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Why mining companies should drop CSR and embrace inclusive business

By replacing CRS with inclusive business models, there’s a better way for mining companies to contribute to local sustainable development. By behaving like partners instead of patriarchs, they obtain social license to operate without creating a culture of dependency.

Due to the harmful impacts mining operations have on local people, their livelihoods and on the environment, mining companies are in need of social license in order to go about their extractive business.

Seen as a way of “giving back” to host communities who otherwise experience little positive return from operations, mining companies engage in finite Corporate Social Responsibility (CSR) projects, often in the form of building and maintaining roads, equipping hospitals and offering education.

Despite their popularity within the extractive industries, CSR is not living up to its aim of contributing to socio-economic development in mining host communities.

In her new report, Sustainable Consumption & Production Research Lead at the Luc Hoffmann Institute, Malika Virah-Sawmy, explains that mining companies can have substantial positive impacts on host communities whilst maintaining or even enhancing operational activities, by replacing CSR with inclusive business models.

Socially irresponsible CSR


The main reason there tend to be sharp contradictions between stated CSR commitments and actual performance, is that CSR are treated as voluntary “add on soft approaches” aimed at securing social license to operate, rather than being integral parts of company business models. As such, companies find it difficult to enforce implementation of these low priority policies, which in turn makes it difficult to measure performance.

Further, the dependency culture that CSR programs often create makes them in fact very socially irresponsible. As local people start to expect a company rather than their own government to provide for the social services they need, it undermines local governance.

And who’s going to take responsibility for maintaining the services when the foreigner have left the scene?

Partnering instead of patronizing


Inclusive businesses adapt their business models to engage with the poor by including them as clients, customers, employees, producers, or business owners. According to Virah-Samwy, mining companies could win a lot by exploring opportunities to become inclusive despite their technologically complex, labour free nature.

By sourcing goods and services locally instead of internationally, locals can partner with the company by becoming suppliers. The company, on the other hand, benefits from shorter supply chains, faster deliveries, and lower transportation costs.

Rather than taking the government’s place in providing for social services, local governments could be encouraged to develop business incubators to support new companies to develop services for the industry. At the same time, the mining industry should be forced to incorporate them through legislations. Measuring enforcement and implementation of such policies is going to be much easier than measuring traditional CSR policies aimed at securing social license to operate, Virah-Sawmy says.

More importantly, by becoming inclusive business partners, companies build real ties with the communities, exchanging patronization with a willingness to invest and do business on a more level playing field.

As more income leads to more spending within the local economy, which again creates more income and more spending, the multiplier effect of an inclusive mining company can be really big. This in turn makes it less dramatic when the company packs up to leave, as the local economy has had the chance to develop separately from the industry.

Mending mitigation hierarchies


Another problem that can be more efficiently approached by inclusive business thinking, is that of indirect environmental degradation. Current “mitigation hierarchy” strategies that are employed to deal with the negative impacts on the environment stemming directly from operational activities, fails to take indirect impacts into account.

For example, as the development of a mine often results in a displacement of local livelihoods, it may lead the local population towards a more unsustainable reliance on natural resources, meaning further deterioration and degradation.

Companies should realize this relationship, and develop strategies within their inclusive business models that could support biodiversity conservation and improved livelihoods simultaneously.

With a little creative brainstorming, mining companies can reach a scale and impact well beyond that of traditional CSR policies becoming inclusive.

Blog post courtesy of Karianne Skjæveland

References

Virah-Sawmy, Malika. “Growing inclusive business models in the extractive industries: Demonstrating a smart concept to scale up positive social impacts.” The Extractive Industries and Society (2015, in press).

Main image: Mining operations, Loreto region, Peru. © Brent Stirton / Getty Images / WWF

Luc Hoffmann InstituteWhy mining companies should drop CSR and embrace inclusive business