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Rio Tinto Global CEO: Disruption, Expectation and Complexity

14 Jun 2019 2:00 PM | Anonymous member (Administrator)

On 5 June 2019 the Australian and New Zealand Chamber of Commerce in Japan and the British Chamber of Commerce in Japan jointly hosted a lunch event with Jean-Sebastien Jacques (J-S), Global CEO of Rio Tinto, at the Roppongi Hills Club. The American, Canadian and South African chambers of commerce also joined in for the event with a total of almost 100 participants.

Following a three-course meal, ANZCCJ Chair Sally Townsend introduced J-S, noting the positive performance of Rio Tinto in recent years and mentioning their exit from coal in the process of moving toward a low carbon economy. She explained that J-S would give a speech to the audience, followed by a fireside discussion before finally taking questions from the audience.

J-S explained that business had reached a vital crossroad in a new era of complexity. He pointed out four broad themes which he believes are changing the fundamentals of doing business and shaping the direction of the world. These themes included:

  • Rising powerful global forces which are heavily influencing trade and the geo-political balance;
  • The bias of global growth toward emerging markets with a shift in economic power going from the West to the East;
  • Technology such as AI, big data, and automation and the disruption that comes along with it; and
  • Shifts in societal expectations, with a move toward working for passion and purpose, and paying stronger attention to environmental impacts and responding to climate change.

According to J-S, business leaders must embrace complexity and partnerships, practicing a disruptive innovative mindset internally to stay relevant and avoid being victims of disruption. He suggested that while not all leaders who make these bold decisions will be successful, such moves are important for business leaders to take while also not distracting their cash-generating core business.

J-S noted that the mining industry has a long way to go and is not invincible to disruption. Even though the basics of mining have been stable over the past few decades, new technologies are being implemented across the industry to increase productivity. At Rio Tinto for example, they have been building their first “smart” mine in Western Australia.

The ability to partner with companies in other industries and collaboratively work toward disruption and improvement is another vital leadership factor mentioned by J-S.  Additionally, keeping sustainability and climate change considerations in mind is key as they are important to employees, and society at large. Workplaces must transition to embrace new ways of doing business that adjust to changes and encourage their employees to also adapt and innovate.

J-S was optimistic about Japan’s position to capitalise on opportunities going forward. He praised Japan’s leadership in bringing the TPP-11 to fruition while noting labour productivity, a skills shortage, and an increasingly aging workforce as key challenges facing Japan. J-S pointed out that Japanese companies have traditionally taken a big role in technological innovation and must continue their leadership in this way. On environmental sustainability, J-S also praised Japan for its initiative of making Olympic medals from scrap metals, and other environmentally friendly actions of the 2020 Olympic organisers.

Fireside Discussion

Kaori Takahashi, Deputy Editor at Nikkei International News was invited to the stage to moderate a discussion with J-S. Kaori has visited many Rio Tinto sites around the world and thus she described her knowledge of the company, from the history dating back over 140 years to their first copper mine in Spain to their modern-day achievements such as their automated train system in Western Australia, which was visited in 2013 together by then Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe. She touched on how Japan and Australia are strongly connected through mining and highlighted the importance of the minerals mined in Australia and exported to Japan to Japan’s post-war economic development.

Kaori noted that high barriers to entry in the mining industry gave Rio Tinto an advantage, but asked that given 90% of their materials are traded across borders, is J-S concerned about the China/USA trade war? J-S noted that there are two drivers that grow international business: International GDP growth and increased international trade. He noted that in China there has been no major surprise in terms of GDP but that potential trade wars would have real impact on business. J-S said that he is concerned about trade protectionism and looking carefully at the current situation. He noted that trade has created a great deal of wealth in the past fifty years and that those who believe that some trade deals are not fair should make sure they “don’t kill the machine” but instead try and fix the issues in a constructive way.

Kaori’s next question was asking J-S for more detail on smart mine technology, such as how big data and other emerging technologies are creating improvements at Rio Tinto. J-S noted that they have been testing and employing around 120 new forms of technology recently, which are helping them get a real time understanding of the condition of assets. While many of these technologies have been previously employed in other industries JS noted that the mining industry is now catching up. Rio Tinto are happy with the operation of their automated trains in Western Australia, allowing them to easily send cargo loads on 2.4km long trains. As they have so many sensors on their automated equipment, they have become the largest corporate broadband user in Australia, and they are facing a challenge in that they currently have so much data but don’t yet completely understand how to best use it. J-S emphasised that the implementation of 5G technology will be extremely important for their business to assist with real time data collection due to increased data transfer times and capacity.

Regarding partnerships outside the mining industry, Kaori asked J-S what sort of companies they are looking at to collaborate or make products with, particularly in Japan. He replied that he is unable to name specific companies but is open to the idea of partnering with Japanese companies and may already have some discussions in progress.

Finally, Kaori’s last question was how have environmental, social and governance criteria (ESG) impacted growth? J-S noted that Rio Tinto acknowledges the science behind climate change and wants to be a part of the solution to the problem. He explained that the company has exited from mining coal, recently issued its first TCFD (climate change report) and takes carbon pricing into consideration when making investment decisions as concrete steps to help the environment. They want to produce the materials which are required by manufacturers but do so in a greener, more environmentally friendly manner. Rio Tinto also hopes to be carbon neutral by 2050 and J-S noted that whilst they are not sure of the full solution now, they are working towards it.

Audience Questions

BCCJ Chair David Bickle asked J-S about the importance of diversity and how Rio Tinto was aiming to improving on this particularly with relation to gender parity). J-S acknowledged the challenge and said that they don’t yet have the full solution, admitting that they are struggling with this and progress isn’t moving fast enough as 80% of their workforce is still male. He said progress is being made but it is slow, noting that two years ago they spent a significant amount of money to close the gender pay gap but that this has again drifted back to previous trends, which needs constant attention and improvement. He pointed out that twice a year they conduct an employee engagement survey and in the most recent survey 60% of their 43,000 employees responded. The three most represented topics of concern from respondents related to climate change, diversity, and the distribution of wealth.

Matt Ketchum from the CCCJ asked if Rio Tinto are planning on deploying blockchain technology given strong and differing regulation in different countries. J-S responded by noting that it is still early days for this technology and that they will want to better understand business cases before making a final decision on this. He noted that Rio Tinto wants to remain relevant so they will explore this and leave the option on the table for now.

J-S received several other questions in relation to climate change and action. In answering how to balance profit/investor interests and environmental interests. J-S noted that pure ESG investor numbers are limited but are on the rise, explaining that they were surprised at the amount of climate change concern they heard from questioners at their Perth AGM. J-S said that profit is still important because otherwise the business could disappear, and noted that the metals they mine are essential to the world and the economy, saying that they want to continue to provide the materials the world needs and turn a profit in a more environmentally friendly way.

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