Governance and Ethics

Ethics and business principles

All employees, suppliers, contractors and business partners are provided with our Statement of Business Principles before commencing work with Xstrata. It is the responsibility of every employee and contractor to adhere to our Business Principles.

Photo: Steeve Brassard, Alain Provencher, Serge Trotechaud and Paul Lapotite conduct a behavioural safety tour at the Canadian copper refinery.

Steeve Brassard, Alain Provencher, Serge Trotechaud and Paul Lapotite conduct a behavioural safety tour at the Canadian copper refinery.

Our Statement of Business Principles is produced in the 15 native languages spoken across the enlarged Group, including French, Portuguese, Norwegian, Inuktitut (the Inuit language of northern Québec), and Quechua (spoken by Andean communities in southern Peru). The document is available in every language from Xstrata’s website.

Ethics line

The Xstrata Ethics Line is a confidential ‘whistle-blowing’ facility, operated independently by KPMG, through which any potential breach of our business principles can be reported in confidence. The call line provides a freephone number for every country in which the Group is active and all calls are reported on an anonymous basis to the Head of Internal Audit and Risk for appropriate action. There is also a dedicated email address: ethics@xstrata.com. Emails to this address are read by the Head of Internal Audit and Risk only and are confidential. Ethics line details are published on the back of the Statement of Business Principles leaflets and are regularly communicated through internal briefings and poster campaigns to ensure employee awareness.

In 2006, a total of 11 incidents were reported via these whistle-blowing facilities. All reported incidents were investigated and five incidents in South Africa, Argentina and Australia led to further investigations and actions and were reported to the Board Audit Committee. No investigation led to criminal proceedings. No incidents of fraud were reported during the year.

The five incidents investigated related to:

  • procurement practices that contravene Xstrata’s Business Principles;
  • contractor misconduct;
  • alleged drugs offences;
  • inaccurate reporting of operational data.

Bribery and corruption

Xstrata’s Business Principles state that we do not offer, solicit or accept any form of bribe or inducement. Our Corporate Social Involvement Policy also prohibits political contributions of any kind. No political donations were made in 2006, in accordance with Xstrata’s policy. This includes any type of support – financial or non-financial – for politically-linked events or fund-raising activities. This policy has been rolled out across the operations acquired in 2006, necessitating changes in policy in some regions.

All Xstrata employees and contractors receive the Statement of Business Principles and receive training and communications about the commitments contained within the Business Principles, including the elements relating to bribery and corruption.

Xstrata’s internal audit function, supported by KPMG, takes into account identified fraud and compliance risks associated with our key business activities, including the ethical performance expectations contained in our Statement of Business Principles.

Bribery and corruption risks are assessed by operation, dependent on the identified level of country or regional risk, the policies and practices of other companies operating in the region and an assessment of the probity and transparency of government, suppliers, contractors and other business partners. Each operation is required to have effective controls in place to manage these risks. Procurement of goods and services and interaction with regulators and government are two higher risk areas for potential bribery and corruption practices. No such practices were identified in 2006.

For example, when reviewing procurement activities, Xstrata’s internal audit function tests the adequacy of controls designed to ensure business dealings with our suppliers are conducted in a competitive environment, which if effective, would reduce the risk of unethical business practices from occurring, such as the payment or acceptance of bribes to secure business. These risks and control measures are reviewed on a quarterly basis as part of the Group’s risk management process.

Photo: Sampling earth at McArthur River zinc-lead mine, Australia.

Sampling earth at McArthur River zinc-lead mine, Australia.

Supply chain, procurement
and free enterprise

Xstrata does not have a global procurement function or policy, in line with our devolved management structure. This allows our sites and businesses to give preference to local suppliers and provides greater flexibility in planning and securing procurement. Where there is a commercial or strategic incentive to do so, commodity businesses operating in the same region combine purchasing power from time to time.

We engage with our suppliers, contractors and business partners to assess HSEC performance, training and practices in line with Xstrata’s HSEC Management Standards. All suppliers and contractors are provided with a copy of our Business Principles and we actively encourage and monitor HSEC and ethical performance, including specific health, environmental, safety, community and human rights criteria as appropriate. We pay suppliers promptly, respect contracts and ensure that all transactions are properly authorised and accurately recorded.

Xstrata’s Business Principles state that we will support free enterprise and will compete fairly for business, with scrupulous regard for those regulations which promote competition and protect consumers.

To enhance understanding of competition law and appropriate behaviour when dealing with customers, competitors, trade associations, suppliers and distributors, Xstrata has developed three bespoke, interactive, web-based training modules, in conjunction with legal advisers Freshfields Bruckhaus Deringer and Interactive Dialogues Limited (compliance software providers). The modules are run in three different languages and provide educational materials and test questions, using a range of simulated situations Xstrata employees face in day to day interactions, covering all major anti-trust and competition issues. Every relevant employee is required to complete all three modules and achieve a score in excess of 70%.

The programme was first rolled out in 2005 and is completed annually. In 2007, over 400 employees will complete the training modules across each of Xstrata’s commodity businesses and corporate personnel. Additional training and testing is provided for those who do not achieve 70% and for any person who requests further information about anti-trust issues. The programme is reviewed annually to ensure relevance with current legislation, best practice and Xstrata’s activities.

Human rights

Xstrata’s Business Principles contain our endorsement of the principles set out in the UN Universal Declaration of Human Rights and the International Labour Organisation Conventions. The concept of human rights encompasses a broad spectrum of basic rights. Basic human rights in any particular country are primarily safeguarded by governments and the legal system, however we recognise that we have a responsibility to ensure that Xstrata’s businesses uphold and promote the principles we endorse and to require contractors, suppliers and business partners to do the same.

For Xstrata, the main areas of focus are protecting the rights of our employees and contractors to work for equal pay, to associate freely, to a safe and healthy work environment, to non-discrimination and fair treatment and to legal rights. We also support the rights of employees, community members and other stakeholders to be treated with dignity in a manner that respects cultural heritage, traditions and norms.

In areas where we employ security personnel (either directly or as contractors) to protect our people and assets, we ensure that appropriate human rights training has taken place and monitor compliance to our Business Principles, HSEC policy and standards, in line with Xstrata’s management standard for Suppliers, Contractors and Partners.

Human rights training programmes are being implemented at operations in higher risk locations, for example in Colombia, Dominican Republic, Peru and Tanzania, with a specific focus on security and community relations personnel. In Colombia and Peru this training is extended to community members, local authorities and other stakeholders. In 2006, the non-managed Cerrejón coal operation in Colombia, in which Xstrata has a one-third stake, signed an agreement with the Colombian Red Cross to strengthen its existing human rights programme. The agreement will provide further training and education about human rights to Cerrejón personnel, members of the Colombian army and local police force.

All major suppliers and contractors are subject to stringent HSEC standards and must comply with Xstrata’s Business Principles, which include respect for human rights. Specific human rights criteria are included in all contracts relating to the provision of security contract personnel, including in Colombia, Dominican Republic, Peru and Tanzania.

Child and forced labour

Xstrata’s Business Principles uphold the elimination of all forms of forced or compulsory labour and stipulate that no form of child or forced labour will be tolerated. Following the acquisition of Falconbridge, Xstrata has operations in two geographic regions where child labour statistics indicate there is a heightened risk: Tanzania and the Dominican Republic. Operations in higher risk areas impose a minimum age of 18 for all employees and contractors. All operations report the age of their youngest employee or contractor on an annual basis and are audited through the internal audit risk management programme. In 2006, the youngest reported employee was an apprentice enrolled in a workplace training programme in Australia and was 16 years old.