Sustainable development must endure

A new-found enthusiasm for mining will be tempered by the extent of the industry’s enduring commitment to social and environmental stewardship responsibilities. Minerals Council CEO Mitch Hooke addressed these issues at the recent 4th Annual Australian Mining Prospect Awards Dinner.

A new-found enthusiasm for mining will be tempered by the extent of the industry’s enduring commitment to social and environmental stewardship responsibilities. Minerals Council CEO Mitch Hooke addressed these issues at the recent 4th Annual Australian Mining Prospect Awards Dinner.

Mitch delivered the following speech at the Awards dinner on Tuesday evening, 4 September 2007 at the Waterview Convention Centre, Bicentennial Park, Olympic Park in Sydney:

I’m delighted to be here with you tonight, and thanks very much for the invitation to address you, that’s very kind of you, thanks.

The risk of backsliding is currently getting a lot of play in the public debate, mostly in terms of economical forms, particularly in terms of industrial relations system, that’s quite understandable in the lead up to a federal election, and particularly one that is going to be as pivotal as this one.

The less heralded, but arguably more important risk of backsliding is in our industry, and it is in our commitment to sustainable development, and it is largely within our own purvey.

Tonight, as we recognise excellence in the Australian minerals industry, it’s appropriate to reflect on the profound shift in the manner of this industry’s operations, founded in the realisation that this industry’s future is inseparable from the global pursuit of sustainable development.

It’s been a quiet revolution, probably 10 years in progress, and it took off exponentially in the last five years, and well it needed to.

Our industry was under siege by communities increasingly disenfranchised from the activities, and alienated by our performance.

We were generally regarded as the neighbour from hell, the siege is paying scant regard for our environmental and social stewardship responsibilities.

We were characterised as low-tech, dirty, dangerous, we were dismissed in the IT boom as traditional, old economy, we were getting lost in the logic of our own self-importance, if only the community would understand just how economically and socially significant we were, everything would be okay.

Ours was an industry looking down the barrel at losing its social licence to operate, you know, that’s the unwritten social contract with the host of communities in which we operate, the contract that is vital to maximising neutral benefit from what we do, which is converting the actual capital into societal capital.

Until we do that, it’s just dirt in the ground, not withstanding whatever prospectivity you want to put on it.

Over the past five years in particular, the Australian minerals industry has shifted its focus from defining its performance in the narrower considerations of financial performance, to extend that to environmental and social dividends.

The success of the modern minerals operation really does define its performance on the triple bottom line.

Further, we consider the inter-generational benefits of what we do, that is, transferring from one generation, the value of that conversion of the actual capital and societal capital such that it is, in fact enduring.

Today the industry is in the public spotlight like nothing we’ve experienced in a generation.

Much of this is on account of the dramatic changes in the global market, and the industry’s financial circumstances, but for those of us who have an interest in this industry, often referred to as internal and external stakeholders, I love that expression, we are increasingly recognised as an industry transformed, an industry at the vanguard of the key performance indicators of sustainable development.

The industry has transformed from one of the worst industrial safety records, to now, one of the best in Australia, though we still remain short of our goal of zero harm in the workplace.

We’ve transformed from nearly after the fact, environmental remediation of mine sites and emissions to land areas and water to before the fact, misplace prevention and management.

We transitioned from rehabilitation and reclamations of used mine sites, to beyond life of mine …longer term management, to sustainable eco-systems. We’re not probably there yet, but we’re well on the way.

We’ve shifted from an adversarial litigants’ approach to native title, to building mutually beneficial agreements for land access, and sustainable Indigenous communities. There are some 350-plus mutually beneficial agreements with indigenous peoples in place, not one of which contests native title.

We’ve transformed from being publicly pigeon-holed, as central to the global climate change problem, and labelled as the carbon lobby, to being part of the solution for active, and promoting a suite of policies for a longer term global solution, than getting caught up in the political rhetoric as targets.

We’ve shifted from confrontationists, arms-length industrial relations, an environment of them versus us, to actually building direct relationships between employers and employees for mutual beneficial workplace arrangements, instilling a stronger sense of each party’s rights and responsibilities.

We’ve shifted from a culture of decide, announce, defend, to listen, learn and engage.

We’ve shifted from the creation of jobs, to the creation of careers.

We’ve moved from the macho, not totally, the macho white male-dominated culture, to recognition of the value of women and indigenous Australians in the workforce.

We’ve shifted from securing water access on traditional terms, as our primary consideration, to an understanding of the ecological integrity of the system that supplies the water on a sustainable platform.

We’ve rationalised and consolidated, and we’ve globally integrated probably back to the circumstances of the 70s. You pick any key commodity line you like, and you’ll find that we’re mostly doing somewhere between … the top five companies are doing somewhere between 40% and 80% of the supply, and probably greater control of the inventory.

The focus has moved beyond the traditional sources of productivity, labour and capital, to an increasing focus on revenue through a better strategical or greater strategic employment of capital, increased differentiation in products, in markets, and operational performance, and there’s an increasing supply discipline to give us greater pricing control, or power.

And we’ve shifted from barely recovering the cost of our investment capital as little as three years ago, where we were, in essence, disinvesting, to the point now where we’re direct with profits, the highest level in 30 years, and last year, we had a massive 120% increase in tax of loyalties, paid all government … governments, to 7.1 billion, which is about half the national education budget equivalent. And we’ve shifted from a focus of efficiency and the utilisation of our capacity, to the point where we’ve actually hit the absolute limits of our capacity, to the point where we now have capacity constraints to growth.

This remarkable transformation in the industry’s performance is the product of three underlying structural adjustments, far more so than cyclical, two of which I have referred to.

The manner of the industry’s operations, and the rationalisation and consolidation of the industry, the other one is the global market.

We’re two years into a super cycle of demand, defined as 10 years, and some are confident of 15 years.

We’re simply operating in a global market, that is reflecting new global order of things, so rebalancing of global economic development and strategically we are developing economies … from developed economies to developing economies.

The centres of growth are shifting.

Two-thirds of the world’s growth comes from developing economies, half the world’s economy is made up by developing economies, half the world is going through an industrial revolution, the likes of which we saw in the immediate post-war period, in Japan and the Americas … and the Americas in the 1890s.

We think it’s established a whole new economic paradigm for our industry, and for our generation, it certainly has, but those of you who’ve seen the work of Chris Richardson from Access Economics will know that we’re really going back and repeating what has happened in the modern era, since Christ was born.

Simply those developing economies are coming back into a position of economic and strategic power. And that whole new perspective for us, is actually the capacity constraints to growth, and international competitors, which I referred to. They are, in fact, the economic policy issues of the moment. They’re increasingly a factor in determining a country’s competitive advantage, because those who win the race, to remedying those capacity constraints, are better strategically positioned as a global supplier, in the increasingly converging of global supply chains.

So my simple take-out here, is that the underlying fundamentals to demand are locked in.

The extent of price gravity, or the price [unclear] over a whole new plateau of prices will depend on the extent to which the demand effect is split between the supplier response and the price response.

At the moment, it’s mostly price, supply has virtually nipped onto the market in response to the incredible global demand. This industry is very focused on the reality of capacity constraints and increasing costs, particularly in export corridors, access to human capital, I think somebody mentioned skill shortages earlier, shortage of production inputs, the inefficiency and ineffectiveness of regulation governing OH&S, environmental management, and the project approval.

But I continue that the industry may not be as cognitive of the constraints in the professional capacity to implement sustainable development in environmental management, community engaged in safety and health, and community development. Nor do I consider that the industry universally appreciates the fragility of our new-found reputation, and our recovered social licence to operate.

Few in this room would contest that if we erode it, or we lose it, we add a whole new dimension to capacity constraints, I suspect that will attract no contest in this audience that reputations are hard-won and easy-lost.

We simply cannot afford to go up the stairs and come down in the elevator.

We cannot afford to be seduced by this new-found enthusiasm for our industry.

We cannot afford to be preoccupied with those capacity constraints to growth that go directly to the bottom line, deferring or ignoring those which are foundation to our longer-term reputational capital, particularly in the communities in which we operate.

We know, or at least we should know, that this new-found enthusiasm for our industry will be tempered by the extent of our enduring commitment to our social and environmental stewardship responsibilities, notwithstanding our responsibilities to our shareholders.

My team know that I fundamentally disagree that this industry is judged by the performance of its lowest common denominator.

Individual companies are increasingly differentiating their performance across relevant markets, the communities in which we operate, capital markets, the product markets, and the human resource markets. This competitive differentiation is driving the remarkable transformation of the industry as a whole.

Tonight we encourage, recognise and reward excellence in our industry across all manner of its operations, and the profound significance across the key pillars of sustainable development, financial, social and environmental performance. This in itself, is a strong vote of confidence, that as an industry, we’re not easily seduced by the spotlight, and know that our commitment to the underlying fundamentals of sustainable development must be enduring.

Thank you.

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