Partnerships in procurement – aboriginal businesses operating in Canada’s mining sector

For aboriginal communities across Canada, procurement of local goods and services by mining companies is a central driver of business development creates local jobs and contributes to local prosperity. Today, companies across Canada are increasingly recognizing that developing partnerships with aboriginal communities is a business strategy that mitigates social risk and improves long-term operational security. The Mining Shared Value (MSV) venture of Engineers Without Borders Canada partnered with the Canadian Council for Aboriginal Business (CCAB) to conduct national research to investigate the economic and social impacts of procurement from aboriginal suppliers and to further develop the business case for mining companies to procure goods and services from aboriginal businesses.

The Trudeau government has pledged to invest $8.4 billion over five years to improve the socio-economic conditions in indigenous communities. Of that, $96 million will support indigenous organizations to increase their capacity to effectively engage with the Canadian government. Unfortunately, Maclean’s magazine’s recent report card on the Trudeau government’s first year in power gave failing grades in its resource development engagement practices. Indigenous chiefs and communities have said the time for declarations and promises is over, and action must now be taken. Canadians know that natural resource development cannot continue to proceed along this fractious, antagonistic path. If the federal government is going to actually reconcile the relationship, indigenous peoples, industry and governments must align their efforts and pursue economic development opportunities together.

The convergence of indigenous actions, public attention, legal rulings and political policy is spurring corporate leaders to improve practices in Canada’s mining industry. This new direction for the sector is helping to drive economic reconciliation with indigenous people in Canada. This study documents the current challenges the mining sector is facing as companies aim to improve engagement and offers several recommendations for government, industry and aboriginal community stakeholders to improve co-ordination, communication and partnerships.

Where reconciliation can become reality is in the current and future potential of the indigenous economy, today estimated to be $30 billion. The number of aboriginal people under 25 years of age is more than 1.5 times the Canadian average and it is estimated that closing education and training gaps could contribute $400 billion to the GDP by 2026. If the Mining Industry Human Resource Council estimates are correct and the natural resources sector will have a labour force deficit of more than 125,000 people, the mining industry is well positioned to be a leader in economic reconciliation, progressive indigenous business engagement and community development, if the conditions are right.

The aim of this research was to investigate current and best practices for harnessing the potential of procurement contracts within large mining operations for aboriginal business people and aboriginal economic development corporations (AEDCs). The study recommends the creation of a national strategy aligning federal, provincial and industry training programs, as well as for industry to make public targets and report progress on aboriginal supplier engagement. As procurement contracts are often the first foothold in the door for aboriginal businesses, the study recommends that industry associations such as the Mining Association of Canada include aboriginal procurement content in their guidance for industry.

Currently, there are an estimated 222 aboriginal businesses supplying the extractive industry in Canada. In the past year, 75% of all aboriginal businesses supplied goods to the private sector. For mining, aboriginal suppliers provide exploration, drilling, camp and environmental monitoring services. Our research shows that mining companies are designing their engagement with aboriginal suppliers in diverse ways. Eight of the 11 mining operations interviewed used frameworks or models to conceptualize their aboriginal engagement, and 64% said they had an active aboriginal supplier directory to guide contracting. Hard targets for procurement contracts were not common across the country. Companies generally prefer instead to have ‘set-asides’ or sole-sourcing agreements for aboriginal suppliers that are agreed upon in impact and benefit agreements (IBA) or other contractual arrangements.

The business case for procuring goods and services from aboriginal suppliers can be framed in terms of both obtaining a social licence to operate and building a reliable, efficient supply chain for operations. Prioritizing supply contracts with aboriginal communities is a powerful tool to improve relationships and gain local support. Partnerships demonstrate a willingness to work together and compromise, which helps prevent conflict and creates a more productive operating environment. Positive relationships with local communities also demonstrate responsible corporate behaviour and can improve a company’s reputation.

Max Skudra is the director of research and government relations, Canadian Council for Aboriginal Business. Jeff Geipel is the venture lead for the Mining Shared Value program, Engineers Without Borders.