Material Issues
The concept of materiality goes beyond that of financial impact alone and encompasses issues that are important to stakeholders as well as risks, opportunities or initiatives that are important to the organisation. Issues are judged to be material if the information provided is, or may be, required by our stakeholders to make informed assessments regarding our sustainability performance.
We determine what is material to our business through a combination of internal performance metrics, and the monitoring and evaluation of the external context within which we manage our business and operations. It is done through ongoing stakeholder engagement, a review of scientific developments, review and assessment of performance to date, monitoring of media coverage, competitors’ and other extractive industries’ reporting of material issues and policy and regulatory trends.
It encompasses a review of the cultural, social, political, legal, regulatory, financial, technological, economic, natural and competitive factors that impact our activities at local, regional, national and international levels. Xstrata determines what is material at a Group level through a structured annual ‘bottom-up’ process of review and aggregation at our sites, divisions and commodity businesses, which each determine material sustainability risks, issues and opportunities.
As a global mining company, we face a large and varied set of material SD risks and opportunities. Material risks and opportunities in 2010 remained consistent with those identified in our 2009 Sustainability Report, although in a number of areas the potential nature and implications have evolved. Our material SD risks and opportunities are summarised at the beginning of the sections in this report on ‘Our People’, ‘Environment’ and ‘Community’. We continue to evaluate these issues carefully and adjust our management approach and priorities accordingly.
Material, company-wide SD issues that evolved and were given additional attention by Xstrata and our commodity businesses during 2010 include:
Climate change and energy (click for further detail):
Developments at the international level continue to fail to provide
the predictable policy framework needed for long-term business
investment decisions. However, many national governments are pushing
ahead with introducing regulations on greenhouse gas (GHG) reporting
and limiting GHG emissions – in many cases via emission trading or
carbon tax systems that, effectively, put a price on carbon. As a company
with energy-intensive operations and activities in many different countries,
and in particular substantial interests in thermal coal, the actual and
potential implications for Xstrata are significant. We generated more
than 24 million tonnes of GHG (in carbon dioxide equivalents) during
2010, approximately a third of which was due to fugitive methane
emissions from coal mining. In addition, our overall carbon footprint is
dominated by the GHGs released as a result of our customers burning
coal we produce – emissions that amounted to about 190 million tonnes
in 2010. We are developing and implementing integrated commercial
and operational strategies to address GHG emissions within Xstrata and
we are participating in a CEO-led group of leading mining companies
through the ICMM to develop an industry position on climate change
and engage pro-actively in the global debate. We also continue to invest
significant resources, in collaboration with others, in developing and
piloting carbon capture and storage (CCS) at several locations around
the world, with the aim of finding commercially competitive solutions
in an increasingly carbon constrained regulatory environment.
Water use and scarcity (click for further detail):
We have operations in a number of regions, such as north Chile
and some regions of Australia, where local water resources are
scarce. In these regions, climate change as well as forecast increases
in demand by competing users are set to exacerbate the problem.
In some cases, this could threaten expansion options, and even
the ongoing viability of our operations. The demands by national
governments, international organisations such as the United Nations
and NGOs for improved efficiency in using water resources, including
tighter regulatory and permit conditions, and for more consistent
transparency and reporting on water use and the efforts to reduce
its use by companies are growing. Our operations have been tackling
this issue for a number of years and we continue to improve the
efficiency with which our operations use water, increase water
recycling and improve our data capture, performance monitoring
and reporting. For example, we increased our use of recycled
water by 11% across the Group in 2010 compared to the prior
year. In May 2010, Xstrata plc endorsed the UN Global Compact
CEO Water Mandate and we are participating in the workstream
to address corporate water disclosure, which aims to harmonise
water accounting methodologies amongst participating companies.
Human rights and local community engagement (click for further detail):
We face potential human rights issues
in relation to our workforce, security and the communities in which
we operate. We undertake human rights risk assessments at all
operations and in regions with elevated risks, we implement
human rights training and other targeted initiatives. We support and
implement the requirements of the Voluntary Principles on Human
Rights and Security. During 2010, we trained 41% of our total workforce
(employees plus contractors) in human rights awareness and preventing
abuses. Community engagement remains a key priority for all of our
operations with the objective of securing broad-based, ongoing
support for our activities.
Safety (click for further detail):
Safety continues to be a
major issue and challenge for the mining sector. Scrutiny by regulators
means that poor performance on safety can lead to site shutdowns
and impact a company’s licence to operate. At Xstrata, improving our
safety performance continues to be a major priority. We believe all
Xstrata personnel have the right to operate in a safe environment that
allows them to return home safely each day. While the rate of injuries
has declined substantially over the past several years, and the number
of fatalities has also decreased, three fatalities occurred at our managed
operations during 2010. We continue to dedicate significant time
and other resources to addressing the root causes of safety incidents,
enhancing the effectiveness of our major hazard management plans and
creating a consistent safety culture where continuous improvement and
active risk detection and control are organisational and personal values.
Assurance, transparency and reporting (click for further detail): Investors and other stakeholders continue to demand more detailed information about companies’ sustainability performance and associated assurance and governance frameworks and processes. Site-level, third party SD assurance and transparent reporting have been cornerstones of Xstrata’s approach to managing its sustainability performance and integrating it into our core business strategy, planning and operational processes. 2010 saw further enhancements to our SD assurance programmes. For instance, Group Internal Audit incorporated SD risk auditing into its protocols, and as a result, 34 different SD risks were audited at 29 Xstrata sites during the year.
Off-site dispersion of dusts and SO2 (click for further detail): Emissions of particulates (dust) and SO2 are controlled by national regulatory bodies through stringent emission limits and reporting requirements for large industrial operations such as mines and smelters. Recent epidemiological studies in the US and Australia have raised further awareness about the issue and in some countries, existing emission limits are being revisited. Xstrata recognises the importance of limiting dust and SO2 emissions from its operations. Over the last two years, significant reductions have already been made by Xstrata’s operations. Group-wide, we reduced sulphur emission by 11% in 2010 alone over the previous year, despite increased production at those facilities responsible for emissions (such as smelters). We continue to invest in and implement additional controls to reduce our emissions further.
Our most significant engagements and public policy initiatives in 2010 are shown in the table below:
| Issue | Relevant stakeholders | Xstrata’s response |
|---|---|---|
| Environment | ||
| Proposed climate change legislation in Australia, Canada, South Africa and UK |
Australian, Canadian, South African and UK government: Industry bodies Partners Investment Community |
We recognise the need to cut global carbon emissions and support equitable, We are actively involved in the International Council on Mining and Metals’s In Australia, we are actively engaging with the government on the design features Xstrata is a member of the Government of Ontario’s multi-stakeholder working In Chile, we are working with the British Chamber of Commerce Climate In Germany, Spain and the UK, we are involved in consultations relating to We are actively involved in public hearings, workshops and industry groups |
| Support for low emissions coal technology |
Inter-governmental bodies and national governments Industry bodies Research institutes/ scientific community Power generation industry |
Xstrata advocates increased public and private sector support for the development and deployment of new technologies including carbon capture and storage and other technologies to reduce carbon emissions associated with burning coal for energy. We are involved in forums to support the development of low emission coal technology policies and support a number of projects. |
| Historic soil contamination/ land remediation (Canada, Australia) | Australian state/Canadian provincial and local government Environmental regulators Communities NGOs Industry partners Media |
We work with stakeholders to remediate areas of historic contamination from mining and metallurgical activities. In Canada, with the completion of the Sudbury Soils Study, Xstrata’s Sudbury operation is actively developing biodiversity principles in consultation with the City of Greater Sudbury, both to increase base-line knowledge of existing ecosystems and to further the efforts of the regional Biodiversity Action plan. A major remediation programme was completed in 2010 at Murdochville and Sandy Beach, Canada. |
| Responsible sourcing of coal | European Union National governments NGOs Power companies |
Throughout 2010, Xstrata Coal participated in the Dutch Coal Dialogue with other ICMM member companies, power companies and NGOs regarding the responsible sourcing and supply of coal to the Netherlands. Xstrata is a member of the Responsible Coal Initiative in Europe initiated by power companies. |
| Energy costs, security of supply, efficiency and alternative energy sources | National government State-owned and private power generation companies |
Securing a cost-effective, secure source of power is essential for the economic sustainability of our business. We seek long-term, cost-effective contracts for energy and we implement energy efficiency programmes across our global operations. We are also investigating or implementing alternative sources of energy, including methane-fired power stations, use of coal tailings, flue gases, microalgae biofuels and solar power. We support research into alternative energy and low emissions coal technologies and participate in public policy debates on future energy policies. |
| Water use in waterconstrained regions (North Chile, North Queensland, Argentina) |
Government Communities NGOs Environmental regulators Industrial and agriculture users |
Water availability and potential impacts on water quality are key considerations in the feasibility of new projects or expansions to existing operations. We engage with government, regulators and communities to share water resources, plan for future use and to respond to concerns over water quality. In northern Chile, the use of sea water in place of fresh water is investigated during the development of projects. |
| Air emissions legislation (Australia, Canada, Chile) | Government Environmental regulators Community Media |
We aim to continually reduce emissions from metallurgical operations and set SO2 capture targets annually. We engage with government, community and environmental regulators on proposed amendments to air emissions legislation and keep them informed about our progress in reducing emissions. We launched the Smelter Emissions Reduction Project at Mount Isa in 2007 and in 2010, invested over AUD8.7 million on a range of initiatives to limit emissions from the copper and lead smelters. Since taking ownership of the Mount Isa Mines operations in 2003, Xstrata has invested in excess of $275 million on over 220 environmental initiatives, which includes air emissions projects. Xstrata submitted a response to the Australian Government’s discussion paper on air quality standards as part of the Review of the National Environment Protection (Ambient Air Quality) Measure. Xstrata’s key recommendation was for a Government-established national strategic framework on air quality that adopts a risk based approach with appropriate guidelines for industry, taking into account the local and regional context of any existing and/or proposed development. We are currently working with regulators in the development of more stringent health-based air quality standards in Ontario, Canada. The emissions reduction project will involve the alteration of existing standards in order to allow our metallurgical facility in Sudbury the time to develop the appropriate technology to meet future requirements. |
| EU REACH legislation and proposed amendments to EU Dangerous Substances Directive | EU Commission and Directorates General EU member state governments Industry bodies Industry partners Scientific community |
The EU REACH legislation places the responsibility for ensuring the safety of substances manufactured in or imported into the EU onto industry. By working with the various REACH consortia formed by industry, we successfully registered our nickel, ferronickel, zinc, lead, copper, cobalt, cadmium, zinc oxide, sulphur dioxide and sulphuric acid products, and all the relevant intermediates and feeds, by the first REACH registration deadline of 30 November 2010. Registration is only the first step in the REACH process. Starting in 2011, the technical dossiers accompanying all registrations will undergo an evaluation process for the quality of the data and assumptions, and some substances will face an authorisation process. Through professional associations, we continue to challenge the substance classifications in the 1st Adaptation to Technical Progress of the Classification, Labelling and Packaging Regulation. |
| Community | ||
| Lead at Mount Isa, Australia | Australian federal, state and local government Mount Isa Community Investment community Media |
Lead is naturally occurring at Mount Isa and some areas of historic contamination are present at the site where operations began 85 years ago. The health and safety of our workforce and the community is our highest priority. We offer free blood lead testing to the community and we are a founding member of the Living with Lead Alliance to provide information about how to manage the risks associated with lead exposure. We are funding an independent PhD Lead Pathways Study, Phase 1 (land) of which was published in 2009 and are remediating any identified areas of historic contamination. Phase 2 (air) and Phase 3 (water) of the Lead Pathways Study are targeted for publication in 2011. The Smelter Emissions Project was launched in 2007 to characterise smelter emissions and identify opportunities to significantly increase the capture and treatment of emissions. |
| Resettlement – Peru, Colombia | Communities National, regional and local government NGOs Las Bambas independent Advisory Group Cerrejón Third Party Review Panel |
We aim to avoid resettlement where possible. Where involuntary resettlement is unavoidable, we consult affected communities openly, in a culturally appropriate manner and as early as possible to explain fully the potential impacts and benefits of resettlement. We uphold the World Bank International Finance Corporation standards on involuntary resettlement. At Las Bambas, we have established an Independent Advisory Group of international and Peruvian stakeholders to provide advice and recommendations to Xstrata Copper on the resettlement of the Fuerabamba community. In Colombia, the Cerrejón coal operation is implementing a number of recommendations made by an Independent Review Panel regarding current resettlements as well as the Tabaco resettlement which took place over five years prior to Xstrata acquiring a stake in Cerrejón. |
| Security, human rights, social engagement at higher risk locations including Tampakan, Philippines and Cerrejón, Colombia | National and local government Public and private security providers Community NGOs Investment Community |
We implement the Voluntary Principles on Security and Human Rights and in higher risk regions undertake human rights training for employees and contractors. We engage with government, public security providers and
communities to improve security in higher risk regions and to raise |
| Corporate social involvement (CSI) initiatives | Communities Regional and local government Healthcare providers Industry partners Charities Development organisations NGOs |
We set aside a minimum of 1% of Group profit before tax each year to fund initiatives that benefit the communities associated with our operations. Each operation consults with communities and other stakeholders to develop a CSI plan to align our support with regional objectives and community priorities. In 2010 we set aside 1.2% of Group profit before tax for CSI expenditure, and donated a total of $84 million, including in-kind donations (e.g. of equipment or personnel time). |
| Employment opportunities, employment legislation and impact of operational restructurings or closures | Employees Communities Unions Governments Suppliers and customers Media |
We work with local communities to identify job opportunities and to run skills development programmes, enabling community members to gain skills and knowledge for employment at our sites. We seek to minimise the impact of operational restructurings on our employees, avoid compulsory redundancies where possible and offer employee assistance programmes to those affected. We consult our workforce, unions and government about proposed changes to our operations. In Canada, we worked with the local authorities ahead of the closure of the Kidd Met site in May 2010. Through its membership of the Minerals Council of Australia, Xstrata Coal commented on the harmonisation of OHS legislation in Australia. |
| Economic | ||
| Executive remuneration | Investment community Employees Media |
Xstrata’s remuneration policy is designed to attract, retain and motivate the highly talented individuals needed to deliver its business strategy and maximise shareholder wealth creation. The Board Remuneration Committee considers the following principles when setting remuneration:
See the Remuneration Report available in the Xstrata Annual Report 2010. |
| Amendments to mineral taxation and royalty regimes | Governments Regulators Industry bodies Industry partners |
Mining involves substantial long-term investment and requires stable, clear fiscal frameworks. We engage with governments to advocate equitable, unambiguous legislation governing mining revenues, balancing the requirement to attract investment by responsible and accountable mining companies to develop operations that are sustainable throughout the economic cycle with the need to ensure mining contributes to the economic development of host nations. In Australia, Xstrata engaged with the federal government on the proposed Mining Minerals Rent Tax (MMRT). Following signed heads of agreement between the government, Xstrata and other mining companies a policy transition group (PTG) was established to advise the government on the implementation of the MRRT agreement. The PTG submitted their report to government in October 2010 and the government is expected to issue a formal response in the first half of 2011. Royalty credits is still the key issue that needs to be resolved. Xstrata South Africa was involved in the review and revision of the Mining Charter and New Mining code through its membership of the Chamber of Mines. Xstrata South Africa developed a proposal on the revision highlighting our position, opportunities and concerns which were used in briefings with a number of government departments. In Canada, Xstrata Nickel, Xstrata Copper and Xstrata Zinc jointly participated in the consultation process for proposed revisions to the Quebec and Ontario mining laws. |
| Extractive Industries Transparency Initiative (Peru) | Peruvian national, regional and local government Industry bodies NGOs Investment community |
We actively engage in the process to implement the EITI in Peru, including participating as the alternate national mining industry representative. We discuss transparency and distribution of mining revenues with government and regulators in several operating regions. |