Join Helle Bank Jorgensen — Global Director, Board Development at Board Intelligence, and Founder of Competent Boards — as she hosts an exclusive interview with Dominic Barton, Chairman at Rio Tinto, to explore the future of governance and leadership.
Below is a transcript of the video.
Helle: Dom, it's a pleasure to have you here. Can I ask you to just say a few words about yourself and your career, please?
Dominic: Yeah. I'm Dominic Barton. I'm a student of leadership. That's what I would say.
Helle: I love that. Lifelong learner and a fantastic career both before and also now. Dom, we've been talking about the future boardroom and the transformation of both businesses and the transformation of boardrooms. What can we do? What can leaders and board members do to keep pace?
Dominic: Yeah, first of all, we have to understand our context. I think leadership doesn't happen without understanding the context and different contexts require different types of leadership. And the context I think about here is the climate transition or the energy transition. We are in the midst of it, and we are way behind. We're way off track. For all the Paris talk of what we would have done by 2030, let alone 2050, we are way off track. And I would actually argue because of wars, conflicts, and the fact that we didn't take into account that there's four to five billion new middle class people coming into the system that want to live like the prosperous, developed world and will therefore consume more carbon. The demand for energy is going up, so we're trying to convert from fossil fuels to renewables. We're doing it while we're increasing the demand for energy.
I think that just makes it more challenging and as corporates, we have a long-term view of that, and my view is to stay the course. There's a lot of backward back-pedaling, I would argue, even in the time I've been in this role at Rio. When I think about the messaging I was getting 2.5 years ago to what I'm getting now, it's just less pressure. It's almost like just be careful about how much money you actually spend on that. There's definitely less pressure and a more of a concern of you got to deal with the returns, and there's a lot of issues coming on.
So with all that context in mind, I especially speak for Rio, but I think it relates to other large organizations. If you think long-term, we have to do our part, and there's a way to do it and benefit the shareholder. This isn't at the cost of the shareholder. It's a win-win, it's all cohesive. We've set targets that we want to make by 2030 and by 2050 on our decarbonisation, and we're gonna make them. We're gonna do it. And we have to realise the technology is changing. I mean, people's views of hydrogen three years ago versus today are quite different.
There's new technologies that are coming out that are very exciting, and I would even put in that category nuclear fusion. But only ten percent of what I would bucket as new technology has been commercialised. So, long winded way of saying, I think we have targets that we need to hit, and we got to drive it and deliver it. And if you don't have pressure in a sort of a target, I don't think anyone is gonna get there. So corporates could do a lot. And so we're very driven by that and it's linked to our strategy. This is just a small example, I think all companies need to think this way, but we are focused on the materials that will help with the energy transition. You know, we're not doing diamonds. We want to focus on those materials that are needed, and we want to do it in a way that doesn't generate carbon but at a pace that is doable. There's a lot of capital that we're putting into that.
There's a lot of co-operation that we're having with many different companies and countries, academics, venture capital, because, again, there's no one has a clear solution other than it's just getting more and more urgent. That's our sort of sense.
Helle: And I couldn't agree more that it gets more and more urgent, but I also hear you saying, we're seeing perhaps not so much pressure, perhaps some back-paddling. We are in a year with elections. We are in a year with a lot of ESG backlash, DEI backlash, lot of different positions, different places in the world. At the same time, we're also where it seems like mother nature keeps sending us invoices. And so, you have the pressure from mother nature, but you don't have the necessarily pressure from the political. What do you see? I mean, all of the elections that we have this year.
Dominic: Yeah, I think, we clearly have to think about what the implications. The biggest one is the US one. That's frankly the biggest factor. What will happen to the IRA? What will happen to the push or drive on decarbonisation? I think that has a big effect and has a big effect for everyone. I think it's actually countries outside of the US that will be affected more than the US in terms of that.
And so, we have to think about scenarios of what that means. I think for us, there's no scenario where we're not doing anything. Like, we have to keep driving. It's just how you do it. It's not going to be the what, so much as the how. One of the challenges in this mix is that while this is going on, China is probably doing the most of any country in terms of the decarbonisation. What they're doing on the renewable side is just extraordinary. And so, there are more than fifty percent of the world's new installed base electric vehicles. We've seen what's happening on that front.
And with more trade wars and tariffs, it's going to make it harder. We are actually searching the world for the best technology and the best capability to be able to help us with the decarb. We can't spend a fortune. It has to work.
So I think, again, rather than whine about it, I just think we have to think about scenarios of how we do it, where we do it, how we partner with different people.
But I think there's a role for business to keep pushing because it actually will make sense long term.
And the other part I would just say is, you know, sadly, these invoices, as you said, that we're getting from mother nature or signals are unfortunately hitting the people that are the poorest, the ones that aren't actually doing anything. If you think about what's happening in Southeast Asia, the rising water levels, the drought, agriculture, famine, all of that type of thing, it's very unfortunate in terms of where it's affecting it. In Florida, obviously, we're seeing the impact. People will see it. But when we think about that, we should think about what is happening in other parts of the world where there isn't media talking about things, and it it is going to lead to other consequences because everything's connected. Migration. People don't have food. They move. I think it's climate change that drove the immigration crisis in Europe. That is what started it.
So this is a fundamental issue to the stability of our society, I think. And that's another reason why I think as business, you better not assume it's going to be taken care of. It's going to a very difficult volatile period to make decisions in and drive things forward in.
Helle: And I think that goes back to where you started with leadership. I mean, we are talking now about just transition, but we're talking about just transition in a world that seems to be looking more at the old shell scenarios and the bound scenario, right? Let's make sure we keep everything. So if we look at this from the leadership perspective, how would you say we structure and govern in a very different and, let's say, fast paced world where some will say, well, let's just take care of our own, and others are saying, well, we do need, as you're saying, to look at just transition in order to not have those big societal issues that clearly will hit business as well.
Dominic: Well, it's a hugely challenging question you're putting forward. And I think it's because so many of the lead variables are not determined. They're not fixed. They're all over the place. And I even think it gets down to social capital, like the premises on what we think is reasonable or right or just, there's even debate about that. Like, you can have a very dark view of that, it's just getting more splintered, more short term, more selfish. On the other hand, I think the world moves in cycles, things will shift back. And I think, again, for leadership, it means you take ownership because that's an important part of it. And so, do what you possibly can to try and fix that context.
And it may seem, in some cases, like it may be outside of your wheelhouse, but you need to be thinking about that for the stability of the system. It's interesting here just being in the UK, I think what most business people are actually yearning for is just stability. That's all they want, just stability.
But policymaking has become more complicated because a lot of countries have elections, as you mentioned. A lot of incumbents are being thrown out. There's a lot of debt that has to be accounted for. The United States is probably the only country that can kind of continue to spend because they have the dollar and so forth.
But, I don't think it'll last forever, but it's gonna last a lot longer than for anyone else. So you're seeing cuts in in government expenditure. You're seeing rising taxes, and that all is negative. It doesn't excite business to hear that. It doesn't excite people. And so, we've got some very tricky policy challenges. And that's where I think there has to be more thinking. And, again, corporates may not do this, but to support this, how do we think about a new frame of policy over the next 5 to 10 years given all of these just transition, the energy transition, conflict, splits within society. What I think, we are actually going to need is some new thinking on that. We should be thinking about how to get more cohesion or context to be able to move things forward. And it may not seem like it's direct impact, but I think it's going to be important to make the changes moving forward. Because as we become more fractured with less social capital, with bigger and bigger issues, I inevitably think that leads to conflict. And that's the worst outcome, but I feel like that's where we're heading. It's like we're all in a river floating along. We know that there's a waterfall coming sometime down the corner, but we're all kinda trying to get into a different part of the stream, but it's all heading in one way. And I think we just going to be able to step back and figure out how we're going to try and build it, and that's a challenge.
Helle: Who are those leaders that needs to kind of say, okay, let's put our heads a little bit higher and actually talk about what we can do and, you know, not have anti Trump, all of those different things, but, really, what does good global governance look like?
Dominic: Yeah, well, I think the leaders are out there, but it may not be the existing leaders. I think there are amazing existing leaders but there's a notion that there needs to be some rethinking. So for example, it's ironic, but, you know, it's the eightieth anniversary of the IMF and the World Bank right now. Those are very important institutions, but they're eighty years old. Now how much have they changed over an eighty year period? I think those are extremely important institutions, and I thank God that we have them because they have helped on many, many dimensions. But it probably needs to be modernized for the next, let's say, at least, say, twenty years. What is that gonna look like? How's the system gonna be? And so I think it's important to do the thinking. And it can either be people who have been in the system but are out of the system that maybe are writing about this type of thing. A guy like Mark Malek Brown, he is a guy I have a lot of respect for. He has been in many different roles. He's sort of older but I would also be looking for younger 35 to 40 year olds just thinking about the system. We have got to talk about technology and the interesting things on the AI front and how quickly that vector is moving, let alone energy.
So I think we almost need like, a postwar summit without having a war, if you will, to say, what do we want that to look like? And it's probably not the incumbents that are the ones that will have the credibility to do that. I think this is where we need to be encouraging people to be writing and thinking because I think there is the insights. They're out there. I'm saying all of this stuff that sounds bad, I'm a frightened optimist. I'm actually optimistic. I just think it's going to take a lot of work. And I think we need to put some resources in areas that may seem not as direct impact, but they'll be in the long-term.
Helle: So if we look at the optimistic part of this, and going back kind around the boardroom table and that future, what will outstanding governance look like?
Dominic: Well, I think again there's so many different elements of that, right, but besides the basics of the oversight and all of that which I think is we should just assume and I know that a big thing to say. I think it is having a more long-term view. I think good governance is people that are thinking in 10-20 year time frames, not quarterly to 3 year time frames, and that's hard in a book, but that is a very important part. The second is the on capital allocation, and it's not so much about what you're putting between projects or organic or inorganic. It's about future building versus cash generating, and how do you make the right trade-offs on that front and keep your shareholder satisfied. And I think it's really on people. It's leadership, so obviously succession, we know that's critically important, but just what type of leadership model that is required in your organization to be successful for the next 10 to 20 years. So those are to me three areas that I think are pretty fundamental besides the basic oversight. How can you be long-term? How do you think about capital allocation? In that context, how do you focus on developing the leaders that are going to be needed for the world we're moving into.
Helle: And I think that also gets to the communication with the market being the shareholders, the future shareholders, and but also internally in the company. What does good look like and what are we looking for in the leader?
Dominic: You're right, I think that communication role is so important, and I think we've underplayed it for a long period. It's PR or the corporate, it's this way again because of this breakdown in social capital, how messages get sent or perceived, how the fractionation, if you will, of media. You mentioned the internal within your organisation, people, it's so different than it was 10 years ago in terms of expectations on political issues, ESG, diversity, and I think we are way behind on how we communicate what we're trying to do with the market, but also with your organisation and with stakeholders.