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Disruption and Institutional Development: Corporate Standards and Practices on Responsible Mining

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Abstract

This chapter accounts for the special context of mining and discusses what “respecting” human rights means in the mining industry. The aim of the chapter is to clarify the relationship between social investments and respect for human rights in a context characterised by the disruption mining operations cause and weaker local capacities to cope with mining. Three questions are raised herein: Are social contributions part of the corporate responsibility to respect human rights under the UNGPs, and thus imperative, or are they optional, desirable, rather irrelevant or even problematic from a human rights perspective? Do industry strategies recognise institutional development as part of their social responsibility? Are there operational arrangements substantiating a shift in CSR strategy or does the shift remain largely confined to rhetoric and aspirations? The chapter examines the latest reports from five of the largest mining companies and the guidance from four organizations influential in the extractives sector. The focus is on potential shifts in industry strategy putting more emphasis on local institutional capacities and holistic solutions to facilitate good governance dynamics. Thus strategic shifts in four specific areas are analysed: water management, security provision, contributions to development, and revenue transparency. The chapter finds that institutional development is emerging as a cross-cutting dimension and thus creates opportunities for increased participation of rightholders and external actors in constructing a right-based and development-enhancing approach to mining.
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Disruption and institutional development
Corporate standards and practices on responsible mining
Radu Mares*
Forthcoming in Feichtner, Krajewski, Roesch (Eds.), Human Rights in the Extractive
Industries: Transparency, Participation, Resistance (Springer, 2019)
Table of Contents
Abstract ..................................................................................................................................... 2
1. Introduction .......................................................................................................................... 3
2. Disruption and institutional development .......................................................................... 5
2.1. Disruption: mere presence and irresponsible operations .......................................... 6
2.2. Social investments: irrelevant or even problematic? ................................................. 7
2.3. Institutional development: the missing link ................................................................ 9
3. Shifts in CSR strategy ........................................................................................................ 12
3.1. Shifts in social investment ........................................................................................... 13
a. Shift from philanthropy to community investment ........................................................ 13
b. Shift from economic and social development to institutional development .................. 14
3.2. Shifts in social responsibility ...................................................................................... 16
a. Shift from punctual interventions to more encompassing approaches ......................... 16
b. Shift from partnerships to meaningful partnerships ..................................................... 19
4. Operational settings ........................................................................................................... 23
4.1. Water management ..................................................................................................... 23
4.2. Security provision ........................................................................................................ 25
4.3. Contributions to development .................................................................................... 29
4.4. Revenue transparency ................................................................................................. 33
5. Conclusions ......................................................................................................................... 36
* Associate Professor, Raoul Wallenberg Institute of Human Rights and Humanitarian Law,
Lund University, Sweden. Email: radu.mares@rwi.lu.se
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Abstract
This chapter accounts for the special context of mining and discusses what
“respecting” human rights means in the mining industry. The aim of the chapter is to clarify the
relationship between social investments and respect for human rights in a context characterised
by the disruption mining operations cause and weaker local capacities to cope with
mining. Three questions are raised herein: Are social contributions part of the corporate
responsibility to respect human rights under the UNGPs, and thus imperative, or are they
optional, desirable, rather irrelevant or even problematic from a human rights perspective? Do
industry strategies recognise institutional development as part of their social responsibility? Are
there operational arrangements substantiating a shift in CSR strategy or does the shift remain
largely confined to rhetoric and aspirations?
The chapter examines the latest reports from five of the largest mining companies
and the guidance from four organizations influential in the extractives sector. The focus is on
potential shifts in industry strategy putting more emphasis on local institutional capacities
and holistic solutions to facilitate good governance dynamics. Thus strategic shifts in four
specific areas are analysed: water management, security provision, contributions to
development, and revenue transparency. The chapter finds that institutional development is
emerging as a cross-cutting dimension and thus creates opportunities for increased participation
of rightholders and external actors in constructing a right-based and development-enhancing
approach to mining.
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1. Introduction
The far-reaching and diverse impacts of mining on local communities, the environment and
national economies have been well documented.1 Meanwhile mining companies have pointed
to economic and social contributions and the opportunities for advancing development their
operations bring to host countries. In the same time, local communities in developing countries
often associate mining with dispossession, repression, environmental degradation, conflict and
social tensions, while benefits are felt mainly in capitals and the wider economy. The industry
confronts a legitimacy problem. According to Ernst & Young the need for a social license to
operate ranked third out of the top ten list of industry-wide challenges.2 Nowadays obtaining
this license is inconceivable without demonstrating respect for human rights.
The analysis herein revolves around two notions: the disruption accompanying
mining operations and local institutional development. Traditionally the industry’s social
responsibility discourse has concentrated on compliance issues and contributions to economic
and social development, but attention to deeper sources of risks and institutional capacities is
increasingly surfacing in industry materials. For example, the International Council on Mining
and Metals (ICMM) has a principle dedicated to contribution to the social, economic and
institutional development of host countries and communities.”3 The International Financial
Corporation (IFC) writes that local capacity building cannot be overemphasized;” furthermore
it draws attention that the local government is not always included in capacity-building
considerations, yet it is frequently the critical ‘missing link’.”4 Companies also show interest
into more encompassing and integrated strategies to match the interlinkages and complexity in
their social environment.5
The UN Guiding Principles on Business and Human Rights (UNGPs) impresses
that businesses should respect human rights and undertake human rights due diligence to
1 World Bank (2004); UNCTAD (2007).
2 Ernst & Young, “Business Risks Facing Mining and Metals 20142015”, referred to in ICMM (2015c).
3 Principle 9, ICMM (2015a).
4 IFC (2010), p. 74 and 51.
5 The CEO of Anglo American writes that “all the issues we are faced with in our operating environment, such as
inequality, distribution of wealth, corruption and lack of governance, are very clearly linked to the human rights
of our stakeholders.” Anglo American (2017), p. 14.
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address their adverse impacts.6 The responsibility to not infringe human rights is a minimum
responsibility to be met by all businesses. This chapter accounts for the special context of
mining and analysis what “respecting” human rights means in the mining industry. Three
questions are raised herein: Are social contributions7 part of the corporate responsibility to
respect under the UNGPs, and thus imperative, or are they optional, desirable, rather irrelevant
or even problematic from a human rights perspective? Do industry strategies recognise
institutional development as part of their social responsibility? Are there operational
arrangements substantiating a shift in CSR strategy or does the shift remain largely confined to
rhetoric and aspirations? The aim of the chapter is thus to clarify the relationship between social
investments and respect for human rights. This should provide insight into what responsible
human rights conduct in the mining sector entails in light of the UNGPs and latest corporate
practices.
The analytical framework for this article revolves around institutional
development local capacities and good governance dynamics which is essential from a
human rights-based perspective.8 The focus is on the capacities of two local stakeholders local
authorities and local communities to cope with mining, and the positive or negative impact of
mining companies on these capacities. Items such as participatory governance arrangements,
capacity-building of local institutions, and corporate leverage to support good governance
dynamics are highlighted. The analysis herein expands beyond the usual human rights accounts
which tend to confine themselves to negative impacts and relegate positive social impacts to
development discussions.
In terms of sources, the chapter examines the latest reports from five of the largest
mining companies9 and the guidance from four organizations influential in the extractives
sector10 in order to discern their reasoning on the issue of institutional development. The
companies were selected not as a representative sample but to serve as illustrations and ground
6 Human Rights Council (2011), UN Guiding Principles on Business and Human Rights, A/HRC/17/31.
7 The IFC refers to “strategic community investment” to mark a qualitative shift in CSR and have companies think
creatively about the different ways to generate value for both business and neighboring communities. IFC (2010),
pp. i-ii.
8 United Nations (2003)
9 BHP Billiton, Anglo American, Rio Tinto, Glencore, and Barrick Gold.
10 Extractive Industry Transparency Initiative (EITI) pursuing anti-corruption through disclosures on revenues
generated and received, Voluntary Principles on Security and Human Rights (VPI) promoting security
arrangements that do not infringe human rights, International Council on Mining and Metals (ICMM) as a leading
industry association on sustainability issues, and International Financial Corporation (IFC) belonging to the World
Bank group.
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the analysis in industry-generated materials. The four organizations guide and reflect latest
thinking among industry stakeholders, and have touched directly on institutional development
aspects.11
The chapter has three delimitations. It covers primarily sources related to mining
operations, rather than oil and gas as there are differences and similarities between the two
industries.12 Furthermore responsible mining encompasses mineral exploitation and trading of
minerals along global supply chains, but this analysis covers only exploitation. Finally, the
focus here is on large scale mining operated often by multinationals, not on small and artisanal
mining.
The structure is as following: section 2 sets the framework for human rights
analysis to encompass disruption and social investments. Section 3 uses this more
comprehensive analytical framework to identify shifts in industry strategy putting more
emphasis on local institutional capacities and holistic solutions to facilitate good governance
dynamics. Section 4 continues the analysis of the strategic shifts in four specific areas where
they are particularly discernible: water management, security provision, contributions to
development, and revenue transparency. Based on these materials it becomes possible to
conclude whether the responsibility to respect human rights takes a distinct shape in a context
like mining characterised by (unavoidable) disruption.
2. Disruption and institutional development
The starting point is to recognize the dislocation, that is, the far reaching impacts that a large
mine’s presence and its (irresponsible) operations have on host communities. The dislocation
is mitigated or aggravated by the institutional capacities of local communities and local
authorities to handle the harms and opportunities brought by mining. Therefore, CSR strategies
in this industry must be measured for their contribution positive or negative to good
governance dynamics. Issues of participation, capacity-building, and corporate leverage are
particularly relevant. Corporate human rights policies should be measured for their depth, that
11 All documents and reports referenced herein are available freely on-line and have been last accessed 7 July 2017.
12 For differences between oil/gas and mining, see World Bank (2008), p. 25 and OECD (2016) pp. 20-22.
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is, for how they affect beneficially or detrimentally deeper factors leading to violations of
human rights in mining areas.
2.1. Disruption: mere presence and irresponsible operations
Even where a mine with a large footprint operates rather responsibly and neither directly
infringes rights nor harms the environment, the mere presence of the mine can be disruptive
and start producing sources of risks for communities and company alike. The far reaching
adverse impacts can take the form of side effects of population influxes, increased security risks
due to military presence, displacement of previous occupations and livelihoods, new divisions
within communities and aggravation of pre-existing tensions, transformation of traditional
institutions with authority in the community, and so on.13 Poorly managed, such sources of risk
also reinforce each other and nurture a spiral down that deteriorates company-community
relations and inhibits good governance dynamics. Social investments meant to break the vicious
circle become difficult to implement as such social investments often require collaboration to
achieve significant impact. As accidents and other harmful impacts occur they further
compound distrust and the downward spiral.
These are reinforcing negative dynamics that diminish social capital and retard
local institutional capacities on which resilient communities depend. Sand is thrown in the
wheels of local and international, private and public actors that work to respect and ensure
human rights of host communities. Therefore, the relation between respecting human rights and
social investments needs to be placed in an operational context characterised by disruption.
Respecting human rights – addressing the direct and indirect impacts of the operation – cannot
be understood in separation from the responsibility and role of the business in managing that
disruption.
Both mining presence as well as its absence (mining closure) have far-reaching
impacts for local communities. For example, BHP Billiton recognises the significant risks
associated with ineffective closure and seek(s) to minimise these through our closure
governance framework. BHP Billiton’s closure framework integrates resource planning and
development, health, safety and environment, stakeholder engagement, finance and assurance
13 IFC refers to “indirect or ‘induced’ impacts (such as population influx, food security, or an increased incidence
of HIV/AIDS)”. IFC (2010) p. 9. See also ICRC (2016) section 4.4.
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into business operational design.14 The disruption caused by mine closure points to the
corresponding need for local institutional development to reduce risks and grasp opportunities.
The mining industry will close many large operations over the next decade, Rio Tinto writes
that [i]n many jurisdictions where we operate, regulatory frameworks for large mine closure
remain undeveloped or untested. With our peers we are working on the challenges and engaging
with governments on good closure policy and regulation.”15
Mining can be seen as a fragile environment due to the disruption caused by a
mining presence or its (irresponsible) operations. As Ganson and Wennmann explain, in post-
conflict and other fragile environments, large-scale investments in the extractive industries,
commercial agriculture and infrastructure often create stresses at the community level and also
present conflict triggers for broader political, economic, social, and ecological systemsand
argue that collaborative action is required to tackle the stress factors and conflict dynamics in
the context of large scale investment.”16 Their research found there is growing convergence
around understandings that proactive, multi-layered, multi-sectoral, and locally-rooted
initiatives represent the most promising practice for lasting conflict prevention and risk
mitigation.17
2.2. Social investments: irrelevant or even problematic?
The UNGPs lay down a corporate responsibility to respect human rights that requires a
company to act diligently when it causes, contributes or is linked to adverse impacts through its
business relationships. Can the UNGPs account for social investments? Are they even relevant
for a discussion to respect human rights, meaning to not infringe on human rights? The answer
is affirmative.
Mines operate in volatile contexts where sources of risks compound each other,
particularly in developing countries displaying multiple governance gaps. To deal with such
risks and weaknesses, the UNGPs call on companies to employ human rights due diligence”.18
The latter is a proactive process meant to prevent and address harms. The more far-reaching the
disruptive effects of mining, the more numerous are the actors that get involved and the harder
14 BHP Billiton (2016) p. 15.
15 Rio Tinto (2017) p. 57.
16 Ganson and Wennmann (2012), p. 3.
17 Ganson and Wennmann (2012), p. 3.
18 Principle 17, Human Rights Council (2011).
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the risks are to control by individual actions of the company. Collaboration and comprehensive
packages of measures are needed as a modality to discharge due diligence effectively. So the
UNGPs can easily accommodate social investments through its human rights due diligence
provisions. Furthermore, when social investments are geared toward local institutional
development, they have direct significance on the other two pillars in the UNGPs where the
capacities of public authorities (pillar 1) and rightholders (pillar 3) matter. And the UNGPs are
explicit that the three pillars are reinforcing: ‘Each pillar is an essential component in an inter-
related and dynamic system of preventative and remedial measures’.19
Once disruption and multiple sources of risk in a volatile context are factored in, the clear-
cut distinction between respect for human rights and development contributions begins to break
down. This is acknowledged in the 2015 UNGPs Reporting Framework: “The Reporting
Framework focuses on [the baseline expectation of] respect for human rights [and] does not,
therefore, address any social investment or philanthropic activities to support or promote human
rights, except where these form part of a deliberate strategy to address a risk to human rights
related to the company’s salient human rights issues.”20 Therefore, in higher risk mining
settings, social investment measures are firmly within the corporate responsibility to respect
human rights and are imperative rather than discretionary expenses. They should not be seen as
irrelevant to a human rights analysis, as mere charity or counting but as commendable
development contributions.
Presenting such social investments as a human rights issue might be problematic as they
can distract attention and confuse audiences about what responsible mining entails. While
desirable, social contributions are problematic if part of a strategy to buy the social license to
operate not by reducing harms, but by continuing business as usual with add-on, check-writing
programs. Therefore the UNGPs warn against such offsetting approaches: Business enterprises
may undertake other commitments or activities to support and promote human rights, which
may contribute to the enjoyment of rights. But this does not offset a failure to respect human
rights throughout their operations.21 As the OHCHR writes, “there is no equivalent of a carbon
off-set for harm caused to human rights: a failure to respect human rights in one area cannot be
cancelled out by a benefit provided in another.”22
19 Introduction, para. 6, Human Rights Council (2011).
20 UN Guiding Principles Reporting Framework (2015), p. 5. (emphasis added)
21 Principle 11, Commentary, Human Rights Council (2011).
22 OHCHR (2011) p. 14-15.
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The concern regarding offsetting appeared also in the context of the Sustainable
Development Goals (SDGs),23 where the private sector is seen as a key vehicle for
development, from the financing to the implementation stage. Ruggie warned that this global
framework covering business conduct should not end up de-emphasizing respect for human
rights: business has a critical role to play in achieving the Sustainable Development Goals.
This role must be founded on respect for human rights and not on philanthropy or social
investment, much as they too are needed. Sustainable development depends not just on generous
business, but first and foremost on responsible business.”24
The argument herein is that social investments are particularly relevant to a human
rights analysis if they advance local institutional capacities and good governance dynamics.
Against this indicator, social contributions can be exposed for a smokescreen when companies
actually retard institutional development. For example, reports from Nigeria indicate a
multinational that won oil licenses with a much inferior offer, possibly due to corruption.25 But
bribery retards institutional development. Also it is common for companies to negotiate
significant tax rebates just to beat the drum loudly afterwards for their voluntary social
contributions worth a fraction of the tax rebate. Both these versions of offsetting are problematic
as they diminish institutional capacities: the rule of law is weakened and public budgets are
deprived of revenues for essential services.
2.3. Institutional development: the missing link
A focus on institutional development and good governance dynamics in host communities is
warranted to cope with the disruption caused by mining. Some businesses set up operational
grievance mechanisms that meet the criteria of the UNGPs26 as part of their commitment to
respect human rights in what is a worthwhile contribution to institutional development. More
companies are keen to highlight their contribution to development. They insist on economic
development wherein companies contribute jobs, taxes, business opportunities, credit schemes,
training for local entrepreneurs and employees, and social development wherein companies
support social services such as education, health, and sanitation. Such economic and social
23 United Nations (2015).
24 John Ruggie in H&M (2016) p. 68. (emphasis added)
25 Global Witness (2016).
26 Principle 31, Human Rights Council (2011).
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contributions are also cross-referenced with the SDG framework.27 They are also understood
as community investmentwhich implies that companies should consider it strategic and
measurable just like other business investments normally are.28
Overall however, in corporate reports, contributions to institutional development
aspect tend to drown among economic and social contributions. They are not highlighted
conceptually and tracked systematically. At times, relevant aspects such as the unintended
effects of CSR creating dependency and divisions among host communities have been
highlighted.29 As the next sections shows, a wealth of industry materials is now recognising
these aspects. But a systematic assessment of corporate impacts on institutional development
and capacity constraints faced by two local actors local governments and local communities
is still underdeveloped.30 The need is however pressing if the far reaching effects of mining
are to be addressed effectively. To begin with, local governments are often short in human
resources, logistics, ability to attract financial resources, or ability to function in a stifling legal
framework. When local authorities are weak, ineffective, or corrupt, vulnerability increases
further if local communities also fall short in their capacities to organise under an effective,
knowledgeable, representative leadership, to network externally to enhance their leverage, to
use the legal system, to effectively engage in participatory development following
decentralisation, and to hold local officials accountable.
A rare analysis of these aspects in a corporate report comes from Anglo American which
indicates that “Good local institutional capacity depends on at least six building blocks:
Participation of citizens in the public processes and decisions that affect their lives,
including planning and budgeting.
Partnerships among local governmental institutions, community-based organisations
(CBOs) and the private sector for transparent, accountable and equitable service delivery
and local development.
Capacity of local institutions to respond to peoples’ needs and facilitate local
development and governance processes.
Effective information channels for communication between state and non-state actors.
27 For an example, BHP Billiton (2017).
28 IFC (2010), pp. i-ii.
29 Warner and Sullivan (eds.) (2004); McPhail K (2008).
30 Bebbington A et al. (2007); Bebbington A (ed.) (2011) (discussing institutional development in the mining
industry)
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Accountability between local representatives and their constituents (including citizens
and CBOs), and between government bodies (both local and national).
Appropriate administrative, fiscal, political and legal frameworks for local governments
to function effectively.”31
For the time being, institutional development is far from being recognised as an essential cross-
cutting issue for evaluating CSR performance.32 Some companies remain concentrated on
delivering and measuring contributions to economic and social development.33 Companies
often touch on institutional development narrowly by referring to their policies on corruption
and revenue transparency. For example, BHP Billiton recently launched its Global Signature
Programs encompassing two projects on anti-corruption led by Transparency International and
on financial transparency led by World Bank; their aims are to “enhance citizens’ ability to use
data and improve the governance capacity of institutions.”34 Indeed, bribery and secrecy around
revenues generated by mining are classic ways in which the extractive sector has historically
retarded local institutional development. Anti-bribery laws in home states as well as the
Extractive Industry Transparency Initiative35 offer detailed standards and guidance. These two
areas are entry points for businesses beginning to focus on institutional development.
Sometimes the importance of institutional development is clearly stated but is yet
to be elaborated meaningfully. For example, the leading industry organization, ICMM
dedicated one of its foundational principles to institutional development of both local authorities
and local communities: Pursue continual improvement in social performance and contribute
to the social, economic and institutional development of host countries and communities.36
However the notion of institutional development is hardly developed in the sub-paragraphs
which refer to social and economic development while institutional development is replaced by
vague notions of partnerships and collaboration.
31 Anglo American (2012) p. 185.
32 For example, “At Barrick, we believe strong relationships with communities are about getting the simple things
right: managing our impacts (such as dust, noise and traffic), doing what we say we will, resolving grievances, and
buying and hiring locally.” Barrick (2017) p. 107.
33 For example Glencore launched in 2015 its socio-economic contribution scorecard which does not refer to
institutional capacity aspects and focuses on socio-economic contributions: “While the most significant
[contributions] derive from employment and procurement, we also have a responsibility to minimise dependency
on our operations, and promote diversified and resilient local economies.” Glencore (2017) p. 43.
34 BHP Billiton (2017) p. 19.
35 See the chapter by Feldt on the EITI in this volume.
36 Principle 9, ICMM (2015a).
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In sum, focusing on institutional development is essential for managing the
disruption accompanying mining. But are the CSR strategies of mining companies conceived
and implemented in ways that enhance local capacities? The next section analyses a number of
shifts appearing in the industry from simpler models of CSR towards more comprehensive
assessments and holistic responses.
3. Shifts in CSR strategy
The previous section emphasized that social contributions fall squarely within the corporate
responsibility to respect human rights, and that contribution positive or negative to
institutional development should be a key indicator for assessing corporate performance. This
section argues that the way in which the industry accounts for disruption and sources of risk is
shifting. There are signs that institutional development is emerging as a cross-cutting dimension
in corporate strategic documents. This section covers the shift at the strategic level while the
next section shows how the shift has played out in four operational settings.
Industry documents point to two main shifts in CSR thinking. One shift regards
social contributions: there is a move away from philanthropy to community investment, and
from economic and social development towards the inclusion of institutional development
aspects also. The other shift regards overall CSR strategies: there is a shift from punctual
interventions towards more encompassing strategies and from partnerships to ‘meaningful
partnerships’ in ways that circumscribe both negative and positive impacts through more
holistic assessments and solutions tackling deeper causes. So there is a growing emphasis on
effective local institutions and local governance dynamics able to deliver resilient communities
able to cope with mining. What is being analysed here might be more profound than a mere
partnership approach; indeed such collaborations and collective action have been around for a
while and the partnership rhetoric has been used in CSR for the last two decades.
This section contains strategic level documents from both individual companies
and influential organizations within the industry. They reflect the latest conceptualisation and
are based on lessons learned from past experiments. They explain why these shifts are necessary
and what the nature of the CSR task is. As the analytical spotlight is on institutional
development, a number of components will be tracked: participatory (inclusive) governance
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mechanisms, capacity-building of local stakeholders, corporate leverage to support good
governance dynamics and remove a myriad of bottlenecks, and encompassing strategies
accounting for the interaction of negative and positive impacts.
3.1. Shifts in social investment
a. Shift from philanthropy to community investment
The shift away from philanthropy to community investment is compellingly explained in the
IFC Handbook on Strategic Community Investment.37 The IFC draws on the lessons and
practical experiences of IFC, its client companies, and other organizations focused on the
private sector in emerging markets38 to explain how good practice regarding community
investment continues to evolve. Participatory approaches and institutional development are two
issues increasingly mentioned as some companies move away from hand-outs and mere
compliance with (imperfect) local laws. The IFC eloquently presents 12 reasons why “old-
style” community investment has underperformed despite the considerable time, goodwill, and
resources invested39 and writes:
Companies are moving away from philanthropic donations and ad hoc practices to
more sophisticated and strategic ways of planning and delivering their community
investment programs. There is greater emphasis on the business case—on viewing CI
[community investment] through the lens of risk and opportunity, and on creating
“shared value” by aligning business goals and competencies with the development
priorities of local stakeholders. Other trends include a focus on building social capital
and local ownership through multi-stakeholder processes; factoring sustainability and
handover strategies into project design; and measuring and communicating results to
optimize the business value derived from CI.”40
37 IFC (2010).
38 IFC (2010), p. ii.
39 IFC (2010), p. 1.
40 IFC (2010), p. i.
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b. Shift from economic and social development to institutional development
The shift from economic and social development to also include issues of institutional
development appears clearly in BHP Billiton’s Social Investment Framework. It covers three
themes: governance, human capability and social inclusion, and environment.41 The
governancetheme has two components: institutional strengthening, and transparency and
corruption. However, while the latter two areas revenue secrecy and bribery are well
conceptualized in detail, “institutional strengtheningappears as only an incipient issue.42
Indeed, the BHP Billiton dedicated policy paper on communities does not elaborate on
institutional strengthening, which receives only cursory attention.43
Figure 1: BHP Billiton’s Social Investment Framework44
Anglo American offers a comprehensive framework that visualizes how inputs translate into
outcomes as they are mediated by the market sector interacting with the social sector. Part of
the social sector are elements of government capacity building” and “social investment”. The
company appears to direct resources towards these two elements. Furthermore, the graphic
indicates the interdependency between the company’s economic and social contributions. Thus
while institutional development is not front and center in this graphic, it is indicated clearly as
part of the social performance of the company.
41 BHP Billiton (2016a) pp. 2-3.
42 For latest details and indicators, BHP Billiton (2017) p. 38.
43 BHP Billiton (2016a) pp. 2-3.
44 BHP (2016b) p. 55.
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Figure 2: Anglo American’s approach to development45
The IFC analyses how the presence and interventions of the company affects stakeholders and
their relationships. The Guide draws attention to the imperative of understanding the local
ecosystem”.46 That is essential for how to implement community investment (CI) smoothly as
well as for grasping the far reaching impacts of CI on local stakeholders and local dynamics. In
the graphic the IFC maps a multitude of elements (“variables”) grouped in four clusters. Two
clusters refer to local actors: one mentions to institutions and their capacities while another
cluster refers communities and their (social) capital. This dovetails the emphasis in this chapter
on local authorities and local communities as essential for coping with a mine’s impacts. A
third cluster captures risk factors” and obstacles to CI that revolve around weaknesses in local
institutional development, such as elite capture, corruption, and low capacity. Based on this
graphic it follows that community investment should concentrate more on institutional
development aspects and not remain fixated on economic and social benefits. Finally this
emphasis on the local context and institutional weaknesses carries insights beyond CI for other
strategic approaches that tackle the negative impacts of mining.
45 Anglo American, 2016, p. 47.
46 IFC (2010), p. 25.
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Figure 3: IFC on community investment and variables of the local context47
3.2. Shifts in social responsibility
a. Shift from punctual interventions to more encompassing approaches
There is a shift in CSR thinking from punctual interventions towards more comprehensive
framing and integrated solutions. As the complexity of the local context is appreciated more,
understanding grows on how the negative impacts (infringements) from mining interact in the
volatile local context. Even attempts to deliver positive impacts (benefits) can become sources
of risk. These are sources of risk that interact, compound each other and shortcut efforts for
responsible mining and satisfactory company-community relations. Therefore isolated
assessment and compartmentalised efforts to deliver compliance or socio-economic benefits
tend to fall short. These efforts are not able to address either the interrelations among the sources
of risks or the deeper causes of abuses, including those having to do with a weak local
institutional set-up.
47 IFC (2010) p. 25
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Anglo American puts forward its integrated approach to managing all of our risks
and impacts”.48 In its Social Way strategy paper, the company defines social performance as
encompassing ‘stakeholder engagement, management of social risks and impacts, human rights
and our approach to socio-economic development… [A]ll Anglo American managed sites
[have] to ensure that systems are in place to: engage with affected and interested stakeholders;
avoid, prevent, mitigate and, where appropriate, remediate adverse social impacts; and
maximise development opportunities.”49
The ICMM also offers a holistic framework and discusses institutional capacity.
Its Toolkit on why community support may be lacking places corporate inputs and impacts into
context. Thus it identifies three external, contextual factors: sociopolitical and governance
context, equity and social capital considerations, and reputational context (of the broader
industry). These factors are deemed “critical to understanding communitycompany
relationships since they help define the environment in which those relationships take place.50
Regarding the sociopolitical and governance context the Toolkit explains that
good governance for the mining sector includes, at a minimum, a clear and reputable legal
framework combined with the institutional capacity to execute that framework in an
accountable and reliable manner.51 This helps create a conducive environment; “Conversely,
governance and political frameworks that lack credibility, effectiveness and accountability,
with weak institutional capacity, tend to inhibit healthy community–company relationships.”52
Also the simultaneous emphasis on both negative human rights impacts (implementation of
impact management measures) and positive impacts (social investment”) 53 is welcome. In
sum, the ICMM’s comprehensive approach prevents isolated assessments and emphasises local
institutional capacity in order to enhance community support and move towards responsible
mining.
The IFC recommends a “Holistic Approach to Community Relationsbased on
four components: When it comes to managing company-community relationships, community
investment [CI] is only one part of the equation [and] should not be thought of as the company’s
48 Anglo American (2014) p. 6
49 Anglo American (2014) p. 6.
50 ICMM (2015c) p. 17.
51 ICMM (2015c) p. 17.
52 ICMM (2015c) p. 17.
53 These are both inputs, but how they translate into impacts depends on the context where governance and social
capital must be highlighted. Figure H.2: Inputoutputoutcomeimpact analysis. ICMM (2015c) p. 71.
18
primary means for risk management, stakeholder engagement, or local job creation.’54 With
this the IFC indicates that CI should not offset other ways to minimize harm (risk mitigation)
or essential ways to make positive impacts (jobs).55 However although holistic strategies to
manage interacting sources of risk are important, they are not always necessary, the IFC
maintains. The Guide distinguishes here between higher riskcontexts from other less
challenging settings.56 The higher risk contexts are those where there are significant project
impacts on local communities, where basic needs and expectations for benefits are high, or
where the affected communities do not have the ability (i.e., skills or resources) to take
advantage of development opportunities being created by private investment”.57 Apparently,
the mining operations that make it on the human rights agenda invariably fall into the higher
risk context which then require indeed the kind of holistic approach the IFC puts forward.
BHP Billiton uses the comprehensive framework of the SDGs to explain its performance
in terms of socio-economic benefits as well as the way the company seeks to work in a rights-
respecting and inclusive manner:
In addition to the role the resources we produce play in improving the quality of life of
billions of people around the world, we contribute towards the achievement of the SDGs
in three ways. Firstly, through our business activities, including the direct and indirect
employment we create through our workforce and supply chains. Secondly, through the
use by our host governments of the taxes and royalties we pay. And thirdly, through our
voluntary social investment. Importantly, we also contribute through how we workfor
example, through our respect for human rights, zero tolerance for bribery and corruption,
minimising our environmental footprint, recognition of gender equality, diversity and
inclusiveness and support for reconciliation with Indigenous peoples.”58
In their study of large-scale investments in fragile environments, Ganson and Wennmann
placed “locally-rooted capabilities and systemsat the centre of their framework for action:
[S]trong and resilient local actors are required to identify and mobilize appropriate
responses to stress factors, tensions, and risks from whatever source. Whether the goal is
54 IFC (2010) p. 9. (emphasis added)
55 IFC (2010) p. 9.
56 For this the IFC indicates that “[n]ot every project needs to have a CI program. In fact, many projects can reduce
their social risks by managing project impacts well and adjusting their business practices and procedures to
increase local economic benefits.” IFC (2010) p. 5.
57 IFC (2010) p. 5.
58 BHP Billiton (2017), p. 10.
19
characterized as a stable operating environmentor peace, all actors share common
questions in these contexts. The first is how best to strengthen dispute resolution and
prevention capacities that better manage the overlapping, diverging and conflicting
interests of communities, state authorities, and companies, as well as the multiple risks to
which these interests are exposed. The second question is the role of various national and
international actors in supporting such capacities and risk mitigation strategies.59
b. Shift from partnerships to meaningful partnerships
There is also a shift from partnerships to meaningful partnerships,60 that is, collaborations
that highlight aspects of capacity-building and inclusion. The partnership approach stems from
the realisation that by-passing local authorities, communities and rightholders generates a litany
of negative effects such as ineffective interventions, unsustainable results, dependency,
community divisions and conflict, and mistrust. The benefits and risks of partnerships are well
documented, and some benefits hint directly at good governance dynamics: leverage, capacity-
building, and sustainability of benefits. The IFC identifies five strategic reasons to partner: risk
sharing, ability to leverage of resources, extended reach, scalability, and enhanced likelihood
of successful outcomes (e.g., shared ownership, sustainability).61 Anglo American discusses
both benefits and risks of partnerships, with benefits including “diverse perspectives, skills and
solutions; improved understanding of partner organisations; credibility amongst stakeholders;
reduced dependency and enhanced sustainability (particularly relevant in the context of mine
closure); capacity-building among partners; opportunities to leverage resources; and
reputational benefits.62
Once the decision not to by-pass local actors has been taken, it is essential to move
to meaningful partnership. Partnership does not automatically ensure participation. The latter
requires tackling the multitude of bottlenecks that disable participation. Insufficient capacity to
participate and exclusionary dynamics are such bottlenecks that speak directly to the idea of
institutional development and participatory local governance. As the IFC writes, every program
59 Ganson and Wennmann (2012), p. 5.
60 OECD (2016) emphasises “meaningful stakeholder engagement”.
61 IFC (2010) p. 89-91.
62 The potential risks of partnering include “reputation impact, potential for conflict, slower decision-making,
corruption, reduced control and, potentially, additional bureaucracy.” Anglo American (2012) p. 154.
20
is an opportunity to build institutional capacity63 and exercise leverage over public authorities.64
For Anglo American, Developing local institutional capacity is increasingly seen as a vital
step in promoting good governance and sustainable development. Capacity development can
encourage this by bringing local government closer to citizens, allowing constituents to
participate more effectively, tailoring decisions to local needs, and enabling more effective
provision of public services.”65 The IFC further observed that
Capacity building is one of the least understood yet most important aspects of
development work. Building human and social capital is integral to strategic community
investment because it leverages and multiplies the impact of CI resources by
strengthening local partner organizations, promoting self-reliance, and increasing the
likelihood of project success. Effective capacity building benefits both the company and
local stakeholders by generating inclusive processes that strengthen trust and build
commitment and good relationships.”66
Inviting cooperation with and among local stakeholders overturns governance dynamics where
previously marginalized communities might not want the government involved, or where
governments do not support or facilitate company-community agreement processes.67 The IFC
suggests that government representatives or traditional authorities might fear that community-
led planning processes threaten the status quo.68 Therefore grasping the local context is essential
if interventions are to be effective. Elite capture,69 local governance issues,70 inclusion and
63 The Guide offers tips regarding strategic community investment such as “Choose the option that builds local
ownership and capacity.” IFC (2010) p. iv.
64 Another tip is to “Move away from doing it yourself to making sure it gets done. Instead of substituting for
government by providing health and education services, companies are increasingly using their access and leverage
to ensure that local community needs are met. This can be done by lobbying the government to provide services,
using contacts to attract external donor funds and forge partnerships, or building the capacity of communities to
take these types of actions themselves… [When] communities trust that a company is willing to support them over
a longer timeframe, they are more likely to prioritize skills training and capacity building.” IFC (2010) p. iv.
65 Anglo American (2012) p. 185
66 IFC (2010) p. 49.
67 Rio Tinto (2016) p. 89.
68 IFC (2010) p. 29.
69 “Some communities can be highly stratified, with power structures dominated by traditional “elites” who control
most of the community decisions regarding resource use and management… It undermines representation,
participation, and fairness in the distribution of benefits.” IFC (2010) p. 28.
70 The government can be hindered by corruption and vested interests, lack of resources and institutional capacity,
power dynamics between elected and traditional authorities, historical distrust between government authorities
and communities, and patronage politics. “Past lessons point to the importance of promoting CI without
circumventing local government, and implementing initiatives to build local government capacity and promote
accountability and inclusiveness.” IFC (2010) p. 29.
21
gender,71 historical legacy,72 conflict,73 and availability of local partners74 should be taken into
account.
Inclusion is thus inherent in the idea of meaningful partnership. There is a strong
focus on intra-community dynamics in some industry materials. For example, the ICMM
requires in its Principles to Ensure that appropriate systems are in place for ongoing interaction
with affected parties, making sure that minorities and other marginalized groups have equitable
and culturally appropriate means of engagement.75 Indeed, the government, social groups in
the community, or even the rightholders might be excluded. To prevent this, BHP Billiton
impresses on its staff regarding community investment projects to “never… implement a
community development project that will intentionally, or likely replace, take over or
destabilise the authority of any level of government.76 The company should not intentionally
saw divisions along political, religious or ethnic lines and thus its “approach to community
investment specifically excludes contributions to any religious organization for religious
purposes, as they may be considered socially exclusive.”77
This shift toward meaningful partnerships comes at a time when the rhetoric of
partnership is evident throughout industry. Anglo American has incorporated the partnership
approach in its very vision as an organization “To be partners in the future” and states: “It
is our belief that Anglo American, and mining as an industry, has both the potential and
responsibility to act as a development partner, for the long term benefit of society.”78 Barrick’s
included in its Human Rights Compliance Program five core principles. One is about
“partnership and collaboration” covering global and local partnerships, dealing with negative
71 “Some communities may not historically favor participation and inclusion; others do. … Experience shows that
without specific measures to ensure their inclusion, the most vulnerable groups are typically excluded from, or
underrepresented in, the development process.” Companies are advised to use a range of techniques to address for
example gender imbalances and promote women’s participation: participatory techniques, awareness raising,
support around the non-traditional roles women can perform, use of gender-sensitized facilitators, timing meetings
to accommodate women’s schedules, and organizing separate women’s meetings. IFC (2010) p. 28.
72 Past actions of governments and private companies have left a legacy of mistrust “in response to environmental
damage, land disputes, unfair compensation, broken promises, corrupt practices, non-transparent behavior, and/or
human rights abuses.” IFC (2010) p. 28.
73 The risks lies in CI creating or exacerbating existing tensions around CI resources; “Done well, [CI] can play an
important role in bringing groups together around shared interests, facilitating collaborative processes, and
strengthening the capacities of local actors.” IFC (2010) p. 29.
74 “Experience has shown that even where there are local NGOs and CBOs [community-based organizations],
these organizations can lack capacity, accountability, transparency, or representativeness. CBOs in particular are
often informal in structure and tend to reflect the power structures and cultural values of their communities.”
Companies should “be prepared to invest time and patience in a long-term process of capacity building and mutual
learning.” IFC (2010) p. 29.
75 Principle 9, ICMM (2015a).
76 BHP Billiton (2014) p. 30.
77 BHP Billiton (2014) p. 30.
78 Anglo American (2017) p. 11.
22
and positive impacts, given that “We continue to face human rights dilemmas that defy easy
answers.”79 Rio Tinto also emphasizes partnerships: “Partnership is make or break for our
industry and for Rio Tinto… This allows us to manage risk in the short term, in relation to our
existing operations, and gives us the ability to secure new deposits in the medium and the long
term.”80 For companies extorting the virtues of partnership, focusing on institutional
development aspects is an opportunity to turn rhetoric into meaningful partnerships.
Meaningful partnerships are an illustration of good governance dynamics with
spill over effects beyond the specific objective of each partnership. Furthermore, partnerships
are not confined to social contributions where benefits are simply shared in participatory
fashion. Instead they are a collaborative mode of dealing with negative as well as positive
impacts. Negative impacts caused by third parties often require companies to enter into
partnerships such as the VPI and the EITI. Indeed to effectively exert leverage over third parties
often requires collective action through multi-stakeholder schemes. But even negative impacts
within a company’s own control might require collaboration as in participatory water
monitoring; that is necessary to generate trust in complex technical processes. Furthermore,
exercising leverage to support local institutional development is relevant both within
partnerships – capacity to collaborate and outside partnerships capacity of local institutions
to discharge their respective mandate and public role.
In sum, focusing on local institutional development repositions the company as a
facilitator of good governance dynamics. A fundamental element is to seek not to bypass local
institutions as the company goes forward addressing negative and positive impacts. Instead their
role and capacity should be reinforced. Working collaboratively and for ensuring sustainable
improvements requires multiple repositioning from a company.81 This section documented four
shifts regarding social investment and general CSR strategy. These shifts are consistent with a
stronger focus on institutional development. They help reflecting on what the corporate
responsibility to respect entails in the context of mining. What appears at first glance as social
contributions outside ‘respecting’ human rights prove to be essential ingredients for actually
achieving respect for human rights in a difficult operational context like mining.
79 Barrick (2017) p. 94.
80 Rio Tinto (2017) p. 5.
81 The company’s interventions should be strategic, aligned, multi-stakeholder driven, sustainable, and measurable.
IFC (2010) p. i.
23
These shifts are compellingly articulated at the strategic level and appear to be in
the incipient stages of elaboration and operationalisation. The risk is that they remain confined
to the declaratory and aspirational. The next section analyses latest developments in four
concrete settings where companies are beginning to operationalize these strategic approaches
and move beyond rhetoric.
4. Operational settings
This section concentrates on four settings: water, security, socio-economic development, and
revenue transparency. The first two settings correspond directly to human rights like the right
to water and basic civil rights, while the other two settings are about an enabling environment
for human rights free from corruption and poverty. Some of these areas benefit from global
partnerships (security, revenue transparency) while others evolve through local partnerships
(water, social investments). Some settings deal with direct negative impacts from mining
(water, security) while the other settings cover the positive contributions mining can make to
host societies. However, all these settings, partnerships and impacts can and should be assessed
in terms of contributing to or reducing institutional development as a cross-cutting issue.
4.1. Water management
All five companies herein are members of ICMM, which in 2015 developed a water
management guide.82 It covers a highly sensitive issue that can escalate and stop projects in
their tracks. The key element of ICMM’s approach is the “catchment-based approach” meant
to “both to limit material risks and maximize opportunity”.83 It is grounded in the need to
Understand the true value of water”.84 The Guide promotes a shift in water management from
treating water as an operational issue85 to taking a holistic view of the social, cultural,
82 ICMM (2015b)
83 ICMM (2015b) p. 6.
84 ICMM (2015b) p. 16. (“Water is fundamental to life, human dignity and functional ecosystems. Water is also
the lifeblood of many industries, from agriculture to manufacturing, energy generation and mining.” Id)
85 ICMM explains that “Historically, the industry has approached water as an operational issue one that is largely
managed ‘inside the fence’ with a focus on water use efficiency and control over effluent discharges to demonstrate
good practice and minimize risk... Successful risk management must be based on understanding the complete suite
of water issues within the catchment and finding solutions that work for the business and other water users.” ICMM
(2015b), p. 5.
24
environmental and economic value of water at a catchment scale.86 Thus the ICMM puts
forward
A catchment-based approach to managing water resources [that] looks at activities and
issues in the catchment as a whole, rather than considering different aspects separately. It
requires a diverse range of processes to be considered, including the hydrology and land
use, as well as broader political, economic, social and ecological dynamics that influence
water availability and quality. A catchment-based approach encourages organizations to
consider holistically how competing demands on water resources from a range of
stakeholders (domestic water users, industry, regulators, politicians) can create pressures
and lead to conflict if not appropriately managed. It also requires that people from
different sectors be brought together to identify issues and agree priorities for action, and
ultimately build local partnerships to put these actions in place.87
This comprehensive approach requires engagement with stakeholders. The guide refers to the
opportunities, benefits and risks of partnerships, and recommends that companies should
understand their own internal capacity and consider the ambition and capacity of other partners
(i.e. communities, NGO groups, government or other mining and metals operations) to
meaningfully engage88 before proceeding with a specific catchment-based response. The
ICMM approach builds on lessons learned: Poor social management of water (for example,
lack of inclusive community engagement, participatory monitoring programs, etc) can lead to
the erosion of stakeholder relationships and ultimately the loss of the company’s social licence
to operate.”89
ICMM also refers explicitly to institutional development aspects. There is detailed advice
on the need to get clarity on the regulatory framework and gauge institutional capacities:
In addition to institutional arrangement and regulatory timeframes, the institutional
strength and capacity of local authorities to deliver services and manage catchment
challenges as they arise should also be assessed. Limited resources of local government
institutions may have implications for the expectations communities have of mining
86 ICMM (2015b), p. 6.
87 ICMM (2015b), p. 15.
88 ICMM (2015b), p. 51.
89 ICMM (2015b), p. 17.
25
operations and other industrial water users in the catchment along with implications for
the reliability of water supply over time.90
With its catchment-based approach, the ICMM offers a compelling example of a shift to more
encompassing and integrated approaches to addressing a negative impact of mining (water).
Industry approaches to security issues offer another example of how negative impacts need to
be addressed broadly to deal with compounding sources of risk in volatile environments.
4.2. Security provision
The Voluntary Principles on Security and Human Rights initiative (VPI) is a global
multistakeholder partnership set up in 2000 to “guide companies in maintaining the safety and
security of their operations within an operating framework that encourages respect for human
rights.”91 The scheme covers three sets of issues: risk assessment, public security, and private
security. Governments, businesses and NGOs participate.92 As a partnership, the VPI evolved
from a rather opaque multistakeholder initiative into a more transparent one.93 This however is
mainly internal transparency towards participating organizations; information is shared within
the confidential setting of the VPI in order to secure engagement and full and open dialogue”
among participants.94 Reputable NGOs are engaged in the VPI and lend it credibility.
The VPI progressively adopted measures to make it more likely that genuine learning and
collaboration takes place. With its emphasis on measurement and learning, the VPI offers the
opportunity to inquire whether institutional development aspects are given due emphasis at the
strategic and operational levels. Nowadays the VPI reporting system places emphasis on
measurability, including to develop and share key performance indicators (KPI), and lessons
learned. All companies follow the Reporting Guidelines95 and companies that voluntarily
opted-in into the Verification Framework,96 complete self-assessments emphasising KPIs.97 To
stimulate this lessons sharing process, NGOs are also asked to report to the VPI and concentrate
90 ICMM (2015b), p. 23.
91 Introduction, Voluntary principles on security and human rights (2000).
92 For the list of participants, see www.voluntaryprinciples.org
93 For a concise table comparing reporting requirements expected from the three groups of stakeholders see Global
Compact Canada (2016), pp. 66-67.
94 VPI (2007/2016), pp. 1-2.
95 VPI (2017a).
96 VPI (2017b).
97 The VPI constructed 6 categories of KPIs and explains that “a significant component of the accountability
framework for any participating organization is the selection of a suite of organizationally appropriate performance
indicators.” VPI (2017b) p. 1.
26
on evaluation techniques and key learnings.98 Work on KPIs commenced in 2012 and has been
supported by the UN Global Compact.99
Naturally institutional development aspects feature high in the VPI: it is public forces that
might provide security to mining facilities and the host government itself regards mining
operations as a strategic asset. Among the challenges identified are lack of capacity of host
government to support VPI implementation; resistance to the VPI within the host country
government at local or national levels; and VPI being seen as “interference” in the affairs of the
host country government.100 Therefore the VPI extensively deals with both capacity constraints
of security forces as well as leverage over host government to deliver security responsibly.
Attention and action on these challenges is essential for tackling a root cause of human rights
infringements, that is, an underlying cause stemming from deficiencies of public authorities.
Companies in the VPI are invited to use their leverage to strengthen the
functioning of governmental institutions, which is within their roles and responsibilities”.101
For example companies should support the rule of law to the extent feasible in each operating
context” in different ways: record and report credible allegations of abuse, urge investigation,
actively monitor investigation status and press for their proper resolution; and support efforts
by states and civil society organizations to strengthen state institutions.102 The ICRC also
discusses leverage issues in its Guide and recommends coordinating with other stakeholders
and strengthening their capacities and role.103
Local capacity constraints come in diverse forms. The international Committee of
the Red Cross (ICRC) indicates that “Public security forces may suffer from insufficient human
resources, low salaries, inadequate training and poor equipment. This may increase the risk that
they engage in criminal activity or human rights violations.”104 Weak capacity might take the
form of a poor understanding of human rights and rules of engagement, arrests and detentions,
health of people in custody, and torture or degrading treatment.105 However even apparently
98 NGOs are asked to share their evaluation techniques and present in-depth case studies with specific
methodologies employed. VPI (2015).
99 Global Compact Canada (2016) p. 2.
100 VPI (2011), p. 21.
101 VPI (2014).
102 VPI (2014) p. 1.
103 ICRC (2016) p. 23.
104 ICRC (2016) p. 45.
105 VPI (2011), p. 42.
27
non-controversial actions a company might take, such as training as a method to build local
capacity, can be problematic in the security area.106
The ICRC indicates that another capacity weakness the lack of appropriate
equipment – may lead to excessive use of force by security forces.107 The VPI explains that “In
many countries, public security providers are underresourced and will make requests to the
company for the transfer of equipment (lethal and nonlethal), fuel, or access to vehicles…
Receiving requests from public security providers for equipment (e.g. fuel, use of vehicles,
communications equipment, etc) can be very common.108 That creates risks that transferred
equipment will be sold illicitly or be used to commit human rights abuses. To address such risks
and gaps in the public security provider’s ability to deliver on the VPI, tips are offered.109
Sources of risk compound each other in the security context which then calls for
more comprehensive assessments and solutions. Tus the VPI draws attention how Security
measures that are viewed as ‘heavy-handed’ may end up creating, rather than reducing security
risks by endangering parallel efforts to develop community trust [e.g. through social investment
and CSR activities].”110 The ICRC also highlights the multiple sources of risks that require a
comprehensive assessment:
“Community-related security risks are frequently the result of unaddressed concerns,
negative impacts, or misunderstandings about non-security related issues such as
employment, land, environment, compensation, resettlement, and negative legacies from
previous company projects, to name a few. When concerns and grievances go
unaddressed or unmitigated, these issues can escalate into tensions and may eventually
result in situations of violence.”111
As often done in conflict analysis, 112 attention goes to root causes: “The company may be faced
with community-related security issues caused by unidentified root causes, unaddressed
impacts of the operation or unfulfilled commitments. In these situations, tensions with
106 Examples from Colombia and the DRC reveal governmental restrictions on what training companies are
allowed to offer to public security forces on international standards. ICRC (2016) pp. 60-61.
107 ICRC (2016) p. 70.
108 VPI (2011), p. 43.
109 For example, installing tracking devices on equipment, company personal to accompany the equipment, third-
party monitoring, and supporting other stakeholders involved in security sector reform. VPI (2011), p. 43 and p.
72.
110 VPI (2011), p. 20.
111 ICRC (2016) p. 146.
112 Ganson and Wennmann (2012).
28
communities may persist despite efforts by the company to address them.113 Therefore the
ICRC recommends comprehensive baseline studies and risk assessments114 that use
participatory methodologies. This attention to the depth of CSR responses to security risks
results in recommending an encompassing approach. Indeed such a comprehensive approach
transpires from the ICRC Guide as it recommends both a prevention and a conflict
management approachto corporate-community relations given that understanding why
companies, at times, face opposition from local communities, crime and violence, and how to
change the situation, remains elusive.115 This holistic approach is warranted as “corporate-
community relations do not happen in a vacuum”:
“Community concerns and grievances targeted at the company will often be the result of
weak governance, poor public services, and lack of genuine engagement on the part of
the host government. Companies, therefore, must assess how all aspects of their
operations, beyond just security measures, interact with the existing context. Critical
analysis must be applied to understand whether the company’s actions are reinforcing
inequalities, increasing competition for resources, and reducing the extent to which
community members have a voice in decision-making, or whether, conversely, company
actions are reinforcing good governance, respecting human rights, and safeguarding
human security. In this respect, while companies cannot and should not replace the
government, efforts can be made to support a stronger government role.”116
Rio Tinto offers an example of a comprehensive strategy to security risks at its Peruvian mine
and why that proved necessary. The company decided to move from its previous narrow
approach to security to a broader one encompassing other human rights issues. Previously the
company’s main approach was to focus on the interaction between company security
personnel, local and national security forces, and surrounding communities.117 The company
sought however a broader understanding of how existing social conflicts and intra-community
issues might exacerbate security and human rights issues, and how company behaviour could
113 ICRC (2016) p. 148.
114 Consider all direct and indirect impacts of the company’s operations on local communities, including: in-
migration, displacement, loss of land, loss of livelihood, loss of biodiversity, all forms of pollution, prices of goods,
services and accommodation, rise in violence and crime, effects on community health, damage to religious,
spiritual or cultural sites of significance, and increased socio-political tensions, strife or conflict.ICRC (2016) p.
150.
115 ICRC (2016) p. 146.
116 ICRC (2016) p. 147.
117 Rio Tinto (2013) p. 39.
29
in turn aggravate these.118 That led the company to conclude that “the primary source of peace
and security for the La Granja project lay in the project’s ability to work with local communities
and organisations… to manage the social and economic changes brought by the project.”119 It
resulted in diversified and expanded forums (roundtables) covering security and other issues.
Furthermore, the company reviewed its local employment, social investment and community
engagement activities to better understand and anticipate socioeconomic impacts and
strengthen the integration of project activities into the local economic and social context.120
In sum, the security area offers a compelling example of a negative impact of
mining that requires local institutional development. Contributions to local capacities and
exercising corporate leverage come at the forefront. The fact that the above security related
documents refer to social investment show the interlinkages between security, human rights
and development. The VPI offers evidence of a global partnership that has been evolving and
thus substantiates emerging shifts in CSR strategy appear to trickle down to the operational
level.
4.3. Contributions to development
The economic and social contributions to the development of host communities are front and
centre in CSR reports. They also appear as commitments to the SDGs the integrative
framework covering both contributions and compliance aspects 121 which some companies use
now as a framework for their CSR policies. Both positive and negative impacts should be
discussed under a common umbrella of human rights. Indeed the way both such impacts are
handled can enhance or reduce social and human capital (institutional development) within host
communities and thus reverberate well beyond the specific impact being addressed. As the
OECD explains, “if stakeholder engagement activities are not properly supported, developed or
executed, their due diligence function may not be realised, and adverse impacts may not be
avoided or addressed. Furthermore, poor stakeholder engagement can in and of itself give rise
to actual or perceived adverse impacts and jeopardise potential benefits to stakeholders.”122
118 Rio Tinto (2013) p. 39
119 Rio Tinto (2013) p. 41.
120 Rio Tinto (2013) p. 41.
121 United Nations (2015), para 67.
122 OECD (2016) p. 18 (identifying also common challenges to meaningful stakeholder engagement, pp. 71-74).
30
Anglo American offers a compelling analysis of the context of mining and the
ways to address sustainability challenges.123 The company hints to the disruption brought by
mining when it sees “value in pursuing business strategies that are socially inclusive and
environmentally responsible, with the aim of minimising relevant local root causes that drive
social instability.124 In terms of development contributions, it acknowledges the expectation
that the industry acts as a catalyst for socio-economic development.125 The way forward to
address risks and expectations lies in a comprehensive and integrated strategy that refers to
institutional development:
Our strategic focus is on improving the productivity of local markets and public
institutions. The aim is to support sustainable job creation and effective public service
delivery, to ensure that local economies are able to deliver opportunities even after mine
closure. Our strategy recognises the importance of implementing programmes that build
on existing successful initiatives and strengthen the capacity of local institutions, as
opposed to isolated projects.”126
Anglo American illustrates with its development strategy in South Africa. This is an example
of a strategy extending beyond the usual coverage of surrounding communities. The company
explains why a confined strategy would not address effectively the sources of risk. The
background is one of social instability and deprivation in the Limpopo province:
Many of the protests have their roots in poor public service delivery and unemployment.
Persistent drought in the region has exacerbated socio-economic challenges and social
sensitivities, heightening negative sentiment around mining, and raising expectations for
mining companies to deliver socio-economic benefits…. We have placed a particular
strategic focus on mitigating social conflict and promoting socio-economic development
across Limpopo province.”127
Anglo American adopted “a regional approach to development opportunity identification”: “we
needed to move from being a single actor to a regional partner; from a participant in the
development debate to a leader and facilitator. As a result, we embarked on work to catalyse
collaboration and partnership on systemic, cross-sector, transformational sustainable
123 Anglo American (2017), pp. 8-10.
124 Anglo American (2017), p. 9.
125 Anglo American (2017), p. 8.
126 Anglo American (2017), p. 47.
127 Anglo American (2017), p. 40
31
development in Limpopo.128 In operational terms, the company engaged in spatial analysis
and planning in order “to develop a detailed understanding of the opportunities [across a range
of sectors] based on the bio-physical and social conditions of the provinceand employed “the
collective impact model, which hinges on the idea that in order for organisations to create
lasting solutions to social problems on a large scale, they need to co-ordinate their efforts and
work together around a clearly defined goal.129
More broadly, but also on operational matters, Anglo American expects all its
sites to have Socio-Economic Development (SED) plans130 touching on three main elements:
Long-term SED strategy,131 Optimal package,132 and Partnership. The company also reports on
supporting institutional capacityof local institutions to enhance the delivery of public
services. The company exemplifies partnerships in South Africa and Latin America involving
development banks133 and explains how its local infrastructure can be shared with local
communities at marginal cost and with benefits for both company and communities.134
Rio Tinto is notable for its approach to community benefit agreements which
offers a formalised approach to promote good governance dynamics.135 The company
documents its shift towards agreements in the context of the late 1980s; a significant trigger
was litigation and law (Native Title Act) in native Australia and severe unrest at its Papua New
Guinea operations.136 In operational terms, in 2014, the company made it agreement-making
mandatory for its operations globally and shape the social performance standards where long-
term projects are planned; this will benefit indigenous and traditional land-connected
peoples.137
128 Anglo American (2017), p. 38.
129 Anglo American (2017), p. 38.
130 Anglo American (2014), p. 14
131 The SED strategy is “developed with external stakeholders in a participative and inclusive manner to ensure
SED articulates a vision for long-term, multi-sector development and provides a platform for collaboration with
critical stakeholders such as local and regional government, other private sector actors and social investment
partners.” Anglo American (2014), p. 14. (emphasis added)
132 The package contains components such as “local employment, local procurement, employee volunteering,
infrastructure synergies, municipal capacity building, enterprise development and corporate social investment.”
Anglo American (2014), p. 14.
133 Anglo American (2017), p. 50.
134 Anglo American (2012), p. 179.
135 By comparison, Anglo American is much less committed to Benefit Sharing Agreements for which it takes a
case-by-case approach: “The development of these agreements is complex, can have unintended consequences and
may set precedents (intentionally or otherwise) for other Anglo American operations.” Anglo American (2014), p.
23.
136 Rio Tinto (2016) pp. 15-25.
137 Rio Tinto (2017) p. 19.
32
In its Why Agreements Matter” guide,138 the company draws on its experience
with more than 150 community agreements extending over the last two decades. One insight is
that “it takes time to negotiate mutual agreements and the process can be as important as the
final agreement itself.”139 The company flags its Cooperation Agreement in Mongolia at its
Oyu Tolgoi copper-gold operation.140 Concluding such an agreement was obligatory under the
2009 Investment Agreement with the Mongolian state. The agreement was concluded in 2015
after a four year process. The company explains local government capacity constraints,
representation of communities within Mongolian law and tradition, and highlights the novelty
of this agreement as a governance framework with a high degree of detail about rules,
obligations and governance committees in a formal agreementfor the country.141
BHP Billiton describes its program in rural Colombia that works to address the
root causes of poverty and provide opportunities for families to break the poverty cycle.”142
The program is clear about economic and social development aspects: it provides increased
access to basic services (education, healthcare, water, sanitation and housing) as well as
economic opportunities (training in agricultural practices, support for entrepreneurship). But
there is also an institutional development facet in in this integrated development approach
[that] builds resilience in rural Colombia.143 In terms of impacts on local institutional
development, BHP Billiton documents increase in the capacity of local public
administrations144 and in their links to the central government.145 This is part of a general
orientation not to duplicate or displace existing agencies and services, but rather strengthen
and support local capacity development.”146 On the capacities of local communities, the
company reports that a priority was to establish Community Management Committees in 40
rural communities “to provide a forum for discussion, dialogue, analysis and identification of
issues.”147 One outcome has been Community Development Plans through which the the
138 Rio Tinto (2016)
139 Rio Tinto (2017) p. 34.
140 Rio Tinto (2015). The agreement covers seven topics: Water management, Environmental management,
Traditional animal husbandry and pasture management, Natural history, culture and tourism, Social services, Local
business development and procurement, and Infrastructure and capital projects. (section 5.1)
141 Rio Tinto (2016) p. 82.
142 BHP Billiton (2016b) p. 57.
143 BHP Billiton (2016b) p. 57.
144 The evaluation showed that “local administrations have improved by an average of nine per cent in areas such
as planning, resource management, monitoring, evaluation and accountability.” BHP Billiton (2016b) p. 57.
145 The links have improved as the company offers technical assistance to municipalities in the formulation and
submission of proposals for the national Royalty Fund and other government programs.BHP Billiton (2016b) p.
57.
146 BHP Billiton (2016b) p. 56.
147 BHP Billiton (2016b) p. 57.
33
communities indicated “their long-term vision; their tangible and non-tangible assets;
prioritization of needs; possible solutions; and key partners for development.”148
This subsection highlighted participatory approaches that are commonly
described nowadays by leading companies regarding their benefit-sharing and development
programs. Institutional development aspects are still not a commonly used indicator for
assessing such programs, or if that is the case, it remains at a higher level of generality in brief
case studies. There are signs that the shifts in CSR are happening and that trickling down from
the strategic to the operation level. Contributions to development should be seen as a human
rights-relevant matter and important for dealing with the disruption created by mining. From a
human rights perspective institutional development should be emphasised: depending on the
way they are implemented, social investments can facilitate rights-based participatory
governance dynamics in host communities.
The next subsection shows another type of positive contribution mining
companies can make, and that institutional development aspects are not confined to the local
level. It plays out at the national level too when it comes to states managing the vast revenues
the industry generates.
4.4. Revenue transparency
The Extractive Industry Transparency Initiative (EITI) is “a global standard to promote the
open and accountable management of oil, gas and mineral resources149 launched in 2002 and
covering now 52 resource-rich countries. At the heart of the EITI is a multistakeholder approach
and the principle of transparency regarding revenues generated by the extractive sector.
Fundamentally, EITI builds on the belief that “a public understanding of government revenues
and expenditure over time could help public debate and inform choice of appropriate and
realistic options for sustainable development.”150
The initial thrust has been on the reconciliation of revenues paid by companies
and received by governments to detect misalignments.151 However the initiative has evolved
148 BHP Billiton (2016b) p. 57.
149 EITI, https://eiti.org/who-we-are#aim-of-the-eiti
150 EITI (2016a)
151 “Payments and revenues are reconciled by a credible, independent administrator applying international auditing
standards.” Para. 4.9, EITI (2016a).
34
well beyond that and in 2013 the EITI saw a major revision.152 The focus has now expanded to
other expenditures such as transfers from the central government to subnational entities
(revenue-distribution frameworks), and social expenditures by companies. Such revisions were
taken due to the limited impact of EITI’s previously narrow focus as a 2011 assessment
concluded: “little impact at the societal level can be discerned … largely due to [EITI’s] lack
of links with larger public sector reform processes and institutions”.153 That shows how a
limited approach had to evolve towards a more comprehensive assessment and action
framework to tackle revenue opacity.
In 2015, EITI adopted the protocol “Participation of civil society”.154 To become
an EITI candidate country, states have to fulfill five conditions among which are civil society
engagement and the establishment of a multi-stakeholder group.155 The EITI requires effective
multi-stakeholder oversight, including a functioning multi-stakeholder group that involves the
government, companies, and the full, independent, active and effective participation of civil
society.”156 The EITI Standard contains specific provisions regarding civil society engagement.
To be part of the EITI the government must ensure “an enabling environment for civil society
participation” and that the “fundamental rights of civil society” are respected.157 To increase
representation of voices heard in the multi-stakeholder group, the EITI emphasizes
inclusiveness and representation also within civil society sector: “Each stakeholder group must
have the right to appoint its own representatives, bearing in mind the desirability of pluralistic
and diverse representation.”158 In a time of shrinking space for civil society globally, the EITI
affirms the important role of NGOs and remarkably so in a sensitive area such as the collection
and management of massive revenues. This illustrates a genuine shift at operational level from
partnership to meaningful partnerships.
Issues of capacity are addressed in the Guidance on how to establish and manage
an effective multi-stakeholder group (MSG).159 The EITI identifies five common challenges,
among which is a lack of capacity to engage in technical discussions and carry out activities
foreseen in the workplan”. The MSG have to carry out an assessment of capacity constraints
152 https://eiti.org/history
153 Scanteam (2011).
154 EITI (2016a), pp. 41-44.
155 Requirement 1, EITI (2016a).
156 Requirement 1, EITI (2016a).
157 Para 1.3 (b), EITI (2016a).
158 Para 1.4 (a), EITI (2016a).
159 EITI (2016c).
35
and include actions for addressing capacity gaps”.160 Furthermore, data generated must be
accessible to users, so the MSG is asked to undertake “capacity-building efforts, especially with
civil society and through civil society organisations, to increase awareness of the process,
improve understanding of the information and data from the reports, and encourage use of the
information by citizens, the media, and others.”161 For the EITI the priority is that the “EITI
Report is comprehensible, actively promoted, publicly accessible and contributes to public
debate” otherwise the disclosure of extractive industry data is of “little practical use”.162
With these operational measures, the EITI seeks to secure a role a place at the
table – for civil society, and increase their capacity to use the information local EITIs produce.
It is an operationalization of a participatory and genuinely inclusive approach to governance.
The evolution beyond revenue collection towards how the revenue are spent further strengthen
the contribution of EITI to national and now local good governance dynamics. Indeed the EITI
produces now more information about the resource flows at the local level. One EITI
requirements discusses the allocations of revenues from the central to the local levels of
government.163 Another requirement refers to social and economic spending by companies thus
enabling stakeholders to assess whether the extractive sector is leading to the desirable social
and economic impacts and outcomes.”164 This captures social investment by companies, in
addition to taxes paid, as both mandatory (by law or contract) and voluntary (discretionary)
corporate spending is covered.165
Companies analyzed in this chapter are supportive of revenue transparency and
tend to be members of the EITI. Such support extends to the new wave of transparency laws
adopted in developed countries.166 For example, BHP Billiton indicates its support for
“appropriate national and extra-territorial mandatory corporate reporting to complement the
EITI, and provide a globally consistent regulatory framework for all extractive industry
companies.”167 Thus, benefiting from good levels of corporate support, its strategic orientation
and unique operationalization mechanisms, the EITI has evolved to be the leading initiative on
160 EITI (2016c), p. 3.
161 Para 7.2 (d), EITI (2016a).
162 Requirement 7, EITI (2016a).
163 This is meant to enable stakeholders “understand how revenues are recorded in the national and where
applicable, subnational budgets.” Requirement 5, EITI (2016a).
164 Requirement 6, EITI (2016a).
165 EITI (2016d).
166 Mares (2018) (analysing disclosure laws on sustainability, slavery, conflict minerals, and revenue transparency)
167 BHP Billiton (2016b) p. 14.
36
revenue transparency. It thus demonstrates the shifts in CSR around institutional development
aspects.
5. Conclusions
The chapter set out to clarify the meaning of respect for human rights in a complex context such
as mining and examine the (ir)relevance of ubiquitous corporate contributions to development
for a human rights analysis. The analytical focus has been on the issue of institutional
development and local capacities. Of the three questions raised, the first was whether social
contributions fall under the corporate responsibility to respect as defined in the UNGPs. This
was answered in the affirmative and the analysis explained that the responsibility to respect
takes a distinct shape in a context like mining characterised by disruption in host communities.
This finding remains within the confines of the UNGPs and does not appear as an exception
from the do-no-harm principle, but as a particular manifestation of the responsibility to respect
in a complex and volatile context, particularly so in high risk developing countries beset by
governance gaps. In such context, sources of risks compound each other and generate a spiral
down for both the protection of human rights and a company’s attempts to manage its impacts
and break the vicious cycle. The key point is that an analytical focus on institutional
development is helpful to break the cycle and should receive attention from both risk
management and human rights-based perspectives.
The second question was whether there is evidence in industry strategies that CSR
is shifting to recognise the importance of local institutional development. Significant evidence
in this direction comes from both corporations and industry organizations. There is an explicit
and growing emphasis on local capacities and institutional development aspects. The analysis
documented four shifts regarding social contributions and general CSR that are consistent with
a stronger focus on institutional development. While these shifts are welcome and eloquently
articulated at the strategy level, there is also a possibility that these shifts might remain confined
to the declaratory and the aspirational.
The third question asked whether at the operational level there is also evidence
substantiating these shifts in CSR strategy. A closer look at four policy settings covering both
issues of compliance (negative impacts) and social contributions (positive impacts) documented
37
advances in operationalisation. Local institutional development aspects feature prominently in
these four settings. Individually or collectively, some companies are moving beyond rhetoric
and operationalizing new CSR strategies. Some global multistakeholder schemes have evolved
remarkably from humbler beginnings.
In sum, a discussion in responsible mining has to evaluate the impacts on
economic, social and institutional development of a mine’s presence and its CSR interventions.
Institutional development is emerging as a cross-cutting dimension that creates an opportunity
for increased participation of rightholders, mines and external actors in constructing a right-
based and development-enhancing approach to mining. This participation of stakeholders aims
for systemic changes in mining governance that is able to addresses deeper causes of abuse
through encompassing strategies. Placing emphasis on local capacities and institutional
development is indispensable for advancing towards a rights-based framework for mining to
which companies have a responsibility to contribute.
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