Sustainability performance

Training local people at the Lion ferrochrome project

Overall 2005 was another year of rapid development in integrating sustainable development into our business practices. Our businesses achieved improvements in a number of key performance areas including injury frequency rates and number of environmental incidents, and continued to go beyond existing best practice in areas such as our response to HIV/AIDS and supporting enterprise development and sustainable development in partnership with local communities. The major area of underperformance was in managing fatal hazards in southern Africa. In 2005, seven tragic incidents resulted in three employees and six contractors losing their lives at work.

Xstrata's HSEC Assurance Programme results

Xstrata's HSEC Assurance Programme provides assurance to the Board that each operation's performance and management systems comply with the corporate expectations outlined in the Group HSEC Policy and 17 Management Standards. Compliance with these standards assures performance to international HSEC standards, beyond regulatory compliance. The assurance audit is conducted by three independent auditors and a support person, including an external lead auditor. The three auditors comprise an OH&S and environmental specialist from international consulting firms together with an operational specialist. The audit takes place during a five to 10 day period on site and comprises around 650 questions involving the entire site management team and up to 10% of the site's employees at a range of levels in addition to health, safety, environment and community practitioners. Xstrata is one of a small number of international mining and metal production companies to use a fully integrated HSEC audit tool. This process examines the systems in place and tests performance against the Standards and HSEC Policy at different levels of the workforce. Along with an overall score, the audit provides a separate systems and performance score for each standard.

In 2005, Xstrata conducted assurance audits to provide a complete baseline of health, safety, environment and community performance across every operation under Xstrata's management control. Over 600 people were directly involved in the audits with a further 2,000 employees and contractors interviewed as part of the supplementary process to assess the degree to which HSEC performance and understanding is integrated across site personnel. Commodity business and divisional head offices are also being audited to complete the baseline study of the Group. This extensive exercise has provided Xstrata's executive management team and Board with a comprehensive baseline analysis of every operation's HSEC systems and performance, enabling a clear understanding of key risks and areas which require improvement as well as areas of high performance. Good practices from across the Group were collated into a manual and were shared with every site.

For the operations, the audits provide a clear understanding of how Xstrata's HSEC requirements must be met and a benchmark of current performance across the Group. At the end of each audit, the operation is provided with a detailed report and plan outlining the steps that must be taken to address any areas of underperformance. By incorporating managers from other Xstrata sites on the audit teams, we have facilitated knowledge-sharing between our businesses and geographic regions. This process is also an integral part of the training and development of our managers. The clear direction, performance feedback and management focus associated with the programme has initiated a transformational shift in HSEC understanding and purpose that is being applied at an operational level by each commodity business. The audit programme is continuing in 2006 and has prioritised sites which did not meet Group expectations in key areas. The audit programme will continue on a rolling basis, with the target of independently auditing every site within a two to three year period, depending on risk and performance.

Dr Paul Beukes and Oomeshni Naiker at the Project Lion construction site

Presentation of aggregated Group results

Through the HSEC Assurance Programme, operations are given an overall score for systems and performance against each HSEC Standard. Scores are given as a percentage, and are ranked in the following categories: Scores are given as a percentage, and are ranked by the following categories:

The overall Group score was in the satisfactory range, comprising a higher overall score for performance than for systems. Performance scores were almost without exception higher across our sites and across Management Standards than systems scores. This was an anticipated result of the audit programme and is to some extent a reflection of the entrepreneurial 'owner-operator' approach of Xstrata's management, where actions to improve performance often precede formal systems modifications. While good performance is the overall objective, we recognise that well documented systems enable good practices to be sustained over time, irrespective of the personnel in place. The sharing of good practices and improvement of systems are key initiatives being pursued across operations and are driving increased collaboration between sites, divisions and commodity businesses.

Regional performance

Safety Awareness, Xstrata Coal South Africa

Half of Xstrata's operations are in Australia, with a further 40% in South Africa. We have three main sites in Europe and a further two in South America, one of which is an exploration site. Average scores for our European, Australian and South American operations were comfortably in the satisfactory range. While the average performance element of our South African operations' scores was in the satisfactory range, the overall average score of these operations was weak.

A range of initiatives, with a particular focus on fatality prevention and improvements to management systems are currently underway at the South African operations and we expect a dramatic improvement in audits that will be carried out at lower-scoring operations in 2006. Regionally, our three European operations achieved the highest overall scores, closely followed by Australian and South American operations.

Performance by standard

Overall, average Group scores were above the satisfactory benchmark level for the following standards:

• Leadership, Accountability and Ethics;
• Emergencies, Crisis and Business Continuity;
• Operational Integrity;
• Health and Occupational Hygiene;
• Legal Compliance and Document Control;
• Planning and Resources; and
• Communication and Engagement.

Lower scoring standards, where the average was lower than the satisfactory range for the Group included:

• Assessment and Reporting;
• Contractor and Supplier Management;
• Product Stewardship; and
• Project Management (with respect to HSEC performance).

These general areas of underperformance are being addressed at all sites, with reference to the good practice manual compiled from high-scoring sites.

In addition, the audit programme showed that while Xstrata's community programmes are very strong overall, in some areas, programmes are not well co-ordinated between sites, divisions and commodity businesses operating in the same region. Our performance in this area is steadily improving through the establishment of joint steering committees and co-ordination of corporate social involvement plans and programmes, ensuring that each operation is connected and involved with the relevant initiatives in its local area.