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Ethical challenges facing mining companies?

February 5, 2018

Last week a friend who knows I have spent a fair amount of time working on mining/oil and with mining/oil companies in recent years asked me what are some of the major societal challenges facing mining companies in the next few years. My response to her question led me to write this blog post. I should say that much of what I’ve written is informed and borrowed from what I’ve heard others say. So little of this represents my own original thinking. I thought of five responses to her question.

Fairness/unfairness
In the background is the question which is often wrongly diagnosed as one of trust: a lack of trust in mining companies (along with other institutions, to be sure.) This interpretation seems like a classic example of transactional miners interpreting the problem through the lens of their own interest, as in: “we need the public’s trust, to be able to make money, so how can we restore it?” Just another version of the old, ought-to-be-discredited Social Licence to Operate idea.

Of course there is a trust deficit, but why, and what is the bigger issue? Fairness is a more useful lens to use. Whether you look locally, sub-nationally, nationally or internationally, there is a real problem of seemingly growing inequality – not just inequality of income, but inequality of wealth and opportunity.

People can live with a lot of inequality. It’s normal. What gets people’s goat is not having less, but unfairly having not enough – the idea that they or their people are not getting a fair slice – and in the worst case, losing their dignity. Increasingly people are driven by a frustration that they are being treated unfairly. They can see it first hand when they compare their circumstances with others nearby. And they can see on their phones and tv screens how much better off are others who have no more right to opportunity than they. And they (rightly) blame the institutions for that. Mining companies are not only institutions in their own right, but they are a fundamental and influential part of the institutional rules of the game which are manifestly unfair in people’s eyes – a key feature of the institutions whose success appears to be predicated on maintaining an unfair status quo.

There is no simple answer to this. Indeed, it’s part of what’s sometimes known as a ‘wicked problem‘ – one which defies accurate description, is hard to problemetise, let alone solve. But a key to addressing and unlocking this issue – which is part of a set of wicked problems linked to politics, demography, climate change, history, education, governance, luck, etc – is at least to recognise it.

Corporate citizenship – a common stake
This then is the background against which to consider the role of mining companies as corporate citizens. Citizenship can be defined by the nature of a person’s relations with his/her fellow citizens, and with the state. Companies wishing to be good corporate citizens – as they should, and as many already claim they are – therefore need to consider their relationship with fellow citizens. First and foremost, companies need to move away from seeing others as “their stakeholders”, towards seeing them as “fellow stakeholders”: fellows with a common stake in a future which is prosperous and sustainable in terms of the environment, society, health, security, justice, etc. This is a major shift for mining companies, who still tend to see others in transactional terms: what do I need to do for you, so you’ll do what I need you to do for me….

Secondly, the point about the relationship with the state. What does a good citizen do, vis a vis the state? S/he abides by the law, helps out, and contributes to sustainable progress in society. But in liberal democracies in particular, s/he also votes, pays taxes, and desires, campaigns, and lobbies for good government policies: not just government policies which affect his or her immediate interests, but those in line with his or her interpretation of society more broadly. And s/he holds government to account. So enlightened mining companies – which are often among the largest sources of government revenue, and around 40% across Africa – should presumably be taking steps to consult with others and determine what ‘good government policy and investment’ looks like in their operating environments, and using their considerable skills and access to lobby for those. This takes companies out of their comfort zone, but following one’s values and principles often does that, no?

The fiscal element is particularly important here because – as Paul Collier has written – mining royalties represent drawing down the capital or the patrimony of society, and they can only be drawn down once. Collier’s idea, I think, was they should therefore be treated as a special capital fund and only used for capital investment: i.e. an investment in making a better future. That means it’s even more essential that they are spent on only the best ideas, arrived at through only the best, well-informed consultation processes.

Of course its wrong to recommend that giant mining companies should have a voice commensurate with the revenues they remit: that’s a recipe for bad policy, and anyway, a citizen only has one vote. Exercising this citizen role requires a careful approach. But – recognising that there is no monopoly on good ideas, much less the right idea – maybe one of the ways for miners to contribute would be to use their sophistication and wealth and access to support and facilitate well informed consultation processes to help other citizens make up their minds; fund eclectic social policy think tanks, and so on …..

Fragile states
There’s a particular issue for companies operating in fragile or conflict-affected countries, where abudant sources of minable minerals seem to lie. Governance is inadequate there, and the minerals sector is frequently linked to instability, corruption and conflict. Yet natural resources governance is seldom addressed directly in civil war peace agreements – hence the problems recur. This is a major area for companies – especiallty the better companies – take responsibility for helping address. Another very “wicked problem”.

Kramer’s and Porter’s ‘shared value’ concept is the idea of “Policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.” (M. E. Porter and M. R. Kramer, Creating shared value, Harvard Business Review, 2011). Surely in a fragile state, “social progress” includes – indeed substantially means – reducing the risk of conflict. So mining companies, as corporate citizens who believe in shared value, have to ask, how can they explicitly invest in progress towards peace? (I touched on this question at a much broader level in a published report in 2015: Peace through prosperity.)

Stewardship
There is increasing (legal and moral) recognition that the supply chain is part of the company’s zone of responsibility – for human rights, for example. But downstream also matters. E.g. to me, a mining company should not sell Uranium to nuclear industries operating in societies without a culture of transparency and challenge. We saw what happened in Japan with the Tsunami. Who knows what the scenario would have been in a more open society, but we can say there’s a good chance that safety planning would have been better if there had been a culture of openness and challenge in the sector – something conspicuously absent in nuclear industry in Japan, where even politicians were kept at bay. Uranium is relatively easy to consider in this respect. Quantities are small, and it is anyway subject to extremely detailed and pervasive international tracking systems.

It’s much harder to consider downstream stewardship when we think about the kinds of materials which are commoditised, but surely staff and shareholders of a mining company should at least want to know if the materials they sell are being used – for example – to make weapons, or build torture prisons, or build shopping malls or bridges or schools, and know how they feel about it, as a first ethical step. Coal of course brings another dimension to this story, in an era of dangerous pollution and climate change …..

Automation
Finally, ever since a mining company proudly played me its cartoon video of the fully automated mine, about 5 years ago – a scenario which it and other companies continue to work towards – I have been worried about this. How do you “sit” within society, when your wealth is being created by digging and exporting raw materials elsewhere without even providing many jobs? I don’t know the answer but it will have an impact on the “corporate citizenship” issue above… especially in fragile places….

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I’ve written before on this blog about the importance that companies with an inherently long view of things take their responsibilities very seriously. When you think about it, the major institutions in society are failing structurally to take a long view: democratic governments because voters don’t ask them to; undemocratic governments because their main interest is maintaining power for its own sake; most companies because neither consumers nor their all-too-fleeting shjareholders care enough to ask them to; and the major religious institutions frequently seem more interested in either the life hereafter or compliance with very specific individual and family norms and behaviours. So – strangely, perhaps – we must look to the insurance companies, pension funds and natural resources companies – especially forestry and mining who almost by definition have a long term stake – to take their leadership seriously.

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