The rocky road to sustainable development

Once again people have said ‘No’ to a mining project, this time to Meridian Gold‘s Esquel Gold Project in Argentina. One of the main problems was the company’s failure to communicate with local residents about the proposed mining procedures.

This is not an isolated incident. Conflicts between mining companies and their communities have occurred in Papua New Guinea, in Guatemala (San Marcos), in Indonesia (Poboya), in Ecuador, in Per (Tambogrande), in New Zealand (Raglan) and in Honduras.

Pursuing sustainable development in nearby communities should be one of the main objectives of any mining company. Maintaining its social “licence to operate” is a constant challenge. In talking to mining company executives, I have learned that there is still a considerable gap between the corporate social responsibility (CSR) rhetoric and actual practice, because of difficulties in implementing their plans. Managers say, “Yes, we understand what it is. Our company has even made a public commitment to be sustainable. But how do we do it? How do we integrate corporate responsible practices into our mainstream operations?”

A typical response, and one I myself have advocated, is to segment the relevant CSR issues relating to a particular business operation, and suggest policy and practice changes accordingly.

Regarding local communities, companies often want to take immediate measures to alleviate the poverty they observe near their mining projects. They usually do this by building schools, clinics or hospitals, and then sponsoring new programs supplied by distant health and education service providers. Sometimes these efforts collide with reality. Problems arise if the projects are seen to be chosen by the mining company or local elite rather than the majority of residents.

Another common mistake of mining companies is to take charge of building infrastructure and providing services, and problems occur because this is not the core business of mining companies. In the areas of education and health care, they use teachers, nurses, course materials and medicine, none of which are mining business specialties.

Mining companies already have special skills that can be shared with communities. They have expertise in areas such as trade, administration, management and finance. They know how to operate and maintain both fixed equipment and fleets of vehicles. They can support local suppliers and contractors, giving them the opportunity to develop their businesses.

The challenge, however, is not only to build the skills but also to facilitate the growth of other activities in parallel with mining. For example, the Lac La Ronge First Nations band in northern Saskatchewan initially developed trucking and catering skills to support the local uranium mines. Over time the band’s business expanded throughout the region, until it had an annual turnover of Cdn$65 million in 2005. This is an example of how mining companies can localize some of their procurement policies to build local services, which in turn can be sold to industries other than mining.

In addition to building local goods and services suppliers, companies can also support schemes to encourage the creation of small businesses. Supporting the development of local businesses both large and small is the best route for optimizing the contribution that mining companies make to their community.

A sustainable business is a commercial activity that residents value in their community, whether the business falls within the public or private sectors. Like good neighbours anywhere, residents will look out for a company as it looks out for them. As a result, investors and financiers will value the mining company as a good investment.

In addition, mineral producers can foster their good reputation and keep their social licence to operate by maintaining good relationships with regulators and the local community. Without a doubt, this is the route to follow toward sustainable development.

This is the first in a series of articles that Jaquelina Jimena will be writing on corporate social responsibility (CSR) topics for Canadian Mining Journal. She is a business journalist and advisor on CSR issues, based in Mendosa, Argentina, and can be reached at jjimena@ciudad.com.ar.