The mining sector searches for sustainability
A new IIED report into making mining sustainable finds major improvements, as well as areas of concern.
It is rare for a controversial industry to engage with its critics, seek advice and pledge positive action for sustainable development. But this is what happened in 2002 when the mining sector's big players sought to understand what it meant for mining to be socially and environmentally responsible through the landmark Mining, Minerals and Sustainable Development (MMSD) initiative. Ten years on, I have spoken to some of those involved in MMSD and asked how they think the industry has fared.
As governments, businesses and civil society organisations prepare to gather in Rio to chart the future of sustainable development, the experiences and reflections of these major stakeholders in the mining sector provide valuable lessons for the future.
A new report – published today by the International Institute for Environment and Development – reveals both major improvements and areas of stagnation. It also points to new concerns that may affect the sector's potential to become a force for good – such as the way companies respond to the trend of "resource nationalism" as governments in developing nations reassert their control over the minerals and metals within their national borders.
Mining has long been linked to environmental and social harm, especially for poor communities in developing countries. Pollution, environmental degradation and few lasting benefits for local people are just some of its downsides. But in 2000, some of the biggest mining companies engaged with their adversaries' calls for their sector to improve and commissioned the World Business Council on Sustainable Development to provide an independent review to investigate and recommend a better path.
The result was the MMSD initiative, which was housed in the International Institute for Environment and Development. Over two years MMSD engaged with hundreds of people in boardrooms and backwaters to build a picture of what was possible. Its 2002 report was a landmark not only because of its breadth of analysis, but also because of the commitment by the sector's leading CEOs to adopt its agenda to contribute more to sustainable development.
Ten years later, what has changed?
In the decade since MMSD, multi-stakeholder initiatives and new guidelines have proliferated. The International Council on Mining and Metals, the umbrella group tasked with acting on many of MMSD's recommendations, has helped drive this change by developing a raft of good practice guidance and initiatives that provide a continuing basis for collective action amongst some of the biggest mining companies.
The shift has been remarkable. When I spoke to companies such as Anglo American, Rio Tinto and Newmont Mining Corporation they demonstrated a true understanding of what sustainable development meant – something which is reflected in their policies and strategies. As Johan Viljoen, senior vice president sustainability (policy and assurance) at Anglo Gold Ashanti said: "Health and safety, environment, communities and security – 10 years ago these were single silo disciplines, now they cross boundaries."
But what is good on paper and in policy does not always appear to get traction at the level of the mine and the local community. Despite good intentions, mining companies can struggle to get it right when faced with the complexity of situations on the ground.
This same problem – of translating global policy into local action – can be seen when considering the multi-stakeholder initiatives. The Extractive Industries Transparency Initiative, the International Finance Corporation's Performance Standards, the United Nations Global Compact and the Global Reporting Initiative have all emerged to guide the sector in the last 10 years. While mining companies have engaged with them, it is not always clear how information discussed at the international level can be translated into something meaningful to communities faced with mining on their land. The Extractive Industries Transparency Initiative is often asked, for instance, what good is it knowing what a government receives in mining revenues if local people don't get to know how it is spent.
While companies have increasingly embraced community issues, this has lagged behind their efforts to improve environmental performance with technical solutions – perhaps a side effect of the sector's prevalent engineering mind-set and capabilities. But what was clear from nearly everyone I spoke to is that mining companies must now deal with communities that are more connected, aware of their rights and have greater expectations for mineral investments. The number of social movements has increased.
Massive grassroots protests against the Phulbari Coal Project in northwest Bangladesh, which would displace as many as 220,000 people, have stalled work there and led the UN to call for an immediate stop to plans to excavate this vast open pit coal mine. In Peru, the government has responded to social conflict over mining with new laws that require mining companies to consult with local communities.
With their demands for more benefits, communities may be helping to drive the latest wave of "resource nationalism", through which governments are asserting greater control over the mining sector. The last year has seen governments taking an increased equity stake in projects (seen in Chile, Mozambique, Zambia and Zimbabwe, for example); increasing taxes and royalties (as in Tanzania, Guinea and Australia); undertaking policy reviews (Namibia and South Africa); and introducing greater oversight and attention to programmes that increase participation of local firms and bring additional benefits to the surrounding communities. Increased commodity prices and an industry that recovered relatively quickly after the 2008 recession may also explain this trend for governments to seek a greater share of mineral profits.
But while mining companies see these changes in government policy as a threat, it could in fact be an opportunity for them to rethink the social contract for mining that has emerged over the past ten years: As mining companies have risen to the challenge of greater responsibility they have taken on some of the tasks for which governments are traditionally better placed to deliver. This partly reflects the fact that capacity in companies to deliver sustainable development has increased over the last 10 years; but that has not been matched with an increase in government capacity to deliver development from mineral profits and resources.
Mining companies across the world are facing hard decisions as governments redefine their mining polices and propose renegotiating mineral contracts. All stakeholders need to work quickly to ensure that the response to this wave of resource nationalism can reconfigure roles and responsibilities, and can build the capacity needed to implement sustainable development that meets the increasing demands of communities.
This blog originally appeared on Guardian Sustainable Business.