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CSR uptake grows as mining companies continue to make errors in application

17th September 2014

By: Simon Rees

Creamer Media Correspondent

  

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TORONTO (miningweekly.com) – The uptake of corporate social responsibility (CSR) programmes continues to grow as companies recognise their value in helping mitigate the threat of delays, opposition and resource nationalism, the Center for Responsible Mineral Development principal Tony Andrews told delegates at the Canada-Southern Africa Chamber of Business risk mitigation and CSR seminar last week.

However, too many companies continue to rely on “homegrown” methods instead of implementing universally recognised standards and best practises. Matters are compounded by the failure of many governments to create national mining strategies and their viewing of CSR as a means to abrogate their own social responsibilities.

GROWING PAINS

The mining sector’s uptake of CSR over the past two decades has been made in an increasingly globalised marketplace with a concurrent growth in risk. “The mining industry has become one of the most globalised industries in the world. At the same time, we are among the most visible and most at risk,” Andrews said. “The above-ground issues have become equally if not more complex than below-ground ones.”

Only around 30% of all mining companies are implementing CSR to the level of established international standards, while 60% comprise the “homegrown club”, approaching CSR strategies and practises based on common sense and in-house strategies. “The result is a variance in quality and effectiveness over a wide spectrum,” Andrews said. “The final 10% are doing their utmost to pretend CSR doesn’t exist.”

Another problem for CSR proponents has been the difficulty in quantifying the value it creates. “But recently, and because of the passage of time, more compelling information has resulted from survey research based on analysis of relatively large data sets,” Andrews said, highlighting the 2011 Davis and Franks study on the cost of delays for mining companies.

“This study suggests that delays to a large, world-class project with a capital expenditure of between $3-billion and $5-billion can cost up to $20-million a week. For exploration projects delays can cost between $50 000 and $100 000 a week,” he noted. “The ability to start connecting CSR practises to market performance means we are getting down to the core of business case parameters, which should provoke the interest of any company executive.”

Also helping propel the uptake of CSR has been the rise of mandatory regulations for mining companies relating to ethical practises, human rights, environmental degradation, bribery and corruption, and disclosure, he added.

NOTABLE ABSENCE

The role of government is often an overlooked factor in the success or failure of CSR programmes and stakeholder engagement; many of the disturbances and delays a company can experience stem from the lack of national or regional resource strategies.

“In the past there was a tendency for host governments to focus on attracting foreign direct investment in the absence of well-designed mineral development strategies. This is something that has contributed to the rising tension in many host societies,” Andrews said. “In parallel there is the debate about the distribution of [mining’s] benefits, a key underlying driver of what is commonly referred to as resource nationalism.”

Government is often notable through its absence in many regions, creating further difficulties that companies should consider when formulating CSR strategies. “There is a general lack of presence of government near mining and exploration sites,” Andrews said. “This lack of presence and the inability of local government to deliver on its roles and responsibilities is the most significant underlying cause of conflict for exploration and mining operations in developing countries.”

Governments are also increasingly tempted to require CSR practises in order to fill the void their absence has created. “But this will not work; CSR is not designed to replace local government,” Andrews stressed.

“So where there has been progress in CSR by industry, there has not been progress in effective governance of mineral resource development by many host governments; they are under-performers with respect to the central objective of responsible mineral development,” he said.

GETTING IT RIGHT

Too often companies investing in CSR also fail to appreciate its ongoing and evolutionary nature. “All key [CSR] activities start early in the cycle, evolving in their focus and application as you advance through each of the stages,” Andrews said. “There are many lessons that have been learned and are still being learnt.”

“Risk assessment plus environmental and political due diligence are the crucial first steps in any project prior to going into the field. Many companies still fail to do this and end up in situations they are not prepared for,” he warned.

“Secondly, CSR is not a checklist. Many companies have wanted to see it this way so they could get the CSR completed and move on to the work of exploration and development. Of course we have learnt that CSR involves building and maintaining long-term relationships that must endure throughout the project’s lifetime,” he added.

CSR should not be considered a paternalistic endeavour. “CSR is about empowerment. Approaching local communities with a paternalistic attitude – ‘we know what’s best for you’ – doesn’t work anymore. It is much more effective to facilitate and empower,” he said. “But empowerment needs to be managed: companies need to know when to redirect, and when and how to say ‘no’.”

Even with CSR programmes in place, companies should prepare for situations over which they have no control. “Things can go wrong because of what you did and didn’t do, but sometimes problems arise from external factors outside of your direct control. There’s still a lot to learn about conflict, prevention and management,” he said.

In the future, companies that remain reluctant to implement CSR programmes may find themselves with little room to manoeuvre as the banking and financial sector begins to fully appreciate the value of stakeholder engagement.

“The financial sector is slowly waking up to the fact that there’s a social risk associated with management projects and that they have an important role to pay. They have the potential to raise the level of CSR practises among their mining company clients,” Andrews said. “A bank can ensure a company implements the recommended measures as a requirement for financing – it’s a tactic that usually works.”

Edited by Henry Lazenby
Creamer Media Deputy Editor: North America

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