1.

Introduction

Anglo American is one of the world’s leading mining companies. It is a UK

public limited company and operates on a global scale. Anglo American
operates mainly in the primary sector of the world economy. This, as the
name suggests, covers industries involved in the first stage of economic
activity, such as mining and agriculture.

Anglo American operates throughout the world. It has extensive operations in Africa, where 76% of its
employees live. It is also a major employer in Europe. Its Tarmac aggregates and construction products
business employs nearly 7,000 people in the UK.

As a primary producer, Anglo American plays an important role in the world economy.

Anglo American produces five main types of raw material.

Mining operations can have a big impact on the environment and on the societies where they work. Since
most mineral resources belong to nation states, mining companies largely depend upon a licence to
operate from governments. This allows them to extract and process minerals in return for investment and
the payment of taxes and royalties. Increasingly it is also important to get the consent of local communities
to mining development a “social licence” to operate.

Like all businesses, mining companies are under increasing scrutiny from pressure groups as well as the
general public. Anglo American seeks to adopt fair and sound business practice. The company believes
that it has an important role to play in building the capabilities of the communities where it works. Issues
such as combating corruption and promoting revenue transparency are high on the company’s business
agenda.

This case study shows how Anglo American seeks to make ethical choices in its business practice.
2. What are business ethics?

Business ethics are moral principles that guide the way a business behaves. The
same principles that determine an individual’s actions also apply to business.

Acting in an ethical way involves distinguishing between “right” and “wrong” and then
making the “right” choice. It is relatively easy to identify unethical business practices.
For example, companies should not use child labour. They should not unlawfully use
copyrighted materials and processes. They should not engage in bribery.

However, it is not always easy to create similar hard-and-fast definitions of good ethical practice. A
company must make a competitive return for its shareholders and treat its employees fairly.  A company
also has wider responsibilities. It should minimise any harm to the environment and work in ways that do
not damage the communities in which it operates. This is known as corporate social responsibility.

The law is the key starting point for any business. Most leading businesses also have their own statement
of Business Principles, which set out their core values and standards. In Anglo American’s case, this is
called “Good Citizenship”.

A business should also follow relevant codes of practice that cover its sector. Many companies have
created voluntary codes of practice that regulate practices in their industrial sector. These are often created
in consultation with governments, employees, local communities and other stakeholders.

Anglo American has also contributed to the Voluntary Principles on Security and Human Rights. This code
sets out principles and practices for ensuring that a company’s need to ensure the security of its employees
and operations in volatile countries does not negatively impact upon the local population. Thus the
Principles provide guidance on how security forces assigned to protect a mining operation or an oil and gas
facility should be trained in human rights, monitored and controlled.

Anglo American also aims to ensure that it plays a role in protecting the human rights of its employees and
local people in countries in which it operates. The company supports the principles set forth in the Universal
Declaration of Human Rights.
All companies need to make a profit. However, Anglo American recognises that this objective must take
account of ethics as shown in its statement on corporate responsibility: “Though providing strong returns for
our shareholders remains our prime objective, we do not believe that these can or should be achieved at
the expense of social, environmental
and moral considerations. Indeed a
long-term business such as ours will
only thrive if it also takes into account
the needs of other stakeholders such
as governments, employees, suppliers,
communities and customers.”

3. Why should a business act

ethically?

Businesses have great potential to transform people's lives and to reduce

poverty through generating economic growth. They produce goods and
services that customers want and they create jobs. Through paying taxes,
they contribute to government revenue that can finance schools, hospitals
and other public services.

However, a business must keep in tune with the wishes of the societies it
serves or it runs the risk of alienating its shareholders, stakeholders and
customers. This would be bad for business, reducing growth and potentially
affecting profit. Anglo American has to deal with many different levels of
interest when setting up a new project. This includes, for example, the
owners of the land and the people and services in the area.

Anglo American is backing the South African government in this process. This includes supporting black
economic empowerment deals (BEE). Through this process, Anglo American has sold (usually at a small
discount) 26% of its assets in South Africa to BEE groups. For example, Anglo American was instrumental
in the creation of Exxaro. This is now the largest black-owned and managed mining company listed on the
Johannesburg Stock Exchange. It also aims to have at least 40% of its managers drawn from the ranks of
previously disadvantaged ethnic groups.

Governments in the developing world face many challenging social and economic
problems. They need companies that are ready to be part of the solution. 

Anglo American believes that it can support governments in reducing poverty and
inequality and in improving health and welfare.

In South Africa, the company has been a major campaigner for AIDS education. It
was the first major company in South Africa to announce that it would provide free
anti-retroviral drugs to its HIV-positive employees. It now has the largest workplace
HIV/AIDS education, voluntary testing and treatment programme in the world. After running the programme
for five years studies have shown that the programme has become self-financing through reducing deaths
and the attendant loss of skills and cutting absenteeism rates by boosting the health of infected workers.

4. What are the effects of acting ethically?

Most business activity incurs financial costs such as equipment and labour.
Non-financial costs include noise and impact on the environment.

There is a financial cost to acting ethically. To engage stakeholders takes time

and money. Mining in ways that minimise environmental impacts is more
expensive than extracting resources regardless of impact. 

An ethical business also recognises its responsibility for minimising the non-
financial costs. The Pebble Project in Alaska is a good example of the way that
Anglo American takes account of non-financial costs. This is a gold and copper
mining project in the early stages of assessment. This could provide new jobs and revenues for the Alaskan
economy at a time when oil and gas revenues have been falling.

However, some people are concerned that the mine could damage fish stocks and wildlife. Therefore,
Anglo American has been consulting widely and through a structured process with local people, politicians,
businesses and especially indigenous people.

Anglo American has made it clear that it will only seek to proceed with the project if it can be done without
damage to the local fisheries. It will also give priority to the recruitment of local people.

Anglo American establishes goals each year for sustainable development. These goals include:

● working without fatal accidents

● eliminating occupational diseases
● increasing diversity in the workplace
● increasing the benefits of mining for local communities
● increasing energy efficiency.

By working towards these goals, Anglo American hopes to gain

a competitive advantage. By demonstrating a more caring and
sustainable approach, the company is able to differentiate itself
from rival mining companies. It makes Anglo American more
likely to be the partner of choice for many governments and
communities in the developing world.

It also helps with its position on the stock market. Most long-
term investors, such as pension funds that run investments for
millions of ordinary people in the UK, believe that it is important
for a company to consider social and ethical issues and not just
the financial bottom line if a business is to be sustainable. Anglo
American sees shareholder returns and social and
environmental responsibilities as complementary activities. This
puts the company in a stronger position. All stakeholders
benefit: shareholders, employees, governments, local
communities and suppliers.

Conclusion

Anglo American is a multinational organisation with a high profile in the

primary extractive sector. Because many new mineral deposits are to be
found in developing countries, some of which have weak governance, Anglo
American recognises that it must be rigorous in observing local laws, even if
they are not always enforced. It has a significant role in supporting good
governance initiatives and boosting the opportunities available to the
communities associated with its mines.

The company is involved in a range of initiatives to help these communities,

such as AIDS testing and provision of new local services like schools and
clinics. Its socio-economic assessment toolbox helps it measure its impact and engage with local
communities to resolve issues and to underpin initiatives like small business development or partnerships
with local farmers.

The financial and non-financial benefits to the company and shareholders are shown in several ways.
Anglo American is trusted as a business partner that takes into account social and environmental issues. It
has licences to operate in countries like South Africa, Brazil or Chile, where it is playing an important part in
encouraging local business development.
When you read this article, consider:

Connections – what do you already understand or can connect to your own life?

Before reading this article…. This article is similar because …

I always thought that … This article says the same think, specifically ….

Challenges – what information or ideas do you disagree with (even just a little bit)?

I disagree with the statement…. Because…

I disagree with the idea that … because ….

I do not believe that …..

Concepts – What do you think are the big ideas in the paragraphs or text as a whole?

The article is trying to highlight that… this is evident when it says …

The ____ paragraph is trying to say that …

Change – How has this article made you change your thinking, or what changes are to come?

Before reading this article, I thought that … but this has changed because the article says …

The article says …. I think this will change in the future because ….

The article says … I think this is a change from the past because …

Task:

1) Explain what you understand by the terms

a) business ethics: moral principles that underpin business behavior.
b) public limited company: a company that is able to advertise and sell its shares to the general
public via the stock exchange
c) code of conduct: a set of rules which is commonly written for employees of a company,
which protects the business and informs the employees of the company’s expectations.
d) pressure group: any group of individuals who work together to exert an influence upon the
decision-making of a company to achieve some specific outcome.
e) corporate social responsibility: when companies integrate social and environmental concerns
into their business operations and in their interaction with their stakeholders on a voluntary
basis.
f) goods and services: what consumers are consuming and spending money on: a good is a
tangible item that consumers desire or own. A service is not a tangible or physical entity but
is still sought after by consumers.
g) shareholders: individual, groups or organizations directly involved with, or indirectly affected
by, a project product, service or enterprise.
h) competitive advantage: factors that allow a company to produce goods or services better or
more cheaply than its rivals.
i) Multinational organization: transnational corporation, any corporation that is registered and
operates in more than one country at a time.

2) Explain why Anglo American is mainly in the primary sector of the world economy.
- Because the primary sector is business activity involved with the extraction of natural resources.
Anglo American covers industries like mining or agriculture.
- Thus it operates a primary producer company worldwide: it produces 5 main types of raw materials:
base metals, ferrous metals, platinum, coal, and industrial materials.

3) Explain what this means in your own words: ‘Since most mineral resources belong to nation states,
mining companies largely depend upon a license to operate from governments. This allows them to
extract and process minerals in return for investment and the payment of taxes and royalties.
- As natural resources like minerals and ores are legally owned by the state in which they are
located, companies that specialise in extracting these materials rely on the permission of the
governments in question to operate. They use the money gained from this type of operation
to both gain investment and pay the government for the taxes on their operations and the
permits for their work.

4) Look up what ‘stakeholders’ means and identify two stakeholder groups for Anglo American.
- Stakeholders are those who are affected by the actions that a company takes.
- A group of stakeholders for Anglo American would be the shareholders, whose interests lay
with the company’s financial success and expansion. Another would be their workers, who
rely on the company for their livelihoods.

5) What would be a possible conflict between the two stakeholder groups you have defined in question
4?
- Some decisions made which could be beneficial to the bottomline of Anglo American may
have detrimental effects on its workers, for example: shorter breaks, less work benefits, no
health insurance coverage.

6) Choose two principles set forth in the Universal Declaration of Human Rights. Explain why you have
chosen these two principles and how these can be important in a business environment.
- Article 1 and 3 are necessary for a business to function effectively and efficiently, as its
workers need to be protected for their experience and institutional knowledge to be
preserved and help the business.

7) Identify and explain one example from the text in which Anglo American acts ethically and
sustainably.
- Anglo American is an educator on the topic of AIDS and HIV which has long been a blight on the
nations that they operate in, especially due to their less developed nature. This is ethical as they are
helping the population against a disease and is generally protecting Article 1 of the charter. It is also
sustainable as it gives Anglo American a larger future possible employee base for its work.

8) What are the advantages and disadvantages to Anglo- American of acting ethically?
- The advantages of Anglo American being ethical in its approach is that customers in nations such
as the United Kingdom and other developed countries would be more willing to purchase from
companies which utilise the materials that Anglo American has procured. It also helps them
maintain long-term production capabilities in these less developed countries, and their good
reputation puts them above their competitors as a boon for the local economy, which makes it
easier for them to obtain renewed permits for operations in the countries.
- The disadvantage is that this costs the company money, time and resources to do the things that
they do. Which, if they fail to turn a profit, makes it so all the advantages stated above become moot
points.

9) Write your view of the article based on the questions/suggestions under

connections/challenges/concepts/change. Write between 300 and 400 words. No more, no less.
Incorporate your business vocabulary from question 1 where possible.
- This article connects to my life as it deals with nations which are still developing and the ethics
surrounding them, which does affect Vietnam as it is considered a developing country. It also
concerns business ethics, which is a hotly debated topic amongst today’s youth. The article was
familiar as it is reminiscent of many other different corporations which made themselves seem
saintly by promoting programs such as education and free healthcare for those less fortunate. Of
course, these corporations would also later be exposed for abusive practices against their local
workers, who’d be heavily penalized for the smallest violations of the code of conduct, and they
choose to stay silent as the conditions the company provides is still overall better than the
alternatives. I personally disagree with the idea of corporate social responsibility, the idea that a
private organization has the obligation to do what governments would not do sounds closer to non
governmental organizations such as charities or other non-profits, not a company. The main
concept of the piece is the benefits and why a company should pursue corporate social
responsibility, and how one such example of a company has improved the lives of the people in its
locale. The article is attempting to extol the virtues of a company going out of its way to invest
corporate funds and capital into smaller countries and their developing economies. The article did
not really change my thinking or opinion on the topic. In fact, due to how it was written and the fact
that we only really see the benefits if we take the corporation’s word at face value, it only makes me
even more skeptical of the whole concept, and leads me to believe that the company’s outward
facing persona of a social leader and a responsible caretaker for its workers and their surrounding
community is simply a facade meant to hide abuses of power or negligent practices.