Mineweb.net 2002 – Archive

I am a strong believer in the market economy and free enterprise. For all their imperfections, they lead to the most efficient use of resources and are the best motor for development and wealth creation.

I also believe that to be successful over the medium to long term, it is essential that business effectively addresses the sustainable development agenda. Regrettably, recent experience has shown us too many examples of how greed or short-term pressures to perform have led businesses to behave unsustainably. The net result of such practices has been the destruction of some companies and a dive in share prices on the back of a loss of confidence in corporate ethics and accountability.

Companies must continue to regard their primary responsibility as being to secure a return for investors. Nevertheless, I am also sure that no company which pursues the shareholder interest blind to the context in which it operates will prosper in the medium term. The motivation and development of employees; the priorities of national and local government; the needs and perspectives of local communities are all part of the framework within which a responsible company must operate. For Anglo American this is not a revolutionary discovery – our founder, Sir Ernest Oppenheimer said as far back as 1954 that “The aim of this Group is, and will remain, to make profits for our shareholders, but to do so in such a way as to make a real and lasting contribution to the communities in which we operate.” This encapsulates what I see as a sustainable philosophy of business.

Now that the Johannesburg Summit on Sustainable Development is upon us, it is worth reflecting upon how much has changed since the Rio Conference a decade ago. Whatever one’s political perspective, the role of business has moved closer to centre stage over the period. This has occurred because of ‘globalisation’; the trend towards privatisation; an increasing understanding of the limits of what the State can deliver; and the huge growth in the significance of foreign direct investment (FDI) relative to traditional government-to-government development aid.

My objective in this article is to explore what international companies may be able to contribute to social and economic advancement and how they are increasingly adopting key elements of the sustainable development agenda.

First, a word about profit. Despite the collapse of state socialism there is still an instinctive suspicion in many quarters of the profit motive. Of course the cause of profit has not been enhanced by cases such as WorldCom and Enron. But it is the pivot of a market economy. We do not live in an age of oligarchs. The profits earned by the titans of the corporate world do not go into the pockets of the few; they represent the future livelihoods of tens of millions of pensioners. Their sheer number may render them faceless. But when companies are asked to forgo profit to further a wide social objective, we have always to keep in mind that our profits must ultimately pay not only the wages of employees but also the pensions of our ultimate investors. Immediate profit maximisation is not always the right answer when the long-term sustainability.

Global Mining InitiativeI turn now to the background to the public policy debate on the natural resource industry. We are in the middle of a defining period for the future of the mining industry. Over the last decade or more the leading mining companies have transformed their environmental performance. A similar improvement is taking place in the social area. But perceptions still lag. Partly with this in mind and frustrated by the lack of constructive dialogue with many of our critics, in 1999 the leading figures in the industry set in train the Global Mining Initiative.

A parallel initiative was the establishment of the independent Mining, Metals and Sustainable Development (MMSD) programme of stakeholder engagement and research. After a great deal of consultation, the MMSD produced its report in April 2002. Although I do not agree with some of its analysis or a number of its recommendations, it is a good point of departure for future debates. This was reflected in the spirit of the debate at the Toronto Conference of the Global Mining Initiative held in May. This was attended by a majority of people who are not from the industry and provided a much-needed forum for engagement with representatives from governments, NGOs, international organisations, community representatives and academics. There was a lot of honest disagreement, but there was also an appreciation on both sides of the value of the dialogue. The Conference has provided the industry with a comprehensive work programme going forward.At the Toronto Conference I made a number of ambitious commitments on behalf of Anglo American, including:

q taking full account of social, environmental and political considerations in our investment decisions;q increasing engagement with local communities, including seeking to ensure that our support for community projects reflects the priorities of local people and working to assess and report upon the socio-economic impacts of our operations;q to make a contribution to community development through the creation of opportunities for small business development and for workers from disadvantaged backgrounds; andq where it lies within our power to do so, to seek to promote the observance of human rights in the countries where we operate.

These commitments build upon much of our exciting practice, shaped by the philosophy of our founders and previous leaders.

Extractive Industries ReviewSimultaneously, the Extractive Industries Review is under way on the future role of the World Bank Group (WBG) in lending to mining, oil and gas projects. The Review was established at the World Bank’s Prague meeting as a concession to the anti-globalisation protesters. The case put against the extractive industries is that mineral wealth is bad for development because it concentrates wealth creation too narrowly; provides opportunities for corruption; may contribute to conflict through accessing resources for people to fight over; and, through generating exports, inflates the currency value for other economic sectors. Finally, critics suggest – although in my experience fail to prove – a correlation between mineral wealth and poverty and lack of development.

Historically, the US, Canada, Australia and South Africa all based their industrialisation upon mining and the exploitation of natural resources. Indeed, minerals continue to play an important part in the economies of Australia and South Africa. More recently, Chile and Botswana are object lessons in how minerals can be exploited to the benefit of wider society and as a motor for development. There is unquestionably a need for wise macro-economic management of the revenues and Chile’s revenue stabilisation fund is one successful model for doing this.

There is certainly work to be done in ensuring in some countries that mineral wealth is better used. In Africa, for example, a number of initiatives which flow from the New Partnership for Africa’s Development (Nepad) may help to address some governance and corruption issues. But to reduce the amount of lending from the WBG for projects in developing countries would be folly. To circumscribe the World Bank/IFC’s role would almost certainly increase political risk and, therefore, the cost of capital for projects in the poorest countries. Moreover, I gladly bow to the Bank’s guidelines as being a major source of guidance on ‘best practice’. The Bank’s involvement has helped to raise standards in the industry and its investment has served the cause of sustainable development.

GlobalisationA major issue for any international company must be the issue of poverty alleviation in the developing world. If it is not tackled successfully, it will be a continuing and substantial source of instability in the international system.

During the last decade, the role of private-sector investment flows has grown in importance, so that they now exceed development aid five times over. Even so, a relatively small proportion of private-sector FDI goes to developing countries (excluding China). Whilst many campaigners talk of the risks to poorer countries from globalisation, I would suggest that there is a bigger risk – that they are excluded from the dynamism of the world economy. You can also get more in this article we wrote.  Arguably for these countries there is too little globalisation and this route to their sustainable development is, thereby, inhibited.

If private investment flows are to be increased to the developing world, a number of things must happen. Firstly, the developed world needs to play fair in the world trade system. EU and US agricultural subsidies have wrecked the operation of trade in food products and tariffs effectively exclude many products from Africa and Latin America. Moreover, in relation to minerals and other commodities, substantial barriers are routinely erected when developing countries seek to beneficiate their products.Secondly, we must look to the leading developed-country governments to live up to the commitments made earlier this year at Monterrey in relation to increasing and making aid flows more effective. Developing countries continue to be in urgent need of help with capacity-building and there are many health, education and poverty-alleviation projects which can only be financed through public-sector funds.

Thirdly, we need to see an improvement in the standards of governance in many developing countries – especially in relation to corruption, respect for human rights and upholding the rule of law. This is seen in the US law that allows their citizens to invest in a Gold Backed IRA account – more information.

Fourthly, I hope that we can see the development of a more collaborative approach between multinational companies and some of the leading NGOs. High-profile campaigns – some justified, others less so – against those multinationals which do invest in developing countries is hardly an encouragement to other, risk-averse, companies to take the plunge. Of course, campaigns on specific issues will continue.

I do, however, recognise the underlying fears which motivate those with reservations about globalisation. Maybe read more about it here. These fears relate in particular to concerns about accountability, loss of local control and ‘cultural imperialism’. As Bill Clinton observed, ‘the benefits (of globalisation) are all general; whilst the pain is all specific’. In return for the benefits which have accrued to business from the increasing scope to compete in a growing number of markets, companies are having to come to terms with a new level of accountability. Through our recently published Good Citizenship business principles, Anglo American has made it clear to our employees what standards we expect of them; and to our external stakeholders what they can expect of us. Our own Statement is reinforced by a range of overlapping codes, such as the OECD Guidelines, international conventions and sources of ‘best practice’ guidance. To meet the needs of our stakeholders we have become more transparent, especially in the reporting of our safety, health, environment and community impacts. We aim to extend our reporting to include a range of social issues and increasingly to report at a local level.

Integrating sustainabilityWe are increasingly integrating thinking about sustainability into the way in which our businesses are run. By the end of 2004, we aim to have achieved ISO 14001 certification for all our operations. We have developed policies on bio-diversity and climate change. Across our businesses there is an emphasis on accurately measuring, and seeking to minimise resource use – from energy to water. We have a number of initiatives under way too to reduce our emissions. Prominent amongst these are an investment which will reduce sulphur dioxide (SO2) emissions from the Anglo Platinum Waterval smelter by 85% and the construction of a replacement cement plant in Buxton in the UK which will be both more energy efficient and reduce SO2 and particulate emissions by 60% and 70%, respectively. No significant investment goes ahead in a new operation within the Anglo American Group without an Environmental Impact Assessment.

Anglo American is also placing increasing emphasis on maximising the beneficial social and economic impacts of our operations. We must balance the depletion of natural resources inherent in mining with an enhancement of the human capital in the communities which support our operations. To this end, we are piloting studies of the socio-economic impacts of our existing operations so as to help managers to gauge and plan how to improve performance in areas like small business development or improving health provision. Often such social objectives will best be secured in partnership with local government or community groups. A good article might be this one and this. But we recognise the catalytic role our operations can sometimes play in identifying needs and building coalitions to address them.

I used to run Mondi, Anglo’s Forest Products division. In that case, through an industry-wide voluntary initiative in partnership with other stakeholders, we achieved a significant improvement in environmental and social performance. Through this, Mondi, has become the leading Forestry Stewardship Council certified operator in the southern hemisphere.

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