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Arrium Limited: 'Growth through Sustainability' shows progress, with flaws

By Amanda Nuttall (Net Balance) on January 28, 2013 at 1:23pm.

Company

Arrium Ltd is an international mining and materials company, listed on the Australian stock exchange. The name may be unfamiliar, but the business has existed for over 13 years and was previously named OneSteel. The company was originally formed as part of the BHP Billiton group. In 2000, it was demerged to form a separate business, OneSteel, predominantly a domestic steel manufacturer and distributor. OneSteel subsequently increased its resource based business and became a significant exporter to international markets. OneSteel Ltd changed its name to Arrium Ltd on 2 July 2012. The name change reflects the evolution of the business from a domestic manufacturer and distributor to a vertically integrated business engaged in mining through to the manufacture of finished steel products.
Content

Arrium’s first sustainability report under the new brand (two previous reports were released as OneSteel) is entitled ‘Growth through Sustainability’. This phrase is neither explained nor defined in the report, so it is not clear how this is interpreted by the organisation or how it might be seen by stakeholders. The report gives the impression that sustainability is applied at Arrium with a focus on prevention and compliance, rather than as a strategic approach.

The report outlines the five drivers of sustainability at Arrium, as well as two core values that underpin the organisation. The drivers are categorised as Economic; Community; Environment; People; and Market. The core values of Arrium are Safety and Customer. The report is largely structured around providing disclosures against these drivers and values, although the process for determining these drivers and values is not disclosed.

The process to define report content is explained as a five step process which consists of: 1. Market Assessment; 2. Materiality Modelling; 3. Consolidation; 4. Endorsement; and 5. Output. However, the outputs of this process (i.e. the material issues) are not reported. The process indicates that a review of stakeholder feedback was used to determine the scope of the report. Whilst a summary of stakeholders’ top concerns is provided, it is not clear whether these are the issues which were considered when defining report content. It is also unclear how they link to the core drivers and values or how the organisation has or intends to respond to stakeholders on these issues.

The report provides a scorecard in which the organisation reports against its sustainability drivers and principles. This is comprehensive and informative and provides a good level of detail regarding the initiatives undertaken and the outcomes realised. The report discloses Arrium’s performance against a range of indicators for safety, environmental management, workforce and community investment data. However, with the exception of the safety data, other trends or performance targets are not reported.  Whilst there are good disclosures on environmental performance from a minimisation and compliance perspective, the impact of mining and export sales on global carbon emissions from fossil fuels appears to be outside of the current reporting boundary. This approach may be challenged by stakeholders and the increasing trend by leading reporters to address both upstream and downstream impacts along their value chains.

The report outlines the company’s management approach towards increasing gender and cultural diversity by outlining a comprehensive and proactive strategy. The community investment section is very detailed, though there does not appear to be any formal investment strategy or benchmarking to industry through standards such as the London Benchmarking Group. This leads the reader to question why it is given such prominence in the report and if there are any plans to formalise an approach to support strategic engagement with community investment. 

Communication

Arrium’s report is well structured, easy to navigate and succinct, running to 39 pages. It is available as a pdf download in landscape layout that reads more like a Powerpoint presentation than a traditional pdf document. It is bright, colourful and incorporates many images to good effect. The table of contents is relatively brief. The GRI Content Index would benefit from cross reference links so that the disclosures against indicators can be easily assessed.

The report opens with an introduction from the Managing Director and Chief Executive Officer and an About Arrium section. This introduces the business to the reader and explains that the structure of the report is based on the sustainability drivers and core values of safety and customers. The About Arrium section provides a summary of the company, its product range, location of operations and history. This provides useful context and includes graphic representations that work well.

Credibility

A clear and credible outline of sustainability (or growth through sustainability) and what this means to Arrium is not discernible in the report. The Managing Director’s introduction talks about executing the business strategy, and states that ‘sustainability continues to be integral to our thinking and the way we do business’. However it does not explain how sustainability integrates into this strategy and whether it is implemented into operational decision making and practice. The tone of the report is very positive, and an expanded discussion of risks, challenges and dilemmas faced during the reporting period and into the future would enhance its credibility.

There also seems to be a misunderstanding with regards to the use of the GRI G3 framework. For example, the endorsement stage of the report development process offers ‘External assessment' by GRI’ as a component of the stage. Do they mean a GRI Application Level Check was undertaken? Regardless, labelling this ‘endorsement’ may not accurately reflect the GRI’s role. A GRI content index is provided, but an Application Level is not reported, nor is a statement from the GRI advising an Application Level Check provided. Also a number of GRI indicators are reported as fully compliant, despite the gaps identified when compared against the GRI G3 protocols.

The report does not appear to have received any independent assurance on the sustainability disclosures in the report aside from an audit of its carbon data, which is subject to mandatory reporting in Australia.

Recommendations

• Improve the disclosures on materiality and the report content determination process, the material issues that are identified by this process, how stakeholders are mapped and engaged across a variety of issues and how the GRI Guidelines are applied to the report’s preparation.
• Outline the broad sustainability context for Arrium in the Managing Director’s introduction and explain how sustainability integrates into the business strategy and operational decision making.
• Develop group-wide sustainability performance targets and KPIs linking to each issue. Disclose performance against these KPIs where possible.
• State the applicable GRI level and progress toward external assurance or verification.

Amanda Nuttall is an Associate Director at Net Balance, a sustainability advisory services firm with offices in Melbourne, Sydney, Brisbane, Hobart and London. www.netbalance.com