Glencore's sorry record of fatalities and fines

Published by MAC on 2011-09-12
Source: The Guardian, Zambia Post, Reuters

Campaigners say corporate responsibility report makes mining and commodities giant one of the most dangerous listed companies

by Leo Hickman and Fiona Harvey

The Guardian

7 September 2011

Mining and commodities giant Glencore has suffered dozens of fatalities and been subject to six-figure fines for environmental breaches, the company revealed on Wednesday.

Glencore and its majority-owned operations suffered 56 fatalities in the 2008-10 period covered by its corporate responsibility report. It is the first such report produced by the company, even though they are standard in the sector. The company pledged to start publishing such information as part of its plans to list in April earlier this year, in what was the biggest listing for some time on the London Stock Exchange.

Although the company is one of the biggest in its sector, and the world - with a market capitalisation on flotation of $60bn - Glencore paid only $2m in tax last year on European revenues of more than $1bn.

However, shares in the company, whose interests run from mining and energy to farming, have performed poorly since their debut, amid turmoil in the markets in the last few months and a flight to safe havens by investors.

Glencore's health and safety record takes up six pages in its 106-page report. But mining expert Roger Moody, of the London Mining Network, a group of non-governmental organisations concerned with the impacts of mining companies, said the company's record put it well below the sector leaders in safety terms.

"These numbers of fatalities are not the most egregious we've seen - in recent years, that has been from Vedanta, and that is a significantly smaller company. But that is in no way to minimise these fatalities - what they show is that Glencore is one of the most dangerous mining companies listed in London, when you compare it with others in the sector."

Moody pointed to Vedanta, the London-listed mining company with large Indian interests, whose operations have come under heavy fire from protesters, as among the worst, with 41 workers dying in a single incident in September 2009. Glencore's report does not contain detailed targets on future performance, but the company said these would be included next year.

Michael Fahrbach, head of sustainability at Glencore, said: "We are concerned about the figures because there's nothing more important than achieving no fatalities in your operations. It is the situation with the mining industry that it has more fatalities than other industries because it is more dangerous and the challenges are higher."

The company said it also collected statistics on "permanent damage injuries", and had other figures for health and safety, but that it only publicly disclosed what was required by the Global Reporting Initiative standards.

Peter Coates, Glencore non-executive director, said: "Obviously, the high fatalities rate is totally unacceptable. As well as environmental issues, I think the major issue we must address is the high incidence of fatalities. I know a lot of those fatalities were caused by ground falls in one of our African operations and I have a very superficial understanding of what's being done to try and improve that situation. But, from a board point of view, that will be one of the first things we try to address. Management is responding and the board has to make a decision if they are responding fast enough. If not, we have to do something about that, either by providing enough resources for them, or encouragement."

Glencore also said that some of its problems were owing to recent acquisitions, or cases where the company took over full running of an operation. At its Katanga mines in the Democratic Republic of Congo, where it took over management control in 2009, it said, "more than $11m has been spent on reinforcing more than 1,900m of mine shaft roof and on completing mined-out production chamber support, following a thorough review of rock mechanics to improve safety".

An investigation by the Observer last year into the then 12 major London-listed mining companies found 154 work-related deaths revealed in annual reports and other shareholder filings. Vedanta had the highest toll, with 67, followed by Anglo American with 20 in one year, Kazakhmys with 17 and ENRC with 12.

Although not all companies said where the deaths took place, estimates suggest they were concentrated in India, Kazakhstan and South Africa. Eight Chilean miners were killed over the period studied, at mines operated by Xstrata and Antofagasta. However, the deaths showed a clear divide - although the FTSE100 companies studied had considerable mining interests in developed countries, they listed no deaths in North America and only seven in their large mining operations in Australia.

Environmental breaches at Glencore also became a focus of attention in advance of the company's flotation, and the company's report contains 25 pages on the subject, including details of four "significant" environmental fines totalling about $780,000 in 2010.

Glencore said: "We consider any environmental fine over $10,000 to be 'significant', which is an indicator of how seriously we take our environmental responsibility. As we detail in the report, these fines related to encroachment (infringement on protected land) and a three-day interruption in the licence to operate at one of our production sites in Kazakhstan. We've reached agreements with the relevant authorities on these matters. We are not complacent about this at all, but clearly these fines are minor within the context of our global business."

Glencore's tax records are also likely to be pored over. Its tax liabilities show the company paid only $2m last year in tax and royalties on European revenues of more than $1bn. Glencore told the Guardian: "We see our payment of taxes and royalties as a core part of our contribution to our host countries, alongside providing employment and our broader voluntary contributions to local communities.

"In Europe the majority of revenues are earned by processing units - they are not subject to production royalties and have much higher cost bases and therefore lower taxable net margins than our mining interests elsewhere. Glencore is a involved in commodities production and marketing. Although our profits come roughly half from production and half from marketing, most of our revenues come from the marketing side. When we were a private company, taxation on our Swiss marketing business was paid by individual shareholders when they received their proceeds and therefore did not appear in our corporate accounts."

Renowned for disclosing as little as possible about its operations while a private company, Swiss-based Glencore has been forced to take a more open stance as its financial operations have come under unprecedented scrutiny in the wake of the listing.

Glencore is expected to produce its first annual full-year financial results next May, and is likely to hold an annual general meeting next June. The meeting is likely to be a focus of attention for environmental campaigners and other non-governmental organisations, according to Moody.

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Glencore releases 1st sustainability report

Reuters

7 September 2011

LONDON - Commodities group Glencore released its first sustainability report on Wednesday showing it paid $780,000 in major environmental fines last year and had 18 fatalities.

Glencore, one of the world's largest commodities trader, promised to launch sustainability reporting during the run-up to its listing earlier this year after spending decades as a private company, revealing minimal information about its business to the general public.

In addition to its trading activities, Glencore also produces commodities such as copper in Zambia, zinc in Kazakhstan and coal in South Africa.

The 106-page report said the company incurred four major environmental fines each worth more than $10,000, relating to encroachment on protected land at unidentified locations and for emissions, water discharge and tailings disposal in Kazakhstan.

In contrast, the world's biggest mining group BHP Billiton reported environmental fines of $35,057 for its 2010 financial year ending in June and miner Rio Tinto paid $540,328 in fines last year.

Glencore said it was making progress in installing equipment to capture sulphur dioxide emissions at its Mopani copper operation in Zambia and the project was due to be completed in 2015.

The company reported 18 fatalities last year, of whom eight were contractors. This compares with three deaths for Rio, five at BHP Billiton and 26 at India-focused Vedanta Resources during its 2010-2011 financial year to the end of March.

"Our first priority is to protect our people from all injury and make Glencore a zero-harm operation," the report said.

Glencore also said it had joined the Extractive Industries Transparency Initiative, which seeks to boost accountability and governance by getting companies to publish what they pay governments and the nations to disclose how much they receive from mining and oil production.

Glencore said it had paid $575 million last year in tax and royalties to governments, including $89 million in Africa and $308 million in Asia, from its industrial activities, which had revenues of $10.8 billion.

Glencore's total revenues were $145 billion, the bulk from trading activities, and total core profit was $6.2 billion, but the group has historically paid very low taxes on its trading operation, according to analysts.

Liberum Capital has said Glencore, based in the low-tax canton of Zug in Switzerland, has paid a corporate tax rate close to zero on its trading business up until last year due to its partner ownership structure.

In contrast, BHP Billiton paid $7.1 billion in company taxes on $71.7 billion in revenues and Rio Tinto paid $7.45 billion in net taxes to governments on gross revenues of $60.3 billion.

Zambia, Africa's top copper producer, said earlier this year it planned to audit more miners after previous audits had turned up as much as $200 million in unpaid taxes.

Glencore's Mopani Copper Mines said a leaked audit that found the company had not paid all its taxes was based on flawed methodology.

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Explain tax avoidance reports, ActionAid tells Glencore

By Gift Chanda and Kabanda Chulu

Zambia Post

7 September 2011

ACTIONAID Zambia has challenged Glencore to "clear the air" on tax avoidance allegations in Zambia before embracing the Extractive Industries Transparency Initiative (EITI).

Country representative Pamela Chisanga said Glencore, the owners of Mopani Copper Mine, should not sidetrack from clearing its name on the tax avoidance issues her institution raised last year.

Last week, there were assertions that commodities trader, Glencore, would own up support for a global standard on transparency in natural resources by declaring its support to the Extractive Industries Transparency Initiative (EITI), an initiative which promotes principles of ethical behaviour at natural resources companies.

Glencore has been notable by its absence from a list of EITI backers that reads like a Who's Who of natural resource giants. The list includes Anglo American, BHP Billiton, BP, Shell and fellow commodities trader Noble Energy.

"Much as we appreciate Glencore's position to support various initiatives, like EITI, we would still want Glencore not to use this to sidetrack from the real issues that we have been calling on in terms of how they should be paying their fair share of tax to Zambia," Chisanga said. "We are a little bit concerned that these measures are being used to cover up the wrongdoing of Glencore."

Chisanga said the time Glencore has decided to raise its support is wrong considering the issues surrounding the institution. The Swiss-based company's transformation into a public company has been littered with embarrassing accusations over corporate governance including allegations - denied by the company - that it avoided tax in Zambia.

The controversy emerged after the leaking of a report into internal controls at Mopani, which was carried out in 2009 by accountants Grant Thornton at the request of the government.

The dossier stated there had been an "unexplainable" increase in Mopani's costs between 2006 and 2008 that allowed it to minimise its stated profits and lower its tax bill.

"We are yet to see how events unfold but we will not relent from calling upon Glencore to pay its fair share of taxes," Chisanga said.

She said time had come for heightened transparency levels in the extractive industry.

Chisanga said multinational companies need to be more transparent if the country is to benefit from its resources.

"And to achieve this, we have always called upon the multinational corporations, the private sector to collaborate and work with civil society even in terms of providing information regularly for us to get an understanding of what is happening within these industries," Chisanga said.

And during the ongoing Comprehensive Africa Agriculture Development Plan (CAADP) consultative meeting for non-state actors (civil society and others) in Lusaka yesterday, Chisanga said there was need to use agriculture as an avenue to attain economic development.

She said Zambia should urgently implement practical and inclusive policies that will result in the maize bumper harvest to significantly reduce hunger and food insecurity.

"We need partnerships that will bring the missing voices to influence the agriculture policies, for instance, Zambia has recorded a number of milestones in the last two farming seasons and yet the sector has had huge challenges in ensuring food security and reducing hunger so how do we ensure that agriculture is managed to bring desired results?" Chisanga asked. "Women are underrepresented yet they produce most of the foods that we eat. What are we doing to ensure that their voices are heard and we have a bumper harvest but what policies do we have to ensure that hunger is reduced and what measures are we putting in place to make agriculture as a base for sustainable development and economic growth?"

Chisanga, however, said the challenges of the agriculture sector cannot be left to government and cooperating partners alone.

"This calls for a significant shift in broadening the space to accommodate the voices of non state actors in all important decisions because CAADP is government led but not government owned or controlled. As such, it provides a nexus through which to structure and coordinate non state actor participation," said Chisanga.

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Glencore's First Sustainability Report Merely a Declaration of Intent

Berne Declaration Press Release

9 September 2011

Zurich/Berne - Less than three months after its IPO, Zug-based commodities giant Glencore already published its first sustainability report. Instead of concrete goals and measures, this hastily-prepared document primarily contains grandiose declarations of intent. This demonstrates the enormous catching up that is necessary in the area of ecological and social responsibility by the firm formerly known as Marc Rich + Co AG. Glencore is still miles away from its intended international best practice.

The "Glencore Sustainability Report 2010" has not earned its name, because today a relevant sustainability report needs to contain at least the following elements: credible problem analysis, concrete metrics and indicators, and above all concrete measures to reach clear objectives. In Glencore's glossy brochure one searches for all of these things in vain. Instead, individual unverifiable numbers without context and a few assorted charity stories from the PR department are peddled.

The report comes from that early phase of a discussion about Corporate Social Responsibility (CSR) that Glencore has readily mistaken for charitable commitment. This applies to almost all concrete examples, which shows that although Glencore has been in the commodities business for 38 years, the ecological and social consequences of its activities in the Global South have not been an issue thus far at its headquarters in Zug. Nor is it noteworthy that the report satisfies the purely formal standards of the Global Reporting Initiative (GRI).

Meaningful numbers are few and far between in the report. Instead of striving for more transparency in its own business, Glencore prefers to support international initiatives that scrutinize governments rather than corporations. Thus, in its sustainability report Glencore supports the EITI, a global transparency initiative for the commodities sector. In the current 35 EITI member countries, all payments from commodities firms to government agencies and their respective revenues are compared - a promising means to fight corruption. But for Glencore, support for the EITI implies no additional obligation for transparency. And misconduct by companies - for example Glencore's aggressive tax avoidance in Zambia - is neither uncovered nor censured by the EITI. Such tax practices flagrantly violate the purpose and spirit of the EITI, where primarily the local population should benefit from "their" mineral resources.

Further information is available (in German) at www.evb.ch/rohstoffe (including a preview of the BD's new commodities book) or from:

Urs Rybi, Berne Declaration, +41 44 277 70 17
Oliver Classen, Berne Declaration, +41 44 277 70 16
Lorenz Kummer, Swissaid, +41 79 307 25 92