These business risks exist because mining operations rely heavily on climate-sensitive inputs. Energy supply, water supply, and infrastructure effectiveness represent three primary concerns for the industry as climate change increasingly impacts operations [2], and RT is exposed to potential risks to these systems in different ways across its variety of geographies.<\/p>\n
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At the subarctic Diavik Diamond Mine in Northwest Territories, Canada, infrastructure is particularly susceptible to warming temperatures observed in the region because a 568 km \u201cice road\u201d provides the only ground transportation to the mine. The majority of the traffic on the road is trucks carrying diesel fuel for the mine\u2019s electricity generation. In 2006, when warm temperatures shortened the ice road season, RT was forced to fly in 15 million liters of diesel fuel, increasing fuel costs by an estimated $11.25M [3]. In addition, RT also experiences infrastructure risk in its shipping activities, as port operations are increasingly suspended due to intensifying storms. Recently, RT\u2019s shipping operations in northwest Australia were delayed due to intensifying cyclones in the Indian Ocean [4].<\/p>\n In addition to energy supply and infrastructure, water supply also represents a significant physical and regulatory risk in RT\u2019s supply chain. At RT\u2019s various mines located in water-scarce regions, production has been impacted from water shortages and often the cost of water as well as the cost of wastewater discharge will increase. Furthermore, maintaining water supply often puts industry in direct conflict with local communities, making engagement with local regulatory bodies essential to the success of the company [5].<\/p>\n <\/p>\n Mitigating risk in the short and medium term<\/u><\/strong><\/p>\n In cases such as the Diavik Diamond Mine, RT has learned the hard way that risks of climate change are real and present; therefore, they continual assess opportunities to combat these risks. In order to mitigate the ice road infrastructure risk at Diavik, RT installed a 9.2 MW wind farm to diversify the energy supply and protect themselves against shortening ice road seasons [6]. This effort was also a part of the company\u2019s effort to reduce greenhouse gas emissions intensity (relative to 2008) 24% by 2020 [7].<\/p>\n <\/p>\n RT has also formed a water resource management program that focuses on site-specific risks such as security of water supply and regulatory requirement changes. At the Richards Bay Minerals mine in South Africa, where mining operations are located near rural communities, the company recycles water 16-20 times in order to reduce water supply costs and meet regulatory requirements [8]. The company claims that 67% of operations with site-specific water risk are on track to achieve their internal water supply performance targets by 2018 [9].<\/p>\n <\/p>\n Recommended steps for management to take<\/u><\/strong><\/p>\n As a global industry leader, Rio Tinto has an opportunity to develop technologies to be used in mitigating climate change risk. The management team should first focus funds for tech development on the company\u2019s core competency of energy efficiency in mining and processing in order to reduce energy supply risk. These technologies could be patented and could provide additional revenue for the company [10]. With exposure to many of the various risks of climate change across their various geographies, RT is developing valuable trade knowledge across many risk profiles.<\/p>\n <\/p>\n Additionally, management should periodically conduct risk analysis to determine where the inventory risk is greatest in their supply chain. Using this analysis, the company should continually assess if inventory capacities should be increased in order to protect the company from increased costs during unforeseen circumstances. For example, while it may not have been feasible to add additional diesel fuel storage at the Diavik mine in the past, if the frequency of short winters increases, the economics of additional storage capacity may change.<\/p>\n <\/p>\n Lastly, RT should evaluate the pros and cons of developing an international agency to share best practices for climate change risk mitigation. Such an agency would improve efficiencies across the industries, but some companies might be unwilling to give up their best practices if they see them as a competitive edge.<\/p>\n <\/p>\n Questions to be answered<\/u><\/strong><\/p>\n As an industry leader, what obligation does Rio Tinto have to share their best practices for climate change risk reduction with competitors? Should businesses share their learnings for the greater good?<\/p>\n <\/p>\n Word Count: 757<\/strong><\/p>\n <\/p>\n References:<\/strong><\/p>\n [1] Rio Tinto, 2016 Annual Report, p. 236-243.<\/p>\n [2] Julia Nelson and Ryan Schuchard, \u201cAdapting to Climate Change: A Guide for the Mining Industry,\u201d Business for Social Responsibility, September 12, 2011, p. 1, https:\/\/www.bsr.org\/en\/our-insights\/report-view\/adapting-to-climate-change-a-guide-for-the-mining-industry<\/a>, accessed November 2017.<\/p>\n [3] Pearce, Tristan & David, James & Prno, Jason & Duerden, Frank & Pittman, Jeremy & Beaumier, Maude & Berrang-Ford, Lea & Smit, Barry & David Ford, James. (2011). Climate change and mining in Canada. Mitigation and Adaptation Strategies for Global Change. 16.<\/p>\n [4] Reuters Staff, \u201cUPDATE 3-Australian cyclone shuts Rio Tinto ports, crude output,\u201d reuters.com, January 3, 2013, http:\/\/www.reuters.com\/article\/australia-cyclone\/update-3-australian-cyclone-shuts-rio-tinto-ports-crude-output-idUSL4N0AF2RZ20130110<\/a>, accessed November 2017.<\/p>\n [5] Dr. Elaine Dorward-King, \u201cRio Tinto\u2019s water strategy\u201d (PDF file), downloaded from Project Wet website, http:\/\/www.projectwet.org\/sites\/default\/files\/content\/documents\/conference-2011\/Elaine-Dorward-King-CS1.pdf<\/a>), accessed November 13, 2017.<\/p>\n [6] Canadian Wind Energy Association, \u201cDiavik Wind Farm: Wind energy helps reduce carbon footprint,\u201d (PDF file), downloaded from CANWEA website, https:\/\/canwea.ca\/communities\/case-studies\/<\/a>, accessed November 12, 2017.<\/p>\n [7] Rio Tinto, Climate Change Report (Melbourne: Rio Tinto Limited, 2016), p. 28.<\/p>\n [8] Dr. Elaine Dorward-King, \u201cRio Tinto\u2019s water strategy\u201d (PDF file), downloaded from Project Wet website, http:\/\/www.projectwet.org\/sites\/default\/files\/content\/documents\/conference-2011\/Elaine-Dorward-King-CS1.pdf<\/a>), accessed November 13, 2017.<\/p>\n [9] Rio Tinto, 2016 Annual Report, p. 28.<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/Lockhart-Lake-Winter-Road.jpg\")
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