CSR in the Extractive Sector
J M Eyre, CSM, University of Exeter and
M Macfarlane, CCU, University of Warwick
The oil, gas and mining industries make a large contribution to the world economy and have the potential to create vast wealth. They are presently active in over 50 developing and transitional countries [1] in the search for and development of hydrocarbon and mineral resources, often encouraged by host governments in their attempts to attract foreign direct investment by multi-national corporations in developing a national economy. Working in locations which are rich in natural resources and high in poverty can bring sustained economic benefits to a region. However, in some cases, the influx of sudden wealth can have detrimental effects on social and political life. This can lead to or support corruption, authoritarian government, human rights abuse or armed conflict.[2]
The development of corporate social responsibility (CSR) in the extractive sector arose out of concern for the environmental and social impacts of their activities, driven initially by broad-based criticism during the 1990's. It is against this background that companies have sought to adopt CSR strategies and techniques to address their social, cultural and environmental responsibilities. While multinational companies that rely extensively on their public reputation for continued viability largely drive the implementation of CSR strategies and techniques, smaller companies are also being encouraged to implement them. At the strategic level, CSR policies, standards and systems in the extractive sector are shaped by a number of key international voluntary initiatives and guidelines, including:
International Initiatives and Guidelines
The Global Mining Initiative (GMI)[3] - initiated by ten of the leading mining and mineral companies, this initiative established a model for sustainable development as a basis for the industry's future. It encompasses the Mining, Minerals and Sustainable Development Project which reported in 2002 [4]. In addition, a new global industry body, the International Council on Mining & Minerals, was created to provide leadership on policy matters, maintain dialogue with stakeholders and promote best practice [5]. The ICMM Charter contains management principles on Environmental and Product Stewardship; Community Responsibility and General Corporate Responsibilities.
US-UK voluntary principles on security and human rights - were developed from an arrangement between the Governments of the United States and the United Kingdom, companies in the extractive industries and non-governmental organisations. The principles, set out in December 2000, were designed to guide companies to ensure that security arrangements at their operations are managed in accordance with human rights standards.[6]
Extractive Industries Transparency Initiative - was announced by the UK Prime Minister at the World Summit on Sustainable Development in Johannesburg, September 2002[7]. Its aim is to increase transparency over payments and revenues by companies to host country governments and government-linked entities. A coalition of governments, extractive companies, international groups and NGOs will be formed to assess the best mechanisms.
Business Partners for Development Natural Resources Cluster - was established to highlight practical examples around the world, of how three-way partnerships involving companies, government authorities and civil society organisations can be a more effective means of reducing social risks and promoting community development. The programme was designed to report on good practice and create new operating structures.
Global Reporting Initiative (GRI) and AA1000 - are globally applicable and voluntary multi-stakeholder guidelines and processes for, respectively, reporting and accounting by organisations. They are complimentary guidelines and processes, differentiated by the former's emphasis on external generic and extractive sector specific indicators for reporting and the latter's emphasis on in-house developed indicators and targets.
Diamond certification - The Kimberley Process - agreement was reached in November 2001 by over 30 countries and the diamond industry, to develop a certification and tracking scheme to stop the flow of 'conflict' diamonds and to protect the legitimate trade in diamonds. [8]
Ethical Trading Initiative - is an alliance of companies, non-governmental organisations and trade union organisations working to identify and promote good practice in the implementation of labour standards. [9]
Management Processes and Practices
In addition to the influence of international initiatives and guidelines at the strategic level, the extractive sector has adopted a wide range of technical level downstream CSR management processes and practices. What follows is a brief overview of some key technical CSR areas and leading cases from the extractive sector in their utilisation.
Social and Ethical Assurance Provision for the verification and evaluation of sustainability accounting and reporting is increasingly adopted in the extractive sector to enhance the trust of stakeholders in company CSR performance. Leading Practice: Shell Oil has undertaken one of the most widespread and innovative assurance exercises. In addition to using external practitioners to provide assurance they have explored alternative assurance mechanisms such as using independent expert testimonials and stakeholder panels and surveys.[10]
Socioeconomic Impact Assessment (SIA) is a regulatory requirement in many operating environments. However, in a quest to further enhance positive impacts and mitigate negative impacts, a number of extractive companies have developed SIAs that go beyond mere compliance. Leading Practice: Western Mining Company at Tampakan, Philippines included ethnographic and archaeological studies, evaluation of social structures and customary laws, mapping of traditional territories and natural resource dependency in their SIA.[11]
Community Investment and Partnership approaches have traditionally been rather arbitrary and paternalistic in the extractive sector, but are now more strategic, equitable and inclusive. Leading Practice: At Las Cristinas in Venezuela, Placer Dome conducted extensive consultation with displaced artisinal miners and encouraged them to form a partnering association to manage investment in a suitable concession for them as part of the company's technical support package. Placer also developed a project with the Canadian International Development Agency to explore employment generation and economic diversification options beyond those related to mining. 11
Conflict Resolution, Ethical and Human Rights Training has been adopted by a number of extractive companies at managerial and operational levels as a means to embed CSR and to increase their capacity for in-house CSR development and implementation. Leading Practice: Premier Oil's past and future collaboration with Warwick Business School to receive employee social performance management training and Premier Oil's own promotion and facilitation of Human Rights training for Burmese authorities and military. [12]
For more information, please contact:
Camborne School of Mines, University of Exeter
jeyre@csm.ex.ac.uk
+44 1209 714866
www.ex.ac.uk/CSM/
Maplecroft Consultants
magnusmacfarlane@maplecroft.net
+44 7947 274427
www.maplecroft.net/
[1] Anon. 2003, Extractive Industries Transparency Initiative - guide at www.dfid.gov.uk/News/News/files/eiti_guide.htm accessed on 17/03/03
[2] IIED. 2002. Breaking New Ground - The Report of the MMSD Project. (London and Sterling VA: Earthscan Publications Ltd) ISBN 1853839426
[3] www.globalmining.com
[4] www.iied.org/mmsd/finalreport/
[5] www.icmm.com
[6] www.state.gov/g/drl/rls/2931.htm accessed on 15/03/03
[7] www.dfid.gov.uk/News/News/files/eiti_guide.htm accessed on 16/03/03
[8] www.kimberleyprocess.com/
[9] www.ethicaltrade.org/pub/about/eti/main/index.shtml
[10] Salterbaxter. 2002, Trends in Corporate Social Responsibility Reporting.
[11] McPhail and Davy. 1998, Integrating Social Concerns into Private Sector Decisionmaking. A Review of Corporate Practices in Mining, Oil and Gas Sectors. (World Bank: Washington).
[12] Macfarlane, M. 2003, Premier Oil Social Assurance Statement. (University of Warwick).
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