Rio Tinto and Juukan Gorge (A)

Name: Rio Tinto and Juukan Gorge (A) (English version)
SKU: IN-1886

Petriglieri, Gianpiero; Lockhart, Jordan

Product #:IN-1886

Supplier:INSEAD

Discipline:Strategy

Details:Case (PDF) • 26 pages • 2023-01-15

Subjects:

Strategy Business ethics Corporate governance Corporate social responsibility Globalization Leadership

Industries:

Fabrication and manufacturing

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In May 2020, Rio Tinto, the world's second-largest mining company, destroyed a cave system in Juukan Gorge, in the remote Pilbara region of Western Australia. The caves were of exceptional archaeological distinction - thought to be the oldest site of continuous human habitation on Earth - and were of deep spiritual and cultural significance to the local Aboriginal community, the Puutu Kunti Kurrama and Pinikura (PKKP) people. Rio Tinto was reputed to be an industry leader on Aboriginal partnerships, environmental protection, and other 'social licence' issues. The cave blast was entirely legal. It had received government approval and was supported by a signed agreement with the PKKP people. Nonetheless, the destruction sparked global outrage. Rio Tinto was panned in the local and international media for disregarding cultural heritage. Furious investors and shareholders demanded executive accountability. The Australian government launched a parliamentary inquiry. Trust between Rio Tinto and Aboriginal communities was shattered. The destruction of Juukan Gorge was the culmination of a decision-making process that lasted over a decade. What happened during that period was not unusual for a company of Rio Tinto's size - lucrative contracts were negotiated, new details trickled in on the Gorge's significance, a new executive team was installed, and changes were made to the organisational structure. Combined, these events cast uncertainty over who knew (or should have known) crucial information, the extent to which stakeholder consent was obtained, and how the company's values had evolved. Students step into the shoes of Simon Thompson, chairman of Rio Tinto, as he considers how to respond to the crisis. First, he must decide who to fire as a demonstration of accountability. Three top executives are implicated in the blast, but none is clearly individually responsible. Second, and perhaps more importantly, he must determine what went wrong at Rio Tinto that allowed it to happen? Who and what needs to change?

Learning Objectives

The case highlights the importance of combining strategic calculations with moral considerations when making business decisions, and the danger of not doing so. It can be used with MBA and executive audiences in modules on Leadership, Ethics, Corporate Social Responsibility, Power and Psychology, or Organisational Behaviour. The purpose is not to debate whether Rio Tinto was right or wrong. Most students will agree that the blast should never have happened, yet are not surprised that it did. Rather, the question is why individual and systemic 'lapses of judgment' are so common and how they can be prevented. The case goes below the surface to explore the complex issues surrounding the crisis, including power relations, personal accountability, value creation, and how corporate values are upheld. Students reflect on how to put 'values-based business' into practice and the risks to a multinational when its leaders become estranged from local operational settings. The Juukan Gorge blast was the outcome of a process that was as meticulous as it was insensitive. Debating why the process failed and how the resulting breach of trust should be repaired should persuade students that a leader's morality must be firmly rooted not only in corporate values but in a relationship with key stakeholders.