New Rio Tinto chief executive Jakob Stausholm will face his first public test on climate change as an investor push looms for faster and deeper emissions cuts across the miner’s global operations.
Since taking the top job in January, Mr Stausholm has laid out ambitions to lift Rio’s environmental and social performance and accelerate its decarbonisation agenda with expanded emissions goals that incorporate the huge carbon footprint of its customers.
However, in a series of resolutions to be lodged ahead of investor meetings in Australia and the United Kingdom, shareholder activist group Market Forces argues Rio’s direct and indirect emissions targets still fall short of what is needed to meet the Paris agreement’s goals of limiting global warming to well below 2 degrees.
Rio Tinto last year pledged to invest more than $1 billion over five years to achieve a 15 per cent cut to its operational emissions by 2030 and become a “net-zero” emitter by 2050. The shareholder motions argue these targets are inconsistent with Paris goals and are “falling behind” those set by rival miners. BHP has targeted direct emissions cuts of at least 30 per cent by 2030. Brazil’s Vale is aiming for 33 per cent.
“Clearly, further investor support is required to ensure the company acts to align its operations with, and appropriately manage the risks posed by the low-carbon transition required to meet the climate goals of the Paris agreement,” one of the resolutions says.
In another resolution, Market Forces calls for Rio to disclose its “risk threshold” for the indirect emissions produced by customers of its products such as steel mills in China. Known as Scope 3 emissions, these are far greater than the company’s operational carbon footprint and were an estimated 519 million tonnes of carbon dioxide-equivalent in 2020 alone, almost as much as Australia’s.
Steel mills are by far the biggest consumers of Rio’s iron ore, which is combined with coals in huge blast furnaces heated at more than 1000 degrees to churn out liquid steel. While Rio no longer produces coal, the carbon dioxide in the steel-making process accounts for the bulk of Rio’s Scope 3 footprint and presents a growing challenge amid pressure from investors and world governments to slow climate change.
“Rio Tinto’s massive exposure to Scope 3 emissions turns into a liability through the costs of carbon emissions being passed through, or customers for its iron ore simply not being able to keep up,” Market Forces director Julien Vincent said. “Investors should be made aware just how much of this risk Rio Tinto is prepared to bear, and how it will work to preserve its customer base into the future.”