Stakeholders:  The Key to Responsible Business in the Extractive Industry

Stakeholders: The Key to Responsible Business in the Extractive Industry

The concept of responsibility in the extractive industry has grown immensely over the past few years and a number of practices aimed at good corporate citizenship have taken shape. Admittedly, you may be able to think of a number of cases of irresponsibility straightaway, because many companies in the extractive industry continue to exploit the weaknesses of corrupt governments and powerless inspection mechanisms. But there are also many good cases to be mentioned. Many of them show a classic embodiment of corporate responsibility – the good practices really help mitigate the internal and external risks that companies in the extractive industries face, while creating shared value for the communities and economies in which they operate. After all, the levels of awareness and empowerment are continuing to grow among environmentalists and community organizers, who understand the importance of the industry but have no tolerance for the injustices sometimes associated with it.

Engaging all stakeholders, a classic practice of corporate responsibility, is a key governance practice for companies in the extractive industry. Acting Executive Director of the Canadian International Institute for Extractive Industries and Development Dr. Bern Klein says that various stakeholders have a role to play – the industry, professional associations, NGOs, independent institutions and the government. The industry is risk averse and focuses on long-term planning. It might find a need to develop the capacity of local employees and improve the communities in which they operate. At the same time, extractive companies need to keep a careful eye on their environmental practices, because attempts at “greenwashing” are almost impossible to get away with in today’s era of social media mobilization. Professional associations, another stakeholder, help develop formal practices and standards for the industry, including on the concept of responsibility. For example, the Mining Association of Canada has developed an initiative called “Towards Sustainable Mining,” which is a set of tools and indicators that help member companies manage risks at their facilities. Such industry standards allow companies to save time and resources by implementing a practice that has already been evaluated and vetted by major stakeholders.

While NGOs and extractive companies may often find themselves at loggerheads in many countries, a practice of engagement and partnership is really of mutual benefit. NGOs can help these companies take a result-oriented approach to environmental and social issues, supporting them in developing and monitoring their corporate responsibility strategy. That lowers the risk of social discontent and conflict—a major concern for any company—provided of course that the companies are honest and transparent in their partnership. Dr. Klein says, “There may be short-term needs in a community, but NGOs also think in the long term. What happens when the mine is gone?”

 

Fostering Partnerships

 

Academic and other institutes are very important because of the research-based evidence that they provide and the scientific data that can either help drive the current good practices or unequivocally prove the damage done by the bad ones.  Such institutes can also support the government in designing good policies and measures. Their neutrality is important, because academia can only be a reliable resource for both the industry and civil society if it remains a source of quality information.

A good example of a multi-stakeholder partnership in this sector is the Extractive Industries Transparency Initiative (EITI).  A coalition involving governments, companies and civil society from around the world, the EITI focuses on an important aspect of corporate responsibility – transparency and accountable management. In May 2013, the EITI launched a new standard, replacing a set of rules that were in place since 2011. The 12 principles of this standard emphasize the prudent use of natural resources, transparency and the disclosure of all payments both by companies and governments, valuing the contributions to the process of all stakeholders involved. Involvement in the EITI by the Middle East is still very limited, with Iraq currently the main active country from this region. Jonas Moberg, Head of the EITI Secretariat, says that extractive companies invest have a very long time horizon on their investment. “These companies increasingly recognize and understand that contributing to good governance develops a more stable investment climate.”

So while stakeholder engagement is considered one of the central tenets of corporate responsibility in general, it is perhaps the most important place to start for the extractive industry. Any attempts by extractive companies at responsible business without the active involvement of NGOs, academic, professional associations, the government and others can come crashing down in failure. On the other hand, a genuine attempt to engage and partner with these stakeholders can lead to mutual benefit on a very large scale. What is the bottom line? In an interview in 2012, Dr. Saleem Ali, Director of the Center for Social Responsibility in Mining, said, “When we think about natural resources, there is a tendency to think about them as divisible issues such that if one person is gaining the other is going to lose […] But you can find ways to use them as a means of fostering cooperation.”

 

*Nazareth Seferian has been a leading figure in CSR in Armenia for more than six years. He is the author of CSR Armenia (www.csrarmenia.com)--the first blog dedicated to CSR issues in the country--as well as an experienced trainer and facilitator. A special thanks to Dr. Bern Klein, Jonas Moberg and Dr. Saleem Ali for their input towards this article.

 

  

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All, 2015

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