Rio Tinto: The Mining Giant Pollutes Indonesia's Environment

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Case Details:

Case Code : BECG030
Case Length : 16 Pages
Period : 2003
Pub. Date : 2003
Teaching Note :Not Available
Organization : Rio Tinto
Industry : Mining
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"It's (Rio Tinto's) activities in some of the wildest and the most pristine places in the world and their impact on the environment of those places, the people who live there, the life-style of the indigenous people and also its corporate culture, are subjects of real concern."

- 'Rio Tinto: the Tainted Titan,' the Stakeholders Report,, 1997.

"Rio Tinto has for many years disregarded human rights and devastated unique environments."

- As stated by Friends of the Earth (FOE), in, 2001.

"Wherever possible we prevent, or otherwise minimise, mitigate and remediate, harmful effects of the Group's operations on the environment."

- Rio Tinto's Environmental Policy,

Rio Tinto Under Attack

In early-2003, Rio Tinto, the world's biggest privately-owned mining company, came under attack at its annual general meeting for alleged environmental destruction and human rights abuses related to its mining operations in Indonesia. Among other allegations, Rio Tinto, the parent company of the Indonesian mining outfit PT Citra Palu Mineral (PT CPM), was said to be secretly exploring the protected forest park 'Poboya-Paneki Great Forest Park' for gold reserves.

The forest park was a protected conservation reserve within a distance of seven kilometers from the provincial capital of Palu in Central Sulawesi. It was a crucial water catchment area and a source of drinking water supply for Palu, managed by the local communities. Rio Tinto had reportedly continued mining in this area despite opposition from the local community (on environmental issues). The fact that the company indulged in the above activities despite Indonesian forestry laws having declared (in 1990) the forest park as a protected area where mining activity was prohibited, was shocking indeed. Rio Tinto categorically denied all the charges leveled against it. However, Muhardjo, a geologist working with PT CPM had confirmed that the company had gone ahead with the mining exploration activity in spite of knowing that it was a protected area.1

Reportedly, company officials openly admitted that Rio Tinto had entered into negotiations with the local government to shift the forest boundary so that mining activities could be carried out. Reportedly, PT CPM had been carrying on exploration activities in the park since 1997 though the local people found out about it only in 2000.

The company described the forest as 'unproductive' though there was sufficient evidence that it was home to several kinds of flora and fauna. The local community had been continuously tapping the forest's ecosystem and used some parts of the area for small-scale plantations, farming, husbandry and forest product harvesting. Above all, the forest performed the important function of keeping the hydrological balance of the region's eco-system. A major concern of the environmentalists was that mining activities in the forest would not only cause dust pollution in the city of Palu, but the waste dumped into the Bay of Palu (sea) could affect the region's marine life, which has for long been a source of livelihood for the local fisherman community.

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1] As mentioned by Muhardjo in a telephonic interview conducted by Mining Monitor on 28th March 2001


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