How Does PTFI Approach Sustainability?

10 July 2019

In 2019, Freeport-McMoRan (FCX) the parent company of PT Freeport Indonesia (PTFI) received high recognition for its sustainability performance.

First, from Forbes business magazine and the Just Capital organization which every year determine the rankings of 100 Just Companies. FCX is ranked 91st and the only company in the basic resources sector. Second, from the Corporate Responsibility (CR) magazine by means of 100 Best Corporate Citizens. Here FCX is ranked 92nd and is one of two mining companies.

Both rankings are for companies that are flooring on the US stock exchange. The first ranking started in 2016 and since 2017 FCX has always been included. The second ranking this year commemorates its 50th anniversary. FCX was included in 2007-2013, and again in 2016 and again included this year.

It is far from easy to be included in both lists because the indicators used to determine the rankings are extremely comprehensive. Forbes and Just Capital collect votes from 81.000 respondents in the US in terms of what it is that they would most like to see in/from a company, up to subsequently using the just remuneration indicator, best client treatment, quality products, minimal impact on the environment, community contribution, ethical behaviour and leadership supporting diversity, as well as creating job opportunities. Meanwhile, CR magazine uses performance indicators and disclosures related to climate change, employment relationship, the environment, finances, management, human rights, as well as relationship with stakeholders.

How is FCX able to achieve such performance? The answer to this question can be found in the 2018 Working toward Sustainable Development Report by FCX. In the part entitled Our Approach it discloses that FCX uses the re value approach toward local stakeholders to ensure responsible production. Their production is also guided by safety, respect, integrity, excellence and commitment principles.

Those principles are subsequently enforced in the company’s management which is principally overseen/guarded by four committees: Audit, Compensation, Nomination and Management, as well as Corporate Responsibility. The last mentioned committee assist the board in managing risk in terms of work safety and health, environment, human rights, community and public health, relationship with stakeholders, climate change, donations and political activities. Both regarding policy, program, implementation, as well as its monitoring and assessment are under the coordination of the Company/Corporate Responsibility Committee.

In the Executive part, is what they refer to or state as sustainable development leadership team led by the VP for Environmental Services and Sustainable Development, with members comprising top managers, including the Chief Operating Officer (COO). During 2018 they have achieved a lot including ensuring achieving the performance expectation based on the sustainable development framework from the International Council on Mining and Metals (ICMM), as well as enhancing sustainable development risk register.

In 2018, FCX stated their focus was working on 10 issues in terms of sustainability, namely anti-graft, biodiversity, climate change, relationship building and community development, health and safety at work (K3), human rights, employment relationship, products stewardship, tailing management, as well as the supply and management of water.

To manage those 10 sustainable issues, as well as other issues which are all reported in the 2018 FCX Sustainable Report, FCX employs/applies principal international standards. ICMM principles, Sustainable Development Goals (SDGs), Global Reporting Initiative (GRI) G4, and Mining and Metals Sector Disclosure (MMSD) are employed to serve its greater framework.

Meanwhile, for specific political issues, FCX also applies relevant international standards. For payments/remittances to administrations wherever FCX operates Extractive Industry Transparency Initiative (EITI) guidelines are applicable. Meanwhile, to manage human rights issues, FCX applies The UN Guiding Principles on Business and Human Rights, as well as The Voluntary Principles on Security and Human Rights.

To assure/guarantee that the performance reported categorically complies with good and correct sustainable reporting, FCX seeks for assurance of corporate integrity, which operates by simultaneously using two standards, namely ISEA3000, and the standard issued by International Auditing and Assurance Standards Board (IAASB). Therefore, in the (said) report the balance absolutely comes through, including the issue in terms of unachieved goals/targets.

FCX set a target for female workers up to the managerial level, will become 15% in 2018. This target was not achieved. Generally, the proportion of female workers was 13% and the proportion of female managers was 12%. In terms of health and safety at work or K3, the target for 2018 was 0.70 in total recordable incident rate (TRIR). In reality, throughout the (entire) FCX operation the figure was 0.71. Almost there… but not quite. Similarly in terms of the 2018 environmental target namely zero significant environmental incidents. Meanwhile, there was one incident applicable in this category whereby the air quality in Sierrita, Arizona surpassed the limit.

Beside the missed targets, which were openly/transparently reported by FCX, there is also interesting evidence of complete transparency in terms of the numerous incoming complains/grievances, namely 226 for the entire 2018, whereby 28% were in terms of the benefit received by the community, 24% were about the environmental performance and 11% were in terms of health and safety at work (K3).

FCX also transparently and openly reported the numbers and sources of its emissions during 2018, both direct, as well as indirect emissions from the use of energy. The largest sole FCX energy source is natural gas, thereafter water, then coal and other fossil energies. Although FCX only recently started to use wind source and sun source to meet 2% of its energy requirement, but its energy source which could be classified to be low and renewable emission that is utilized is beyond 80% of its energy mix.

As one of the principal miners, PTFI operations seem to substantially colour the 2018 sustainable report compiled by FCX. However, because of just being one of the operations, the report can mainly be used to comprehend how the PTFI economy, social and environment sustainable performance approach is managed/implemented thus far. If we want to dig deeper into what PTFI is doing, a number of other reports are available, including a report on sustainability issued by the Amungme and Kamoro Community Development Association (LPMAK) and Social Investment Report prepared by PTFI.

Now, the Government of the Republic of Indonesia is the majority shareholder in PTFI. The stakeholders will surely probe whether the sustainability policy previously owned/established will be upheld/maintained or perhaps even reinforced. Similarly, they would like to know if the PTFI economy, social and environmental performances will be enhanced under the new shares ownership.

Jalal,Page : 8 Kompas Newspaper

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