Sam Walsh tells Critical Resource how stakeholder engagement is crucial during tough times, why shareholders are asking more questions about the management of stakeholder risks, and how partnerships have helped build resilience in Guinea
Cost-cutting can strain relationships
Most mining companies, including Rio Tinto, are now under pressure to reduce costs and curtail investments. Capital is scarce, productivity is challenged and the economy and our markets are uncertain and volatile. The industry has moved from growth and expansion to restraint. Tough times call for tough decisions – cutting jobs, squeezing suppliers, and stopping or delaying projects. For a company like ours which is so capital intensive with long investment horizons, turning off the tap isn’t easy – it has stakeholder consequences that need to be carefully balanced.
This can put a strain on relationships with stakeholders at all levels. Our shareholders continue to seek returns, our stakeholders expect us to deliver on commitments and our partners and employees expect us to keep supporting them. Managing and balancing expectations is vital.
Shareholders want to know how we manage stakeholder risks
Being good at earning and maintaining our ‘licence to operate’ is at the core of any extractive company’s investor presentations. One of the biggest risk factors for our industry is not having a constructive working relationship with the governments, communities and stakeholders that host our operations. When that happens it potentially causes significant destruction of shareholder value.
We can have the best geologists in the world to make great new discoveries, but if the owners of the resource won’t let us dig it out of the ground and bring it to market, we won’t be making a return for our shareholders. Shareholders are increasingly asking more questions about our ability to manage stakeholder risks.
Getting quality information – and listening hard – is key
Taking time and effort to fully understand the environments in which we are working is vital. We need to appreciate the communities, the education systems, the main sources of employment, and the development priorities. We also need to understand the cultural values, and the history of these environments. To achieve this involves listening at every stage of our engagement, building trust and forming sustainable partnerships with governments, communities and civil society.
Partnerships at Simandou can help to build resilience
Partnerships have been a key theme of the Simandou project in Guinea. Simandou is a world-class resource but finding a robust way to develop it and bring the ore to market is a challenge. Our partners already include the Government of Guinea, Chinalco [the Chinese state-owned miner], the IFC [International Finance Corporation], and project support partners such as Conservation International. There is also a recognition among all parties that the financing of the project infrastructure will involve assembling an even broader coalition. The Trans-Guinean railway and the new deep water port to be built on the Guinean coast are major projects. This kind of coalition is not just good for stakeholders; it is good for shareholders as well. Shareholders appreciate the additional resilience we can build into a project by developing it in partnership with others.
Transparency is also critical – hence the importance of the role played by the EITI [Extractive Industries Transparency Initiative]. Debra Valentine [Rio Tinto Executive Committee member] was in Guinea recently for an EITI Board meeting. President Alpha Condé and Guinea were also prominent in the 2013 G8 summit discussions around trade, tax and transparency.
At Rio Tinto, we promote transparency and good corporate governance across our business. We state this publically in our global code of business conduct ‘The Way We Work’.