Sustainable business

My proposition is this: The business of business is sustainable business.

I stress the word “sustainable.” If our business disappears, so does our contribution to the world’s social, environmental and economic needs. We stop giving our shareholders a return on their investment; we cannot employ people and develop their skills and experience; we cannot help to provide society’s basic essentials and necessities.

If we don’t stay in business, we cannot support economic development and infrastructure development, nor can we provide health and education programs. Similarly, if we go out of business, we will not find new methods and better technologies for combating climate change and preserving or repairing the environment.

Conversely, if we in business neglect any of the three fundamental aspects of sustainable development — the economy, society, and the environment — we will not stay in business long. Today, more companies recognize that sustainable business is built on these three things; the problem is, most of us are still treating them independently. It’s time to connect the dots. Until we do, the investment community will not “get it.” And businesses won’t realize their full potential.

There are plenty of examples of companies that have focused too much on one or other aspect of sustainable development, and missed the mark. So I think it’s worth taking a step back and asking ourselves what is business responsible for? In other words, what are we, in our capacity as business people, responsible for? And what practical steps should we take in order to live up to our responsibilities?

Let’s think about the first question. Business has a duty, together with governments and society, to meet the needs of the current generation without endangering the ability of future generations to meet their own needs.

In doing so, we have to recognize that society has changed its view of what companies are responsible for. And society’s expectations will continue to change. Business now has greater accountability than it did in the past, to a wider range of stakeholders: shareholders, employees, communities, and governments.

At the moment, unfortunately, some of these accountabilities are not well defined. There are issues we need to address, in terms of where the boundaries lie between what business, government and civil society should be accountable for.

Consider Rio Tinto’s operations. In many remote locations, especially in developing countries, the company takes on a much broader range of responsibilities than it would in an urban environment: it supports the social infrastructure through schools and health facilities; it provides training in a wide range of areas; it builds roads and other physical infrastructure. Rio Tinto does these things because they contribute to smooth business operations. The world needs what Rio Tinto and other companies are in business to produce.

Our business, mining and metals, pervades daily life. This morning, for instance, did the bed you get up from have a steel frame and springs made from aluminum or iron ore? In the bathroom, copper piping could have delivered water to your ceramic wash basin. Perhaps you ate your breakfast cereal with a nickel alloy spoon, from a bowl coloured by titanium dioxide. If you travelled by car to work, it probably has an aluminum engine and certainly copper wiring.

The point is made. The world needs what we do in order to sustains itself economically; which also helps secure social and environmental sustainability.

Rio Tinto has issued a public statement of our values, principles and practices, in the belief that transparancey — stating, measuring, regulating and reporting activities — is a prerequisites of sustainable business.

Another prerequisite is dialogue. For example, the Global Mining Initiative has also enabled us to build relationships across a broad spectrum of people who have an interest in what we do and how we conduct ourselves.

Half of all fund managers now believe that companies add shareholder value by effectively managing intangibles, such as reputation. Most investor relations professionals rate environmental and social issues as important to long-term performance.

The next important question, after what needs to be done, is how do you do it responsibly.

The first stage in any of our business operations is obtaining a licence to operate and explore, and I don’t mean only a licence from the government.

In Madagascar, Rio Tinto has been working with non-government organizations, central government, international donors, and the local communities on a project that could deliver not just a titanium mine but integrated regional development.

The mine would employ around 600 people. But the project also calls for construction of a deep water port and new infrastructure. These will be used by local businesses and traders, as well as the mine.

How will the poor people of the region benefit? The mine’s support activities will create jobs for unskilled labour. The project plans include health and education programs, plus ways of setting up donor funding and micro-credit support for small local businesses.

The plans also include a fast-growth reforestation program. This will provide firewood for local people, while conserving the long-term viability of the eco-system.

Let me stress: this activity is not driven by philanthropy. Part of the public justification for the mine comes from the fact that the project can help prevent the destruction of local forests.

Rio Tinto is also helping provide a strong, stable environment for the mine. The company recognizes that the benefits of large-scale mining projects do not automatically trickle down to the poorest, so it is enhancing the mine’s ability to perform.

— The preceding is an edited version of a speech presented at the Business for Social Responsibility Conference in New York, N.Y. The author is chairman of London-based Rio Tinto.