Mining Environmental Management > Reports > Kevin D'Souza Corporate social responsibility

Reports

Corporate social responsibility (CSR) has moved from being a niche civil society crusade advancing social goals, to being the mantra of the majority of mining executives, and has permeated to mine-site management. Although largely voluntary, nearly all major mining companies, and a growing number of juniors, have, or are in the process of, incorporating CSR into their mission statements, polices and internal management systems.

Notwithstanding the claims of some anti-mining lobbyists, most mining companies operating in Africa do want to act in a socially and environmentally responsible manner. Many mining companies, including some of the more pioneering juniors, are keen to add value for all their stakeholders, ensure their host communities receive equitable benefits, and contribute to broader social and economic sustainable development.

The World Business Council for Sustainable Development (WBCSD) defined CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large”. Despite this clear definition, there is still great diversity in the perceptions of what constitutes CSR with respect to the mining sector and what the key tenets should be.

Ideas vary from humanitarian actions, philanthropic and charitable giving, to a moral imperative, an implied social contract, voluntarism, legal compliance, a duty of care to stakeholders, the transfer of technical skills and cleaner production technology, or simply conducting business whilst respecting ethical rights and values.

In spite of a proliferation of general codes and guidelines, corporate bewilderment is exacerbated by the current absence of any international CSR architecture; industry best-practice management and accountability systems, or recognised CSR benchmarking or disclosure standards that are relevant to mining. Companies are often confused by the need to balance the dynamic demands for greater responsibility, assurance, stakeholder engagement, accountability, public disclosure, governance, performance management, transparency and the ever-evolving economic, environmental, social and governance (EESG) challenges they face in the emerging mining jurisdictions of Africa.

However, to paraphrase the popular West African proverb, the CSR drumbeat has now resonated throughout the African mining sector, but the new dance steps are still to be learnt, and are far from perfected.

Although the intentions of CSR and corporate citizenship are certainly not new and are commendable, one could argue that some objectives are completely outside the scope and main ambit of any mining operation, and its implementation places yet more demands on mine management. Therefore, why should mining companies assume extraneous responsibilities that could dilute their production focus, or why should exploration companies consider issues that are only peripherally relevant?

The answers lie with our globalised society and information-hungry world, where companies must constantly evolve and adapt to meet society's wider and growing expectations. The underlying external drivers for CSR in the extractive sector can be roughly grouped into three categories, namely:

§       Lobbyists & Pressure Groups: Both NGOs and the anti-globalisation movement have become more sophisticated. Their campaigns have consistently targeted the mining sector, basing their arguments on the increased visibility and severity of the environmental and community disruptiveness or the fashionable resource curse hypothesis and perceived inequitable revenue distribution. There are accusations of companies buying support from naïve NGOs and using public relations consultants to distort realties. Activists are also indirectly targeting the mining sector through pressure on project financiers and supply chain partners such as the jewellery sector.

§       Changing Societal Expectations: There is a heightened interest and generally negative public perception and opinion of the mining sector. Reasons include the rise in the number of activist lawsuits, indictments, and allegations of pollution and environmental degradation, interference in sovereign affairs, resource plunder, perpetuating civil wars, corruption, destruction of indigenous cultures, deepening disparities of wealth, biodiversity devastation, intimidation, and human rights abuses.

§       Fiduciary Responsibility:Mainstream mining project financiers from both public and private institutions are increasingly focusing on both risk management and EESG perspectives. This conditionality is framed within the World Bank's Extractive Industries Review (EIR), the United Nations Principles for Responsible Investment (UNPRI), the United Nations Environment Programme Finance Initiative (UNEP-FI), and the more recent and widely adopted Equator Principles.

 

Is there a Business Case?

With the developmental rhetoric aside, and these issues in mind, could embracing CSR allow mining companies to recognise the emerging EESG trends that could impact on their mine sites, especially in the more challenging operating regions of Africa? Could CSR help better identify the interests, concerns and objectives of their divergent stakeholders and help frame their relationships with, and strategies and attitudes towards them?

It is now evident that the economic viability of a mining project is no longer the only consideration in the decision to proceed with development. Experience has shown that from an internal perspective there is a real business case for CSR in the African mining sector, both as a prudent risk mitigation technique and as a recognised driver of shareholder value.

CSR is playing a crucial role in the emerging investment framework and has probably now become a prerequisite for operating anywhere on the African continent. In essence, a CSR strategy needs to identify, anticipate and prevent EESG impacts from the project outset, using participative approaches to working with stakeholders towards improving the balance of benefits for all. CSR calls for a greater degree of accountability and responsiveness.

Through proactive corporate behaviour and a competent strategy CSR should provide a duty of care to all stakeholders, added business value, and commercial advantages that are often all mutually reinforcing. These could include:

§  Safeguarding a durable and locally won social license tooperate by maintaining a stable commercial and operational environment. Seeking society's approval potentially provides a competitive advantage by being deemed as the company of choice by stakeholders. This improves the likelihood of being granted lucrative concessions and permitted mining rights, thereby maintaining a market share.

§  Facilitating access to capital (and insurance coverage) driven by the rise in Socially Responsible Investment (SRI). The rise in fiduciary responsibility means that stock exchange regulations and mining investors are now focusing attention on EESG and sustainability issues. This is driven by the private sectors' adherence to the Equator Principles and the anticipated widespread de facto adoption of the new comprehensive International Finance Corporation (IFC) Performance Standards (2006) for all mining projects regardless of the source of funding.

§  Managing external perceptions and maintaining a credible citizenship reputation can improve a company's profitability and value, enhance relationships with regulators, reduce operational and political disruptions, and can enhance the safety and security of company personnel and mine site assets. This can be achieved through the integration of EESG and ethical risk assessments into overall corporate risk management systems.

§  Improved stakeholder engagement and inclusiveness will help maintain continuous, amicable and consensual dialogue, enhance transparency, and boost staff recruitment and retention. Companies can help to build their overall capacity and effectiveness to contribute positively to community level sustainable development by becoming more attuned with the general welfare and needs of local communities, mitigating social and cultural disruption, overcoming cross-cultural barriers, and preserving social cohesion. Proactive and participatory engagement and communication can also help close the gap between the intentions of the mining company, their actual behaviour, and stakeholder expectations whilst simultaneously reducing community dependency.

 

Mining companies should be aware that although a competent CSR strategy creates many opportunities, an ill-conceived and implemented strategy with misallocated resources, could bring many reputational and operational risks that will affect the overall viability of a mining project.

Such impacts could include damaged public trust and depressed share price value; production delays and operational stoppages; loss of investor confidence and the potential withholding of project financing; disloyal and demoralised employees and with difficulties in staff retention; increased community agitation and resistance; inadvertent undermining of the State; and even escalating trespass and problematic artisanal mining activity within the concession.

 

Avoiding Corporate Greening

Many opponents of the business case for CSR suggest that the legal limits on corporate accountability and the voluntary nature of much of what is embedded in a CSR strategy results in corporate 'greenwash'; with interventions rarely tackling the root causes of social problems surrounding the mines.

Some sceptics go as far as to claim that the majority of CSR interventions in the mining sector manifest as philanthropic initiatives aimed at improving corporate image and general public relations, and result in a patronage system of benefactor and recipient.

It would be naïve to believe that this is a complete untruth, as corporate window dressing is still adopted by some unscrupulous companies, and regrettably, there are cases where a blatant and unilateral 'Santa Claus' syndrome approach by a mining company has resulted in a vicious cycle of corruption, paternalism, irresponsibility, a lack of effective community dialogue and engendered-community dependency.

However, mining companies are facing escalating external market pressures, especially from investors and host governments, to bring about significant change in the way that CSR is adopted, implemented and in the future regulated.

Given that continued institutional change is likely in both the investor market and through reviews of African government policy and sovereignty over mineral resources, companies will no longer be able to adopt a blasé or 'greenwash' attitude towards CSR or use the voluntary character as an excuse for inaction.

Providing investors and government uphold their stated values and codify mandatory CSR practices in law, CSR cynics should witness a paradigm shift in the mining sector. In the future, mining companies may be legitimately required to demonstrate the reasonableness of their actions and prove their genuine commitment based on shared responsibilities, responsiveness and negotiated collaboration with all stakeholders. Such a move should help close the gap between the image that many mining companies seek to portray and their actual social performance.

 

Keeping up with the trends

Many mining companies have already incorporated concepts of CSR in their business strategies in the areas of environmental protection, stakeholder and community relations, and employee health and safety management. However, the global voice of society's changing expectations means that within the African mining sector there are a number of emerging economic, environmental and social governance trends that are particularly relevant and need to be identified and then embedded within future comprehensive CSR strategies.

 

Human Rights and Security: The deployment of both public and private sector security forces on mining concessions has raised a mounting concern with respect to the protection of human rights. Experience has already proved that complicity in human rights violations can result in companies being indicted and individuals being criminally prosecuted. Therefore, companies need to revise their internal security policies, protocols and procedures in accordance with the now widely accepted Voluntary Principles of Security and Human Rights.

The principles address three main areas: risk assessment; interactions between companies and public security; and interactions between companies and private security. However, in order to fulfil their CSR requirements, mining companies still need to formulate a set of robust tools and practical training programmes continuously to educate and properly implement the principals on and around their concessions.

 

Artisanal Mining: The presence of artisanal mining activity and informal settlements on, or at the periphery of, commercial mining concessions has moved beyond being just an uncomfortable neighbour. Current artisanal activities in the vicinity of many mining operations are exceedingly dangerous, exploitative, socially disruptive and essentially sustain an illegal trade. However, such mining activity does represent a major social and economic livelihood for several million Africans; many in the locality of current commercial mining activities. Unfortunately, the relationship with the artisanal mining sector is largely misunderstood, and has been characterised with mutual mistrust, antagonism, resentment, intimidation and increasing violence.

Most companies have now learnt that building constructive relationships, as a risk management strategy, is far more effective than resorting to increased security measures in an attempt to eliminate the artisanal miners and hope that the problem simply disappears.

Given the fact that the economic, environmental and social costs and potential liabilities of uncontrolled artisanal mining activity are beginning to get out of control on some mine sites, there is hopefully a strong case for a move towards a more innovative, non-confrontational and pragmatic strategy for managing artisanal mining. Notwithstanding this desire, the irrefutable challenge remains of how to uphold CSR polices and constructively engage, and attempt to coexist, with the increasingly vulnerable, and in some cases volatile, artisanal sector and their informal settlements.

 

Indigenous People: New international codes and key documents have helped to recognise the specific characteristics that set indigenous people apart from broader society. The currently controversial concept of free, prior and informed consent will increasingly become the benchmark for company CSR performance with respect to interaction with indigenous people, whilst recognising that some areas are too culturally sensitive to mine.

This concept advocates the need for communities to be true partners and legitimate decision makers in their own development. Relationships must be based on respect, meaningful engagement and mutual benefit, whilst protecting social cohesion and promoting long-term economic and cultural sustainability.

 

Biodiversity: Numerous conservation organisations have been instrumental in raising awareness about the impact of mining activity on biodiversity especially in critical ecosystems. There is also the real need to respect and enhance legally designated protected no-go conservation areas (such as UNESCO World Heritage Sites) that are too ecologically sensitive too exploit.

To aid companies, the ICCM has produced a good-practice guideline to help companies demonstrate commitment to biodiversity, particularly in environmentally sensitive areas. Environmental CSR policy must ensure that mining companies strive to identify and evaluate biodiversity and the interface with their activities; fully assess all the negative impacts; apply appropriate best practice mitigation measures; and try to increase their contribution to conservation and overall biodiversity enhancement in the area in which they operate.

 

Community Engagement and Development: The proximity of vulnerable communities with many mine sites means that companies must demonstrate a contribution to the long-term sustainable development of such host communities without cultivating community dependency or intensifying vulnerability.

Stakeholder management and community engagement should be initiated at an early stage thorough social baseline mapping in order to fully benchmark, define and understand what is the precise composition of the neighbouring communities; remembering that communities are far from homogenous and include a variety of constituencies. Later, a Social Impact and Opportunities Assessment (SIOA) can help define the interaction of the proposed mining project with the local community and such a process must be ongoing, dynamic and fully consultative; always respecting the basic rights, needs and materiality of the community.

Companies need to realise that the measurement, mitigation, and monitoring of social impacts should always be undertaken in conjunction with local stakeholders. Although there are some useful guides, tools and models for community development in existence, CSR community programmes sometimes still fail for a variety of mostly avoidable reasons including, not adopting a multi-stakeholder approach that fosters full local ownership/drive that protects sustainability and ensures foolproof community feedback and failing to acknowledge power asymmetry and legitimacy of community perspectives leading to a lack of an active partnerships to name just two.

 

Baseline Studies and Closure Plans: Proactive CSR management from early exploration, through operation, to final closure is rapidly emerging as 'cradle-to-grave' best practice. Early engagement through competent social mapping and environmental baseline studies can help define appropriate CSR plans. Such timely work can help manage expectations and reduce the risk of social conflict and avert a degree of criticism from external stakeholders. Although the physical footprint of a mine can often be reclaimed, issues such as acid mine drainage and less tangible social legacies will extend beyond the mine life.

Community level sustainable development requires the timely identification of other drivers of development so there are viable social and ecological systems as well as a thriving economy post closure. Hence, legacy issues are equally important and emerging standards of best practice will entail leaving a net positive economic, environmental and social governance benefit post mine closure.

 

Supplier Chain: Through their sourcing and affirmative procurement polices, mining companies can take a number of specific steps to demonstrate commitment to local economic development. For instance, companies could choose to avoid procurement through large contracts that are often inaccessible to local companies, instead it should be insisted that bidding companies must have legitimate local partners. Although local business capacity is often low, community investment to strengthen local businesses can directly benefit the company, especially if smaller supplier contracts for labour intensive assignments and locally produced goods and services can be established.

As a final point, it should be emphasised that contractors are often an important representative of the mining company, however, such contractors are seldom faced with the same incentives or pressures to act in accordance with the company CSR, and their behaviour could undermine the company's CSR performance. Therefore, mining companies need to ensure that all contractors are obliged to adhere to their CSR policies with respect to community relationships, environmental management, and to health and safety standards.

 

African Realities

Since the business case for CSR in the mining sector appears robust and the voluntary nature of CSR could be diminishing, is the reality on the ground conducive for real commitment?

Some companies operating in Africa are clearly pioneering some novel CSR strategies and trialling some genuinely ground-breaking community focussed initiatives including the adoption of company Key Performance Indicators (KPIs) linked to CSR. However, the reality is that management of some of the economic, environmental, social, and governance externality issues are still a relatively new area of management focus for many African mining operators. In addition, many of the areas of greatest economic, environmental and social controversy combine a multitude of stakeholders with divergent interests that can often impede progress.

Most local circumstances are also socially and politically complex requiring approaches and solutions that go beyond the traditional technical fixes and contingency planning familiar to the majority of current mine-site operational management. Regrettably, some companies have adopted CSR for impact mitigation and have struggled to innovate, internalise, appreciate material issues, or implement organisational change to achieve and maintain best practice economic, environmental and social performance and have relied on chaos management to steer them.

 

Challenges

In Africa, current CSR challenges include the obvious poverty and vulnerability of proximal communities; transparent benefit sharing with local communities; the presence of indigenous people; human rights abuse allegations; environmental concerns; poor regulatory and public institutional capacity; lack of resource governance; political risk; corruption and bribery; security, armed conflict and militarisation; the Sino-African investment alignment; and probably the greatest challenge is the presence of artisanal mining and their informal settlements. Some companies also rightly question how they should implement, monitor, and report on socially responsible practices in situations where there is poor public governance that is not fully supportive and in extreme cases even subversive towards worthy CSR interventions.

The liberalisation of mining policy in many African mining jurisdictions has resulted in increased foreign direct investment (in 2007 Africa attracted around US$1,395 million or around 16% of global exploration budgets). However, the dynamic relationship between market-based CSR, corporate accountability and good public governance is still not fully understood in the African mining sector. In countries where public governance and civil society is weak, stakeholder expectations and demands for CSR can create an overwhelming and uneasy predicament for mining companies. In remote areas (sometimes neglected by the State as they have low electoral densities) that are economically underdeveloped mining projects can be the only significant economic activity in the region. This can result in such companies facing growing demands to deliver public goods and services that are well beyond their core competencies. If such demands are met in the absence of a competent CSR strategy, mining companies will inadvertently foster community dependency and default to the precarious position of a quasi-governmental role.

The evident failure of many governmental policies to retrocede mineral royalty payments to alleviate poverty in the vicinity of the mining operations has also led to the perception that mining revenue streams deliberately bypass the communities affected by the mining operations. Some countries have also witnessed an increase in local unemployment and underemployment, combined with a lack of a workable or enforceable legal framework, an ineffective national judicial system, an unpredictable fiscal regime and monetary policy, and a weak decentralised institutional capacity.

Unfortunately in some regions where public governance is weak, corruption is commonplace and companies are blatantly requested to make payments to officials or ‘silent partners’ in return for mining rights or other forms of public service delivery. The combination of all of these factors, and high political risk in some areas, further exacerbates the problem by increasing the vulnerability of mining companies to the CSR challenge. Correspondingly, the onus for dealing with all economic, environmental, social, and governance issues and oversight rests inevitably on the shoulders of mining operators who are somehow expected to demonstrate responsible leadership by adopting a benevolent and pragmatic rather than legal-protectionist approach.

Without a doubt, qualified and informed NGO criticism has helped incentivise some companies to promote high levels of socially responsible practice and this form of constructive civil society activity is crucial. Despite some NGOs being exceedingly vocal, having the potential to act as mediators, and being capable of capacity building for mining related CSR interventions: experience has shown that to date they have also failed to deliver. In some extreme cases, and in the absence of a suitable watchdog, some NGOs have adopted a polemical attitude spreading misleading propaganda and have even played a role in augmenting community disharmony and conflict. Given the lack of formal CSR guidance, it is essential that NGOs also realise that they have to change (whilst upholding their core values) and adopt a differing and more pragmatic strategy. For instance NGOs will have to recognise that despite best intentions, mining project timeframes do not always allow for the ideal ‘bottom-up’ developmental approach and that a compromise will have to be brokered. Such progressive NGOs, in partnerships with companies can help resolve the complex issues currently faced with respect to competent and sustained CSR implementation in the African mining sector.

 

Juniors and joint-ventures

Some juniors find that the costs of socially responsible activities can be onerous and many companies at the exploration stage claim that they cannot ‘afford’ a CSR programme when cashflows are negative and long term tenure is uncertain. However, identifying, and addressing the social issues early on and managing them actively throughout the life of the project, starting from exploration, will increase the likely success of future commercial operations. Short-sighted employment and community development strategies combined with poor consultation processes can trigger long-term resentment and unrest.

Remember also that the early exploration and development stages of a mining project often witness the greatest community conflict and mismatch of expectations. Consequently, there is a strong business case for early community engagement, including lessening the risk of social conflict and attendant delays, faster permitting and approvals, reduced risk of criticism and interference from outside parties, and more effective use of company resources. 

First impressions really do count, and this initial phase will be the first sustained contact with the resident communities. It is worth remembering that misunderstandings could result in the creation of a phoney mine situation: expectations will be created and must be properly managed. Exploration teams sometimes have a tendency of suggesting or making promises of benefits or other positive outcomes for communities that need to be kept, and this initial contact will precondition attitudes to the potential mining phase.

Another challenge that is often neglected is the application of CSR policies and procedures to independently managed operations such as joint ventures and minority equity stakes. Such joint ventures can include agreements between majors on large mines; with juniors at early exploration; with emerging market private companies or state parastatals; or through equity investments. Such operations constitute a growing proportion of the portfolio of many major mining companies particularly in Africa.

Although the complexity and diversity of independently managed operations is great, majors must ensure they undertake a proper economic, environmental, social and governance risk assessment and comprehensive due diligence on all such operations. They should ensure that they develop appropriate CSR policies, cross-company governance, and assurance reporting systems.

 

Standards

There is currently no single performance standard that meets all the desired criteria for the mining industry. Although the mining sector is reported to be one of the most prolific disclosers, there is still inadequate appropriate disclosure as companies use a variety of different indicators and metrics resulting in a confusing mix of information that is often difficult to interpret fully.

There have been some responses to this dilemma by encouraging the identification and reporting against material business issues including the Mining and Metals Sector Supplement (MMSS) of the Global Reporting Initiative (GRI), the Mine Certification Evaluation Project (MCEP), and a planned ISO standard on CSR.

The newly established CommDev group (within the IFC) has also acknowledged this shortfall and hopes to establish monitoring and evaluation performance criteria for mining community interventions. This should also recognise the different impacts over the mine lifecycle and also differences in governance structures, social context, size and duration of the mining operations, and changing demographic factors.

Given this proliferation of CSR standards and guidelines, which in reality result in additional corporate costs, it may be prudent for those involved in the African mining industry to advocate for some degree of harmonisation or at least convergence. Mining companies engaged in Africa could also campaign for greater integration of stronger public governance with CSR, perhaps incentivise best practice improvement in business behaviour, and also try to build a more inclusive CSR agenda that does not rely solely on stakeholders in high income countries.

 

The Future

Within the mining sector, the Canadians seem to be taking the lead with respect to CSR, and in March 2007 they held a national roundtable on CSR and extractive industries in the developing countries. This roundtable developed a CSR framework that included adopting reporting obligations based on the GRI; the use of an independent ombudsman office to provide advisory services; the establishment of a tripartite compliance review committee; and the development of polices and guidelines for measuring serious failure by companies to meet Canadian CSR standards.

However, before we all get carried away with the CSR mantra it is also worth noting that despite the plethora of declarations, documents and research papers there are still clashes between different worldviews on what should constitute an appropriate CSR agenda, or even basic value propositions, for the mining sector.

Another issue that is often overlooked by fanatical advocates of CSR in the mining sector is that much of the current evolving CSR agenda actually originates from Northern businesses and policy institutions.

Could this clear bias create an insurmountable barrier for smaller local enterprises looking to enter the African mining sector leading to further marginalisation and generate unfair market access impacts for foreign multinationals? Could there then be a conflict of interest between what would appear to be well meaning CSR agendas and African government mining policies including Black Economic Empowerment (BEE) in South Africa?

Such questions really need to be answered before Africa is subjected to yet more international trade policies that are actually counterproductive and restrict its internally generated growth. Therefore, it is essential that African governments recognise that they also have a crucial stewardship role in raising CSR standards in business practice through informed policy and legislative interventions. Hopefully, global mining CSR agendas and home-grown African mining policy will prove to be mutually reinforcing and in combination will benefit the entire African mining sector.

Although there is growing peer pressure and external benchmarking on CSR conduct, it is also important to persuade mining companies that they should refrain from competing on CSR implementation. CSR is about aligning mining corporate policies and practices with sustainable development. Therefore, CSR information and experiences should be treated as non-proprietorial especially in areas where companies operate in close proximity. In such circumstances a clustering of worthy initiatives could be jointly beneficial avoiding a duplication of efforts whilst maximising available social development funds.

Although the liberal economist ‘business of business is business’ attitude is still contended by some, this outlook is becoming more difficult to rationalise in the new world order of our global economy. Company’s relationships with society go beyond mere marketplace transactions. We need to remember that any CSR mining strategy must provide tangible materiality not only to the company’s shareholders, but equally to the host African nations and their citizens who are keen to develop and capitalise on their mineral wealth in a sustainable and equitable manner.