Rio Tinto-Alcan comes in below par on "sustainability"

Rio Tinto-Alcan comes in below par on "sustainability"

26th February 2008

Rio Tinto took over the world's second biggest alumininum producer, Alcan, in 2007. Alcan recently published its "sustainability" report for that year. Asks a correspondent for UK-based Ethical Corporation: "[I]s this a company trying hard to look green when in fact it is not merely papering over cracks but hammering metal sheets across the Grand Canyon and hoping we won’t notice?"

Says the author: " It’s hard to tell, for a number of reasons "

Alcan’s 2007 Sustainability Report – A little too shiny

As raw material manufacturers go, Alcan is an undisputed environmental leader. But the company cannot do it all, says Deborah Smith,

Ethical Corporation

26th February 2008

Alcan is a world-class Canadian industry leader in a hard-nosed, grubby game – alumina and bauxite mining, smelting, power generation and metal product fabrication.

No surprise then, that such an enormous global enterprise, so strategic to Canada’s economy and reputation and making large revenues from the hungry removal of finite natural resources, would “do” corporate responsibility and sustainability well.

Alcan has had close shaves and controversies over the past few years, such as a big walk-out over safety at a plant in Australia and the eventual withdrawal from a highly unpopular potential investment in a new bauxite mine and alumina refinery in India. But it has come through it all shining brightly.

Alcan’s sustainability pitch is ambitious and its achievements impressive. Its strategy is sound, though orthodox, and its much-vaunted environmental health and safety (EHS) system seems well integrated. The company has received many prestigious plaudits (industry coalition Ceres calls it the “leading metal and mining company in climate change governance practices”) and is the only Canadian firm to make the Global 100 list of the most sustainable companies.

But is this an enlightened, state-of-the-art organisation on a sincere road to redefining sustainability for a dirty industry? Or is this a company trying hard to look green when in fact it is not merely papering over cracks but hammering metal sheets across the Grand Canyon and hoping we won’t notice? It’s hard to tell, for a number of reasons.

The brittle facts

It is encouraging that Alcan’s eight chosen performance areas – including natural resource stewardship, climate change, community development and environmental releases – broadly reflect key priorities for the mining industry as flagged up by campaigners and ethical investors. Each of the “Alcan 8” are given heat and light in the performance review, with narratives, which vary hugely in length, on key economic, social and environmental dimensions and case study examples.

Large amounts of information exist, much of it no doubt interesting. For example, 41 per cent of Alcan’s energy usage comes from renewable sources and it generates some of its own electricity. This is good. But despite the claimed centrality of sustainability to the company psyche, even in the natural resource section, the company does not define the environment itself as a stakeholder. Predictably, job creation is frequently wielded as a shield to justify almost any project – old and new.

Alcan’s sustainability perspective is entirely anthropocentric and all natural resources are described and respected only in relation to their economic and social utility: no sense here of the inherent value of ecosystems, habitats and biodiversity. Given that the company admits its operations are vast consumers of land and water, the data might have told a fuller picture. It reports the quantity of mined land that has been rehabilitated, but there is no obvious measure of the amount of land used or otherwise appropriated in the first place. The figure of 390 for “significant and moderate environmental events” (pollution) gives no idea of how these were spread across business units or geographically.

Proving its mettle?

Finally, information about Alcan’s biggest impact by far – the primary metals business group – could have been given a much higher profile. Aluminium smelting accounts for 68 per cent of the group’s profits, 72 per cent of energy use, 77 per cent of greenhouse gas emissions and nearly all of its other forms of pollution. But only one of the five energy case studies and one of the three climate change studies focuses on primary metals.

The same pattern emerges in the “Natural Resource Stewardship” and “Environmental Releases” sections. For example, we are told that managing spent potlining (a toxic by-product of smelting) is a very big problem, yet we are given only one example of something interesting being done about it – at a solitary 51 per cent-owned plant in Australia. Why is there an imbalanced, unrepresentative emphasis on less-impactful areas of the business? Only Alcan can answer this.

Two major problems remain in this otherwise quality account. First, the painful realities of Alcan’s environmentally damaging industry have been unduly minimised, meaning the relevance of the report suffers.

Second, in understandably pursuing the standard of completeness, Alcan’s text will probably frazzle the mind of an average reader. However, if investment analysts really did read sustainability-related content and base financial decisions and recommendations accordingly, then all the detail would be worth it. Over to the money men.

Snapshot: Alcan’s 2007 Sustainability Report

Follows GRI? Yes.

Stakeholder engagement? Little tangible evidence of formal programmes, beyond employee engagement.

Verification? None apparent.

Strengths: Sustainability analyses around key impact areas.

Weaknesses: Quantity and imbalance.

Pleasant surprise: 59 per cent of smelters’ energy use is from renewable