Business and environmental sustainability are not natural bedfellows. Business is about making money. Sustainability is about protecting the planet. Business is measured in months and quarters. Sustainability often requires significant short term costs to secure a sometimes uncertain long-term benefit. To some activists, all executives are exploitative, selfish one percenters. To some executives, all activists are irresponsible, unyielding extremists. And yet engaging with the issue isn’t optional – all businesses must have a strategy to deal with sustainability and, like any strategy, this involves making choices. This Strategy and Sustainability course based on Rosenberg's recently published book by Palgrave (http://www.palgrave.com/la/book/9781137501738) that encourages learners to filter out the noise and make those choices in a hard-nosed and clear-eyed way. Prof. Rosenberg’s nuanced and fact-based point of view recognizes the complexity of the issues at hand and the strategic choices businesses must make. He blends the work of some of the leading academic thinkers in the field with practical examples from a variety of business sectors and geographies and offers a framework with which senior management might engage with the topic, not (just) to save the planet but to fulfill their short, medium and long-term responsibilities to shareholders and other stakeholders. This course promises to be both engaging and thought-provoking, aimed at anyone who wishes to gain a deeper understanding of a subject that is no longer perceived as a choice but a necessity for future managers and business leaders alike.
1. Introduction: Differences Across Industries and Regions
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From the course by IESE Business School
Strategy and Sustainability
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From the lesson
Week 5 - Differences Across Industries and Around the World
This session explores differences across business sectors including automotive, oil & gas, fast-moving consumer goods, mining, and IT/consumer electronics. We will also contrast the situation in the United States with Europe, China, India, and Africa. Learning Objectives: To underline the importance of adapting a specific firm’s strategy to its sector, its geographic scope and even the nature of its ownership and governance structure prior to developing a specific strategic response.
Meet the Instructors
Mike RosenbergAssistant Professor
Strategic Management
[MUSIC]
This is Mike Rosenberg with Strategy and Sustainability.
We're going to get now into session five.
Session five I think is very important because it talks about the differences
between different industries in different regions of the world.
Because I feel very strongly that one size does not fit all.
That each company's situation is very important in determining what
each relationship with the natural environment should be.
So in this session,
we'll have six segments, the first is an introductory segment.
And I use the mining industry as an example of what these differences are.
Then we'll look at automotive and, oil & gas, which are two different sectors which
are linked very closely, but of course with very, very different issues.
And we'll look at consumer goods and consumer electronics.
And then we'll change gears a little bit and
start looking at differences around the world.
So segment four, we'll look at the United States and
Europe as kind of representatives of the west, if you will.
In section five, we'll look at China and India, two very, very different but very,
very interesting emerging markets.
And finally, in segment six, we'll look at Africa.
So as I said earlier, everything is different.
A mine is not the same as a company producing cars and
trucks around the world.
This is very, very different from the oil and gas sector, or the power sector.
Very different from consumer goods.
In consumer goods, you have the manufacturing of consumer goods and
also their distribution.
And then we have this crazy world of consumer electronics.
So that will be segments one, two and three, if you will.
And then segments four, five and six, we look at differences around the world.
Mining is critical for the global economy.
From mines we get coal, which we're still using for
generating power, for heating and
making steel, precious metals, base metals like iron, copper, tin, nickel, etc.
Exotic metals, lithium, manganese and
what's called rare earths metal which we'll talk about a little bit later.
Diamonds and other gem stones, phosphates, niobium, a whole bunch of things we
use in many, many products, many, many services, all the time come from mines.
Now Mark Cutifani, Mark Cutifani is the CEO of Anglo American,
one of the largest mining companies in the world.
And Mark makes the point that mining,
all of mining only touches 1% of the Earth's surface.
He also makes the point that mining touches that 1% in a very, very deep and
a very, very dramatic way.
So he feels very strongly that mining companies must have a responsibility to
do what they need to do to take these needed materials out of the ground.
But then to be very, very responsible for the environment around the mine, and
then to put the land back to where it was at the end of life of the project.
So Mark I think is an example in this space of an executive who really gets it,
who really sees the future as it might occur.
One example from Anglo American is the Minas Rio project.
Minas Rio is an enormous project.
It's in Brazil.
It actually runs from a mountain in the state of Minas Gerais,
all the way to the coast in the state of Rio de Janeiro.
On the mountain, you have the open pit mine and the benefaction plant.
Which takes very,
very high quality iron ore, mines it out of the ground, processes it.
Puts it into a water slurry, and
sends it through a 529 kilometer pipeline to the sea.
Now, for the project, they've had to cross 33 municipalities,
the mine itself affects six towns.
They built a brand new shipping terminal.
And you can imagine the environmental
permissions that they've needed to do all that.
The right of ways they needed to negotiate.
The roads which they needed to use and the towns.
And Anglo made an enormous effort first to get all the permits,
then to negotiate with everybody involved.
And then to manage the community relations
in such a way that today, it might is running, it's very productive line.
It's gone under some challenges because of the price of iron ore,
which is slowly coming up.
But today, the mine is seen as an asset in the community.
And Anglo had to spend a lot of time, a lot of energy and
a lot of money to make everything work, to make sure that everything's done properly.
And really to make sure that the social license to operate was achieved.
Yeah, just imagine building this thing.
Thousands and thousands of men from all over Brazil,
descending upon these little towns to build the mine itself.
This causes a huge disturbance in the day-to-day life of the towns,
all of which Anglo had to manage and put back together.
The critical issues in mining typically are catastrophic risks.
So many of you might have seen the movie about the 33 miners who
were trapped in Chile in 2010.
I think Antonio Banderas is in the movie.
Mines do collapse, people get killed, people get trapped.
Fortunately in this case, the international community was mobilized.
Everybody worked really hard and
they've finally got all the guys out which was a bit of a miracle.
The other thing that happens in mines is there's
a lot of water in the process of cleaning and processing the metal.
Sometimes heavy chemicals are used in that process,
creating what they call tailing dams or lakes.
Tailing ponds, which are lengths of water which is waiting to be treated or
has been treated which needs to settle
before you can release the water back into the natural system.
These ponds are typically held back by dams.
And the dams sometimes break.
Not very often, but sometimes.
In 1972 there was a terrible tragedy in Buffalo Creek, West Virginia.
125 people were killed, 1,100 were injured, and 4,000 people homeless
in minutes as a coal mine's tailing dam broke, flooding the valley with really,
really heavy muddy water, basically destroying everything in its path.
In 1998, here in Spain, a copper dam had it's tailing dam break.
Flooding the river,
which eventually goes to a beautiful natural park called, Donana.
This is one of Spain's most beautiful places.
It's a natural wetland.
And there was tremendous concern that the heavy water which is loaded
with heavy metals would eventually hit the park and hurt the wildlife in the park.
Huge efforts by the Spanish government, the company involved which is called
Bulletin, to dam the river and to try to manage the whole process.
And most people would say that not too much damage was done to the park,
although all that is debatable.
What is interesting is Bulletin,
the company which was representing the mine, Canadian company has more or
less ceased to exist because of the cause of this accident,
as well as a whole bunch of other things which were happening at the time.
So managing catastrophic risks becomes very important in the mining business.
Another issue in mining is a very specific one.
These are rare earth metals.
Rare earth metals are called rare because they're found in very low concentration,
so their mining requires huge amounts of processing, and huge amounts of chemicals.
Right now, China is responsible for about 90 or
95% of world production of these metals, which are critical in making magnets and
very light weight materials, which we need for electric cars, wind generators and
a whole bunch of renewable energy applications.
But the reality is, it costs too much money to do this in the West,
so one the rare earth mines in California,
Mountain Pass, is right now closed because of the environmental regulations.
China is making, is mining most of these in the region.
The town is called Baotou and it's famous for its toxic lakes, its terrible air, and
the tremendous environmental contamination that mining these materials has produced.
Also mining is subject to some technological innovation and
the biggest one really is automation of the mines.
There is a possibility now and some mines are already doing this
of running the equipment remotely from air conditioned.
Things like drones in the military.
The issue there is if you automate the mine,
you no longer offer jobs to the people who live around the mine.
And the entire social commitment of the mining companies has been to
use economic development as the reason for people to support the mining activities.
If we automate all the jobs and if people in Cape Town are driving equipment
in South America using the technology, then this all might breakdown.
So if you think about mining company's and
how they seems to be managing over the environment.
You'll find different company is following different strategic options,
many in what I would call, wait and see.
Some in, and take the low road specially national companies and in certain markets.
And some of the most,
the biggest publicly traded companies are moving towards show and tell.
So if you look at BHP Billiton, Rio Tinto, Glencore, Goldcorp or
Anglo American, all of these companies are publishing a very well
prepared sustainability reports with the latest guidelines, etc.
But if you look at little bit further down,
unless you find other operators doing things very differently.
And one of the strategic issues then is how do you compete with
operators who may not be following the same standards as you are.
[MUSIC]
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