Rio Tinto (ASX, LON, NYSE: RIO) in its 148-year history and laid out plans聽to tackle the vast carbon footprint of its global customers, in an effort to leave behind what its new chief executive called a 鈥測ear of extremes.鈥�
The world鈥檚 second-largest miner is handing back $9 billion in cash to shareholders, including a record final dividend of $6.5 billion. The splurge comes as iron ore prices, Rio鈥檚 most important commodity, climbed almost 85% in 2020 to a nine-year high of more than $175 a tonne.
In his first address since taking up the top post in January, Jakob Stausholm said he would strive to restore trust in the company, shattered after it destroyed a sacred Aboriginal site to make way for an iron ore mine expansion in Western Australia.
New CEO Jakob Stausholm has laid out plans for a shake-up of the mining giant鈥檚 climate change agenda
The blasts at Juukan Gorge cost former CEO Jean-S茅bastien Jacques and two other senior executives their jobs as investors and indigenous groups聽demanded accountability聽for the incident.
Rio鈥檚 new leader promised on Wednesday to work with traditional owners as the company continues to grow its flagship iron ore division.
Stausholm鈥檚 comments were made in the context of Rio鈥檚 . 聽Underlying earnings rose 20% to $12.4 billion in the period. Net debt fell to $664 million from $3.65 billion. Profit before tax was $15.4 billion, up from $11.1 billion in 2019.
Stausholm said 2020 was an 鈥渆xtraordinary year鈥� for Rio but also one 鈥渙f extremes.鈥�
鈥淥ur successful response to the covid-19 pandemic and strong safety performance were overshadowed by the tragic events at the Juukan Gorge, which should never have happened,鈥� he said.
Emissions u-turn
Stausholm also announced that the group is reversing an earlier stance on Scope 3 鈥� those generated by customers through the use of its products 鈥� by owning its role in how third parties use the commodities it mines.
Rio Tinto is the world鈥檚 top iron ore miner, a commodity responsible for around 90% of its profits. Given its huge exposure to the steel industry, one of the world鈥檚 heaviest polluters, the company has come under increasing pressure聽to help making steelmaking a more environmentally-friendly activity.
The process of producing steel involves adding coking coal to iron ore to make the alloy, and is responsible for up to 9% of global greenhouse emissions.
鈥淭oday, you should just see it as an extension, recognizing that we can actually work together with our partners to reduce the Scope 3 emissions鈥�
Rio Tinto CEO Jakob Stausholm
The mining giant vowed in 2020 to spend $1 billion over five years. The ultimate goal was to have 鈥渘et zero鈥� greenhouse gas emissions by 2050.
Rio also said at the time that its total Scope 1 and Scope 2 emissions (indirect聽emissions聽from the generation of purchased energy consumed by a company, such as electricity) would be 15% lower by 2030 than 2018 levels.
The company, however, did not set a target to reduce scope 3 emissions, arguing it was nearly impossible to control how steelmakers use the iron ore it provides them.
Rio said on Wednesday it will now work with customers to reduce steelmaking carbon intensity by at least 30% from 2030. It is also aiming for carbon-neutral steelmaking and zero-carbon aluminum and net-zero emissions from shipping by 2050.
Taking a page from rival BHP鈥檚 (ASX, LON, NYSE: BHP) book, Rio said it will tie executive bonuses to progress.
鈥淲e are all learning on the journey of climate change,鈥� Stausholm . 鈥淭oday, you should just see it as an extension, recognizing that we can actually work together with our partners to reduce the Scope 3. It is a real shift, but it鈥檚 also a natural development. You start with your own emissions, and then you expand from there.鈥�
A study published last year聽showed that eight of the world鈥檚 top ten largest mining companies were not doing enough to help聽keep global temperatures from increasing by less than聽2掳C a year by 2050.
(With files from Bloomberg)