Corporate Social Responsibility
Practice in Australia

24 April, 2016

prepared by

Executive Summary

This report provides an analysis and importance of CSR reporting in mining industry, how well companies disclose social and environmental issue according to GRI guidelines. This article’s main focus is to describe trends of CSR reporting in mining companies in Australia. This article provides detailed overview of companies reporting format and structure, CSR disclosing motivation, how well company account for job losses and impact of reduction of oil price on companies. The purpose of this report is to describe CSR practice of mining companies in Australia and highlights the importance of sustainability reports regarding social and environmental perspective. This report is based on two major mining companies namely BHP Billiton and Rio Tin. The information used for writing this article is gathered from different researcher, annual reports, newspapers, and online articles, GRI guideline. Only Secondary data used to write report and study based on ASX registered companies companies in Australia are more aware of GRI reporting standards now and also know that how crucial it is to report on the sustainability issues from social and environmental perspective to have long term business and secure future.
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Contents

Executive Summary i

Contents ii

Introduction 3

Question a 3

Question b 5

Question c 7

Question d 8

Question e 9

Conclusion 11

Reference List 12

Introduction

Corporate social responsibility is a business approach which help companies to sustain improvement by providing social, environmental, and economic advantages to all kind of stakeholders. The biggest reason industries follow CSR is to clean environment and have a good society (Govindan et al, 2014) This report aims to generate a sound understanding and importance of the CSR reporting and how well mining companies follow GRI guidelines. Also this study focus on social, financial, environmental impact on companies due to continues fall in oil price. Many people already researched CSR in different counties. The role of different stakeholders in mining industry is crucial. After introducing stakeholder theory, in most of the organizations importance of stakeholders have increased. In Past year’s companies prepare CSR policies according to stakeholder’s point of views. In most of mining industries Stakeholders cooperation on large scale is a reason to disclose CSR reporting. To describe ‘motivation to CSR reporting’ stakeholder theory is applied in this report. This study is only based on some previous researches done by different researcher and secondary data collected from company’s annual reports, newspapers and online articles. For this report, only two mining companies have been chosen out of ten, from ASX listed companies. All other kind of industries have been ignored for this report.
Section 1 focuses on GRI Reporting Guideline,
Section 2 provide analysis of GRI reporting of two companies, section 3 provide disclosing motivation, section 4 highlights impact on stakeholders, section 5 explain how oil reduction price affected companies condition, section 6 conclusion.

A. ASX listed mining companies

Ten selected mining companies from ASX, namely:

• BHP Billiton • Bougainville Copper Ltd • Cuest Coal Ltd • Fortescue Metal Group • Interatowa Resources Ltd • Rio Tinto Ltd • OZ Mineral Ltd • Anglo Australian Resources • Anson Resources Ltd • Ausroc Metals Ltd

External reporting documents • Financial Statement • Strategic Report • Sustainability Report • Economic contribution and government payment Report • Director Report • Shareholder information Report • Auditor Report

GRI reporting guideline

Over the years most of the mining companies have been producing a single and short environmental and social report every year which was defiantly not according to the GRI reporting guidelines. Back in 1999, only BHP and Rio Tinto were the only two companies producing standalone social and environmental reports, rest of the companies only wrote few pages about the subject in their financial annual reports (Jenkins & yakovleva, 2006). In 2002, only two of the companies stated that they were reporting according to the GRI reporting guidelines covering core aspects like health & safety, environments & community/society, sustainability, environment, external auditing, etc. and the figure rose to six in 2003 (Jenkins & yakovleva, 2006). And since then the social and economic reporting has become more sophisticated and detailed. Now most of the companies are producing standalone social and environmental reports in accordance with the GRI reporting guidelines as they understand that how crucial these factors are to run a long term business.

B. Social and Environmental reporting in Australia mining industry

In this report, I choose two leading company of Australia i.e. BHP Billiton and Rio Tin Ltd for my research. According to BHP Billiton 2015 sustainability report to apply sustainable approach in the organization BHP Billiton has developed a new framework comprising themes like governance, human capability and social inclusions and environmental resilience. The report states that sustainability is essential part of their strategy, they ensure that they must integrate health, safety, environmental, social and economic factors while taking any decisions for the organization. The report covers all the major core aspects and the additional indicators in their report (BHP sustainability Report, 2015) • Applying sustainable approach within the company: In 2015 BHP Billiton has sustainably provided energy and resources which are required for economic growth and development along with delivering value to shareholders. The sustainability report is well supported by case studies listing specific activities that has been developed or used to maintain the sustainable development (case studies www,bhpbilliton.com/casestudies).

• Governance: Operating with integrity and ethically is essential part of governance. Ability to work ethically and with integrity is very well covered in the report. The projects like delivering greenhouse gas emissions reductions, building climate resilience in our environment are the projects being carried out in Australia for climate change.

• Safe and healthy work environment: Keeping people and operations safe, focusing on health of people, developing workforce are the key aspects of BHP Billiton sustainability report. In the mining industry mobile equipment and light vehicle collision is one of the major risk and steps are being taken like focusing on road designs and the separation of mobile equipment and light vehicle are explained in the report. Other health issues like fatigue and impairment from illegal or legal drugs including alcohol which impairs the ability of workers to perform their work is also well addressed in the report.

• Society: Many projects are held to engage effectively in communities based on open communication so to develop relationships and hence ensuring a meaningful contribution to economic and social development. Some of the examples are Collaborating on regional planning and development in Chile, Indigenous training and employment in Australia, etc.

• Environment: In Mining due to nature of the operations it has significant effect on the environment. In order to have minimal impact on environment various plans are put in action like Managing for excess water in Australia, managing for water supply variability in Australia, minimizing impacts to shared groundwater resources in USA, etc.

Rio Tinto is another company which I picked to study social & environment reporting. Their format is almost similar to BHP Billiton; the difference would be that BHP Billiton have a detailed report but very sophisticated while Rio Tinto’s sustainability report is very interactive and detailed comparing their figures in graphs from previous years, etc. This report also follows the GRI reporting guidelines covering core aspects like social, environment, economic, governance, etc.

Under SOCIAL aspect they have covered topics like: • Safety: The motto of the company is “Striving to be Fatality-FREE. Risk management, identifying critical risks, verify that we have controls in place and provide employees with appropriate training are few of the steps to fulfill this motto. • Communities & regional development: Developing good community relationships is essential part of Rio Tinto. Recognize and respect the cultural heritage of all communities in which they operate, resettling communities as groups in order to minimize cultural and social impacts, a complaint, disputes and grievance procedure is set up to timely resolve the complaints. • Health: According to the report occupational illness (musculoskeletal disorders, noise induced hearing lose, stress) cases has decreased in 2014-2015. • People: Under people strategy company has recruited employees based on skills and experience and without any discrimination. Throughout 2014, we remained one of the largest private sector employers of Indigenous Australians, with over 1,650 full-time Indigenous employees, representing approximately 7.5 per cent of our permanent Australian workforce (Rio Tinto sustainable Report, 2014).

Under the ENVOIRNMENT aspect they have explained the categories like: • Air: The Company has taken several measures to minimize impacts to air quality like controlling air emissions at their source, etc. • Biodiversity; climate change, energy, land, waste: Various strategies have been put in place to deliver better biodiversity outcomes like Emphasis on the application of the mitigation hierarchy, Increased flexibility in accounting methodologies for biodiversity losses and gains, Stakeholder participation to ensure transparent, credible and relevant programme, etc. • Water: As water is one of the most precious resource of the world company has done projects to conserve water e.g. In Mongolia 80% of the water is being reused for domestic purpose in their copper-gold mine, in Canada hydropower plant gives power to 72% of their Aluminum industry, etc. • Climate change: “Their climate change programme focuses on reducing the energy intensity of the operations, as well as the carbon intensity of the energy. This includes the use of renewable energy and reduction in emissions intensity from chemical processes” (Rio Tinto sustainable Report, 2014).

In the Governance aspect following given issues have been covered: • Business Resilience: • Engagements; human rights, Integrity & compliance. • Internal controls:

C. Motivation for disclosing social and environmental reporting Every Company is motivated to report for different reasons, larger company like BHP Billiton and Rio Tinto report more than small scale companies.

Different author used different theoretical approaches to describe CSR disclosures importance and motivation. Few author used social political theory, some used political theory but most important theory used for CSR motivation for reporting is stakeholder’s theory and legitimacy theory (Patricia, 2012). This article is related with CSR reporting of mining industry thus main focus is on some the importance of stakeholder’s theory.

Stakeholder theory According to Freeman definition, stakeholders explain as” any group or individual who can affect or is affected by the achievement of the organization’s objective” and in later studies Mitchell, agle & wood describe this theory in broad way, that how various parties treated as stakeholders (miji kim, 2011). With the rise of different types of stakeholders group, organizations also developed new form of communication techniques like CSR report.

Reason to use stakeholder’s theory (Ten) according to ullmannn, stakeholders are first pillar to describe his model. In past, companies only gave importance to the management and shareholders but now relationship between companies and stakeholders are also important. He suggested companies believe stakeholders are more worried about social and environmental issues, thus the companies are more motivated to disclose their CSR reporting. Shareholders pressures, Creditors pressures, Government rules & regulations, Employees,
Community are also the major reasons which made companies to release more information on CSR reporting

D. how companies account for job losses? The recent job losses in the two major companies are accounted for the sharp drop in commodity prices. Mining companies have cut thousands of jobs over the past two years due to the steep and sustained decline of most major commodity prices. BHP Billiton slashed 16,924 employees and contractor jobs in the past financial year i.e. 14% of their workforce. The annual report revealed that employee and contractor’s numbers have dropped considerably from123, 803 in 2013-14 to 106,879 in 2015-2016. The cuts mean BHP’s workforce is now at its smallest since 2011 (the Australian, 2016). BHP Billiton revealed that they are focusing on cost cutting and efficiency thus making $US4.1 billion of productivity gains in 2014-15, hitting a previous target two years early. Another major mining company Rio Tinto is poised to cut up to 700 jobs in Western Australia. The companies explained these cuts are because they are transforming their business to remain globally competitive. (Australian mining, 2016). Yes, it is a challenge for the companies to show the profits with decreasing number of employees. With the statements released by them from time to time put them to a little ease for e.g. After the job cuts BHP Billiton released a statement that “Further operational productivity will stretch the capacity of existing operations to safely increase volumes at very low cost and increased capital productivity will reduce the cost of investments”. Now this sought of statement defiantly makes a positive effect on the stakeholders (the Australian, 2016).

E. Oil prices fall to their lowest level since 2003 is accounted for two reasons: • Oversupply of oil in the market. • Fall in demand because of a slowdown in economic growth in China and Europe. The effect of falling prices is being felt economically all around the world (BBC News, 2016) Figure 1. Brent crude oil price . [pic] Source: Bloomberg

The most obvious impact of the oil prices drop is on company’s financial accounts due to increased risk of impairment of assets. “Rapidly changing oil prices make it difficult to judge the present value of assets for investment decisions on capital allocation, an acquisition or for accounting impairment purposes” (deloitte, 2016). Lower oil price predictions mean that producers should expect lower future profits from an asset which in turn reduces the present value of the asset, and if the value currently carried on balance sheets cannot be recovered in full, thus company will suffer loss. There could also be a severe effect on related deferred tax and company’s investment balances. Further, the reduced operating cash flows can ultimately result in business failure, so company boards will need to give greater thoughts towards the fact that whether the company will be able to continue trading for the foreseeable future. (deloitte, 2016) The sustainable development helps secure the future as it provides real, long-term business value and is a source of competitive advantage. Low oil prices does not mean the oil is “cheap” as it is still coming to us at the cost of people’s health, environment; where the drilling takes place and world’s climate. Drilling, fracking and ongoing production have adverse effects on health, the local economy, and the livability of a community or the local ecology. Today’s low oil prices and the expected market forecasts on the oil prices which says “oil will not recover its production cost until 2024” may lead to cancellation of various oil production plans which in turn is good from the environment perspective.( Goldstein, 2016) The drop in oil prices is expected to give positive effect on Australian economy. (RBA, 2015) As a net importer of oil, falling prices could mean increase in Australian trade. Many of the industries largely depend on oil as a fuel especially mining, transportation and manufacturing; lower prices of fuel will lead to lower production cost of the products which will make company profit and they can also defer some of the profit to the customers by reducing the price on commodities. Thus making good relations with the customers and developing socially as well.

Conclusion
This study based on mining companies to anlyse their social and environmental behaviour. For this study GRI reprting guideline used to describe their format and other aspects. By adopting Freeman stakeholders theory in this paper to explain sakholders impotance in mining industries. after analyse Sample from 10 mining companies, found that small mining companies only provide sustainability report included in annual report but on the other hand large companies BHP billiton and RioTin issued separate sustainability reports every years. The end result of the analysis between two companies figure out is, mining companies are more aware for sustainability reporting in australia for external parties.companies like BHP billiton and Rio Tin are mainly concerned about enviorment.
Other major finding in this study show that how companies can still show profit even after loosing employees. The report reveals that with the steap and sustained decline of comodity prices like oil, companies are focusing on costs cutting and increase in efficiency to maximize their profit targets.
Reference List
Aldrugi A, Abdo H, 2014. Determining the Motives or Reasons that Make Companies Disclose Environmental Information. Journal of Economics, Business and Management, Vol. 2, No. 2, 119.

BHP Billiton. 2015. sustainability Report 2015. [ONLINE] Available at:http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonsustainabilityreport2015_interactive.pdf. [Accessed 23 April 2016]

Evangeline Elijido-Ten, Applying Stakeholder Theory to Analyze Corporate Environmental
Performance: Evidence from Australia’s Top 100 Listed Companies, Faculty of Business & Enterprise, Swinburne University of Technology

Falling oil prices: How are countries being affected? [ONLINE] Available at: http://www.bbc.com/news/world-35345874 [Accessed 23 April 2016]

Govindan, K, Kannan, D & Shankar, KM 2014, 'Evaluating the drivers of corporate social responsibility in the mining industry with multi-criteria approach: A multi-stakeholder perspective', Journal of Cleaner Production, vol. 84, no. [*ISSUE REQUIRED*], pp. 214-232.

How low oil prices can be good for the environment https://www.greenbiz.com/article/how-low-oil-prices-can-be-good-environment [Accessed 23 April 2016]

Jenkins, H & Yakovleva, N 2006, 'Corporate social responsibility in the mining industry: Exploring trends in social and environmental disclosure', Journal of Cleaner Production, vol. 14, no. 3, pp. 271-284.

Job cuts loom closer for Rio Tinto Pilbara operations https://australianmining.com.au/news/job-cuts-loom-closer-for-rio-tinto-pilbara-operations/ [Accessed 23 April 2016]

Rio Tinto. 2014. sustainable Development 2014. [ONLINE] Available at:http://www.riotinto.com/sd2014/pdfs/00_sd2014_full.pdf. [Accessed 23 April 2016].

Statement on Monetary Policy [ONLINE] Available at: http://www.rba.gov.au/publications/smp/2015/feb/box-c.html [Accessed 23 April 2016]

The impact of plummeting crude oil prices on company finances http://www2.deloitte.com/ng/en/pages/energy-and-resources/articles/crude-awakening-the-impact-of-plummeting-crude-oil-prices-on-company-finances.html [Accessed 23 April 2016]

http://www.theaustralian.com.au/business/mining-energy/bhp-billiton-slashes-17000-jobs-as-cost-cuts-take-centre-stage/news-story/78ab4b451bebbceaadffd8d6bfc92c37. [Accessed 23 April 2016]