James Ensor, Chief Executive, BHP Foundation - IMARC 2019 - Wednesday, 30 October
The short clip you’ve just seen reflects some of the unprecedented sustainability challenges facing our world.
They’re challenges that have real consequences for all of us: challenges including inequality, corruption, loss of public trust in institutions, climate change and water scarcity.
A potent combination of fear for the future and anger at our collective inability to address many of these challenges is driving millions of people onto the streets.
From Santiago to Hong Kong and Barcelona to Quito, people are coming together to express their frustration and fear for the future.
And many of those frustrations and fears are directly relevant to the global resources sector.
- 800 million children – that’s roughly half of the world’s youth – will reach adulthood without the modern skills necessary to enter our workforces. The majority of these potentially disengaged, poor and angry young people also live in the rural and remote regions where our sector seeks a social licence and wants to draw our future workforces from.
- 20 per cent of foreign bribery cases around the world involve just one sector - extractive industries.
- We are losing 700 hectares of forest every hour around the world due to increasing demand and competition for access to land for food, water and natural resources.
- Related to this, is land-use related conflict. While the majority of this conflict is not mining related, it will increasingly influence the operating context for all land-based industries.
Now, like our donor, BHP, every company represented in this room is trying to do the right thing. We abide by our environmental obligations. We take governance seriously. And we make positive contributions to our local communities.
Yet my proposition to you is the future sustainability of our industry in many parts of the world will be dependent on our ability to drive big step change to address these challenges. Because the pursuit of social license is no longer enough. Society increasingly – and rightly – expects business to make a broader contribution to addressing the big sustainable development challenges beyond our direct business interests.
And it isn’t just societal expectations. Blackrock is the world’s largest institutional investor with $1.7 trillion in funds under its management. Its CEO, Larry Fink, has in recent years written to global CEOs on this theme. I quote from his most recent letter:
“The public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate. Without a sense of purpose, no company, either public or private, can achieve its potential. It will ultimately lose the license to operate.”
This makes it clear how these considerations will inform choices of where institutional investor capital will flow now and in the future. The question is, therefore, can we – as a sector – rise to this challenge? Our donor, BHP, has started this journey in recently announcing a shift in approach from ‘social licence’ to what it calls ‘social value’.
In a nutshell, a social value approach drives long-term societal, environmental and economic considerations into the heart of all company planning processes and decision making. Every business decision has a societal implication and companies increasingly ignore this at their own peril. Through a ‘social value’ approach, BHP as a company will continue to invest in their local host communities, helping them to thrive socially, economically and environmentally. However, BHP also recognizes an imperative to invest in tackling the big sustainable development challenges that will likely determine the future of the global resources sector.
This is where the BHP Foundation comes into the picture. When we began in 2015, we were a start-up with a simple but daunting mandate from BHP as our donor: to make a positive difference to the world. Now, the easy option would have been to immediately start spending money on worthy initiatives. However, we took the opposite approach. We didn't spend a cent for 18 months. We decided that shifting the needle on these big challenges required us to start from scratch. So in 2015, we began with a blank sheet of paper and invited unusual alliances of people from industry, NGOs and international institutions into the room to work with us to develop our strategy. These were global experts in their fields; people who were on the ground every day, dealing with real impacts of these challenges.
And over four years, we’ve worked together, aligning aspirations and harnessing collective expertise to co-create a strategy for the BHP Foundation that was both bold and ambitious. We determined that to have the greatest impact, we’d focus on three defining issues: natural resource governance, environmental resilience and education equity.
Let me talk briefly about why and how we focus on each of these areas.
Our Natural Resource Governance program is about harnessing the transformative power of natural resource wealth for sustainable and inclusive human development. As you saw on the trailer a few minutes ago, today 1.8 billion people in resource rich countries live in poverty. That’s roughly one in every four people on earth. This should be an outrage.
The hundreds of billions in taxes and royalties that our companies pay to our host governments should fund the health, education, infrastructure and other services that lift people in resource rich countries out of poverty. But in far too many countries it does not.
Now, at this point you may be thinking, what does a Natural Resource Governance project to address this challenge look like? As an example, we work with an organisation called Open Contracting Partnership to drive better outcomes from extractive industry tax and royalty payments for citizens across 15 resource rich countries. Open Contracting shines a transparency spotlight on government contracting, which is the world’s top corruption risk and represents 57 per cent of corruption cases coming to the OECD.
Corruption often comes in the form of limited or opaque government tender processes, lack of transparency of tender bids, deal making between corrupt civil servants and tenderers, or outright price-fixing. Open Contracting places every government tender on a single web-based portal accessible to any potential tenderer. This increases the number of tenderers, generates greater competition for government contracts, reduces successful tender prices and eliminates the opportunity for corrupt back-room deals. Through our partnership, Open Contracting has been implemented by the Education Department in Bogota, Colombia, for the provision of school meals for 700,000 children. Prior to implementing open contracting, children were receiving poor quality food at grossly inflated prices paid by parents and taxpayers. Open Contracting exposed a corrupt $22 million cartel in the provision of school meals, quadrupled the number of suppliers and delivered vastly superior quality and cheaper food for 700,000 children. Every single day.
Our second program area is environmental resilience. This program aims to find new ways of conserving and managing our natural environments for the benefit of future generations. For example, the wellbeing and livelihoods of one billion people – that’s one in seven people on the planet -- are reliant on healthy coral reefs, yet 75 per cent of all coral reefs are under threat from the combination of over-fishing, pollution and, of course, climate change. Through our Resilient Reefs project, being led by our partner Great Barrier Reef Foundation, we’re building a whole-of-community approach to the challenges facing World Heritage Listed reefs spanning Palau, New Caledonia, Belize and Australia’s own Great Barrier Reef and Ningaloo Reefs. Through this project we’re bringing together reef dependent communities – for example fisherfolk, reef management agencies and resilience experts to develop and implement reef resilience plans to give the reefs the best possible chance to survive and adapt.
Our third global focus is education. Everyone has a right to achieve their potential through access to quality education. We also live in a rapidly changing world where skills in the STEM fields (Science, Technology, Engineering and Maths) will be increasingly important in nearly every field, not least the mining sector. We also know that women and girls are under-represented in STEM education and career pathways, and that reversing this trend will drive enormous talent into our future workforce. We are partnering with the Australian Mathematical Sciences Institute -- AMSI – in Australia to realise the potential of girls. The Choose Maths program aims to encourage women and girls to pursue STEM education and career pathways. In just five years, it has transformed maths learning for over 58,000 female students across 1,300 schools. A big part of the project’s success has also been its teacher outreach program through which 7,000 hours of training has been delivered to 3,000 Maths teachers with outstanding results. For the next generation of STEM professionals, that’s giving them the foundational skills and confidence they need to make a difference. For Australian industry, this project is also helping build a pipeline of female talent for the workforce of the future.
Today through these programs we work with 33 partner organizations and have a portfolio of projects that spans 43 countries.
To give us the best possible chance to achieve our ambitions we are guided by three key principles in all our work:
1. We collaborate – the only way we believe sustainable change can be achieved is by building genuine partnerships across communities, civil society, industry, governments and international institutions that work towards common goals. As an example, we partner with globally renowned anti-corruption NGO Transparency International on a project which is addressing corruption risks in the issuing of mining licences and tenements. TI have worked across 18 countries over the past three years, bringing together government, regulators, communities and members of civil society organisations to identify corruption risks. Since the project commenced, it’s linked local anti-corruption experts and campaigners dealing with similar challenges across the world including from Zimbabwe, Sierra Leone and Cambodia to name just a few, and that’s helping to drive real reform in the issuing of mining licences.
2. We’re driven by evidence and contribute to a growing evidence base of what works. To give you an example in the education sector, imagine you’re a school principal or education minister and have the good fortune of deciding how to spend $1 million in additional funding to enhancing educational outcomes. What would you do? Invest in laptops? Teacher training? School meals? Too often these decisions about the allocation of billions of dollars of education funding are based on personal experience and preferences rather than hard evidence of what works. Through our partnership with the London-based Education Endowment Foundation, an ‘education toolkit’ has been built from analyzing thousands of education intervention evaluations. For the first time, the toolkit gives education decision makers evidence-based data of what works best to improve student learning outcomes, enabling more informed decision-making about where to invest the education dollar. 60% of education decision makers now use the toolkit in the United Kingdom. For example, a breakfast program is being rolled out to students in nearly 2,000 schools across the UK, because evidence shows if a child eats breakfast, they learn more.
3. We’re also guided by a principle to develop new models and set new standards for the future. For example, the Amazon rainforest of Peru is a global biodiversity hotspot under enormous threat. Reversing the trend of forest loss and conflict between forest users is one of the most pressing global sustainable development challenges of our time. Through our partnership with Conservation International, we’re supporting coffee growers and indigenous communities in Peru to increase their incomes, reduce land-use related conflict and more sustainably manage forest lands. This project is helping local coffee growers to reduce deforestation through shifting to shade grown coffee production, achieve premium coffee prices through product certification, control more of their supply chain and generate income from carbon credits through avoided deforestation, in turn contributing to climate change solutions. What’s truly exciting about this project is that if the model is proven to be sustainable and effective, it can become a prototype for the broader Amazon basin. I was recently in Peru visiting this project and had the opportunity to talk to local famers. Because of this project, their incomes are now 3-4 times what they were and they can now send their kids to school.
Of course, success won’t be quick or easy. These are enormous challenges we face. Yet while it is early days for our projects, we know with the right people and support, it is possible to play a part in shifting the needle on the seemingly insurmountable. Because at the BHP Foundation, we think a little differently. We pursue difficult issues that require unique and innovative solutions. So my challenge to you is to think bigger about the social value you and your companies create, beyond what your social licence requires you to do. Find your ambition and collaborate widely with experts from within and outside the industry. Don’t assume another company, NGO or government will fill the void and find the solution because it likely won’t happen. And challenge the status quo because all of us have a responsibility. With millions of people taking to the streets around the world to demand change and real solutions, we all have to get on board. All it takes is the first step.