Mining CSR: The key to responsible mining

But what really gives a mining project its value? Beyond its financial viability, a mine becomes valuable if it makes a positive impact on its host community. This is where the corporate social responsibility (CSR) projects of a mining company are essential in underscoring their operations as a responsible and sustainable effort—and separating them from illegal and unregulated projects that only leave the earth bare.

Initial benefits of mining

At its most basic and beneficial level, mining is a source of mineral resources important for maintaining and upgrading living standards, according to a study on mining technologies by the National Academies Press (NAP) of Washington DC in 2002.

By definition, mining is the extraction of valuable and non-renewable minerals or other geological substances from the earth. Materials acquired through mining include gold and metals, limestone, rock salt, gemstone, coal, oil, gravel, and clay. Mining is intended to obtain resources that cannot be produced through agricultural activities or manufactured artificially in a laboratory or factory.

Meanwhile, responsible mining has some obvious benefits. A properly structured mine operation, says the NAP, engages with the local residents and provides them with jobs, raising the living standards of the community.

Revenues generated from mining activities help in developing facilities, such as schools, hospitals and other social infrastructure, says Australian Mining — the industry magazine in the country that rode its so-called mining boom to newfound prosperity. These activities promote business enterprise in the mining regions; for instance, they promote growth in rental houses to provide accommodation for miners.

Growth in businesses that would cater to mine workers’ needs, such as apartments, grocery stores and service businesses, is expected from a mining venture too—part of the “multiplier effect” that economists use to describe the impact of an industry beyond the monetary value of its products or services.

Finally, mining resources are important foreign exchange earners and contribute significantly to the gross domestic product or GDP, adds Australian Mining.

Argument for mining in the Philippines

In the Philippines, mining as an industry has existed for at least a century, yet the country has barely scratched the surface of its mineral wealth. According to a US State Department report in 2012, the PH is one of the world’s most mineralized countries — with estimated untapped mineral wealth of over $1.4 trillion (Php68.86 trillion) according to the Joint Foreign Chambers of the Philippines.

The Mines and Geosciences Bureau (MGB) says the Philippines is second in the world in gold resources, third in copper, and top five in overall mineral reserves covering an estimated nine million hectares of land – although just two percent (2%) of this area has received mining permits.

The country is also part of the broader Asia Pacific Region that includes the world’s largest producers and consumers of minerals, and accounts for more than 70 percent of global consumption of coal, iron ore and tin, a report by the Asia Pacific Economic Cooperation (APEC) said in 2011.

“Given the size of the mining industry, it holds significant economic importance in the region,” says a report by the Asian Institute of Management-Ramon V. Del Rosario Center for Corporate Social Responsibility (AIM-RVR-CSR) done for APEC in May that same year.

However, the AIM report continues, “based from global industry records, there have been numerous past instances of environmental damage due to unacceptable mining practices, causing irreversible harm to the mining industry’s reputation (and) leading to the increasing resistance of host communities to mining operations.”

The Philippines only has to look back at the horrible Marcopper spill 20 years ago to the illegal black-sand mining along its coastlines and even wholesale smuggling of nickel-rich earth to countries abroad to see the opposition to the industry here. Thus, the economic potential of mining “has not been maximized and the sector has failed to create significant impact on member economies,” the AIM report for APEC adds.

Where CSR comes in

The key goal for countries, therefore, is to find ways to balance the benefits to all stakeholders, the AIM report added – and this is where mining CSR steps in.

The challenge for the mining industry in APEC economies, says the AIM, covers three dimensions: economic, environment and social.

“The mining industry, specifically in developing countries, needs to ‘heal’ and revive the lost trust towards mining activities by ensuring maximum economic benefits with minimum environmental and social costs and the objective of sustainable development,” the institute report adds.

“Mining activities should contribute to the host communities — safeguarding human rights, enhancing quality of life, and ensuring the sustainability of the environment during the operation and after the closure of the mine.”

CSR is one of the “key practices” that could promote and enhance in line with sustainable mining objectives, the AIM says. CSR supports the principle that business “is fundamentally about meeting human needs.” For the mining industry, it must be “systematic and scientific in demonstrating benefits and efforts to prevent negative impacts and create value to society.”

CSR refers to “voluntary actions” undertaken by mining companies to either improve the living conditions (economic, social, environmental) of local communities or to reduce the negative impacts of mining projects. By definition, “voluntary actions” are those that go beyond legal obligations, contracts, and license agreements.

According to MiningFacts.org, CSR programs of mining firms usually invest in:

Infrastructure (potable water, electricity, schools, roads, hospitals, hospital equipment, drainage repairs, etc.);

Building social capital (providing high-school and university education, providing information on disease prevention, workshops on gender issues, information on family planning, improving hygiene, etc.); and

Building human capital (training local people to be employed by the mining enterprise or to provide outsourced services, promote and provide skills on microbusiness, aquaculture, crop cultivation, animal rearing, textile production, etc.).

Common CSR components

It is challenging to outline a set of clear components that are common to all mining CSR programs, says MiningFacts.org, which is a portal for the Canadian mining industry run by the Fraser Institute, one of the top 20 “think tanks” in the world.

“Each CSR program needs to be designed and continuously evaluated according to the needs of the community affected by a mining project,” MiningFacts.org says. “Creating a successful CSR project is therefore usually a process of trial and error.”

Most mining CSR projects, however, focus and incorporate three mains areas: the environment, social, and economic factors. Several international initiatives and associations exist that promote best practices and corporate social responsibility in the mining sector. The following are the most recognized worldwide:

The United Nations Global Compact initiative, in which companies self-evaluate and report their performance regarding 10 principles;

The European Commission’s Renewed EU strategy 2011-14 for Corporate Social Responsibility and Sustainable Consumption and Production and Sustainable Industrial Policy;

The International Council on Mining and Metals (ICMM), organized by the largest mining companies in the world and has a variety of programs to enhance sustainable mining. ICMM makes its members accountable for the fulfillment of the 10 principles for sustainable development; and

The Extractive Industries Transparency Initiative (EITI), a mechanism to publish and verify company payments made to governments and government revenues received from oil, gas, and mining.

Mining companies also pursue certifications such as ISO 14000 (environmental certification), SA 8000 (working conditions certification), and AA 1000 (accountability certification). They are also making efforts to be listed in the Dow Jones Sustainability Indexes.

Why engage in CSR?

Who do mining firms engage in CSR, and why should they? From the community’s perspective, the Fraser Institute says CSR programs of mining companies “provide a mechanism of compensation for the social and environmental costs associated with mining.” These costs are usually associated with environmental impact, higher food and housing costs, and social impacts from an increase in the number workers living in the area.

In addition, a CSR program “provides the community with a means through which it can be involved in, and provide input into the mining project.” Since local communities “may not see many of the direct benefits from the mining industry,” CSR programs are a means through which a mining company can be seen to actively give back to the community.

Mining firms also benefit from CSR programs in several ways. Firstly, they help build better relations with the local communities in which they operate. The economic risks of not having good community relations include project delays and even mine closure, and “significant delays may cost up to two-thirds of the mine project’s initial value,” MiningFacts.org notes.

According to the World Bank, the mining industry has become “a very technologically complex sector,” which employs considerably fewer people than in the past and, therefore, needs to provide other benefits to local communities “in order to obtain a ‘social license’ to operate.”

Secondly, it provides a way of responding to increasing consumer concern about how the products they buy are produced, combined with the fact that the Internet allows consumers to scrutinize mining companies’ operations, according to the Fraser Institute.

Finally, companies that are regarded as socially responsible “may be more likely to be asked to do business with governments that are accountable to their citizens. These companies can also be more efficient in their recruitment processes because “access to the brightest and best in the labor market will depend upon the reputational status of the industry and the companies within it,” MiningFacts adds.

Success and criticism

It is difficult to precisely measure the success of a mining firm’s CSR program, the Fraser Institute says, because the program’s success “is usually measured in terms of what doesn’t happen rather than what does.” For example, the absence of local tension, time not spent in dispute litigation, or of not having to absorb unplanned costs can be called successes.

Despite their benefits, there are a number of reasonable criticisms of these programs. Some critics claim that CSR programs are just part of a company’s public relations strategy, and thus do not really intend to benefit the local community, but are there more to bolster the company’s image, MiningFacts says.

In some cases, funding for projects under a CSR program never materializes. Others argue that these programs divest profits from companies’ shareholders and diminish efficiency of the market economy. The Fraser Institute, for one, says further research needs to be done “to explore to what extent CSR programs take away from company profits.”

Another drawback of adopting CSR is that a mining company runs the risk of making a community dependent on the mining activity for community development, says MiningFacts. “Such dependency can become a real issue when a mine closes and the company is trying to leave the area,” it notes.

Mining companies, a handful of them in the country under the banner of the Chamber of Mines of the Philippines, are aware of this issue and to respond have begun to invest in the community in a sustainable manner that generates real and tangible social benefits.

Still, questions loom over how best to invest sustainably – and of how much of a role government should have in creating CSR standards. One example Canadian miners have asked, according to the Fraser Institute, is that if CSR programs are meant to be implemented by industry to benefit industry, should the government become a driving force behind these programs?

What’s clear is that without CSR, miners everywhere would have less of a social license to extract minerals on behalf of a country, which truly owns this wealth. Mining is indeed big business, but the stakes are high, and engaging in CSR lets mining firms do their work responsibly and sustainably – in the Philippines and elsewhere.