17 November 2017
The Political Context of Populism
Good morning everyone.
I want to talk today about the idea of the responsible company. There is never a time when this is not important and it is especially so today.
This idea in fact takes us right back to the origins of the joint stock company.
Think of the word equity which describes the sense of sharing, of coming together, of being in company with others.
The institution of the public limited company shows that business and the public interest are united from the start.
Political events of the recent past, here in the UK, in the EU and in the US have given BHP reason to think again about our social value and how we articulate that to society.
As the world’s largest natural resources company, listed on the FTSE and the Australian ASX, BHP spans the globe. Our license to operate stems from being trusted by the communities in which we operate.
That is because mining is an immobile industry and we stick with communities for decades.
Trust, the most vital commodity of all, is built up over years.
Recent political events suggest that business needs to look again at building greater trust. BHP is no exception.
There have been calls in the UK for a tougher corporate governance regime and I would agree that high standards are vital.
Indeed, the integrity of the UK system gives companies listed here an international competitive advantage.
The ecosystem that supports corporate governance in the UK is regarded as one of the strongest in the world.
I am not naive about this. It is not long since market failure in the financial sector sent ripples through our economy.
And regulation has not fully solved the problem.
But in most sectors of the economy, corporate governance has worked. We share the UK government’s view that the system needs fine-tuning rather than a radical overhaul.
In any case, there are political and social tensions which need a fundamental rethink.
The signs of turmoil are visible in politics but they could have been anticipated.
They are a response to real economic trends.
The premium to high skills, in industries powered by technological change, has increased.
This has created a lot of wealth but plenty of people have been left behind in developed countries.
The implicit promise of democratic politics has always been that conditions would gradually improve.
For too many people, that no longer looks or feels to be a safe assumption.
Political turmoil was perhaps inevitable.
Thus, muddling along and relying on governments to deal with the unintended consequences of globalisation is not an option for business.
Business must invest more in research and development, in training and education, to make sure we have a workforce able to compete in the future in science, technology, engineering and maths. STEM subjects.
And business needs to do more to support government policy on skills so that workers of today and tomorrow are able to face the bigger challenge of automation in the fourth industrial revolution.
Rebuilding trust in Business
It is little wonder then that trust in business is falling, from what has already been a low base.
We need to respond.
But it is worth pausing a moment to reflect on the contribution of modern capitalism to global wellbeing.
Over past decades, people living in extreme poverty has fallen from 40% to less than 10%.
The extension of global trade has meant that, for the majority of people, living standards have improved.
Hence, the first thing that we need to do, as a business community, is to tell a better story about our contribution to society. If business doesn't tell its story about social value, who else will?
I don’t think it is correct to say that companies don’t take their responsibilities as public citizens seriously. The vast majority of companies certainly do, especially those listed on the FTSE.
I can tell you how seriously BHP takes responsible behaviour.
We operate in many countries around the world. When we invest, we do so at scale and for decades. We create well-paid jobs, often in remote areas and we pay substantial royalties and taxes.
Take diversity and inclusion, for example, where BHP is at the vanguard. Last year we published aspirational goals to reach gender parity by 2025.
Like all mining companies, we start from a low base. But we have pushed ourselves hard.
In one year we have made more progress on female participation than we did in the past decade.
Make no mistake. We do so for moral and commercial reasons.
We compete on the quality of people and since BHP announced the target, we have seen a significant increase in approaches from female talent.
It gives us the competitive edge.
Especially when you consider that BHP’s top ten most inclusive sites perform 15 per cent better and have half the injury rate than the company average.
At BHP, we continue to invest in STEM so that tomorrow’s workers have the skills to tackle tomorrow’s challenges and embrace new opportunities.
For BHP, being responsible also means being transparent about the taxes we pay; the gender pay gap; and about our exposure to climate risk, which matters for pension holders.
We led the way for the sector on climate risk disclosure in our Portfolio Analysis report in 2015.
We were hence invited to be members of the Task Force on Climate-related Financial Disclosures, set up by Mark Carney, Governor of the Bank of England in his capacity as Chair of the Financial Stability Board.
The Task Force has since developed more efficient and effective climate-related disclosure standards.
Our overall approach to transparency has not been driven by legal necessity.
BHP has been transparent often before the law requires it.
For example, as the EU continues to review low tax jurisdictions, BHP has gone ahead anyway and published details of legacy BHP entities in such countries.
A better response to globalisation: conclusion
There is, then, a great deal for business to be proud about.
But, at the same time, shocks to the political system in western societies is our call to action.
And we are listening.
I have said we need to do the right thing, which is more than just compliance, and I have said that we need to tell our story about our place in society in a more compelling way.
I want to end by reiterating the issue that might be the most important contribution business can make.
Training and education is an area in which investment has not kept up with globalisation.
That is why equipping people to compete in the future global economy is one of the most responsible things that a company can do.
The UK has enormous capacity in its world class universities.
However, there is a lot more to do.
Business and government must work in partnership to have a workforce proficient in STEM.
The BHP Billiton Foundation will continue to invest significantly in education opportunities for the future workforce, with a purposeful focus on girls.
Today’s conversation is topical as we are at the start of a serious, thoughtful and deliberate response to the whirlwinds of our time.
To use the power of enterprise to be a force for good.
It is an aim around which I think we must all rally and that BHP remains committed to.
Thank you for listening.