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Hall, John --- "The social responsibility of corporations" [2002] AltLawJl 5; (2002) 27(1) Alternative Law Journal 12

The social responsibility of corporations

JOHN HALL[*] describes how Rio Tinto, a multinational resource group, is joining the debate on human rights with some creative programs for local communities and Indigenous Australians.

While it remains fashionable in some quarters to be cynical and dismissive of corporate initiative in the social sphere, often from an ideological perspective, that view is increasingly outmoded and wrong. The days when companies could rest on their technical and commercial competence, and leave other issues to governments and bureaucracies, are over — particularly for businesses operating internationally. Today a global business is judged by a global audience. Moreover, it is judged with at least as much emphasis on its social and environmental record as its financial performance.

The experience of Rio Tinto, a diversified global minerals and energy group, provides some telling illustrations. Rio Tinto takes social responsibility very seriously, and for more than merely reputational reasons. The company believes that corporate social responsibility is an essential element in any responsible business strategy. It also believes that corporations have a duty to act responsibly in the social and environmental sphere, as much as the economic.

The new paradigm

It is important to put this development in a historical context. The world is experiencing a series of profound changes. Many of the paradigms that characterised the last century will hardly be relevant to this one. Information and communications technology is empowering people who are increasingly prepared to assert their fundamental rights. Communism and other forms of totalitarianism are in decline. Divisions between nations, economies, races and cultures are giving way to globalisation in all its manifestations.

The nation state, the prevailing political structure of the 20th century, is giving way to trans-national structures — some regional, some global — a trend inaugurated by the formation of the United Nations. Increasingly, nations are accountable to higher authorities. Moreover, they are accountable to principles and instruments with universal application. The accession by the Belgrade government to the jurisdiction of the International War Crimes Tribunal and the subsequent transfer of former Serbian President Milosevic to that jurisdiction is a most prescient illustration.

However, the fact remains that poverty and inhumanity continue to be the daily lot of millions of people. The means to really change that fact are not found in high principles. It is submitted that real change will only be driven forward if organisations of many types are prepared to work together in ways not yet contemplated. Old enmities, stereotypes, ideologies, and bigotries must be put aside. Organisations, including mining companies are, after all, essentially groups of people.

And, while miners don’t necessarily bear any special responsibility, their activity has had a profound influence throughout recorded history. For over 5000 years miners and metallurgists have provided the commodities and created the wealth that have made civilisation possible. There is no doubt that mining will be just as significant to the future, and in particular, to realising the legitimate aspirations of millions of people in the less developed world.

Partnerships for the future

I believe that corporations like Rio Tinto must play a critical role in creating new relationships and partnerships which may help to build a better future. Rio Tinto is involved in a series of initiatives, ranging from global to very local:

• Rio Tinto is a founding member of the Global Mining Initiative (GMI), involving the world’s largest mining, minerals and metals companies, as well as NGOs and other interested organisations. The purpose of the GMI is to provide leadership as the industry faces the complex challenges of sustainable development. The GMI has three work tracks that are separate but linked. It has launched an independent multi-stakeholder analysis of issues and how they can be addressed, the Mining, Minerals and Sustainable Development project. A conference, timed prior to the Rio Plus 10 conference, is planned for May 2002 to look at the outcomes of the work and a new global representative structure of industry associations will be established to ensure effective implementation.

• Rio Tinto supports the UN Secretary General’s Global Compact, to which a substantial group of the largest corporations have also pledged support. In a speech to the World Economic Forum in Davos last year, Kofi Annan stated:

I have asked business leaders not to wait for governments to impose new laws, but to take the initiative in improving their own corporate practices. Specifically, I asked you to embrace and enact, within your own firms, nine core principles derived from universally accepted agreements on human rights, labour standards and the environment.

… the Global Compact now includes, not only leading companies from around the world, but also the International Confederation of Free Trade Unions, and a dozen or so leading voluntary agencies active in upholding human rights, protecting the environment and promoting development. They are working together to identify and promote good practices, and helping, thereby, to drive out bad ones.

• The Voluntary Principles on Security and Human Rights was developed by the UK and US Governments and supported by BP, Chevron, Texaco, Freeport McMoran, Rio Tinto, Shell, Amnesty International, Human Rights Watch, Business For Social Responsibility, Fund For Peace, International Alert, the Prince of Wales Business Leaders Forum, Council on Economic Priorities, Lawyers Committee for Human Rights and ICEM. The Principles were signed on December 20, 2000.

• Rio Tinto has also published a Human Rights Guidance for all its managers. The situations described in the Guidance are drawn from practical experience in over 50 operations on six continents. Its composition drew not only on in-house experience but also on the advice of those outside the resources industry, including human rights advocates and organisations such as Amnesty International and the office of the UN High Commissioner for Human Rights.

• Rio Tinto is also committed to supporting the Universal Declaration of Human Rights, and we have stated that commitment in our published statement of business principles, The Way We Work.

Working with communities

Rio Tinto is investing globally in community building programs. Across the world we help fund hospitals, schools and libraries. Some operations are located in such remote locales that they are effectively the only provider of social services. And financial assistance is just part of the program. We try to ensure that all our business is conducted with sensitivity to local needs.

A new diamond development in the Canadian Northwest Territories involved over 300 meetings with local individuals and groups. All Rio Tinto operations are now required to produce five-year community plans. These are detailed documents, containing assessments of the social, economic and cultural characteristics of each local community. Operations are asked to explain how they are consulting with local people and to set out their programs and strategy for community relations, just as they also do for matters like financial and production goals.

Essentially, Rio Tinto acknowledges that its license to operate depends on community acceptance of, and support for, its activities. The business case is clear: we aim to maximise shareholder value over the total life of the resources and assets that we manage, which is typically several decades. With that time span it obviously makes good business sense to invest in the future by earning the trust and respect of people who could be a part of our community for many years to come. Good community relations provide a surer basis for effective, uninterrupted business operation.

The figures for the 2000 reporting year, when Rio Tinto provided nearly $US50 million for community programs, illustrate the extent of the company’s social involvement:

• 77% of 60 operations offered programs to improve secondary school education;

• 45% had programs to improve employment opportunities in local communities;

• 59% supported health clinics available to the local community;

• 73% had undertaken baseline or community surveys;

• 68% conducted regional community consultations;

• 59% supported small business or infrastructure programs.

The company is also working in active partnership with a range of environmental, educational and Indigenous NGOs under the Business With Communities program. We recognise that voluntary and non-government organisations can have a serious interest in what we do and how we do it. That acknowledgment led us to the view that we should develop positive and mutual relationships with such organisations where appropriate.

The program places deliberate emphasis on forming active relationships with organisations and communities. We not only provide funds but, just as importantly, contribute technical and business management skills and participate in the planning and implementation of each project. We choose community partnerships that are integral to our business and that are undertaken by organisations with which we have something in common.

Rather than dissipate funds over a wide variety of activities, a limited number of strategically appropriate partnerships are supported. The governing factor is that the partnership fits in with our business focus. We consider, amongst other issues:

• the strategic relevance of the potential partnership from the company’s point of view;

• the potential for the partner to benefit from the partnership;

• the capacity of the partner to make effective and efficient use of the funds and skills provided;

• the opportunity for direct involvement of our people and operations; and

• the potential for a long-term relationship.

Our focus on partnering requires a high degree of involvement by all the parties to ensure that benefits are achieved. Before entering a partnership agreement we spend many months working through a wide range of issues with the prospective partner, including understanding the benefits and obligations of both sides. We view this planning and negotiation phase as a necessary preliminary to reaching a partnership agreement. It also provides the opportunity to develop a healthy working relationship and a common understanding.

The level of ongoing financial support depends on the achievement of objectives. Programs are reviewed annually. Some business–community partnerships gain additional benefit with the participation of our employees. Involvement in partnership programs enables people within the company to become more aware of the Business with Communities program, its objectives and outcomes. It assists in developing employee awareness of corporate citizenship. It builds links with communities and provides our employees with the opportunity to work with people from a range of backgrounds and in circumstances that are personally challenging and that will provide new insights.

Employees may be invited or assigned to assist in a project because they have specific expertise that can help the project succeed, or they might apply to undertake volunteer work under an employee fellowship program. Through this process community programs benefit from a broad range of environmental, scientific, technical and management skills.

In 1996 the company established the Rio Tinto Aboriginal Foundation. The Foundation is administered by an independent board comprising an equal number of Aboriginal and company representatives. With an annual budget of $A1.3 million, the Foundation funds projects developed by Aboriginal communities and organisations all over Australia.

Some of the organisations with which we have partnerships are: Earthwatch, World Wide Fund for Nature, The Royal Botanic Gardens Kew, Conservation Volunteers, Birdlife International, The World Conservation Monitoring Centre, Australian Science Olympiads, Australian Legal Resources International, Centre for Peace and Conflict Studies at Sydney University, Centre for Appropriate Technology, and Garnduwa.

Rio Tinto and Aboriginal Australia

Australians have only lately come to the realisation that the history of colonisation of their country took a fearful toll on indigenous society. The echo of that initial impact is still with us. Whilst many people expect Government to close the vast social and economic gap between indigenous and non- indigenous Australians, reconciliation is the responsibility of all Australians.

Relationships with indigenous communities are fundamental to the future of Rio Tinto’s operations in Australia — operations which now constitute more than 40% of the group’s global assets. The significance of these relationships is best demonstrated by the fact that most of our Australian assets are on land that has ongoing Aboriginal interests and the consequent customary responsibilities

Ten years ago, like most Australian mining companies, we found it difficult to acknowledge that Aboriginal people might be significant stakeholders in our operations. It seems extraordinary to us now that it was only in March 1995 that the then managing director, Leon Davis, set out the principles that have since underpinned the company’s relationships with the indigenous community. I would like to quote from his speech at that time:

Let me say this bluntly. CRA [Rio Tinto’s predecessor] is satisfied with the central tenet of the Native Title Act. In CRA we believe that there are major opportunities for growth in outback Australia which will only be realised with the full cooperation of all interested parties. This government initiative has laid the basis for better exploration access and thus created the probability that the next decade will see a series of CRA operations develop in active partnership with Aboriginal people.

This statement by Leon Davis ushered in a process that has changed Rio Tinto profoundly and irrevocably.

Later that year, the Walgundu Agreement was concluded between CRA Exploration and the Ngukurr community in Arnhem Land, in the Northern Territory. That agreement broke the legalistic and adversarial stereotype that characterised black/white relations at that time. Instead it proved that relations can be based on trust, and that an essentially economic imperative can include a strong social dimension.

And, at a time when it was fashionable to assert that native title for Aboriginal people would be the death of the mining industry, this ground-breaking agreement proved that view to be demonstrably false. Rio Tinto now has over 30 land access agreements with indigenous communities around Australia.

There are two agreements between Rio Tinto and indigenous Traditional Owners which I would like to relate to you in some detail. The company’s iron ore subsidiary, Hamersley Iron, has negotiated a Memorandum of Understanding with the three Aboriginal groups with interests in the land on which Hamersley Iron has now built a new mine — Yandicoogina. The mine is situated in the Pilbara region of Western Australia, a lonely spot even by Australian standards, but one to which indigenous people living hundreds of kilometres away on the coast retain traditional ties. This agreement constitutes the first regional land use agreement between a mining company and traditional owners in Australia.

A significant issue for negotiations between big business and indigenous communities is the perception that one side has all the wealth, power and influence. Hamersley sought to counter this criticism by an arms length funding of the Aboriginal groups in ways that allowed them to build negotiating capacity. As a further safeguard, the Yandi Land Use Agreement received input from ATSIC (the national body representing Aboriginals), the WA government and the federal government. Together these bodies contributed to an agreement, through 18 months of intensive consultation and negotiation, with real outcomes and designed to safeguard the social and economic wellbeing of the community for the life of the mine and beyond.

The Agreement provides for community development, training, employment and business assistance in a package estimated to cost $A60 million over the next 20 years. As a result of the Agreement, three indigenous business enterprises were set up to help in the construction of the mine and, now that the mine is operating, those same enterprises continue to provide earthmoving, equipment hire and accommodation management and services. Gumala Enterprises now employs 24 Aboriginal people and the skills they are learning are easily transferable to the growing hospitality and tourism industries in this region.

As a result of the success of this work, the company has a contract with the Commonwealth Department of Education, Employment and Youth Affairs to increase the number of indigenous people employed at RioTinto sites in Australia by 200 people over two years. This program is building on a current level of approximately 200 people, so it is a major undertaking planned to effectively double the number of Aboriginal employees. Perhaps these do not sound like large numbers but in fact they are very significant.

During 2001 the Western Cape Communities Co-existence Agreement was signed between indigenous people from Cape York in Australia’s north east corner, the Queensland Government and Comalco, the company which manages Rio Tinto’s aluminium businesses. The Agreement provides $A4.5 million each year for the community, recognises the inherent native title rights of traditional owners and provides for consultation with them in future mining operations. It includes an extensive package of assistance to the local people that will help them protect their cultural autonomy and, at the same time, build capacity through employment, training and educational programs.

The Agreement represents part of the future for Aboriginal people and it demonstrates how significant the role of mining can be in the development of communities.

• Under the Agreement, Comalco will provide substantially greater recognition to Traditional Owners and will support their quest to gain Native Title over the Comalco lease.

• The Agreement provides for the Traditional Owners’ continued support for Comalco operations and, when Comalco has gone, Native Title can then exist to the fullest possible extent.

• Steps will be taken to register the Agreement as an Indigenous Land Use Agreement under the Native Title Act.

• Parts of the Comalco lease no longer needed for mining will be progressively relinquished and we will support that land being returned to Traditional Owners.

• Cultural heritage surveys and site protection plans will be enhanced and all Comalco staff and principal contractors at Weipa will undergo cultural awareness training.

• The traditional owners of the land on which Weipa Township was established will be recognised.

• Extensive support will be provided for community development and indigenous business enterprises.

• Outstations will continue to be established on suitable areas of the mining lease.

• The 1325 square kilometre Sudley pastoral property will be transferred to the Iunthan Traditional Owners.

• Comalco has agreed to pay a minimum of $A2.5 million each year to the Western Cape Communities Trust. That figure may increase on the basis of Weipa bauxite production and aluminium prices.

• Comalco has also agreed to spend $A500,000 a year on employment, training and youth education programs endorsed by the Western Cape Communities.

• The Queensland government agreed to contribute around $A1.5 million each year as part of a partnership agreement.

The capacity for agreements like this to change the lives of the people is difficult to exaggerate. They can, effectively, create the environment where human rights, including economic, social and cultural rights, are realised. In the longer term such agreements promise to empower communities to decide their future themselves.

Conclusion

Rio Tinto’s work with communities is evidence that companies and communities can work together, leveraging the wealth created by the enterprise in ways previously not contemplated. The trend is showing every sign of serious growth, albeit in a variety of manifestations. It is submitted that, while not a panacea, business and community partner- ships can make a difference.

[The Rio Tinto Group was formed in 1995 by the merger of the Australian company CRA Limited and the British-based RTZ Corporation PLC. The Group mines a wide range of minerals and metals and operates in 20 countries. Rio Tinto Group companies, together with the Group’s share of joint ventures and associates, employs approximately 36,000 people worldwide. The combined Group’s market capitalisation is US$29.5 billion.]

An edited version of a speech to the 6th Annual Meeting of the Asia Pacific Forum of National Human Rights Institutions, Hong Kong 11–13 July 2001.


[*] John Hall is Manager Corporate Relations, Rio Tinto Australia.

©2002 John Hall


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