Creating shared value in mine site communities: shifting from reliance to relevance

In recent years, we’ve witnessed the escalation of protests in mining-related communities. During 2018 alone, about thirty-five, often violent, protests took place in South Africa every month. Unfortunately, South Africa is not alone—we’re seeing this trend in other countries. These protests result in mega investments being halted and significant value being eroded. According to the Responsible Mining Foundation (RMF), the mining industry has acknowledged social license to operate as the number one risk facing the industry for the second year in a row.^[1]

In 2020, the RMF published the RMI Report—an evidence-based assessment of the economic, environmental, social, and governance (EESG) policies and practices of thirty-eight large-scale mining companies that operate in more than 780 mine sites. Together, these companies account for twenty-eight percent of the world’s mining activity by value of production.^[2] Across forty-five countries and 180 sites, the report found variabilities in public information disclosures and misalignment with state policies and practices at the site level. For example, on local procurement practices, 129 of the 180 mine sites scored zero. This represents a major disconnect between corporate sustainable development goal (SDG) commitments and mine-site action.

So, is the industry doing enough?

The industry contends that socio-economic progress is being achieved and, in fact, that this needs to be recognized. In their 2018 report, Social Progress in Mining-Dependent Countries: Analysis through the lens of the SDGs, the International Council on Mining & Metals (ICMM) showed that the life of people in mining-dependent countries improved by seventy-four percent overall between 1995 and 2015.^[3] These are countries with mineral resources accounting for more than twenty percent of their exports and greater than ten percent of their gross domestic product contribution.

They observed that socio-economic progress across mining-dependent countries is strong, even when compared with the progress of other countries around the world. According to the ICMM, “Life for people in countries that are ‘mining-dependent’ is improving […] Today people in these countries are generally healthier, wealthier, and better educated.”^[4]

The question then becomes, is there a disconnect between what we’re seeing from the protests and the industry’s reported progress? There appears to be a very significant one, which calls for deeper reflection from the mining industry.

Socio-economic polarization

Perhaps the protests are a symptom of deeper discontentment and frustration, and we’re treating the symptoms rather than the root cause. The battlefront may have shifted beyond the perceived exploitation or the non-delivery of promised benefits. As world-renowned historian Yuval Noah Harari suggests in his book, 21 Lessons for the 21^st Century, perhaps we’re facing something much more difficult. Harari points out, “All wealth and power might be concentrated in the hands of a tiny elite, while most people will suffer not from exploitation, but from something far worse—irrelevance.”^[5]

We need to consider that the fight in these communities might be for the ore bodies they perceive belong to them and the business success that they believe they’re instrumental in delivering. Maybe it’s the humiliation that these communities feel from the idea that they’re not important, or don’t matter.

A framework for creating shared value

It’s time to show up at the new battlefront—that of relevance—where interventions like philanthropy and the re-distribution of benefits no longer work, and perceiving communities as risks to be managed or in terms of our social license to operate doesn’t work either. We need to embrace a framework that will help us transition from philanthropy, social license, and managing risk to creating shared value.

The idea of creating shared value is not a new one. However, it may be far more sustainable and successful because it engages business scale and innovation to advance social progress. The term was coined by two Harvard professors back in 2011 and it simply means “creating economic value, in a way that also creates value for the community/society, by addressing its needs and challenges.”^[6]It places societal problems at the core of the business, rather than in the periphery. Business economic progress becomes congruent to community progress, and it means that we are not treating social problems as an afterthought or an expense. Rather, we build on the lessons we learned from the COVID-19 pandemic, where we realized that the productivity and competitiveness of companies and the health and well-being of our communities are intertwined—and we intervened meaningfully!

There are three parts to the shared value model:

• Reconceiving products and markets: consider whether products meet societal needs and whether they’re good or bad for the end-users.
• Redefining productivity in the value chain: understand that societal problems can create economic costs in the firm’s value chain. The health of the communities can positively or negatively impact company productivity.
• Enabling local cluster development: develop related local businesses, institutions, and regulatory bodies for standards and guidelines.

And in the pursuit of positive change, improving one aspect gives rise to opportunities in the other!

Igniting the potential of the future

Old notions around community risk management and social license to operate will not help us in the fight for community relevance. Here’s how we can start transitioning to this idea of shared value:

• Focus on making communities relevant to the success of your business, instead of a risk to be managed.
• Drive a shift in behavior towards creating shared value. Delivering with impact requires more than process, it requires cultural change.
• Strive for a deeper appreciation of societal needs, including the socio-economic impact that you’re delivering. Have a plan to raise the bar and deliver even more.

Creating shared value demands that, where social problems are concerned, we don’t stand as bystanders. A deeper understanding of the impact that we’re making is required so that we are all investing in creating relevant communities around mine sites. As an industry, and as people, we should all be fighting for the same thing. It’s good for humanity, it’s good for the economy, and it’s good for business.

Find out more!

Listen to Welekazi present this topic at The Canada-Africa Chamber of Business 22^nd Annual African Mining Breakfast & MineAfrica’s 19^th Annual Investing in African Mining Seminar. Click here to watch the recording!

 

^[1] Hélène De Villiers-Piaget, “How data can help mining companies tackle their trust deficit”, World Economic Forum, published July 20, 2020, https://www.weforum.org/agenda/2020/07/data-help-mining-companies-tackle-trust-deficit/

^[2] RMI Report 2020, https://2020.responsibleminingindex.org/en, Electronic, Responsible Mining Foundation.

^[3] “Social Progress in Mining-Dependent Countries: Analysis through the lens of the SDGs (2018)”, International Council on Mining & Metals (ICMM), 2018, https://www.icmm.com/en-gb/research/social-performance/social-progress-1-2018

^[4] “Social Progress in Mining-Dependent Countries: Analysis through the lens of the SDGs (2018)”, International Council on Mining & Metals (ICMM), 2018, https://www.icmm.com/en-gb/research/social-performance/social-progress-1-2018

^[5] Harari, Yuval Noah, 21 Lessons for the 21st Century, London: Jonathan Cape, 2018.

^[6] Porter, Michael E., and Kramer, Mark R.,. "Creating Shared Value", Harvard Business Review 89, nos. 1-2, February 2011, https://www.hbs.edu/faculty/Pages/item.aspx?num=39071