Reference no: EM133045930

CaseRio Tinto: A Shameful History of Human and Labour Rights Abuses and Environmental Degradation Around the Globe

Founded in 1873, the Rio Tinto Company began its operations by mining copper in Rio Tinto, Spain. Over the next few decades, the company expanded its mining business to many countries across the world. By 1954, the company had divested/sold-off most of its Spanish businesses. In 1962, the British operations of The Rio Tinto Company and The Consolidated Zink Corporation (a British mining company) merged to form The Rio Tinto Zinc Corporation. For Rio Tinto, controversies were nothing new as the company had been embroiled in many problems for years. However, the company did not seem to be bothered by controversies. A Rio Tinto project manager dismissed public protests stating, "Greenies (environmentalists) are protesting. But that always happens, greenies are protesting all over the world".

In the early-2000's the company came under attack at its annual general meeting for alleged environmental destruction and human rights abuses related to its mining operations in Indonesia. Among other allegations, Rio Tinto, the parent company of the Indonesian mining outfit PT Citra Palu Mineral, was said to be secretly exploring the protected forest park 'Poboya-Paneki Great Forest Park' for gold reserves. The forest park was a protected conservation reserve within a distance of seven kilometers from the provincial capital of Palu in Central Sulawesi. It was a crucial water catchment area and a source of drinking water supply for Palu, managed by the local communities. Rio Tinto had reportedly continued mining in this area despite opposition from the local community. Rio Tinto categorically denied all the charges leveled against it. However, Muhardjo, a geologist working with PT CPM had confirmed that the company had gone ahead with the mining exploration activity despite knowing that it was a protected area. However, Rio Tinto maintained that it did not see any problem with mining in the forest area as it was adhering to the applicable government regulations.

The mining industry, an integral part of any economy, can cause environmental damage and are also responsible for disturbing the living habits and lifestyles of the indigenous people. More harmful than these are the contaminations caused by tailings (solid waste left after the processing of ore) and waste water (water used for treating the mining waste) disposal. Mining organizations have to set up a massive infrastructure in and around the mines (roads, buildings etc.) besides bringing in their staff, which stay there for extended periods of time. This leads to a disturbance in the way of life of the people originally living in these areas. Often cultural clashes arise as the local people are displaced from their land, which deprives them of their self reliance and destroys their sense of belonging. 

This following are just a few of the allegations levied upon Rio Tinto around the world:

• Rio Tinto "viewed the people of Bougainville as inferior due to their colour and culture and, therefore, intentionally violated their rights." As part of its discriminatory treatment of the local people, the company allegedly paid "slave wages" to black workers.
• Serious human rights violations have reportedly occurred near the Grasberg Mine and Rio Tinto and Freeport-McMoRan have been accused of complicity due to their reliance on the military and police for security at the mine.  According to Indonesia's National Commission on Human Rights, "in the mid-1990s the Indonesian security forces indulged in indiscriminate killings, torture and disappearances of local people in their safeguarding of the mine operations and their campaigns against West Papuan secessionists."
• According to the Indonesian Commission on Human Rights, protestors of the mine were arrested and detained on numerous occasions during the 1990s and some Kelian staff reportedly raped local community members.  Local people also reported that mine security guards shot at and attacked them and local police ran a terror campaign intended to squelch protests.
• In its 13 years of production the mine reportedly dumped 100 million metric tons of waste rock into the environment, much of which was contaminated.   Rio Tinto acknowledged that there was "acid mine drainage" from the mine site; further, the company's own environmental report said that in 1996 almost 1,100 kilograms of cyanide were discharged from the mine into the Kelian River.

Rio Tinto was fully aware of the damage all the negative publicity was causing to its image as a socially responsible company. In addition to the rehabilitation measures, the company had in fact taken many other remedial steps to salvage its reputation. Rio Tinto claimed that it had stopped using 'old' mining practices and adopted a new approach, which was guided by the document entitled 'The Way We Work'. Thereafter, the company even claimed to be the 'industry leader' in adopting a community friendly approach. However, environmentalists criticized the document itself for lack of verifiable and enforceable standards and the company's reliance on fine sounding, but not binding, aspirations. 

Question 1:

Rio Tinto's reputation has taken a hit. You are working with the Marketing Manager to construct a marketing strategy for each component of the 3 components to try and improve Rio Tinto's corporate perception. Note: Keep in mind the concept of Marketing with Ethics.  

Question 2: 

As COO, you are assembling a management team to find some solutions to resolve this problem. Assembling the right team will be a big challenge. The people you assemble may not know each other or may not get along. According to B. W. Tuckman, there are five phases that groups go through in their development. Select four phases and discuss how you will use each of these phases to ensure your team meets your objectives.