Sustainable development works

Many people think sustainable development is about making choices. And they are right. But many are mistaken about the kinds of choices involved.

To set the scene, let me state what sustainable development is today. Probably the best description was produced by the Brundtland Commission in 1987: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

Commendable, you may say. But why is it important for business? What has changed from the days when Milton Friedman could say with confidence: “The business of business is business.”

Essentially, when we ask ourselves today why business should pay attention to sustainable development, there’s a “stick” and there’s a “carrot.” The “stick” has two main strands and rising societal expectations form one. Increasingly, society chooses to acquire goods and services from companies with a reputation for ethical behaviour and transparency. And people like to work for them. This links in to our second strand: globalization. Businesses in general have a greater impact on more people in more countries than ever before, and global media ensure that a company’s behaviour in one region of the world is made known to its customers, employees and investors everywhere else.

We need to be companies that do good business — and do business in a way that’s good for all our stakeholders.

What surprises some people is that corporate entities benefit from working toward the same vision. Adam Smith would have called it “enlightened self-interest.”

Let me give you an example: In my first few months at Rio Tinto, I have been visiting the company’s operations and meet the people that run them. One of the most inspiring experiences came during a visit in South Africa. I met there a man called Ben Mikhize, one of the many local people from a disadvantaged background. He is the managing director of a company that rehabilitates land that has been mined. In the past, the Rio Tinto subsidiary in the area used to manage the rehabilitation work — putting up windbreaks, sowing seeds, and so forth. Now it outsources to Ben’s company, Dune Rehabilitation Services. Dune is one of several local companies that Rio Tinto has initiated or encouraged in the area. We help them to identify business opportunities, and develop the business or technical skills they need to grasp those opportunities.

The benefits of this program for disadvantaged South Africans are clear: the creation of more than 1,200 permanent jobs, plus more than $9 million annually in outsource contracts from Rio Tinto alone.

But we also benefit, as a business: lower unemployment in the area means greater stability, and less of an impact on our operations. The bottom line benefits directly, too. For example, by outsourcing to Dune Rehabilitation, we are increasing our own productivity and efficiency. This will translate into lower costs per unit area of rehabilitated land. Everyone wins.

Governments and consumers have a responsibility to understand and make the choices that will contribute to sustainable development. The investment community also needs to recognize the business case for sustainable development. I have been in many investor presentations and seen eyes roll at the mention of sustainable development. We have not succeeded yet in making that business case.

Clearly, the business sector doesn’t have all the answers about sustainable development. But we are making progress.

— The preceding is an edited version of a speech by Rio Tinto Chairman Paul Skinner at a recent seminar in London.