Former Shell and Rio Tinto leaders discuss responsible business strategies

Environmental, social and governance are key issues in the mining, oil and gas industries, so how important is responsible business strategy in the current climate? Former Shell and Rio Tinto leaders recently discussed the approach to responsible business strategies in a LinkedIn chat. Here, Mining Global sums up the key messages.

A long-term approach

Tom Albanese, former CEO of Rio Tinto and current Chief Executive of Vedanta Resources, believes the industry needs to stop focussing on the short term. "Projects that would have taken 3-5 years to develop in the 1980s are now taking 8-12 years and they need to be developed in this type of cycle." He says.

This need for a more long term approach is a result of increased budgetary pressures placed on companies to complete projects, a by-product of "the incredible expansion of the Chinese economy punctuated by an extraordinary recession".

A larger focus on projects taking longer is born out of a demand induced recovery in what Albanese believes is an “equally extraordinary” response from the world’s central banks.

But of course there are other key factors which affect the time scale of projects. Namely, the finances and infrastructure of local economies.

"There are some very large projects where the budget can start at $5 billion but then you put it in a remote community where those communities don't have electricity. They don't have the amenities that you would normally expect when working on a larger project. These communities simply don't have the infrastructure." Says Albenese.

The former chairman also discussed the impact of these projects on the local rural communities. Extensive extractive programmes can produce a significant change in the country's economy, sometimes contributing up to 30percent of its Gross domestic product (GDP). When a project of this magnitude receives what can be anything up to a 75percent budget cut, mining companies must adopt a long-term approach.

Sir Mark Moody-Stewart, current CEO of Vedanta Resources emphasises this need for a long-term approach, also warning of the dangers of recruiting employees, investing money in training and then being forced to let them go in more difficult financial situations.

Multi-skilled employees

When companies make employees redundant in this difficult financial climate, they lose out on workers with valuable skill sets. Moody-Stewart believes that one way to look at this situation is "to seize it as an opportunity".

"Try to make sure that the sustainability and social aspect of the work are spread into everybody's job,” He says.

“when people are made redundant you are going to lose specialists, so we better make everybody into something of a specialist."

Acknowledging the difficulties of approaching the industry with this outlook, resulting in a more constrained workload as they have a lot of work to do in other areas, Moody-Stewart adds "If you want to be robust over cycles, you better embed it everywhere."

Use minimal expats

Both men agree that in some areas expats must be used at the start-up as local talent is not available.

"As we develop these programmes, they can't be staffed by expat specialists. There has got to be a few, but staffed by local residents and people from these countries" says Albanese. He points out that major projects can handle the strain of resource reductions when a project moves into that phase.

When a project winds down or reduces its capacity, expat workers are the first to be pulled out, but as Albanese points out, "the local residents have developed those skills so if they are given a sufficient level of resources then they can continue at least in some capacity."

Learn from China

Over the last few years, China has fast become a dominant force in the global resources industry and has seen a huge boom in the economy as a result. Sir Mark Moody-Stewart believes that despite centuries of mining resource experience, businesses in more developed countries have a lot to learn from China.

"We shouldn't think it's all about us explaining to them how to do it,” he says.

“China has more knowledge of lifting people out of poverty than anyone else in the world and they achieve this through infrastructure and connecting villages to markets. We have a lot to learn from our Chinese colleagues.”

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