Introduction
Rio Tinto is a multinational mining group with headquarters based in London and Melbourne. It was founded in 1873 when a group of investors who were mining ancient copper workings at the Rio Tinto river, near Huelva, Spain. Rio Tinto is one of the world's leading companies that produce and extract a wide range of natural resources - aluminum, iron ore, uranium, copper, coal and diamonds to name a few. It has diversified and operates in six continents is mainly concentrated in Australia and Canada.
It is a dual- listed company and is available on the Australian Stock Exchange, London Stock Exchange and is a component of the FTSE 100 Index.
The company has been face with many ethical dilemmas in the past regarding environmental and human rights and the most recent issue regarding the arrests of four of its employees at their Shanghai office.
Business Ethics is learning what is right and wrong in the workplace, and to find the right solution in regard to effects of products and services and the ongoing relationships with stakeholders. It is managed through the use of ‘codes of ethics and conduct, the role of the ethics committee, policies and procedures and how to resolve ethical dilemmas. There are many ethical issues that face organizations today. The following describes some of the ethical dilemmas faced by Rio Tinto. These dilemmas significantly effect the businesses operations and financial status.
Corruption, Bribery and Espionage
Earlier this year in July, four Rio Tinto employees in Shanghai were arrested because they were suspected of stealing Chinese state secrets regarding information on China's steel and iron industry and providing them to other countries and committing bribery by Chinese steel mill executives. One of the offenders included an Australian citizen, Stern Hu. China is one of Australia's second largest trading partners.
For a few months, Rio Tinto has been avoiding holding meetings in China and therefore conducted their meetings in Hong Kong and Singapore, because they feared that they're conversations were bugged and the information was being sent to the China Iron and Steal Association.
Rio Tinto was accused of illegally obtaining information for six years an was engaged in “winning over an buying off, prying out intelligence, routing one by one, and gaining things by deceit,”
The stolen information includes data from China's steel sector such as the risks China faces from its foreign counterparts. This creates inconsiderable damage to its national economic security.
China's Public Security Bureau removed computers which belonged to the four accused executives from Rio Tinto's Shanghai office.
Due to the unstable controversy towards Rio Tinto it has moved its employees out of its Shanghai office, and the non- Chinese employees were relocated to Singapore.
In a statement issued by Rio Tinto states that they intend to co-operate with Chinese authorities and is concerned about they're employees well being.
Environmental Damage
Rio Tinto conducts mining operations at its Grasberg mine in West Papua, Indonesia. Grasberg is one of the largest gold mines in the world and it is situated on Mount Grasberg which is inhabited by the Amungme and Kamoro tribes.
When a mining co-operation sets up its massive infrastructure in and around the mines, they create additional other structures such as buildings and roads. The staff and the mining workers are lodged there as well therefore causing disturbances to the existing inhabitants in the area. This creates cultural clashes and the inhabitants are displaced from their land.
The Norwegian government criticized Rio Tinto for ‘unethical conduct and environmental damage' in relation to Rio Tinto's mining operations in Indonesia. The Norwegian government has sold its $500 million shares in Rio Tinto an has removed the multinational company from its pension fund. The government followed in suit of the advice it retrieved from its Council of Ethics.
Grasberg produces about 23,000 tonnes of waste into the Akywa River everyday. It causes water and land contamination from its acid rock drainage. This results in killing trees and sago palms which is one of the main foods for the Kamoro tribe. The tribe usually obtains its food from the forest through hunting and vegetation and the usage of the river - for fishing and drinking water. Rio was accused of polluting the local river.
In early 2000, Rio Tinto's mining operations were halted because, of protests by the locals and environmental groups. The Indonesian government allowed the company to resume its operations but banned the dumping of waste in the river.
The islanders at Bougainville Island, Papua New Guinea filed a suit against Rio Tinto for alleged environmental damages. The extensive damages included razed forests and polluted rivers. It owns through a subsidiary, about 53% of the Panguna copper mine. It has created a hole in the forests which measures 2.5 miles wide, 3.5 miles long and one third of a mile deep. Rio Tinto was opened in 1972 and closed down in 1989 when a local conflict between the Papua New Guinea and the Bougainville Army grew over the islands mineral wealth. This continued for eight years.
Human Rights
Rio Tinto operates in over 40 countries and employing more than 34,000 workers. The mining industry has a few major drawbacks two of which is of high importance - environmental and health impacts.
On the Bougainville Island of Papua New Guinea filed a suit against Rio for damages to the environment and violation of human rights. Rio Tinto has been accused by the islanders regarding war crimes - it was engaged in ‘racially discriminatory labour practices at the mine. Apparently, the mining conglomerate were paying the local black workers lower wages than the white workers. The housing conditions for the black workers were of poor condition as well. In 1988, the residents from the area began protesting against the inhumane treatment at the plant as well as the environmental damages caused by the mine. The protests intensified and became violent. The Papua New Guinea (PNG) government was accused of attacking and killing civilians through various acts of destruction. Rio Tinto was allegedly claimed to provide financial support to the PNG government. This created a civil war between the PNG and the Bougainville Army which lasted a decade.
Trade unions from around the world are joining TUC in the Rio Tinto campaign which includes - Australian Construction, Forestry, Mining and Energy Union, Australian Council for Trade Unions, the American Federation of Labor and Congress of Industrial Organizations and Mine and General Workers Union.
Safety and Health Issues
Rossing Uranium Plant, Namibia - is filing suit against Rio Tinto after being diagnosed with cancer. The mining giant refuses to accept these allegations. In the UK, workers from the Capper Pass tin smelter also contracted cancer and are filing a suit. Rio Tinto delayed the process in presenting the medical records of the mining workers. At first, Rio Tinto denied in any unlawful activity, and then agreed it had violated health laws at the smelter. The mining company is facing massive legal liability from ex-workers and families for contact of cancer risk.
Rio Tinto response to ethical dilemmas
Rio Tinto is making adverse steps to promote sustainable development. There are three fundamental aspects of sustainable development - economic, social an environmental performance. If these aspects were ignored, then a business will not be able to last in any expanding market. A statement made by Rio Tinto - ‘the business of business is sustainable business.'
Rio Tinto ensures that its entire staff and contractors are aware of its employment procedures. It strictly follows its codes of conduct on different issues such as sexual harassment, discrimination, prohibition on child labour an indigenous groups.
Rio Tinto carries out operations in many countries where the land belongs to indigenous tribes or people. It respects the rights of all the indigenous inhabitants.
It conducts meetings with the local communities regularly so that it enables it to achieve the consent of the indigenous groups. If these tribes have any issue regarding the mining operations they are welcomed to discuss they're complaints.
Rio Tinto is against inhumane activities and treatments, therefore they support the UN Secretary, Kofi Annan's Global Compact - which is to uphold the international human rights standards.
In the mining industry, there are many impacts that face any mining organization- a main issue is the environmental factor.
Rio Tinto established a Global Mining initiative which mainly focuses on finding alternative or feasible steps to help the mining industry to deliver it maximum production with a minimum negative effect. Rio Tinto, produces minerals and mining components that meet international standards, and in turn try they're very best to reduce the environmental damages incurred.
According to reports published by Rio Tinto, in 2006 there was an increase in environmental incidents compared to 2005. 52 incidents occurred in 2006 and 30 incidents reported in 2005. Therefore, it reviewed its system for its health, safety, environmental and community incidents. Rio Tinto suggested that the cause for these incidents were from sewage spills, which were the result of power outages, pump and pipe blockages and pump failures. It received a penalty for this discrepancy from the Queensland Environment Protection Agency.
Rio Tinto continues to implement engineering techniques that continue to find the source of all environmental problems and try to make the necessary changes.
Rio Tinto seeks to understand to social and environmental implications of their activities. It discusses the different issues with the local government and community representatives and arrives at a mutual agreement. This can optimize production as well as reduce negative influence on the social and economic term. Rio Tinto follows three aspects in an approach to working with communities - build knowledge, engage and develop. Firstly, it carries out studies that help them to identify and rectify the risks and opportunities because of their presence in that area. This enables them to collect information on demography, families and their well being and educational prospects. Rio Tinto are based in also base in developing countries, therefore they take more responsibilities, by supporting the local communities with schools, health facilities, training seminars, roads and other important infrastructures. Rio Tinto products play a major role in many of our everyday activities - bicycles, stoves, woks etc.
An example of Rio Tinto's social responsibility would include in 2008 its businesses supported more than 2,000 socio-economic programs which included health, business and agricultural development, education, housing and environmental protection. Rio Tinto spent a total of US$134 million, where 60% went to community programmes. And its community contribution was divided to Australia, Africa and the America's.
There are occupational health standards, which Rio Tinto makes sure they follow. This helps to improve and manage health risks. Some workers are more prone to contracting diseases than others. To prevent such an issue, all workers are to take part in personal and workplace health screening activities. Such an example would include, the occupational asthma risk while working in aluminum smelters, because of the dust and emission gases. All mining companies face the same issue in relation to health as workers are exposed to dust, noise, fumes and forms of radiation.
According to reports in 2007, after the merging of Alcan occupational health risks increased. The new cases increased by 110 percent to 46 per 10,000 employees in the year 2008. The increase in these illnesses was due to the considerable noise which caused hearing loss and stress. However, in 2008 in Rio Tinto's other operations, the occupational health risks reduced by 40 percent, especially in the reduction in hearing loss and musculo-skeletal. This reduction is because of the risk management approach that has allowed Rio Tinto to recognize its most harmful activities and to find a way to reduce them.
Rio Tinto was fully aware of the damages that were obtained from its operations in Indonesia and have taken many remedial steps to save its reputation. In 1997, Rio Tinto claimed it has eradicated its old mining techniques and adopted a new manner in relation to their new guide, ‘They way we work.'
Ethical Practices
Companies are also capable of providing ethical solutions, guidance and assistance to the environment and community.
Rio Tinto improves its misunderstandings with indigenous groups in Western Australia. This gesture has brought many benefits to the locals and in turn has increased Tinto's commercial prospects. An agreement regarding the Argyle Diamond mine has created a cheerful celebration between Rio Tinto and the indigenous Gidja, Mirriuwung, Malgnin and Woolah tribes. This agreement was aimed at the future expansion of mining at its current operation site, which now recognizes the tribes as the legal custodians. The agreement offers the aboriginal community an involvement in the management of the mine, as well as creating jobs for them- as trainees and employees. This proves that a multinational company like Rio Tinto is capable of creating corporate relationships with indigenous groups. Since 1985, Argyle Diamond mine have had disagreements with the indigenous community regarding the ownership of land cultural misunderstandings.
In Brazil near its Moro do Ouro gold mine it provides assistance to business by providing equipment and technical advice to farmers.
It has also helped farmers to triple their harvest yield near its Kelia mine in Indonesian Borneo, to reduce the impact of the mine closing down.
In 2008, Rio Tinto announced that they would be providing more than US$700,000 in funds to support Indonesia's education programme. This program enables Indonesian students to accumulate graduate or post graduate levels within the country and/or abroad. Rio Tinto has also initiated other educational programmes in the areas it operates in which includes - Education Fund Assistance Programme (throughout the East Kutai Regency), Education Development Programme, Morowali Scholarship Programme (in conjunction with the University of Tadulako) and the Kelian Farming Vocational School.
Rio Tinto is working NGOs, central government, international communities and the local community on a project for regional development in Madagascar. Madagascar is considered one of the poorest countries in the world with low educational levels. It would not only set up a titanium mine which would employ about 600 workers but also creating a project of deep water port and new infrastructure. This will be available to the workers as well as local businesses. This in turn would create jobs for the locals. The project also includes educational and health programmes and credit support for local businesses. It would also include a ‘fast growth restoration programme, which will provide firewood for locals, while reducing the environmental impact.
Recommendations and Conclusion
In order to prove that Rio Tinto is concerned about its reputation and the disastrous impacts caused by its mining operations make sure they find realistic solutions to their on going issues. They are allegedly been accused of human rights violation, damage to the environment, health issues - to name a few.
The mining giant, has continuously sought and searching for new ways to avoid such discrepancies, by taking part in educational programmes that provide scholarships for underprivileged children and providing them the opportunity to advance their educational careers in their own country as well as abroad. This proves that Rio Tinto is concerned about communities and social responsibility.
As Rio Tinto sets up its operations in any country especially in developing countries, there are always advantages and disadvantages. Surely, it creates jobs for the locals as well as the indigenous community, therefore allowing people to support their families and themselves.
It has also been accused of damaging the environment with its operations - that is interrupting wildlife, polluting rivers, deforestation, cultural misunderstandings, creating excessive noise and destruction etc. Rio Tinto also creates roads and new infrastructure to poorly developed areas, therefore providing for the local community.
Any business does not always carry out the correct and ethical factor, but they are always trying to create and develop new ways in how they are able to support communities.
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