Anglo American Chairman Sir Mark Moody-Stuart Speech to the Leadership Conference on Global Corporate Citizenship in New York (January, 29, 2009)

This speech by Anglo American Chairman Sir Mark Moody-Stuart is an excellent example of the mining sector’s corporate social responsibility initiatives throughout Africa – Stan Sudol

Anglo American is one of the world’s largest mining companies focusing on platinum group metals, diamonds, copper, nickel, iron ore, metallurgical and thermal coal. For more info about their corporate social responsibility initiatives, go to: http://www.angloamerican.co.uk/aal/siteware/docs/sd-report-2009.pdf

Anglo American Chairman Sir Mark Moody-Stuart

Mining companies don’t normally get much publicity and when we do, it tends not to be particularly positive. Nor are our products well-known
brands – for good reason. We don’t sell at JC Penney or Wal-Mart. Unlike our colleagues in the oil and gas sector, we don’t sell at the gas station. We produce commodities that are vital for modern society in a whole host of ways. But I confess I’ve never heard a dinner-table conversation revolve around whether someone’s home electrics are built with Anglo American copper, or their car’s catalytic converter with Anglo American platinum.

Both are possible: indeed the latter is quite likely, since Anglo American is the world’s leading primary producer of platinum, and platinum is a key element in cleaning exhaust emissions. Our other core businesses include base metals – copper, nickel, zinc; iron ore; coal; and diamonds – we are the largest shareholder in De Beers.

We are present in about 45 countries around the world, and employ some 190,000 people. Speaking here in New York, I guess I owe you a word of explanation about our name. We do not have major operations in America. But the United States did play a vital part in our history, alongside the United Kingdom, as these two countries were the source of the original capital that was raised by our founder Sir Ernest Oppenheimer to establish the company, over 90 years ago now, in 1917 in South Africa.

Despite being one of the largest mining companies in the world, with operations in so many countries, the reality of our business is that we sell
into bulk commodity markets. Commodity markets care a great deal about quality of the product; but quality aside, they don’t really care who
produces the metals. The result? We are not known as a brand by the general public.

So if corporate citizenship were all about brands, spin, and PR, there’s an
argument that mining companies simply wouldn’t need to bother. Where is
the value in brand enhancement if no-one needs to know who you are?

I’ve two answers to that: first, true, other than through De Beers, who are
independently managed, we don’t have retail customers; but some
important stakeholders do know exactly who we are and are vital to our
success. And second, Anglo has for a long time seen value in taking a
broad view of what our business is about: long before sustainability
became a buzzword, elements of the concept were integral to the way
Anglo did business. This was perhaps best captured by our founder, Sir
Ernest Oppenheimer, who said – over 50 years ago in 1954: “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”.

Before I go on to talk about what Corporate Citizenship means for us, first I
want to be clear what it is not: it is not about philanthropy. The Economist
newspaper has in the past referred to this as “virtue borrowed from the
shareholder”; “borrowed virtue”. I’m not suggesting there is no role for
corporate philanthropy – and indeed Anglo has extensive programmes
through our Foundations. But Corporate Citizenship as I see it goes well
beyond philanthropy and is about how we manage our impact on society.

So for Anglo, Corporate Citizenship is simply the way we do business. It
makes sense for our business model to recognise the broad range of
stakeholders who are affected by what we do. Why? Because there is
business value in doing so and there are unwelcome costs in taking a
narrow, blinkered approach. Corporate Citizenship is a broad area: I’m
going to talk about two aspects central to successful mining: water
management; and livelihoods, both individual and community.

First, a word about a subject of much debate around Corporate
Citizenship. Is it about making money or “doing good”? Primary
motivations vary. A survey in November last year of US companies by the
Economist Intelligence Unit found most to be motivated by financial
reasons. But a substantial minority – 16% of respondents – cited pressure
to “do good” as the main driver.

“Doing good” was seen in the survey as a separate motivator to delivering
value for the business. But to me this is a false dichotomy: doing good
and delivering value are two sides of exactly the same coin.

Morality changes, evolves as societies evolve. The legislation we all have
to abide by is often a lagging indicator of accepted morality: laws are
changed as a result of societal pressure for change, with new laws often
reflecting societal concerns that have been around for years. In the United
Kingdom, Quaker employers such as Rowntree and Cadbury developed
progressive systems of welfarism in the 19th century – for sound business
reasons. In the United States, Henry Ford instituted worker welfare for the
same business imperatives. Well paid and healthy workers are more
productive. Over the years, voluntary practice became baked into
mandatory labour laws – in different ways on different sides of the Atlantic.

We in the mining industry have to operate where the minerals have been
formed in the earth’s crust. This can often mean that we are present in
weak governance zones where, even if legislation is in place, its rigorous
application often lags even further behind society’s expectations.

In such areas, voluntary initiatives set the bar not just for best practice, but
often the ability to do business. Multi-stakeholder partnerships between
business, civil society, labour, sometimes governments set the standard.
Initiatives such as the Kimberley process for combating “blood diamonds”,
the UN’s Global Compact or the UK and US-led Voluntary Principles on
Security and Human Rights have established standards which become
conditions for loans from Equator Principle banks – another multistakeholder initiative; they become integrated into the Performance
Standards of the World Bank’s IFC and they guide national legislation as it
becomes established

In our ever-more-joined-up world, civil society knows about these
standards, and expects us to apply them. To succeed, mining companies
– or at least those of Anglo’s size and global footprint – need to be
accepted. We strive and aspire to be welcomed, but as an absolute bare
minimum we must be accepted – by governments, but critically by our host
communities. Without the support of local society, we can’t mine
successfully, and can’t generate profit for our shareholders. That means
being aligned with not just national legislation, but also societal
expectations of how a business with high moral standards should behave.
For us, doing good is good business.

So what are the expectations of communities around our operations? I
mentioned water and livelihoods. Water first. Mining needs large amounts
of water to operate. There are two key issues around water: quantity and
quality. Mining can only thrive where these issues are comprehensively
addressed.

As for quantity: sometimes there is too much: mines are susceptible to
flooding, and this can require removal, treatment and storage of large
volumes of water.

More often, there is not enough water. This requires not only technological solutions to maximise recycling and minimise net use in our operations; it also requires policies and actions integrated into local circumstances. Scarcity is a major societal concern in the arid zones where we mine in parts of South Africa, Australia and the Chilean Andes.

For example our Mantos Blancos and Mantoverde copper mines lie in the
Atacama – the world’s driest desert. To remain welcome, we must be part
of the solution, not an unwelcome competitor for water for communities
and farmers. So for example in Chile we will reduce water use by 40% per lb of copper produced at our Los Bronces expansion project and at the
Mantoverde mine we are working with the local community to study the
potential for using mist traps to harvest water for community use in
agriculture and to support sustainable tourism initiatives. Similarly at our
Quellaveco copper project in Peru we intend to use water that is
unsuitable for agricultural use and increase the availability of water for all
users during periods of low rainfall.

Water quality has in the past been a major problem for the mining industry.
Historically, the impact of mining on water quality was poorly understood
and largely ignored by industry. Many polluted sites around the world bear
witness to this. As a major mining country the United States has its share.

But societal expectations have evolved. Communities and governments
no longer accept these negative impacts. So there is pressure – good
pressure – to act responsibly. And industry best practice has responded.
One example is Acid Mine Drainage – whereby rock exposed by the
mining process reacts with oxygen and water to form polluting acidic
solutions which in turn can leach out minerals which cause further water
pollution. A few decades ago, AMD was not well understood. Today, as a
result of extensive scientific research, we know how to minimise AMD and
prevent it damaging local water systems.

Responsible water management is not just about preventing problems. I
believe that solutions have to go well beyond just operating in sensitive
and sustainable ways; we need partnerships and imaginative solutions.
Le me give you one example of how we have tackled water issues in
South Africa. We operate in the major coal-mining area of Witbank where
all three problems – exist: too much water collecting in the mines, reacting
with exposed rock and becoming contaminated; too little water to meet
growing community needs in this developing country. Our solution? In a
multi-year, $42 million dollar project, we partnered with our major local
competitor BHP Billiton and the local authority to build a water treatment
plant. We pump out the dirty water, clean it, and channel the purified
water to feed community supplies. Wins all round.

But we didn’t stop there. As in much of South Africa, unemployment is a
problem in the area. Through our local enterprise support scheme called
Anglo Zimele – in itself a business, not a charity – we supported local
entrepreneurs to set up a bottling plant: they now bottle and sell what a
few years ago was dirty mine water.

And we make the most of the by-product of the purification process too:
this produces gypsum, which is being used for construction.

The value of all this for us? It helps resolve our excess water problem and
keep our mining profitable. And it creates great goodwill in the community
which translates into business benefits in numerous ways.

I’ve talked about developing world examples. Business is not Government
and must not seek to appropriate the role of Governments. But where a
multinational company like Anglo American has a major presence in the
developing world, we become de facto an important development actor.
Often there are multiple local needs: a lack of basic health care, education,
infrastructure. Or even simply a lack of food.

Business must act as a partner to help meet those needs. Why? A
healthy population means a healthy workforce; an educated population
means a skilled workforce; a prosperous population means a motivated
and supportive workforce.

Although local circumstances vary hugely between the developing and the
developed world, our values and principles are constant. It is not
sustainable to operate by one set of principles in one part of the world and
by a different set in another. Anglo American is involved in a major copper
exploration project in Alaska – the Pebble project: water quality is a key
issue there. The fisheries of South-West Alaska are famous for their
thriving salmon – integral to the Native Alaskan culture as well a valued
commercial and sports fishing resource.

Of course, any mining operation will have to demonstrate it can protect the
fish before it is allowed to proceed. But more to the point, if we can’t protect
the fishery, we won’t want to proceed and we will not proceed. It’s not the way we go about things; it doesn’t work as a business proposition it would damage our reputation with Governments and communities and other stakeholders worldwide, and make us unwelcome elsewhere.

Because, though mining is not retail, and our brand may not be the stuff of
dinner table conversation, we do depend on support from Governments
and communities.

So supporting livelihoods – contributing to prosperous communities –
helps us do business. Let’s look briefly at just two aspects of livelihoods:
health and jobs.

Health first: we are deeply concerned by the human tragedy caused by the
HIV/AIDS epidemic, especially in sub-Saharan Africa where we have
many operations. The epidemic has grave implications for our employees,
their families and the communities within which we operate, and the
situation is particularly acute in South Africa.

Our response? We were the first large employer to put in place free
workplace HIV/AIDS treatment programmes for our workers and today we
operate probably the largest single company treatment programme in the
world. Beyond treatment, the programmes also focus on prevention, care
and support. They strive to tackle the stigma and discrimination that can
so easily attach to this illness. And we are rolling them out not only to our
workers but also to their dependants – a major challenge particularly given
the migrant nature of significant parts of our workforce.

Holistic programmes, in line with a corporate policy embedded in a deep
respect for the most basic human right – the right to life. This against a
backdrop in South Africa of a government at the time which was in denial
about the epidemic, with public policy languishing behind best corporate
practice. We have played a key role as a development actor, and policy
has followed in our wake.

Again, you may ask: why is this a job for the company? Surely healthcare
is for the public sector? My response: societal expectations and business
interest merge: successful corporate HIV/AIDS programmes mean a
healthier, more productive workforce. Although at the time of the decision
in 2002 we did not know it, we’ve now done the sums: this core element of
our Corporate Citizenship agenda saves us money at an individual level; it
costs roughly $125 to treat an employee for a month, but we realise
savings of over $200 per month in costs that would otherwise be incurred
in dealing with AIDS.

The overall burden of HIV/AIDS remains a significant cost to the company at 3.4% of payroll, which will only reduce if we are successful in preventing new HIV infections. Extending the same level of care, support and treatment to dependants is important to achieve this prevention goal, despite the significant additional cost. Through our comprehensive HIV/AIDS response we hope to set an example for others in the private and public sectors, thereby contributing to healthier communities and a stronger pool of workers from which we all can draw. I am immensely proud of our programmes: they deliver for our shareholders, our workers and our communities alike. And they prolong and save lives.

Moving on to jobs: Old mining used to be highly labour intensive. Modern
mining still provides significant employment, but it is increasingly
automated. In crude terms, the deal between the mining industry and local
society used to be that the business delivered most local economic impact
in the form of employment – directly building and boosting livelihoods
through the payroll. As modern mining evolves, so does that deal erode.
Yet if local society cannot appreciate real benefit from our activity, they
won’t want us there. So again, we have to be imaginative in our response.

First, we have professionalised the social function in the company: just like
any other discipline, we approach our interface with local society in a
systematic and professional way. We have developed leading-edge
systems to do just this. Application of our award-winning Socio-Economic
Assessment Toolbox, or SEAT, allows us to understand community
interests not as we see them in some old-fashioned paternalistic way, but
as perceived by them. A formal SEAT study is mandatory at all our
operations. Not just once, but every three years, so that we stay ahead of
local changes and sensitive to local interests.

The understanding we reach from this drives our local interactions to help
meet community needs. A common demand is for more good, local, jobs.
We can help deliver this through imaginative use of our supply chain. A
glance at the pie chart on the screen shows the huge flows of income into
local economies through our payments not just to employees but to our
suppliers. Governments tend to look merely at the $2.3 billion in corporate
taxes which we pay.

They overlook the very much more important impact of the $3.6 billion which we pay to our employees, $2.3 billion of it in developing countries, and the tax we collect for them from those employees. Equally important is the $11 billion we pay our suppliers, over half of which is in developing countries. Some of that in turn goes to employees and governments. The employee element goes straight into the local economy, much of it in further employment generation through services and of course on capacity building through education and healthcare.

We learnt how to leverage this in South Africa. I have already mentioned
Anglo Zimele, our local enterprise business there. Zimele has invested in
380 businesses employing 11,500 people: not charity, but a sound
business proposition, making the most of our own activities for local
benefit. We’ve rolled out similar initiatives in other countries like Chile and
Brazil: this is increasingly becoming a core part of how we do business
wherever we operate.

And it’s not just the developing world where these needs are apparent. At
our zinc mine at Lisheen in Ireland, we have worked to create sustainable
jobs long after the mine has closed collaborating with major investment in
a new wind farm that will supply clean energy for many years to come. In
the United States, good jobs can be hard to find in the area around the
Pebble project in rural Alaska, and many small, remote communities are
struggling to retain their traditional livelihoods. To be viable in such a
context, any mining project must invest – as the Pebble Partnership is
doing – in the local economy. It must understand its needs – be they in
education, energy, infrastructure – and seek to be a supportive partner in
helping meet those legitimate aspirations.

This are just a few examples of the very broad view a company like
Anglo American takes of our Corporate Citizenship agenda. We may not
be a strong consumer brand, but we depend on our good reputation for
our business to prosper.

I would just like to conclude with a simple but important reflection: these
activities become even more important in difficult times. With economies
contracting worldwide and the very concept of global capitalism under
pressure, we know that it is vital to sustain our investments in our
communities. We all know that when the economy contracts, projects
slow down and are deferred, jobs are lost. These are times when trust,
built up over many years, can – we know through bitter experience – be
destroyed virtually overnight.

So the sort of programmes I’ve described cannot be an add-on, peripheral, boom-time luxury and they cannot simply be switched on and off. They are not immune from economic reality – in these times we have to take difficult choices in all areas of our business. But they are integrated into how we do business, because we do better business that way.

END

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