When Rio Tinto plc was amalgamated with Rio Tinto Ltd, the group’s objective was “to maximize total shareholders return by sustainably finding, developing, mining and processing natural resources” (Annual Reports, 2007, p. 1).

To achieve these objectives, Rio Tinto formulated a strategy that was centered on operating and investing in long-term, large, cost-competitive business and mines, driven by the quality of each opening rather than choice of commodity (ICMM 2009).

This strategy was based on the need to provide an economic value while running business in a socially and ethically accountable approach, and sticking to lasting and sustainable development. Rio Tinto focused on increasingly seeking out competitive advantage, and tried as much as possible to integrate them within the structure of the business in a manner that the competitors could not easily imitate (Porter 1980).

Rio Tinto’s long-term investments made it possible to plan, implement and present sustainable gains to the society, through environmental agencies and economic success based on the well-built authority systems (ICMM 2009). The company has mastered the use of Porters Five Forces Model in edging out competitors. The following factors are used to differentiate the company from its competitors (Porter 1986).

  1. improved risk management
  2. better proceeds for the shareholders
  3. increased business opportunities
  4. reduced operating costs
  5. Retaining and attracting skillful employees (Kinicki & Kreitner 2003).
  6. Improving or maintaining the quality and value of products, with reduced effects on the environment.
  7. More employment opportunities for the locals, as well as increased development and better relations with the local communities

Rio Tinto framework for sustainable growth

To achieve its goals of sustainable growth, Rio Tinto structured and implemented a framework that contained ‘must have’ constituents that represented its business drivers.

These frameworks were structured along ‘The way we work’ philosophy that guided its policies, as well as its business practices’ statement, which offered the workers broad guidance on how to represent the company and conduct themselves while working for the company.

Rio Tinto’s climate change initiatives since 1995

Rio Tinto has participated in several climate change initiatives. This has been achieved by contributing to government policies and carbon trading schemes, as well as coordinating with the external companies to come up with new technologies. The new technology that was developed and put in use includes the AP technology, which was used for efficient smelting of aluminum.

The APA technology included maximizing long-term value and project performance and minimizing risk, support and integrator experience to enhance operational success, and technical information.

Furthermore, the company has been active in ensuring low emissions in block cave mining processes and iron ore processing. This technology allowed disintegration of iron ore during the process of handling, and cutting down of materials handling (Rio Tinto 2008).

In addition, Rio Tinto was involved in alternative energy sources including nuclear, fossil as well as evolving technologies such as capture and storage (CCS) and carbon capture, aimed at cutting down emission of greenhouse gas from coal combustion.

Themes of climate change since 2003:

  1. Adopting a transparent, pragmatic and active approach to develop low emission trails for its production processes. This was done in conjunction with the customers.
  2. Forming partnerships with stakeholders, including governments to enhance action taking in managing their greenhouse gas emission (GHG), which particularly focused on the developing nations.

In 2008, Rio Tinto initiated a team of Energy and Climate Strategy, which was aimed at ensuring that climate and energy change was an integral part of business decisions considerations. This initiative advocated for the following:

  1. Incorporating ideas relating to technology and public policy development.
  2. Taking into consideration the basic economic issues of the results of intergovernmental panel science, with regards to climate change.
  3. Building future energy and carbon through Rio Tinto’s business units.
  4. Partnering with external stakeholders to promote the climate policy framework, which was essential in ensuring that Rio Tinto renovated its emission profile – this was believed to be attainable only if the external markets were ready to adopt essential changes.

Community investment in Rio Tinto’s West Australia business

Rio Tinto supports a variety of partnership and programs in Western Australia, which are very crucial in ensuring a sustainable and a stronger community. The country- wide partnership is governed by the company’s future fund, which is run by Rio Tinto’s community investment. Table 1 shows the manner in which this fund is prioritized and invested in key areas.

Table 1: Priorities and key areas of the fund

Priorities Environment Education Health Culture
Key areas
  • Protect aboriginal heritage
  • Improve and maintain regional biodiversity
  • Conservation of water
  • Boosting community education in regards to environment
  • Early childhood education
  • Primary and secondary technology/science
  • Leadership
  • Indigenous programs
  • Educational activities
  • Maternal and child health services
  • Difference between regional health and metro health services, skills and equipment
  • Promotion of indigenous arts
  • Attracting and retaining employees
  • Programs for regional touring
  • Business/skills development

Table 2: 2008 performance data

2006 2007 2008
economic
Total export revenue (US$ million) 5795 777 13702
% spend in WA 64 80 87
Tons shipped 150 161 171
Government Direct payment (A$ million) 1717 2099 2927
social
Lost time injury 46 33 55
Employee numbers 123 0.89 1.00
Aboriginal employees 6 10.2 8.15
environment
Serious environmental cases 2
Medium environmental cases 55 38 67
Freshwater use (liters) 154 191 253
Energy use n/a n/a 171.14
Greenhouse emission 8.6 10.78

Table 3: Rio Tinto SWOT analysis

Strengths
  • The Rio Tinto’s iron ore dealing is exposed to worldwide markets, and it has a leading market share in the mining industry.
  • The company is a world leader in mining, finding and processing the global minerals.
  • Efficient use of resources
Weaknesses
  • Rio Tinto concentrates most of its operations in north America and Australia
  • The company holds large amounts of long-term debt, which subjects it to payment a of large amount of interests
  • The company holds most of its assets in illiquid form
Opportunities
  • The demand for its products is on the surge, particularly in the developing countries
  • Large market remains unexploited across the world (Porter 1980).
Threats
  • The company’s potential growth could be hurt by political risk
  • Regulations and taxes could limit its growth
  • Volatile commodity prices threaten its prospects
  • Poor performance on environmental performance has dented their reputation, reduced their profits, prevented them from acquiring new assets, as well as presented problems in their employee and investor relations (Senapati 2006).
  • The public has increasingly put pressure on the mining industry

References

Annual Reports 2007, Rio Tinto annual reports 2007.

ICMM 2009, Implementing a global solution to managing a low emissions economy: policy on climate change, ICCM, Sydney.

Kinicki, A. & Kreitner, R. 2003, Organizational behavior: key concepts, skills & best practices, McGraw Hill, New York.

Marr, J. 2012, Step beyond business advisors, assisted by Allan Jackson and Bob, Sage, New York.

Kennel, Rio Tinto Iron Ore, and professor Graham Hubbard, University Of Adelaide, Sydney.

Porter, M. E. 1980, Competitive Strategy, Free Press, New York.

Porter, M. E. 1986, Competitive Advantage, The Free Press, New York.

Rio Tinto 2008, AP technology: the world reference in smaller technology transfer.

Senapati, N. 2006, Regional Vice President, Rio Tito India Sustainable Mining: The Riot into Approach, Sustainability Summit, Sydney.

Walsh, S. 2009, executive director and chief executive, Rio Tinto Iron Ore Perth, Speech to the Australian-Japan Co-operation Committee, Sydney.

Wilson, R. 2002, sustainability in the 21st century – the global mining initiative, 2001 global metals and mining conference, Sydney.

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