The Influence of the company on local society and environment

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The company is of the leading groups in the field of exploration, mining and processing of mineral resources. The resources portfolio includes aluminium, copper, diamonds, energy products (coal and uranium), gold, industrial minerals, and iron ore. The company offers it services to clients from around globe with a strong presence in Australia and North America, which employees almost 34,000 employees. The company manages 30 businesses in total, which are operated with the help of 57 mining operations, five smelters/refineries remote from operations, 19 other operations (including rail, port, power generation, plant, mill, loading/packing facilities and land development), seven development projects, five exploration regions and 19 closed operations. Rio Tinto businesses include wholly owned subsidiaries (such as Borax, Comalco, Hamersley, Rio Tinto Coal Australia, Kennecott and Rio Tinto Iron & Titanium), partly owned subsidiaries (Coal & Allied and Palabora) and non-managed, (Escondida) and joint ventures (Grasberg) in which public shareholders, other companies or governments are partners.

The company was set up in the year 1962, after the merger of two UK groups, Rio was formed in 1962 by the merger of two British companies, The Rio Tinto Company, established in 1873 to mine the ancient copper workings at Rio Tinto in Spain, and The Consolidated Zinc Corporation, incorporated in Australia at the turn of the century.

With a unified business approach, the company strives to accomplish higher benefits to its employees and shareholders every financial year by concentrating on the expansion and improvement of their existing operating machinery and operations into huge, elongated life and resourceful processes, which are able of supporting the high cutthroat benefit through industrial cycles. The management closely contributes to the health and safety of its employees by initiating new management and safety policies which at the same time boost development for the group. The management makes its best possible efforts to work closely with its host countries and clients while respecting its state laws and society customs. Minimization of unfavorable effects and endeavor to develop each characteristic of its performance is one of the major aims of the board. The company makes it a point to employ the local people and guarantee just and evenhanded reimbursements and development of opportunities.

The board of directors of the Rio Tinto Group has set up company rules and regulations that help the management to meet the high standards of safety, performance and governance across all its global units' operations sites. The focus of the company since the merger has been on corporate governance and international operations. The company has adopted various policies which also include a Corporate Code of Conduct and Board charter which reviewed the recent law changes with the expansion of the company. The code of conduct addresses some Business and strategic philosophies for the company management board to follow.

Lay solid foundations for management

The board is directly responsible for approving the direct of the company business and is in charge of the performance of the group in all senses. The board of directors keeps in mind the need to carefully formulate the strategic goals, budget, and policies for the company that can help identify and mitigate the risks ahead. Also the board of directors is responsible to ensure the benefits of the shareholders and see that the company's activities are aligned with the interest of its shareholders.

Structure the board to add value

The directors in the board which strive to provide the skill, knowledge and experience to the company business in order to render results for the shareholder of the company. It is the choice of the company to retain any of its directors or remove any of them who are found not be working in the benefit of the company.

Promote ethical and responsible decision making

The boards of directors have set up policies and codes that promote the company's approach to a moral and responsible decision strategy. The Board has accepted a Code of Conduct to direct all employees as to the practices necessary to make sure that directors, executives, management, employees, contractors and agents hold out their duties and responsibilities to the highest ethical standards. The code of conduct also includes the legal complexities, and share trading as well.

Safeguard integrity in financial reporting

In order to safeguard the financial interest of the company, the CEO offers written undertakings to the board of directors that states the authenticity of the financial reports of the company status. The audit and risk control committee works to supervise and monitor the progress of the external auditor, contracts and audit plans. The audit and risk control committee also takes charge of offering some financial recommendations to the company board for making of the operational risk management policies.

Respect the rights of shareholders

The boards of directors ensure that the shareholders of Rio Tinto are well informed of the company material and other information reading the performance of the company. This is done with the help of annual reports, disclosure reports to the Australian Stock exchange, half yearly reports and media releases.

Management Structure

Rio Tinto is a world leader in many of the product markets across the world. To make sure the business stays on a positive note for the employees and the investors, the present board has brought out a new executive management structure which has been implemented in the month of September 2008.

The novel management structure has given more importance to the operating regions and have made them independent (five regions operating across the world) and increased stress upon projects exceeding US$10 billion. At the same time the board has set up independent responsibility to these sections so as to increase the accountability within the business activities.

The year 2008, the company further made new rules that categorized all its services into three basic segments. The three segments were Select, Deliver and Improve. Select is a expert ability of the company, alert on project feasibility evaluation and assortment. The company offers any kind of consultancy services through this group. This part is an essential division of Rio Tinto's international project delivery facility. The second segment, the Deliver phase, assist the group in converting the maximum prospective worth of the project that has been identified during the Select phase into fully definite, secure and productively implemented projects, comprehending highest value for its clientage. The third segment - Improve executes the most important projects, improves, de-bottlenecking and maintenance projects, project portfolio management and support services to sustain assets and improve business performance of the company's operations.

Budgetary control

Rio Tinto plans to administer their performance in an enhanced manner by moving to the Budget control model. There are some laid down points by the budget control committee of the company:

• Evaluation of on hand measures for official risk administration and major business decisions such as investment and income projects and come to a decision what improvements are desirable if risk management is to be maintained rather than weaken the budget control initiative.

• Supervision of the ambiguity and risks of the Budget control implementation itself.

• The budget laid down by the company for every financial year, is used to bring together all the activities within the company and setting targets. The budgetary control committee of Rio Tinto decides the targets that are based upon the expected sales that are assessed from the future conditions of the market share of the company. This anticipated figure that is calculated by the budgetary control committee decides the production, raw materials and other financial requirements.

• The budget targets that are set up by the budget control committee integrate the company as it divided the target equally amongst every level. These levels are usually classified as divisional, personal, sectional or at times individual as well.

• The targets are used to gain control of the company by efficiently monitoring the levels that are assigned the targets. The feedback loop gives a complete analysis of the performance at each level.

This way the targets are met with changing individual or levels targets of the various targets in the company. This further increases the production pace and systematic attempt to achieve relative certainty of business conditions that are desirable for a better markets share thus providing a competitive advantage to the company.


The last financial year of 2007 was once again a time for some major acquisitions. With continuously rising demands in the minerals and metals sector, the company brought about a change in chief executive and the transformational acquisition of Alcan. The acquisition is coupled with an unswerving strategy, alert on value creation and industry brilliance, with a promise to offer high quality results for the company's investors and employees. Rio Tinto purchased Alcan in early July and closed the deal in October with all the formalities completed. This major acquisition turned Rio Tinto into a world leader in Aluminum. On the other hand, Rio Tinto continued its heavy investments of approximately US$5.0 billion in its existing businesses aimed at higher production units and higher revenue. The acquisition of Alcan along with the other new programs introduced in the company promoted power and profundity of Rio Tinto's decision-making ability to distribute value to shareholders.

Alcan's widespread worldwide asset support has amongst the lowest cost aluminum smelters in the world and is an manufacturing leader in manufacture expertise and self generated power, particularly hydro-electricity, which holds great amount of significance for a carbon constrained world. Producing value and effieceny for its shareholders is the main objective and the accumulation of Alcan facilitates the company to incarcerate price from growing aluminum requirement at the side of the company's recognized headship place in iron ore and copper.

On the company's part, it has entered into joint venture with BP to seek cleaner uses of coal through production of hydrogen energy coupled with storage of carbon dioxide underground. The company has also invested in Guinea to develop a major iron ore project. Rio Tinto was also given a place in the FTSE4Good index in the UK after its policy committee decided to include companies involved in the production of uranium. Rio Tinto has maintained membership of the Dow Jones Sustainability World index since its inception in 1999 and has been an active member of the World Business Council for Sustainable Development and the International Council on Mining and Metals (ICMM), whose members are committed to superior business practices in sustainable development.

The total investments approved for 2007 were approximately US$46 billion, with a higher amount for the next year with some major investments in the pipeline. Other than the acquisition of Alcan, a 100 per cent basis, construction of two new iron ore mines in the Pilbara of Australia for US$2.42 billion, the underground development of the Diavik diamond mine in Canada (US$563 million) bringing total investment in the underground mine to US$787 million, the expansion to 30 million tonnes per year of the Hope Downs iron ore project (US$350 million), the Yarwun alumina refinery expansion to 3.4 million tonnes per year (US$1.8 billion), the Cape Lambert port expansion to 80 million tonnes per year (US$860 million), the US$991 million investment in the extension of the Kestrel coal mine and US$300 million for the Eagle nickel project in the US.

Furthermore, the company says it is also on track to deliver annual synergies of $US1.1 billion after tax from the end of 2009, considerably higher than its initial estimate of $US600 million.

The present and the other pipeline projects with the company are some of the opportunities that the company is looking forward to. Amongst them, a joint venture project in Oman - the Sohar smelter in is targeted to reach its maximum producing capacity in by the end of 2009. The Sohar smelter is one of the most modern and efficient technology based smelters in the world and aims at using the company's latest AP technology -the most energy efficient and greenhouse-gas efficient in the world. With an initial capacity of 360kt per year, it will fall in the first quartile of the global industry cash-cost curve.

Amongst the other investments doe by the company is the joint venture smelter to be based in Sarawak, Malaysia. These smelters would comprise of the two state-of-the-art AP pot lines and would generate 720,000 tones of metal per year; while another smelter based in Saudi Arabia is set for commencement in 2009. the company is also looking forward towards some more expansion projects which will take in the smelter based in Iceland and the joint-venture project concerning the Alucam smelter in Cameroon.

The company has sought some of the most valuable assets in Quebec, and Canada. The company has lately announced its huge investment of US$300-million investment for the up-gradation of the Kitimat smelter which is based in British Columbia. The company has already invested half a billion US dollars to this project since its inception. Another notable investment on the company's part is the US$228-million rejuvenation and improvement plan of the Shipshaw power generating station in Quebec's Saguenay-Lac-Saint-Jean region. The project entails installing a new 225-megawatt high-efficiency turbine that will facilitate the more efficient use of water resources. The power station is a major component of Rio Tinto Alcan's extensive hydroelectric network, which has a total installed capacity of approximately 2,900 megawatts in Quebec. The Shipshaw venture underlines the significance that the company gives to the rising energy costs which in other way realize the potential for a long term investments.

In addition, the company is fostering growth in the Saguenay-Lac-Saint-Jean region, along with the commencement of their new US$225-million plant for spent pot-lining, which exploits the recent technology developed by the company's Arvida Research and Development Centre. In a partnership deal with Stationnement de Montréal and Rio Tinto, the company intends to launch a new BIXI self-service bicycle rental system. The service is similar to that currently available in Paris, and is to be launched next April with 2,400 bicycles available at a network of 300 stations covering central Montreal.

In addition to the aluminum projects outlined earlier, Rio Tinto is making sizeable investments in expansions at IOC, QIT and Diavik. These include a total of US$768 million approved earlier this year to expand IOC's mining and processing facilities in West Labrador and buy additional rolling stock for the company-owned Quebec North Shore and Labrador Railway, which transports product to IOC's deepwater port in SeptÎles. At Diavik, Rio Tinto and its partners have approved investments totaling US$787 million over the past couple of years to develop the underground phase of the diamond mine, which began as an open-pit operation.

Environmental impact assessments

Environmental actions are a significant characteristic of each stage of a project life. In the midst of exploration activities, it is among the initial job carries out at a site and persists all the way through the existence of the project and past shutting down even as rehabilitation is finished. Whether obligatory by home government policies or not, reserve expansion projects start in on with environmental impact assessments, as made compulsory by the Rio Tinto Environmental Policy. In nearly all the countries, ecological impact evaluation must be presented to the existing environmental authorities for sanction and consent. These show a discrepancy on different sites and project with different clients of Rio Tinto, depending on the requirements of regulatory authorities. For instance, even though not made compulsory by the Quebec law, an intentional impact estimation was undertaken for the development of the Rio Tinto Alcan's extensive hydroelectric network, which has a total installed capacity of approximately 2,900 megawatts in Quebec.

Assessments engage the compilation of baseline statistics on the neighboring atmosphere as well as plants and fauna, habitation, water resources, weather, geology and community circumstances. Time and again, it establishes to be the most inclusive information continually composed in an area. This information is indispensable to project scheduling and forecast strategies for development to diminish the blows, as well as for comparisons when measuring any impact that occurs during and after operation. It also identifies areas of sensitivity that may need special care.

Rio Tinto applies the policy for the accomplishment of an elevated standard of ecological concern in carrying out its business activities (Australian Minerals Industry Code for Environmental Management, 2005). At many instances, the Environmental policy developed by Rio Tinto, has been able to reveal the earlier unknown aspects of the project areas. Exploration effort in the deep water projects of Rio Tinto showed signs of shoals -an area within the sea with a high diversity of biological plants. After this information was revealed with the help of the environmental assessment, the management of Rio Tinto decided to preserve the bio diversity of these areas, therefore saving the valuable eco systems. The management of Rio Tinto developed new techniques related to drilling techniques and shipping and anchoring exclusion zones to avoid any damage to the environment.

At Saguenay-Lac-Saint-Jean region, where the company is carrying on a project, base studies were carried out the available variation of biodiversity and probing the capability of neighboring vegetation to regenerate the waste generated from mining activities.

Society discussion by the company's board is frequently a significant element in evaluation of environmental impacts, mainly in accepting the neighboring and community environment of a project. The processes involved are taken with the consent of the communities (Australian Minerals Industry Code for Environmental Management, 2005). It has permitted the expansion of comprehensive environmental administration arrangements for the life of the employees employed in the mines and beyond, and has assisted for further ground-breaking community work that involves Rio Tinto in more projects globally.

Social responsibility

The group possesses and runs a number of varied businesses all over the globe in various countries and different cultures. With the vast presence, the trade of the group naturally tends top affect the community and customs of the surrounding areas. The objective of the company is to decrease any negative impact if any, on the society and increasing the service and benefit to the community, country and people associated with it, International Labour Organisation Declaration on Fundamental Principles and Rights at Work). With a target of maintaining its objectives related to Social responsibility, the company has been active in strengthening its community relations with the help of activities like:

Structuring a strong investor and company relationship by carrying out open dialogues, consultation and efforts that build trust.

Maintenance and encouragement of human rights of its employees and related communities along with community development programs to raise social assets.

Identify and respecting the local culture, traditions of the community and promoting management and protection of the heritage.

The company also lays stress upon activities which assess and evaluates the impact of the company business activities on the society.

Promoting the development and initiatives of the company employees through Awards and performance oriented bonus systems.

Among the various social development programs the company has adopted, some of them are access to basic health care systems, education, water and housing, and locale employment opportunities which strengthen the bond between the company and the society in which the com[any operations are being carried out.

Evaluation of the impacts (financial) on the society is a regular feature of the company analysis. This includes the job creation for the society, infrastructure development, support facilities, taxation payments, economic affect, increased health risks (if any caused die to the mining activities).

Corporate Governance

The urgent requirement for a proficient security market conforming to the Corporate Governance principles has materialized lately in the industry. There exist a number of Corporate Governance models for the sectors, and is quite evident that markets in the recent times have underwent through a number of corporate reforms and restructured its corporate world on the governmental and infrastructure faces.

Nevertheless, the major concern is the fissure that exists between the proposed legislative outline and implementation of these rules and regulations. Rio Tinto has been able to closely follow its guidelines related to Corporate Governance and the company is trying continuously to prove its sincerity towards shareholders.

A number of companies including Rio Tinto have started paying attention to the issue of corporate governance. There has been a set of rules laid down in order to assist the governments "in their efforts to evaluate and improve the legal, institutional and regulatory framework for corporate governance in their countries, and to provide guidance and suggestions for stock exchanges, investors, corporations, and other parties that have a role in the process of developing good corporate governance,(International Labour Organisation Convention)" These companies have also stressed upon the importance of Banks - as they form a vital part of the economy by offering finance, credit and liquidity to the economy.

During the late nineties, a number of crisis emerged on the scene for the corporate market, which led to the forced obligation of certain corporate governance rules in context with the financial reformers. The experts are working to offer a cohesive strategy for which can fairly present a broad definition of corporate governance to the industry. The rising trends in globalization amongst the world markets and varying financial trends of the market have widened the scope for corporate governance. At the same time, the concerns that arise due to deformed corporate governance laws have shaped up to different levels within the corporate world which finally led to the emergence of corporate governance on the scene.

Since the last decade, the regulatory committees, and other various equity market experts around the globe have greatly stressed upon the requirement to create an effective set of corporate governance policies and practices for the corporations. Rio Tinto management strongly believes in the fact that a good corporate system possessing effective corporate governance policies is subjected to competitiveness, facilitates corporate admittance to money markets, and consequently assists the expansion of the financial markets and can stimulate the economic growth of the company.

As the money market has gone global, both the domestic as well as the foreign investors hold higher values for the techniques and methods that are employed for operating companies, and how these methods are used to resolve shareholder's demands and requirements. The shareholders for today are now much more willing to pay higher premiums to companies who are transparent with their corporate governance and practices. This also includes management adherence to corporate governance practices, disclosure, financial lucidity, and respect given to the rights of the investors. It is true that companies who have a structured corporate governance set up, are more able to accomplish their monetary, ecological, and community errands, and add to sustainable development of the economy.

Upgrading in Corporate Governance observations assist the decision-making procedure in and involving a company's prevailing bodies, and must accordingly augment the effectiveness of the monetary and dealing operations. Superior Corporate Governance in addition leads to an enhancement in the accountability structure, diminishing the threat of scam or self-dealing by business executives. An efficient system of Corporate Governance must facilitate observance with appropriate laws and conventions, and further, permit companies to circumvent expensive litigation and court proceedings.

Viewing the accelerated temperament of revolution, modernization and evolution in the global market, the industry has sought to restate its attention to the issue of Corporate Governance laws, (International Chamber of Commerce Business Charter for Sustainable

Development, 2004). The principles laid down by the Corporate Governance assist in guiding the corporate practices and therefore speed up the incessant progress of the companies to contend and engender higher profits for themselves and the economy.

The basic guidelines that support the fundamental institution of the Company's corporate governance are as follows:

Initially, the supreme contractual obligation of the board of directors of a company or a public firm is to select a Chief Executive Officer and a well competent managerial staff to support a principled functioning of the company. Succeeding, the accountability of an effectual operational strategy which will enhance the value for the investors lies with the management. The Corporate governance laws stress upon the fact that the management should be well aware of its responsibilities, profits generation, income and risks that are associated with the company and the business. The corporate governance laws also put ahead the fact that no personal agendas should be highlighted that stand against the interest of the company. The Corporate governance laws further state that it is the liability of the administration, including the board and the audit commission, to construct fiscal and other financial reports that practically tender the factual position of the company's financial condition and consequences of business of the company, and to make the sensible and well timed revelation and disclosures about the company rules which the will allow the investors to evaluate the monetary, security and risks of the company.

Next, the corporate laws also state that the board is also responsible for hiring an accounting company to review the financial statements that are prepared by management. Along with this, it is responsibility of the management to be vigilant that the auditor is able to work freely without the interference of any employee or administration and no compromise is made with the facts regarding the financial condition of the company. At the same time, the audit committee also owns certain liability to inform the board of the company about some recommendations that may influence the accounting treatments, business transactions that affect the fair presentation of the corporation's financial condition and results of operations, and weaknesses in internal control systems. Sixth, the company owes a fair and just attitude towards its employees so that the employees are subjected to an equitable working environment within the company.

The above mentioned guidelines that incorporate the basic structure of the corporate governance laws are important for the effective functioning of a modern corporation that finally leads to the integrity of the equity markets. However, the market experts persist upon the fact that the most effectual approach to augment corporate governance is through thorough and forward-looking act by the involved company administration so that proper focus is given on creating long term profits for the shareholders and the economy as well. The guidelines discussed above also show the way to the management and board to assist in the implementation of best practices of corporate governance.

Independence of Directors

There is no provision of an independent director in the Company's Principles for Corporate governance; however, it includes a sufficient number of Independent directors - who are actually non executive board members, who work in situation when there is any conflict of interest. This allows for some transparency and flexibility within the working patterns of the board.

Since CG is a decision making process, independent judgment is cases of conflict can yield results which are in the true benefit of the company. These independent board members are significant, as they reinforce the confidence of the stake holders in the company and further promote investment.


Seeing to the assorted nature of activities that are being carried out, it is obvious that the company has a great influence on the local society and environment. These impacts may be positive or negative, if not given any consideration. The company is committed to bring benefits and profits to the employees and the local communities. As this essay reveals that the company has taken good care of the environmental care and social responsibility in the interest of the stakeholders and employees. In the current scenario of market scenarios, the company along with its own benefits has tried to be in line with the minimum standards, and the hopes of the investor community.