When it comes to sustainability in the extractives industry, purists might see a contradiction in terms. But if the interests of local communities are kept central, there is more chance net benefits will follow

Can the mining of metals and minerals – finite resources – ever really be sustainable? Some environmentalists argue this is impossible because of the loss of natural capital. But many economists, governments, NGOs and of course mining companies themselves take a broader view that includes economic and social criteria.

To them, sustainability in extractives is not only essential but also measurable, and is achieved when total gains outstrip total costs in all areas across the whole life cycle of any project from exploration to post-closure. In this way, loss of natural capital, they say, can be compensated by economic and social gains.

But for sustainability to have any chance of success, two conditions must be met locally: first, maintenance of essential life-supporting mechanisms such as air and water, and second, improvement of human welfare – and the latter can only be met if the identity and autonomy of local or indigenous communities are also respected and protected. Traditionally these conditions have not been fulfilled with extractive companies and they have met strong opposition from local people as a result, from Africa to North America, Latin America, Asia and Australasia.

Water sustainability is essential


Non-sustainability comes in many forms but among the most frequent issues are: government approval of mining projects without the consent or even knowledge of local communities; pollution and/or depletion of natural resources, with little government intervention; displacement of local people with inadequate relocation schemes, jobs or other local economic benefits.

Conservation teamwork

Marielle Canter Weikel, senior director, responsible mining and energy at Conservation International (CI), based in Arlington, Virginia, says her organisation has learnt to focus on environmental and social issues together in its dealings with extractives companies. And it applies the same approach to governments, communities and other NGOs. This ties in with its mission of conserving the natural environment “so that people can thrive". However, the industry itself is not yet so adept at integrating these criteria, she says, and it often separates them.

“We prioritised relationships a long time ago with extractive companies because their potential impact on the natural world is so great,” Weikel says. “They also present potentially tremendous opportunities to protect and conserve natural resources over a long time frame – 15, 30, 40 years. It is also undeniable that they can contribute to economic development.”

CI looks at companies’ understanding of biodiversity and ecosystems, including water, and the risks their activities pose to sensitive species. Regular benchmarking helps it gauge the state of play in any sector across a range of issues. It also examines companies’ approaches and commitments on climate change, how they can mitigate or reduce carbon emissions, and their climate adaptation strategies.

“There is a whole raft of activity around social and community issues, particularly the human rights component on areas such as free prior consent (FPC),” Weikel says. “Do companies have policies that address that, and human rights to water?

Engage local communities


“We look at whether they have signed up to the Extractives Industry Transparency Initiative (EITI).” Another practice to look for is whether companies set up good measuring and monitoring systems: “What gets measured gets managed,” Weikel says.

Mitigation methods

CI provides input to the Cross-Sector Biodiversity Initiative, an effort of the International Council on Mining & Metals (ICMM), IPIECA (oil and gas association for environmental and social issues) and the Equator Principles Association financial sectors. CSBI, which started in early 2013, develops and shares good practices related to biodiversity and ecosystem services, including those that support applying the “mitigation hierarchy” to mitigate and offset environmental impacts. 

Mitigation hierarchy, which some environmentalists see as contentious, goes from avoidance (for instance, careful placement of infrastructure or disturbance), to minimisation, to rehabilitation/restoration (i.e. after ecosystems have been damaged or removed), and finally to offset.

Offset measures are meant to compensate for any adverse impacts left after full implementation of the three earlier steps. Biodiversity offsets are often complex and costly, so earlier steps in the mitigation hierarchy are usually preferable. And even after their effective application, extra steps will be needed to deliver “no net loss”.

“It’s often less expensive to avoid [impact] than clean up/mitigate afterwards. Ideally we are looking for a positive impact, but how do we get to the point where we at least achieve net neutral impact?” Weikel says.

CI’s partnerships with mining and oil and gas companies include global efforts as well as site-level partnerships in Colombia, Chile, Liberia, Indonesia, Tasmania and elsewhere. Weikel admits there will “always be room for improvement”, and a number of issues present areas for further work, but she has observed general progress in some areas over the past decade or so.

Biodiversity can be preserved using the “mitigation hierarchy”


“The fact that many companies are now at least setting themselves performance targets for several sustainability criteria is a big improvement on where we were. It tells me that they have a better handle on their impacts than back then,” Weikel says.

That often translates into players taking steps towards mitigating those impacts, she adds. Measurement of biodiversity and ecosystems is still rare against specific targets, however, and CI is working on this. “I wouldn’t say any one company or government has it all figured out in respect of sustainability in extractives,” Weikel says. “It’s so variable.”

CI is developing conservation agreements through support from Chevron Liberia Exploration and Development, aimed at supporting local communities’ livelihoods and basic needs in coastal areas close to where the company is exploring offshore. The agreements will probably address issues such as mangrove degradation and harvesting of sea turtle eggs, partly by providing alternative social benefits.

NGOs facilitate local community partnerships


Extractive companies know they will continue to be held to higher standards of performance, in part because of the rapid advance of information technology, particularly social media, Weikel argues.

Resettlement in Mozambique

Serena Lillywhite is mining advocacy lead at Oxfam and co-author of a report about involuntary resettlement from the Benga coal mine in Mozambique under three consecutive owners, including Rio Tinto. She says people are usually “significantly disadvantaged” by displacement and this case is no exception.

About 3,500 people have been relocated almost 50km from their old homes near the fertile banks of the Revuboe river at Capanga, in Tete province, where they were able to maintain a subsistence lifestyle with several months’ food stocks in reserve. There they also had other economic opportunities such as selling firewood and collecting sand for the construction industry.

Their new home at Mualadzi, still in Tete, is in a harsh and isolated physical environment and they face a precarious future, Lillywhite says. “The soil is infertile and makes growing of crops almost impossible. There is also a lack of adequate water supply for them or their animals,” she told Ethical Corp from the capital, Maputo.

Community relocations have been insensitive to people's needs


The Oxfam report, Mining, Resettlement and Lost Livelihoods, launched jointly with the Centre for Social Responsibility in Mining (CSRM) in April, details the effects of the move through the voices of those displaced. Without a water pipeline, which would be a major and expensive undertaking, long-term prospects look bleak. Culturally and socially a sense of extreme dislocation has taken root. The river was central to people’s way of life, and now they have no church or even a cemetery. Transport links are also poor, limiting job opportunities.

However, Lillywhite is hopeful that Benga’s new owners, International Coal Ventures, based in India, will try to remedy some of the problems it has inherited as the final stage of resettlement is completed in 2015. “We were encouraged at the launch of our report that the new owners are very keen to work with government, community and civil society to try and tackle some of the immediate challenges and more fundamental issues,” Lillywhite says.

“That is not typical – what tends to happen is that nobody takes responsibility, neither the companies exiting nor those who have acquired assets.”

Chequered history

The mining industry is characterised by frequent mergers and acquisitions, sometimes making accountability difficult. Rio Tinto, the previous owners of Benga, sold the site in late 2014 only three years after buying it from Riversdale, the Australian group under which the resettlement scheme started in 2010.

Rio Tinto did try to address the water shortage by drilling 11 bore holes but at the time of Oxfam’s research only four were in operation. It had also attempted to install livelihood-restoration programmes, including chicken rearing, but Lillywhite says these did not involve the whole community and have turned out to be unsuitable.

A few chickens won't save a poorly relocated village


“The community voice has been entirely absent in these decisions, and that often happens – you tend to see very little consultation,” she says. Overall, Lillywhite says, the resettlement has been marked by a major deficit in planning and risk analysis, risk mitigation and remedy process.

“This is clearly not just a matter of money. Rio spent in the region of $50m on the resettlement and despite such a large amount, these issues remain. The monitoring and oversight have been nowhere near commensurate with the risks – this community have resettled to a location with significant problems.”

A smaller number of households are due to be resettled in an urban location but for the vast majority, jobs at Mualadzi have been scarce, even when the local road needs to be fixed. “The loss of economic opportunity is very significant – it compounds low capacity and social fragmentation,” Lillywhite says.

The Mozambican government, not Rio Tinto, selected the relocation site, which highlights how available space should not be the only criterion for such moves – other factors such as whether the new land is fertile should be considered.

Almost 70% of the entire Tete province is under mining concession for current or future projects, according to Oxfam. In March 2015 the World Bank admitted millions of people had suffered from resettlement resulting from its own infrastructure projects in the past two decades. Lack of information is another common problem for people who find themselves near mining sites under prospective or ongoing development, Lillywhite says.

Ultimately, governments of resource rich countries should bear a greater responsibility in such cases, NGOs say, because they are the ones granting the mining/mineral concessions. And if large and relatively progressive mining companies such as Rio Tinto cannot be relied on to get resettlement right, it is likely the pattern is being repeated on a smaller scale by others.

Water under threat

Stuart Orr, who heads WWF’s water stewardship programme, says his organisation realised seven or eight years ago that the private sector’s growing interest in water had to be aligned around better governance and protection of ecosystems. “Because of the social, environmental and human rights aspects of water, we knew it was not a resource that companies could co-opt just for their own personal motives,” Orr says.

Mining companies – perhaps more than many other sectors including food and beverages – have grasped that water management will become increasingly central to business risk, he says.

The International Council on Mining and Metals (ICMM), along with the Water Environment Federation (WEF) and International Finance Corporation (IFC), which is part of the World Bank, are all in the process of embracing more progressive values around sustainability generally, Orr says. But that does not mean this has yet translated into the right measures across the extractives sector, or even any individual company’s whole operations.

Good water management is good risk management


“It’s very hard to say someone is the best in class on any sector, let alone mining, because a company may be running a very good project in one place and doing spectacularly badly somewhere else,” Orr says.

In the case of one multinational mining company, Newmont, which has been at the centre of violent unrest over its planned Conga gold and copper mine in Peru, one analyst says it has shown at senior level that whereas it used to regard water as merely a resource “to clean and move and get out of the way”, it now understands its significant connection to society and the environment, one bringing both risk and opportunity.

For all mining companies, the connection between business value loss and water is much clearer than for other sectors because it is so visible. “Whether it’s acid mine drainage and issues on water in South Africa, or repeated revoking of water licences in South America because of social conflict, or whether there’s just not enough water to mine a seam of ore out of the ground, that link is clear,” Orr says.

He praises work by Ross Hamilton, director, environment and climate change at ICMM, in devising a comprehensive water stewardship framework and a catchment-based approach. Published in April 2014, this looks at the water environment in terms of all the ecosystems services connected to a healthy catchment and aims for better integration of planning and activities so that everyone benefits.

Long-term liquidity

In the long term mining companies cannot just buy their way out of trouble by, for instance, building desalination plants and pumping water in, Orr says. The reaction from investors is that this kind of huge expense does not ultimately represent a good return. “This isn’t something they can circumvent – they are embedded in these communities and environments,” he says.

Some companies have also unwittingly created legacies not only below ground –including acid mine drainage, which contaminates drinking water and threatens aquatic plants and animals through formation of sulphuric acid – but also above ground.

Acid from mines contaminates drinking water


This is because a lot of their interventions have been around providing water to local communities as a way to protect social licence. But when the mine closes, what happens to those people’s supply? Such actions may seem like a good idea at the time, but they turn companies into acting like water utilities with legacy issues where communities expect continued water supply in perpetuity.

“It would be better to think though more strategic responses that aren't about taking over a government role,” Orr says. These might include liaising with national agencies or utilities in an advisory or training role.

Investors are increasingly showing concern about water as a threat to growth and mining companies have enough experience on quality and quantity to know that they’ve got to do better, Orr argues. Companies have to think more broadly and holistically about where their sites are geographically: not just the people outside their fence but those within the river basin they are operating in and how to make a meaningful contribution there.

“So much of the conflict negotiations and discussions with communities end up spreading downstream and upstream from the site, and have caused a tremendous amount of pain in increased cost and shutdowns and stakeholder revolt, on top of the obvious local hardships,” Orr says. “Mining companies can’t dissociate those things from water. The reason extractives covers so many issues is pretty much down to water.”

ICMM is not in a position to enforce measures but it is represented by some of the biggest companies in the world, which are signed up to its framework on water stewardship. “At least it’s a step in the right direction, it’s the right realisation and frankly it’s better than most sectors,” Orr says. “The proof will be how extractives shape up over the next five or six years – it’s not a quick fix.”

Generally, the wider public don’t usually differentiate by company – they broadbrush, so it’s very hard for individual organisations to stand out. “One of the challenges is to lead by example and bring the laggards up but also to help the small scale operators, otherwise it will be hard to get where we want,” Orr says.

Some mining companies are going to realise they have hit the limit in some basins of how much they can grow and source. “They’ll be in places where there’s plenty of stuff in the ground [minerals and metals] but no way to get it out, because of inadequate water supply,” Orr says. Using water per se is not a bad thing, nor is mining – “it’s about ensuring better protection and systems for the water we do use in all aspects of our lives”, he explains.

Investor’s view

Francis Condon, senior analyst for mining, oil and gas at RobecoSAM, a Swiss based specialist in sustainability investment, says even the best extractive companies face challenges at individual operations. For mining, RobecoSAM applies 22 separate industry-specific criteria across environmental, economic and social dimensions, including issues such as waste management, occupational health and safety, and communities.

Most of its information comes from questionnaires completed by companies themselves, and RobecoSAM identifies the sector leaders based on a weighted aggregate of scores across all these criteria. “When we have carried out this assessment it doesn’t mean leading companies face no issues or are necessarily perfect in terms of managing all of them,” Condon says.

Companies given the green light by RobecoSAM have a systematic set of policies and procedures in place; their recent performance demonstrates they’re implementing these well; they display transparency; and there is a generally high level of external verification of approach and outcomes.

As for Newmont – whose Conga project in Peru is still on hold though unrest has abated – Condon says the company appears to have undergone a fairly deep reorganisation in its sustainability management in the past few years, including providing more information on its website and an annual sustainability report. “While public reporting and communications are not everything, they are one indication of the efforts a company has put into its business,” Condon says.

Score card

RobecoSAM conducts a Media Stakeholder Analysis on all companies to identify any specific issues or events that might show whether its sustainability approach is up to the task of managing any operational or reputational risks. It looks at how companies have responded to conflict situations, for instance.

Mining companies offer different levels of transparency

“In this sort of process we are able to compare notes with our Governance and Active Ownership team, which undertakes ongoing company engagements for RobecoSAM,” Condon says. Newmont’s Silver Award for 2015 means its score is within a range of 1% to 5% from the top scoring metals and mining company surveyed. RobecoSAM says it has a high degree of confidence in the information provided by extractives companies but admits there is a “spectrum in transparency”, with some companies far less willing to share – through questioning or the public domain – than others.

Aside from Newmont, community issues are prevalent in Latin America, particularly around other copper and gold mines in Andean regions, whereas in Africa concerns tend to centre more on labour, Condon says.

He adds: “Water is cropping up more and more often, usually first as an environmental then a social issue, where you have some measure of competition between mining operations and local communities for a limited amount of water resources.”

RobecoSAM’s assessment is about encouraging “constructive dialogue”. It aims to recognise leadership and best practice in sectors rather than any sort of naming and shaming. “We want to focus on the better end of sectors and how companies that aren’t there can aspire to and implement those better practices,” Condon says. RobecoSAM openly congratulates those that make it onto the Dow Jones Sustainability Index. “This in itself often spurs on the companies that may have more to do,” Condon adds.

Yet on its website the investor strikes a more ominous tone, citing a range of challenges facing the industry, including corruption, bribery and other breaches of ethical conduct. “In many cases, trends towards less accessible geographical areas, deeper extraction and declining ore grades are likely to exacerbate many of the environmental and social issues facing the mining and metals industry going forward,” RobecoSAM concludes.

To read the accompanying case studies, please follow this link.

extractives  social licence  social legacy  mining  Oil  gas 

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