Escalating Social Risk around mining

Miners are in the business of managing risk.  In recent decades, great strides have been made in areas of Risk Management related to health and safety, environment, and operations.   In the management of social risk, including the risks of community conflicts and social opposition, the industry has so far taken more limited measures, even though increasing evidence suggests that social risk constitutes a material risk to mining operations.

The industry’s relationship with society is both critical and under pressure.  Rising levels of public opposition and social conflict are already having impacts on operations around the world, but industry still has time to shape the future direction of this social engagement.

To its credit, the mining sector began thinking about these issues over a decade ago during the MMSD (Mining, Minerals and Sustainable Development) project.  Today, there are clear signs that the challenges MMSD identified around securing social license to operate are increasing in both magnitude and consequence.   Among many other recommendations, 10 years ago the MMSD report pressed for new and constructive ways to channel community concerns and social opposition. “Without clear and effective methods of expressing grievances,” the final report noted, “they will emerge as they often do now – before institutions that are not well equipped to handle them, in social protest movements, in media campaigns and with no clear mechanism for demanding that some kind of action be taken where it may be sorely needed.” Industry’s response, however, was inconsistent; research shows that by 2011, only 17 of the world’s 46 largest publicly traded mining companies had a grievance mechanism in place. 

Social opposition, and the severity of its impact on costs and operations, appear to be on the rise, and certainly garner more media attention.  In Burma, monks and villagers resist a Chinese copper project over destruction of landscapes, and fears of pollution and birth defects.  Plans for a large quarry in Southern Ontario are withdrawn after broad public mobilization and opposition.  Six years after three Bangladeshis died during protests against a British coal mine, the project remains stalled and protesters disrupt the annual general meeting in London.  Even the appearance of more people and communities publicly mobilizing in opposition to mining projects could present a significant risk to the industry – in terms of reputation, cost inflation, choices about land use, politicization, investor skittishness, regulation, more costly project approval conditions. 

There is no question that mining investment can be a positive catalyst for improvement of livelihoods, bringing much needed investment, wealth creation, jobs, and government revenues.  However, in order to thrive in the new global social context, the industry must, as the World Economic Forum notes, recognize the difficulties communities and countries may have in adjusting, particularly in places with limited exposure to modern mining.  A traditional regulatory and legal compliance lens is insufficient.  Immense, rapid disruptions to traditional ways of life generate fear, mistrust and dislocation.   Fears of losses and negative impacts – even fears the industry would label “unfounded” – are often stronger than faith in promises of positive benefits.   For many communities, the risks are all local; the benefits are all distant.    When governments fail to translate new wealth into social services and sufficient improvements in living standards, or provide robust avenues to address concerns and share information, it should be no surprise that tension results.

Public trust is critical to 21st century mining. Trust builds credibility of scientific data, resilience when things go wrong, partnerships to tackle joint problems. But there are few short-cuts to trust building.  It needs continuous disclosure, information sharing, openness to engagement and dialogue. Trust-building will slow some projects down.   Perhaps this explains why trust in the industry remains low. Disconcertingly, lack of trust is evident even in countries with long histories of mining and with good governance.  A recent Australian poll found mining to be among the sectors least trusted “to act in the public interest,” with 60% of respondents expressing none or not much trust in the sector. Distrust, coupled with a void of digestible information, allows rumour and misinformation to spread. Without social license and public trust, projects are subject to higher risks of conflict and resistance even if they are fully compliant with all host country laws.  There is an opportunity now for industry to take the lead in understanding and addressing these issues.  Building a foundation of trust through greater information disclosure, and permanent stakeholder dialogues (at both the project and the macro levels), would be excellent first steps.