Rio Tinto PLC, the largest iron ore miner in the world with a heretofore strong reputation for respectfully engaging with indigenous groups on cultural heritage issues, legally destroyed important heritage sites more than 46,000 years old in May, drawing global condemnation.
Companies can no longer hide behind domestic laws, federal permits or legal decisions to shield them from community outcry when they adversely impact cultural heritage sites and fail to sufficiently consult with the impacted indigenous people.
Lawyers for U.S. companies should take note and consider how to help clients incorporate cultural heritage impacts and engagement with indigenous people into their risk management practices.
By blasting two caves considered sacred to the Puutu Kunti Kurrama and Pinikura people, Rio Tinto created irreversible loss that could have been avoided by honoring the requests of the community. While Rio Tinto’s actions did not violate Australian law or its own company policy, the site’s traditional owners issued a statement saying they notified Rio of its significance and the specific desire to leave the caves untouched.
The incident has elicited protest from the indigenous and archaeological communities, but it has also led major shareholders to demand answers from the company. In response, Australian legislators pledged to tighten cultural heritage laws, and Rio Tinto pledged to review its policies, but the controversy is far from over.
Its reputation now soiled, Rio Tinto may face additional obstacles to funding and approval for future projects. The harm to the company’s standing is already deterring other companies from taking similar action.
BHP Group PLC, for example, received legal permits for an operation that would obliterate up to 40 sacred sites in Australia, but they have opted for further consultation with Aboriginal groups rather than proceed with their plans and risk the public outcry Rio Tinto generated.
Rio Tinto’s devastating blast occurs in a year defined by COVID-19 and global social unrest, both of which have created a sense of urgency in corporations to detect and avoid risk. Environmental, social and governance, or ESG, metrics are gaining unprecedented attention in this context, as early measures indicate corporations committed to better ESG practices have performed much better in the 2020 economic downturn.
As a result, banks, credit agencies, the U.S. Securities and Exchange Commission, and other financial institutions are affirming ESG factors are not only ethically important but also financially material. They are doubling down on efforts to standardize ESG metrics and employ them as critical analytical tools.
When it comes to cultural heritage, however, ESG performance standards are still in development and do not adequately address the concerns of indigenous peoples, the need for consent from local communities, and the importance of providing remedies when things go wrong.
Yet, cultural heritage sits at the intersection of many ESG-related concerns, including conflict over natural resources, protecting the environment, and property rights. Indeed, attention to heritage has the potential to mitigate a host of risks facing a project.
Events like the protests over the Dakota Access Pipeline and Rio Tinto’s destruction of sacred sites highlight how much corporations have to lose, reputationally and financially, when they ignore cultural heritage interests. They also reveal how violating cultural heritage rights can lead to other human rights violations, including rights to physical security, access to water, and self-determination.
Despite the lack of attention cultural heritage receives in many ESG assessments, there are multiple shared and widely employed guiding principles developed by the United Nations, the World Bank, the International Finance Corp. and other international bodies to govern corporate practice when it comes to cultural heritage.
Many of these frameworks provide indicators firms can be measured against, or baseline performance standards that can be further developed into assessment tools. Rather than folding cultural heritage issues into broader, generalized ESG metrics, it is well worth tapping existing expertise in assessing and mitigating project risk in this centrally important area.
More important, the lessons of Rio Tinto — and other poorly managed projects resulting in loss for indigenous communities — teach us that compliance with the law remains, at best, a minimum requirement for managing risk related to cultural heritage issues.
Rio Tinto seems to have met all legal and internal policy requirements in this case, but they still fell short in meaningfully engaging the community and fully assessing the impact of their actions.
Many U.S. companies similarly stop short at the legal baseline in managing their corporate practices. Stakeholders, including shareholders, investors, employees and local organizations, however, have begun holding companies to higher standards. In short, legal counsel must advise their clients that it is no longer sufficient from a corporate risk perspective for companies to claim that their adverse impacts on cultural heritage sites were legal.
Community outcry over failing to consult impacted indigenous peoples can easily endanger corporate reputations, stock prices and the social license on which companies rely to advance development projects.
This article was written for Law360 by Marion F. Werkheiser, managing attorney and Katherine Sorrell, summer associate.
For more information about our ESG practice please click here.