The Responsible Mining Index, published this month, praises several companies for good practice, but identifies a widespread failure by extractives firms to monitor and share ESG performance with communities. Mike Scott reports
Mining is a challenging business, but many extraction companies are finding their greatest challenges lie not under the ground but above it: dealing with their impacts on local communities.
These cover the full gamut of environmental, social and governance (ESG) issues, ranging from pollution and water use to the effects on local communities, including labour conditions, the level of tax that firms pay and bribery and corruption concerns (see video from United Nations Environment below).
According to Dutch NGO the Responsible Mining Foundation, which this month published the inaugural Responsible Mining Index ranking the top 30 mining companies on their performance on six different ESG issues, many mining companies have established responsible policies and practices on specific issues.
But it says few companies have taken a systemic approach to addressing the full gamut of their impacts, or follow up their own policy commitments with effective, company-wide action. The index states there was: “Little or no action on some issues on which companies would be expected to act, such as monitoring the impacts of mining on children, tracking whether community grievances are being dealt with appropriately, or checking that workers’ wages meet or exceed living wage standards.”
Critically, it identified a widespread failure by mining companies to monitor and report their performance to key stakeholders. The NGO, which assessed 127 mining sites, found that the vast majority “provide little or no data on key issues of direct interest to local communities, workers and other stakeholders. This includes information on how a site is managing local employment, local procurement, grievance, water use and biodiversity impacts.”
Luke Balleny, manager for the role of mining and metals in society programme at the International Council on Mining & Metals (ICMM), says that in the age of social media transparency is key to companies retaining their social license to operate.
“Now it is crucial to have the local population on side,” said Balleny. “They are not only local stakeholders but make up a substantial proportion of a mine’s employees.”
In addition, a trend towards more decentralized government has given more power to local authorities, which have a closer connection to their communities.
You can get the right permits but if you don’t have local community support, your project will struggle
In Colombia, AngloGold Ashanti, which leads the Responsible Mining Index for working conditions and ranks high for environmental responsibility and community well-being, was granted permission by the central government to develop the La Colosa gold mine, but the local authorities took the government to court.
The country’s Constitutional Court overturned the government’s sole authority to approve mining projects, and the mayor of Cajamarca, the local municipality, held a referendum on whether the $2bn project should go ahead. According to Reuters, 98.8% of Cajamarca residents voted against, and AngloGold put the project on hold.
“It was a wake-up call to everyone in the industry, that you can get the right permits but if you don’t have the support of the local community, your project will struggle,” Balleny says.
Mtwalo Msoni, national co-ordinator for Zambia of NGO Publish What You Pay, says that mining groups either fail to communicate with local communities or make a lot of promises before projects open. “It is these promises that eventually lead to mistrust and conflict between the mining company and local community,” he says.
Balleny agrees that managing expectations is crucial, especially in the early stages of a project, “Communities often expect money to start flooding in as soon as a project has been agreed. But mines won’t make profits until maybe five to 10 years after they start operating and they won’t start operating until five to 10 years after planning starts.”
People want not just to be consulted but to be listened to and have their opinions taken into account
Consultation processes have not always been as good as they could have been, Balleny concedes, “people want not just to be ‘consulted’ but to be listened to and have their opinions taken into account. You have to start building trust from a very early stage, long before you start digging holes in the ground.”
Mining companies must invest in building skills in local communities and in supporting local businesses that can provide services to the mines, particularly social enterprises “because they guarantee multiplier effects within the broad community,” says Msoni.
One of the companies that has shown best practice in this is US-based Freeport-McMoRan. The Responsible Mining Index highlights how its subsidiary PT Freeport Indonesia (PTFI) has provided skills development to indigenous Papuans, training more than 3,800 and placed over 2,600 apprentices into permanent employee and contractor positions.
Its US parent company used the model to establish a training institute in Arizona on the reservation of the San Carlos Apache tribe, to increase the skills and employability of Apache students.
If companies are transparent, it is a first step to building trust, and it helps citizens to hold the government to account
Another way that mining companies can counter the perception that they are not contributing enough to the communities where they operate is through increased transparency on tax, according to Balleny.
“If companies are transparent, it is a first step to building trust, it reduces the potential for bribes and it helps citizens to hold the government to account. Companies feel they have a good story to tell about how much tax they pay and that it makes sense to be open about it.”
In addition, there is a raft of regulation that encourages greater transparency, including the EU’s Accountancy Directive, which requires large oil, gas, mining and logging companies listed and registered in the EU to disclose their revenue payments to governments around the world by country by country basis.
When countries sign up for the Extractive Industries Transparency Initiative, a global standard promoting open and accountable management of oil, gas and mineral resources, companies operating in those countries have to disclose how much tax they pay and to whom.
Anglo American, which scored among the top three on the Responsible Mining Index report on all six categories, produces an annual report on tax and economic contribution, and won the PwC Building Public Trust Through Tax Reporting award in 2015 and 2016.
Jan Klawitter, international relations manager at Anglo American, told Ethical Corporation’s supply chain conference last year: “The lack of trust between communities, governments and extractive companies is a significant issue. Tax takes you into a socio-political conversation and it’s really important for our social licence to operate. It’s about the difference you can make on the ground. Providing livelihoods, running enterprise development schemes, localising supply chains is what makes the difference.”
Mike Scott is a former Financial Times journalist who is now a freelance writer specialising in business and sustainability. He has written for the Guardian, the Daily Telegraph, the Times, Forbes, Fortune and Bloomberg
This article is part of the in-depth briefing Clean Energy's Human Rights Challenge. See also:
mining Human rights Responsible Mining Index ESG Responsible Mining Foundation AngloGold Ashanti Publish What You Pay fair tax Freeport-Mcmoran EU Accountancy Directive Extractive Industries Transparency Initiative Anglo American