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Five challenges to the mining sector executives gathered in Cape Town next week
Mining industry big-wigs will gather in South Africa next week for Mining Indaba, billed as the “world’s largest mining investment conference.” As has become de rigeur in recent years at this kind of event, there will be some discussion of social and environmental “sustainability” issues. The final day of the event is in fact devoted to this and boasts an impressive-sounding set of panels featuring mining company CEOs, World Bank executives, government officials, and a smattering of NGOs. This is consistent with a recent spate of mining sector sustainability initiatives including, among several others, the International Council on Mining and Metals’ Resource Endowment series, which looked at how mining can contribute more to economic development.
While this attention to sustainability is in general positive, it hasn’t driven the fundamental change in industry practice that is urgently needed. US-based Newmont Mining’s history in Peru is one example. Following a series of problems in Peru and elsewhere in the mid-2000s, the company commissioned a report that produced recommendations on improving its relationships with local communities. The company’s implementation of these recommendations has been spotty at best. Last year it was forced to postpone its massive Mina Conga project in the face of community opposition. In December the company released another damning external review that described a “state of fear” among communities living near the mine. Clearly the learning from past reviews hasn’t sunk in with company management.
To address this situation and the critical sustainability challenges facing the mining sector, we offer a few recommendations for the mining execs gathered in in Cape Town to consider as they schmooze, golf, and down some of those delicious South African red wines. (Goats do Roam is my personal favorite.)
First, mining companies need to start fully respecting community consent. While industry rhetoric on this point has improved significantly in recent years (which Oxfam has highlighted in a recent report), good examples of implementation are still lacking. Industry types often make the practice out to be more difficult than it really is and worries about communities vetoing a project are overblown. Newmont’s problems at Mina Conga in Peru exist not because communities there are inherently anti-mining. Rather they stem from the company’s bungled handling of community relations (by its own admission) during the early days of its presence in the community. Getting these relationships right from the beginning and actively addressing to community concerns are critical to avoiding these problems.
Ensuring respect for the rights of women in the communities where companies operate is also critical for ensuring sustainability. Women are often the guardians of communities’ long-term interests. They suffer most directly from the negative impacts of mining, via the domestic violence and alcoholism to which mining often contributes. Mining companies must carry out more rigorous and independent gender impact assessments.
Transparency has become somewhat of a cliché in discussions of sustainability in the extractive industries, but it’s an area, like women’s rights, where much work still remains to be done. Mining companies should fully disclose all payments they make to governments – down to the project level where their impacts are felt. To its credit, the mining industry hasn’t joined the American Petroleum Institute’s odious lawsuit seeking to block a new US law requiring these disclosures. This is positive and should be coupled with all companies publicly embracing the law and disclosing this information beginning this year.
The thirsty folks gathered in South Africa will know that there is no sustainability issue more critical to the mining industry than protecting water resources. South Africa itself is awash in acid mine drainage, or sulfuric acid that leaches out of mine sites and destroys ground and surface water. This problem is a ticking time bomb in developing countries and it is incredibly expensive to fix once it starts. Once it does, the acid needs to be treated forever. Mining companies have the technology now to know when mining in particular ore bodies is likely to cause this problem. They also know they shouldn’t mine there.
Finally, if mining companies want to contribute more to sustainable development, they should accept the fact that that may mean reduced profits for themselves. Mining companies are masters at negotiating deals that enable them to avoid paying significant amounts of taxes. In contract negotiations, industry lawyers routinely take under-trained and under-resourced government officials to the cleaners. Yes, companies should be able to make profits, but they shouldn’t do so by exploiting unfair advantages.
Ultimately, making progress on these issues will depend on the degree to which mining companies incorporate community consent, the rights of women, transparency, and protection of water resources into their business models. Creating incentives for performance on these issues will be critical. Investors can play a role by only buying shares of companies with independently-verified performance metrics on sustainability, including demonstrable progress on the issues listed above. Companies themselves can link compensation and career advancement to performance on sustainability.
It’s time for sustainability to become a central part of mining industry standards in Africa and elsewhere, rather than a sideshow.