What did we learn from the Rio Tinto disaster?
When I first read about Rio Tinto blowing up an ancient Aboriginal site to mine for premium iron ore, I could hardly believe it. To understand how it happened, and what it means, I talked to Brynn O’Brien, Executive Director of the Australasian Centre for Corporate Responsibility (ACCR). She coordinated a successful investor activist campaign against Rio Tinto which brought down the CEO & 2 senior executives.
It is impossible to over-state the tragedy that the blast represents for the traditional land owners, the PKKP people, whose presence in this part of Western Australia date back 46,000 years.
So how on earth did this happen? Was it gross corporate negligence, untrammeled greed, weak corporate governance, or something else?
This is a success story about the triumph of investor activism, but one that reveals a deeper rot arising from the entanglement of mining, law and politics in Western Australia. It is a cautionary tale for everyone because the fact that it even happened beggars belief, and leaves one – as Burchell Hayes from the PKKP says “without words to describe the feeling”.
Brynn O’Brien is a lawyer and strategist, and the Executive Director of the Australasian Centre for Corporate Responsibility (ACCR). ACCR promotes better performance of Australian and global companies on climate, social and governance issues. As an ‘activist shareholder’ organisation, ACCR engages with companies and their investors on these issues, including through filing shareholder resolutions. In the last 12 months, ACCR filed shareholder resolutions to mining, oil and gas, utilities, airline and retail giants on climate change, corporate governance and social issues.
Brynn’s expertise covers corporations and international law, investment and shareholder strategies, and business and human rights frameworks. She analyses the responsibility of corporations for climate change and its human rights impacts, and argues that rapid emissions reductions will protect human rights.
Investor briefing: Shareholder Resolutions to BHP Group on cultural heritage and lobbying – ACCR, September 18 2020
“You can’t describe how I feel about this. When I was first made aware of this and seeing how the blast pattern was laid out, in the vicinity of Juukan rock shelters, it was very distressful and soul-destroying to see how close the explosives were to the site.
It’s just … so sad … that we were exposed to the photos. Our elders are deeply distressed about this. One of our senior elders who is still living here in Onslow, I don’t have the strength to go and tell her what’s happened.
I haven’t been able to communicate it to her.
Because she’s very elderly, its not a discussion that I want to have with her. That’s her father’s country. We named that gorge after her father, my grandfather.”*
* Extract from June 5 interview on ABC radio by Hamish McDonald with Burchell Hayes
Denise:Welcome to episode 9 of New Climate Capitalism, and today we’re going to talk about Rio Tinto and the Juukan gorge blast.
The voice you heard earlier was Burchell Hayes, director of the PKKP Aboriginal Corporation, reacting to the news of the destruction of the ancient Juukan Gorge rock shelters in Western Australia by mining group Rio Tinto this past May.
It is impossible to over-state the tragedy that the blast represents for the PKKP people, who are the traditional land owners of the site, whose presence there go back 46,000 years.
When you listen to the emotion in Burchell’s voice, you might be thinking how on earth could such a thing happen?
But as I looked into the details of the case, I was even more staggered. The blast was legal – approval was granted back in 2013. The following year, new research established the very high cultural value of the site, and that change in “valuation”, did not translate into an appropriate consultation with the PKKP people before the blast charges were laid.
I talked to Brynn O’Brien of ACCR, the Australasian Centre for Corporate Responsibility, who coordinated the investor campaign against Rio Tinto, to try and understand the impact of this case.
Talking to Brynn made me realise how complex this case is.
My conversation with Brynn was very rich and thought provoking, and I came away thinking how right Burchell was when he said there are no words to describe this. There are just feelings – how could it be? How can it be made right?
I hope you enjoy the conversation.
Brynn: my name is Brynn O’Brien.
I’m the executive director of the Australasian Center for Corporate Responsibility, otherwise known as ACCR we’re based on the East coast of Australia. Um, so I’m based in Sydney.
My background is as a corporation lawyer and then a human rights lawyer. And now I’m, you know, very interested in and work across all of the intersections, um, uh, between corporate activity, investor power, human rights, climate and justice.
So, um, ACCR is an activist shareholder organization, or a shareholder advocacy organization. Uh, we hold small positions in large listed companies, including of course the major Australian dual listed iron ore and diversified miners, Rio Tinto, and BHP.
So we’re a shareholder in these companies, uh, we go and engage with them as a shareholder and then what we aspire to do, um, and, and do sometimes with success is mobilize the power of the institutional investment sector to ask companies and demand that companies act in a more responsible fashion.
So we have certainly seen a huge amount of institutional investor interest in Aboriginal cultural heritage protection in the wake of Rio Tinto’s destruction of a very significant, uh, cultural heritage, uh, site known as the Juukan Gorge in the Western Pilbara region of Western Australia.
Denise: So my first question is, what is the Juukan Gorge and why is it important?
Brynn: So the Juukan Gorge is a site in the Western Pilbara region of Western Australia. It’s the site of a huge amount of iron ore mining. Um, it, uh, is a special place for, um, Aboriginal, traditional owners, uh, and a scientifically special place for the whole of humanity because of the evidence of human occupation dating back 46,000 years or more. So in some rock shelters that have been known obviously to Aboriginal people for a long time, but, um, uh, that were evaluated between 2012 and 2014.
Um, again, and there was a salvage mission undertaken, um, at those sites, uh, around that time. The significance and yeah, they, they very high, uh, Historical significance and scientific significance of the site became known. So there were artifacts that were found. Um, there were, uh, human remains, including, a plait of hair that was dated back to over 46,000 years old.
So this site was of a very high cultural and spiritual significance to the traditional owners, the Puutu Kunti Kurrama and Pinikura people that are known as that PKKP um, uh, and, um, the destruction, um, uh, through blasting, um, By Rio Tinto of these sites has been an absolutely devastating development for the PKKP people.
And you know, a very important, uh, historical site has also been lost.
Denise: Who owns this site, and could this have been prevented given that the, uh, as I understand the, the legal permission to, to blow up the site was given in 2013, but some of these important archeological findings happened slightly after that.
Brynn: So the native title holders are the PKKP people. Um, so the, uh, traditional, um, the traditional owners of the country, um, uh, and, um, who have demonstrated a continuous connection to land. So they’re recognized under Australian law as, as the owners of this place. Rio Tinto has, um, uh, has permits in relation to mining activity. Um, and it, as it turns out, um, Rio Tinto wanted to access a high grade iron ore valued at about $135 million and, um, came up with a plan to, um to access it. And that involved destroying these very significant rock shelter sites. Uh, so, uh, Rio Tinto had, uh, all of the relevant legal permissions under, uh, West Australian law.
They had applied for a consent from the West Australian government to destroy these sites. Um, it was, it was granted. Incidentally, um, in the decade leading up to, um, the destruction of Juukan Gorge. Um, there were 463 applications made, uh, but aye, industry to destroy. Um, cultural heritage sites and not one of them was refused.
So it’s an extremely permissive legal regime, um, that now even the major mining companies for the most part accept is, is deeply, deeply flawed. So under that, um, regime, uh, companies are required to consult with the traditional owners and native title holders, but they are not required to seek or achieve consent to activities.
The sites are mined under longterm indigenous land use agreements, um, it is commonplace in those agreements for, um, traditional owners to be bound by very heavy handed confidentiality provisions, which impede their ability to speak freely and publicly about their concerns and objections.
Um, and so we have agreements negotiated in an environment, a legal environment of unconscionable, power imbalance, um, uh, and, uh, and an extremely permissive regime, which facilitates the destruction of Aboriginal cultural heritage in order to facilitate mining.
Denise: Right. Um, so it sounds like nothing could have prevented this.
Brynn: It’s a self regulatory environment. So Rio Tinto, um, could have prevented it. Um, uh, and Rio Tinto, in fact, um, disclosed to, uh, an Australian parliamentary inquiry that is now investigating what happened, um, Rio Tinto, um, disclosed that, um, there were alternative mine plans, uh, that would have avoided destroying these sites, but Rio Tinto chose to go with the mine plan.
So there were four options we heard, um, and Rio Tinto chose to go with this, this plan, which resulted in the destruction of the site in order to access that high grade iron ore, which, um, uh, feeds into Rio Tinto’s signature, um, blend. It’s a blend that it sells to to customers. So, um, Rio Tinto, had the opportunity to self regulate, um, to avoid those sites.
It did not do that. The PKKP people, um, requested intervention by the, um, uh, federal, um, indigenous affairs minister and the federal environment minister. Um, both of those ministers, uh, could have intervened. And in fact, the environment minister under.the environmental protection and biodiversity act has the power to stop, uh, uh, something going ahead.
Um, uh, and they, and they did not exercise it. So there were, um, the, I guess the thing to recognize is there’s no, there was no compulsion on anyone to preserve the site. Um, there was discretion to do so, but that discretion was not exercised.
Denise: Right. So could you, um, a little bit about your role, um, and you know, ACCR role in, um, leading and coordinating the investor campaign, which seems to have been the turning point for this, um, uh, generalized acceptance of business as usual.
Why did investor sentiment change so significantly between May and September?
Brynn: Uh, so, um, one of the key, um, the key elements of, um, uh, the change in investor sentiment, I would say the key element was, uh, the formation of a new Alliance of Aboriginal and Torres Strait Islander Organizations, um, active on, uh, land rights, um, health, uh, other justice, uh, areas, um, across the country.
Um, so, uh, over 25 organizations that came together under new banner of the First Nations Heritage Protection Alliance and this coalescing of Aboriginal and Torres Strait Islander leadership around the, uh, protection of cultural heritage, um, is, is very significant. And, and I think will continue to be very significant.
Um, Uh, this has meant, um, that, um, there has been a strong Aboriginal leadership in, in the advocacy around these matters and, um, you know, with, uh, with Aboriginal leadership, ACCR undertook a very extensive program of, um, briefing, uh, the local and global institutional investment sector.
So these institutional investors – pension funds, asset owners, asset managers have by and large committed to certain standards of responsible investment. So they might be members of the UN PRI. They might be members of various different business and human rights groups. And so they do come to the table with some awareness of international human rights standards, including the UN guiding principles on Business and Human rights. Um, and the UN declaration on the Rights of Indigenous Peoples, um, and these standards are, you know, were very clear about what needs to be done about the approach that business and investors should take to the protection of human rights and cultural heritage.
And it was also very clear that these standards had not at all been lived out by Rio Tinto. Um, and I guess it has become clearer over the last couple of months that these standards are routinely ignored by the entire Australian iron ore mining sector. So not only Rio Tinto. But also a BHP and Fortescue metals group, there are our three major listed iron ore miners.
So I think, um, There was a combination of a visceral reaction, a visceral outrage, a shared outrage, um, particularly across Australia. And I, and I should say there were, you know, Australian institutional investors who have been, you know, very focused on this and very outspoken, which has been, um, extremely encouraging.
Um, so, um, so we commenced briefing, uh, um, The institutional investors, both in Australia and globally, uh, in, I think the first or second week of June. So, uh, very shortly after this site was detonated, we made connections between Aboriginal leadership and the investment sector, um, facilitated many, many conversations.
Denise: oddly there are fewer Australian institutional investors, the big pension funds, superannuation funds. And I think it’s, is it like 75% of those institutional investors are actually outside of Australia. So they’re wherever in the UK or the U S and so on.
Were they equally keen, the foreigners, to be briefed on these issues?
Brynn: so we have had interest, ACCR has had proactive interest from Australian and, investors outside Australia, particularly in European and the UK.
And we’ve heard, um, you know, interesting details of how the negotiations with the company, around the ultimate accountability should be played out. I think the global and local investors kind of played off one another to an extent. So very early on, there was a lot of interest from, um, European funds.
Um, the response from Australian funds was quite muted. But as more information, um, came out. And as more briefings were undertaken, the Australian institutional investment sector really ratcheted up. And we heard at a certain point that the Europeans stepped back after the board level review of what happened was undertaken by one of the directors and there was a move to, to slash the bonuses of these three senior executives, the CEO, the head of iron ore and the head of corporate affairs that European and UK based institutional investors were somewhat satisfied with that risk response.
Whereas the Australian institutional investors, uh, thought that it had deeply misread the moment. Then the Australian institutional investors pushed for that accountability where the three executives, um, have now, uh, exited or committed to exit the company.
So, um, we also saw some, some very, you know, very interesting developments within individual funds. A major Australian fund, Hesta, released a very strong new statement on their approach to engagement with companies about first nations issues as did Aberdeen Standard Investments.
Denise: And just one follow up. Um, did, did the black lives matter movement have an impact on, um, this really strong, um, you know, I guess it’s a change in public sentiment in Australia.
Brynn: Absolutely. I think it did.
Um, we, um, I think, uh, the, the. The black lives matter movement, um, which in Australia has been, uh, very focused on, uh, the rights of, um, first nations people. Um, and the systemic injustices faced by, uh, Aboriginal and Torres Strait Islander people in Australia, um, that, that has resulted in a deepening sensitivity, um, uh, and, uh, and a deepening sense of solidarity and responsibility for, to, to right those, um, past and current injustices. You’re absolutely right. To say, or to, to point to a deepened awareness of systemic injustice, systemic racism, um, which is prevalent through all of our.
Um, power structures in Australia, um, including, um, in the legislative regimes that, that facilitate, um, the Australia’s very significant economic activity of, of mining. Okay.
Denise: So I want to go back to the fact that the blast was actually legal. And you mentioned this incredible figure 400 odd permissions that had been given in the decade prior to that.
Um, uh, what are the prospects for, for real change right now?
Brynn: So there are a few things that are, are currently happening, none of which are sufficient, but, um, all of which are interesting and being watched very closely. So one is a review of the legislation in Western Australia under which this consent was obtained. There is a draft bill that’s been published. The sense that I get, although I’m not an expert in this area of law, that the sense that I get, um, is that the improvements are, uh, fairly, um, marginal in nature and don’t go far enough. So what I have heard is that the fines for cultural heritage destruction are far, far too low, even within this new draft.
There are law reform and review processes going on at a federal level. But, um, given the positioning of the federal government, i doubt that they will have the required effect of removing the possibility that this ever happens again.
There is a parliamentary inquiry, which I think is probably the most interesting, um, thing that is happening. A parliamentary inquiry into the circumstances of the destruction of Juukan Gorge and that inquiry has sort of morphed from something quite discreet into an inquiry, into the behavior of the entire Australian iron ore mining sector. And it may go further than that. You know, it may end up looking at, uh, at what, uh, Australian or what oil and gas companies operating in Australia are doing how they’re approaching their relationship with traditional owners.
So I think that, um, is very, very, um, interesting and has the potential to uncover more. Um, but I think what we really need at this moment in time and what Aboriginal leadership is calling for is truth and justice. So a real transparency, um, like real independent reviews, Aboriginal-led independent reviews of all of these agreements that exist.
Aboriginal-led strengthening of, uh, the standards for cultural heritage preservation and management. And that is the, that is the key that the law reform processes from here, uh, must, um, have Aboriginal leadership, um, in order to, um, achieve those outcomes of preserve preserving cultural heritage.
There needs to be a rebalancing of power. Power relations have been so unequal, so imbalanced, um, that mining companies and to an extent, uh, government are going to have to cede some of their power into the hands of First Nations people in this country to ensure that their cultural heritage is preserved.
Denise: Um, so my last question is really about shareholder capitalism. Rio Tinto has consistently, even over delivered in the size of its dividends to its investors. And this is really the, the, the bread and butter right. Of, uh, pension funds and other institutional investors. Um, so.
You know, ESG traditionally has been a nice to have. Uh, but, uh, today, I mean, how deep is the appetite for change amongst these investors? Are they willing to trade off, big fat dividends for some of the things that you’ve been talking about.
Brynn: Well up until relatively recently, uh, Rio Tinto did have a fairly good system in place from what we hear.
So up until 2016, 2017, Rio Tinto did have much stronger communities and, and social performance practice within the organization. We’d suggest that perhaps, um, that, uh, background on that legacy actually put Rio Tinto into a strong position to be able to deliver returns for their shareholders and that the recent weakening of that, of that system, which has led to this, uh, destruction and this scandal, um, will erode, uh, shareholder value or has the potential to erode it.
So for example, we hear that trust has just totally been lost between Rio Tinto and the communities on, on whose lands they, they operate in Western Australia. So next time Rio Tinto goes to, um, get a, you know, enter into patients with another, um, group of traditional owners. Perhaps those negotiations will be much more difficult.
Similarly, uh, Rio Tinto has, uh, relationships with indigenous communities in other parts of the world. And, and, um, and even beyond indigenous communities that, you know, the, the communities in which companies operate, uh, um, maintaining their trust is essential to maintaining their ability to operate.
It’s commonly referred to as social license to operate, but what it really goes to is the smoothness of their operations. So, um, it really, um, remains to be seen, uh, what effect, uh, this Juukan Gorge disaster will have on Rio Tinto and its ability to perform financially over the medium to long term.
Um, but, uh, you know, I do think that, um, The the scale and the severity and the irreparable nature of the damage that Rio Tinto has caused for the PKK people and for humanity, um, is being taken very seriously. I, I don’t think given the opportunity again, um, that Rio Tinto would think that that $135 million of, of iron ore, um, was worth the cost to them.
I wonder, um, what this, what this loss of social license will cost them over the long term. There’s probably a PhD in quantifying that, but I imagine that, um, that Rio Tinto, uh, not only from a moral perspective, but from a financial perspective, will deeply regret, um, their destruction of Juukan Gorge.
Denise: For investors, uh, and people who are, who have followed this case from Europe, uh, who want to see, learn about the bigger picture, um, on these issues on, um, uh, the changing relationship between, um, I guess extractive companies in Australia, um, and shareholder value in indigenous relations.
What, what should they look out for? What, what should they read? Uh, how can they learn more about your work? Can you recommend a book or something to get up to speed?
Brynn: Uh, well, they can go to our website, which is Accr.org.au, um, and, uh, and get in touch with us. This field is changing relatively rapidly, and you know, we’ll be working with our First Nations partners to develop and enhance the materials that are available for investors that want to get across this, um, these, these issues, uh, over the next year. Um, so, um, to keep a lookout for those things.
As a very immediate thing, we have a shareholder resolution to BHP, um, on this issue.
So, uh, we, with the support of the First Nations Heritage Protection Alliance have proposed, uh, for a vote at BHPs meeting, which is coming up in October. Um, uh, a moratorium on cultural heritage site destruction until such time as the law, the law reform processes are complete and the laws have been strengthened.
So, um, that is an immediate thing that investors, um, wanting to, uh, support, um, the preservation of First Nations Cultural Heritage can do. Um, but please do keep in touch. Um, again, it’s Accr.org.au.
Denise: Thank you very much Brynn. Um, I really appreciate your giving the time to talk through this. I know you’re extremely busy in Australia right now, and it’s a really exciting time.
So, uh, good luck and all the best.
Brynn: Thanks very much. Cheers.
Denise: That’s it for this episode, thanks a lot to Brynn for coming on the show. You can find her on Twitter @brynnobrien and ACCR @AustCCR. For additional resources on the Rio Tinto case, go to the shownotes for this episode at climatenarratives.co.
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Many thanks to Valentine Scherer and Victoria Yates for their help producing this episode, and to Lucas Laufen for the theme music.