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Our Approach to Climate Change

We have put the low-carbon transition at the heart of our business strategy: combining investments in commodities that enable the energy transition with actions to decarbonise our operations and value chains.

Our strategy and approach to climate change are supported by strong governance, and we are building our processes and capabilities to enable us to reach net zero emissions by 2050.

Climate change has formed part of our strategic thinking and investment decisions for over two decades and was a fundamental component in our strategy development process in 2021. Recently, there has been a rapid shift in the external context on tackling climate change. This includes the increasingly ambitious emissions targets set by many governments in the lead up to COP26; developments in low-carbon technologies, such as renewables and electric vehicles, and their falling costs; as well as the increasing international co-ordination on climate policies, including carbon pricing.

In parallel, society’s expectations continue to rise. Companies extracting minerals must reduce their impact on the environment and host communities and go beyond regulatory obligations to drive the development of more sustainable value chains. An emerging theme in tackling these issues is the circular economy, which is built around avoiding and reducing waste and pollution, keeping products and materials in use, and regenerating natural systems. The highly recyclable nature of our products, potential utilisation of waste streams, and re-use of assets could create considerable near and long-term growth and partnership opportunities as the world tackles climate change.

Our approach

  • Producing materials essential for the low-carbon transition
  • Reducing the carbon footprint of our operations
  • Partnering to reduce the carbon footprint of our value chains
  • Enhancing our resilience to physical climate risk

One of the three key elements of our business strategy is to grow in materials enabling the energy transition. Reaching net zero emissions globally will ultimately rely on increasing the supply of a range of metals and minerals supporting the development of clean technologies and associated infrastructure.

Each commodity we produce has a vital role to play in the low-carbon transition. Copper demand will rise with the renewable electrification of energy, and lithium will be a fundamental ingredient in electric vehicle batteries and grid-firming energy storage solutions. Demand for aluminium will grow for uses like energy-efficient lightweight vehicles, and steel will also be essential in a range of applications, from high-speed rail networks, to wind and solar support structures and green hydrogen production facilities.

We are accelerating the decarbonisation of our assets to strengthen our alignment with the goals of the Paris Agreement and aim to reduce our emissions by 50% by 2030. As part of our new Group strategy, we now aim to achieve the 15% absolute reduction target five years earlier, by 2025, and have more than tripled our 2030 target to reduce emissions by 50%. These targets replace our emissions intensity target. We will continue to adjust the 2018 baseline to exclude reductions achieved by divesting assets in future, and to account for acquisitions.

Our products are essential enablers of the energy transition and a net zero world. We operate in energy- and carbon-intensive value chains – particularly steel and aluminium production – and are working with our customers on the technologies needed to address the resulting emissions. Steel is a vital material for industry, construction, transportation and low-carbon infrastructure and, with limits to the availability of recyclable steel, our iron ore products have an important future role to play – but we must support our customers as they work to decarbonise steel production.

Our assets, infrastructure, communities and broader value chains are exposed to the impacts of extreme weather events associated with climate change, as evidenced by our experience of events such as drought, flooding, heat waves and fires that are occurring globally. While the immediate exposure to extreme weather events (acute climate risk) is addressed by product-group-level risk assessments and study guidance, the longer-dated risk exposure to chronic changes in climate is less well understood given the inherent uncertainty in future climate projections. Managing physical climate change risk through risk-based adaptation practices is essential to enhance the resilience of assets and communities.

We support the International Council on Mining and Metals Climate Change Statement

As stewards of the minerals and metals that are critical to decarbonisation and sustainable development, we embrace our responsibility to minimise the impact of our operations on the environment.”

Our Chief Executive Jakob Stausholm has joined with other CEOs on the International Council on Mining and Metals in signing a Climate Change Statement that commits us to a goal of net zero by 2050 or sooner.

We have made this collective commitment because we believe many of the sustainability challenges facing our industry, and the planet, require collective action to solve.

Last year, we announced our ambition to reach net zero by 2050. Our support for the statement confirms this ambition as a clear commitment.

Disclosures consistent with the TCFD recommendations

Climate-related disclosures on governance, strategy, risk management, as well as metrics and targets, are integrated into this Annual Report in the following sections: Strategic Context, Key Performance Indicators, Innovation, Risk Management, Principal risks and Uncertainties, Governance, the Sustainability Committee report, the Remuneration Committee report and in the notes to the accounts.

Our position on climate change

In 2015, we supported the adoption of the Paris Agreement and the long-term goal to limit global average temperature rise to well below 2°C and to pursue efforts to limit warming to 1.5°C. The Paris Agreement highlights the need to take “into account the imperatives of a just transition of the workforce and the creation of decent work”. We are committed to supporting a just transition to a low-carbon economy that is socially inclusive and provides decent work and livelihoods. We will integrate our commitment to implementing core business and human rights standards, including the UN Guiding Principles on Business and Human Rights (UNGPs), into our decarbonisation plans and actions.

Government policy that creates the right framework for change is critical, coupled with real business action and societal shifts. A challenge as serious as climate change requires transparency, collaboration and a shared contribution to the solution. Our positions on key climate and energy policy issues are:

  • Climate science

    We accept mainstream climate science assessed by the Intergovernmental Panel on Climate Change and the fact that climate change is occurring and is largely caused by human activities. We acknowledge the IPCC’s report on 1.5°C and their recommendation to aim for net zero emissions by 2050.

  • Paris Agreement

    We support the outcomes of the Paris Agreement and the long-term goal to limit global average temperature rise to well below 2°C and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels. We support governments as they raise the ambition of their Nationally Determined Contributions (NDCs).

  • The role of business

    Significant progress towards a solution to climate change will only occur where there is broad engagement involving the breadth of experience and opinion from business, governments, investors, civil society organisations and consumers. Business has a role to play in addressing and managing the risks and uncertainties of climate change.

  • Emissions & energy reduction targets & standards

    It is important to set targets, take action to achieve them, and report on progress against targets. We do not advocate for policies that undermine the Paris Agreement or discount NDCs. Our ambition is to reach net zero emissions across our operations by 2050.

  • Adapting to climate change

    We recognise the importance of adaptation and increasing resilience to a changing climate.

  • Market mechanisms & emissions trading

    Where climate policies are implemented, we support the use of market mechanisms, including a market-based price on carbon such as in emissions trading systems. We believe this is the best way of stimulating innovation and achieving emissions reductions at least cost.

  • Competitiveness

    Effective climate policies should incentivise the private sector to invest in low-carbon technology, while avoiding the negative unintended consequences of transferring industrial production to countries with weaker emissions regulation. Where climate regulation, such as carbon pricing, is introduced to incentivise the decarbonisation of ‘hard to abate’ sectors, this should be coupled with measures to maintain the competitiveness of emissions intensive trade-exposed industries to minimise competitive distortions within and across jurisdictions.

  • Energy policy & energy efficiency

    Rio Tinto will promote alignment with its climate and energy policy in its discussions with industry association members. We recognise the valuable contribution that renewable energy sources make in reducing emissions. Many of our operations are energy intensive and we have been taking action to improve both productivity and energy efficiency, as we reduce emissions.

Climate and energy policy advocacy

Significant global and regional progress on climate change will only happen when everyone – business, governments, investors, civil society organisations and consumers – plays their part. Our own approach to climate change requires active engagement on relevant policies with a range of stakeholders in the countries where we operate.

Our responses to government consultations are guided by our overall policy positions that include support for market mechanisms, as we believe this is the best way of stimulating innovation and achieving emissions reductions at least cost. Our submissions are typically developed by subject matter experts, reviewed by government relations and legal teams, and then approved by the relevant country director or senior executive.

We have responded directly to four national and sub-national government consultations on climate and energy policy:

Working with our industry associations

Our annual review of our industry association memberships supplements the Climate Change Report and provides a complete list of the major industry associations that take positions on climate change and sets out the elements used to evaluate their policy positions and advocacy:

  1. Accept mainstream climate science
  2. Advance the Paris Agreement goals to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels
  3. Support governments as they raise the ambition of their Nationally Determined Contributions
  4. Support market mechanisms, including carbon pricing, that stimulate innovation and cost-effective emissions reductions and minimise competitive distortions within and across sectors and jurisdictions
  5. Recognise the valuable contribution that renewable energy sources make in reducing emissions, not undermine the role renewables have in the energy mix
  6. Ensure that any positions and advocacy on the use of coal do not support subsidies and note that it will require advanced technology, and in the medium to long term must be consistent with Paris targets

The review provides further information on any major industry associations whose positions and advocacy on climate and energy policy significantly differ from Rio Tinto’s key positions on these issues.

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