Partnerships Matter, in Good Times and Bad

Partnerships Matter, in Good Times and Bad

How Rio Tinto relies on partnerships to manage risk, share benefits, and create successful business outcomes
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© Rio Tinto

Chief Executive,
Rio Tinto

Partnerships are among the most valuable tools for global businesses. That might sound odd coming from the CEO of a company many perceive as independent, but Rio Tinto’s Sam Walsh argues that dynamic partnerships underpin business success. Partnerships, he says, are especially important during times of stress—such as downturns in the economy or commodities cycles—when the tendency is to become self-focused and fearful. It is exactly at these moments when partnerships prove their worth.

As the global economy struggles to reach full recovery, we continue to focus on cultivating innovative partnerships between industry, government, suppliers, communities, individuals, multilateral organizations, and civil society.  In our 141 years of experience, we have seen that such partnerships help us to maximize shared benefits.

Community partnerships

At Rio Tinto’s Weipa bauxite operations in Australia, we have strengthened partnerships with local indigenous groups by investing in education and employment programs in collaboration with local communities. While some may view this as simply standard practice in Corporate Social Responsibility (CSR), investing in people and relationships has real business benefits. In fact, in 2002, we signed an agreement with 11 local tribal groups to support aboriginal employment, training, and business enterprise development. This partnership has led to local economic development and underpinned our operational performance—a mutually beneficial sustainable outcome.

$10 BILLION INVESTED BY RIO TINTO IN INFRASTRUCTURE PROJECTS IN 2014, PROVIDING LONG-TERM DEVELOPMENT OPPORTUNITIES AND BENEFITS

We have also strengthened our business through collaboration with local suppliers and contractors. At our Pilbara iron ore operations in Western Australia we began an eight-week skills training program for indigenous peoples in partnership with one of our scaffolding suppliers. Trainees become full-time employees of the supplier, where they can utilize their new skills and develop careers.  This program ensures that our suppliers mirror Rio Tinto’s values by facilitating local employment and that our operations have broadly shared economic benefit.

Rio Tinto is one of the largest employers of Aboriginal people. We purchased $1.2 billion in goods and services last year from companies owned and operated by Aboriginal institutions and we have numerous mutual benefit agreements in place with Aboriginal community groups.

Technical partnerships

Partners can bring new expertise to the table. Take our Oyu Tolgoi copper mine in Mongolia, which is consistently recognized as a leading biodiversity conservation project in the mining sector. Rio Tinto is working with the Global Biodiversity Conservation to develop a long-term management plan, along with a monitoring system and an offset program, which are expected to have a particularly positive biodiversity impact.  Alone, neither Rio Tinto nor the Government of Mongolia had the expertise to bring these required components to the project—it was through our partnership with the Global Biodiversity Conservation that we were able to meet our common biodiversity goals.

Commercial partnerships

When it comes to commercial partnerships, strengthening relations with suppliers and customers benefits all parties. For example, in 2013, Rio Tinto and Mitsui signed a 20-year shipping deal that insulates both companies from market volatility.

Partnerships are especially valuable during tough times. A good example is Rio Tinto’s work in Guinea, where we are working with IFC, Chinalco, and the Government of Guinea to advance the Simandou iron ore project. We recently signed a historic investment agreement that will pave the way for Africa’s largest ever infrastructure project: a mine, rail and port that can create an unprecedented development opportunity for Guinea and the broader region. In addition, despite the rapidly spreading Ebola virus, through our partnerships we have been able to commence a feasibility study and initiate a global tendering process for Simandou.

Best practices

Our broad experience points to a few shared best practices that keep partnerships healthy:

· Clarity: All parties must be transparent about their objectives. Business partners must be clear about the realities of economic constraints.

· Certainty: Partners must assure outcomes based on performance. Accountability for each partner’s role ensures there is a regular means of measuring shared benefit.

· Investing for the long-term: Mutual understanding that long-term success means investing in partnerships through all economic cycles. All parties need to avoid being perceived as moving the goal posts on their partner or only performing when times are good.  In periods of economic downturn, tough choices must be made. However, these provide an opportunity to strengthen partnerships, rather than turn inward or do it alone. Tough times are exactly when businesses, governments, communities, and civil society should redouble efforts to pursue shared growth and prosperity. Strong partnerships, based on shared benefits, transparency, and trust are the foundation of sustainable success through good times and bad.

About Rio Tinto and IFC:
Rio Tinto is a long-standing IFC partner in several projects including the Escondida copper mine in Chile and the Simandou iron ore project in Guinea. IFC is also working with Rio on financing the Oyu Tolgoi project in Mongolia and has collaborated on advisory programs including local sourcing, water stewardship, revenue management, and the financial valuation of sustainability.

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