Investor initiative – the mining industry
The Council on Ethics has been running a mining project since 2011, with the aim of achieving an overview of how companies in the sector work with sustainability issues and their efforts to put policies and procedures in place.
The sustainability work of some thirty companies has been analysed according to the ten principles of sustainable development of the International Council of Mining and Metals (ICMM), see page 9. The companies have been scored according to how well they satisfy each principle, based on information that is publicly available. In autumn 2011, all the companies concerned were contacted by letter. In 2012, the Council on Ethics and its partners in the project, the Dutch pension fund PGGM and the Seventh AP Fund, followed up the analysis with approximately half of the companies. The follow-up work was carried out in the form of meetings and conference calls.
How are mining companies working with sustainability issues?
The project includes a broad spectrum of companies and they run various types of mining activities all over the world. The analysis showed that there is considerable variance in the way mining companies work with sustainability issues, with some companies demonstrating that they are well-prepared in certain areas, while others showed weaknesses.
There are several explanations for this, one being that companies that have previously had problems in relation to sustainability issues tend to improve their preventive systems, while the systems of companies that have yet to experience any major problems are not as well-established.
The Council on Ethics also chose to include companies in the analysis whose operations did not give rise to reports of deficiencies in their sustainability work.
The project has generally been received well by the companies involved, since most of them share the Council on Ethics’ view that the sector is faced with a number of challenges. Many companies are also in the process of reviewing their sustainability practices as a consequence of the UN’s new principles for companies regarding human rights, which were developed by John Ruggie and the UK Bribery Act. The fact that the International Finance Corporation (IFC)4, which issues loans to mining projects in developing countries, updated its framework for sustain-ability in 2012, and the requirements that need to be satisfied if the IFC is to participate as a funder in projects, has also affected companies’ sustainability efforts.
Examples from company dialogues
The dialogues began with a general discussion on sustainability issues and the relevant environmental, human rights and business ethics matters. In nine of the dialogues, the Council on Ethics and its partners specifically highlighted aspects to do with human rights, labour rights and working environment, and in five cases the Council took up issues relating to the rights of indigenous peoples. Biodiversity has been specifically mentioned in five cases and in five discussions, the company’s preventive work on corruption was discussed in details. On two occasions, discussions focused on mining waste in rivers and lake systems. In principle, all discussions covered what companies report and why they choose to report/not to report certain information. Many companies have guidelines and procedures in place, but do not provide clear reports on how they have been followed.
For example, one of the companies had analysed its sustainability work recently against the ICMM’s principles, and in the discussion with the Council on Ethics it emerged that both parties had on the whole identified similar deficiencies in the company’s preventive work. Before the meeting, the Council on Ethics had the opportunity to read a new human rights policy drawn up by the company. During the meeting, the company also announced that it had carried out a thorough review of its anti-corruption work, both areas where the Council on Ethics had identified deficiencies.
Following discussions with another company, the Council on Ethics received an additional written response in which the company clarified its policy on the rights of indigenous peoples, and also wrote: in addition to this and taking heed of your recommendation, we have decided to propose the following amendment to our Human Rights Policy to include a commitment adopted from ICMM Guidelines: “We acknowledge and respect the social, economic, environmental and cultural interests of Indigenous Peoples and their specific rights within these interests as articulated and defined by national and international laws”
In the same response the company also writes: “Following your recommendation and realising this was a gap in our Sustainability Management, we have now drafted a policy on biodiversity (appended to this letter)”.
Both these responses match the deficiencies that were identified in the Council on Ethics’ original analysis results, see the Council on Ethics’ 2011 Annual Report.
Although there was a slump in demand for minerals in 2012, demand remains high in a global perspective, boosted in particular by emerging markets. Global demand for gold is fuelling new prospecting, while several historically rich deposits of many minerals are seeing a decline in production. This creates a situation where prospecting for mines is taking place all over the world, mines that create jobs and badly needed national cash flows, but that also compete with local traditional lifestyles and cause concern with regard to contamination and access to water, and other local environmental effects. Gaining and managing to retain the confidence of the local population is extremely important. In their discussions with the Council on Ethics, companies generally give the impression that they are aware of this, but they report varying methods and approaches as regards their handling of situations, based on the company’s, often local, experiences. This is in all likelihood a wise strategy, since each mine faces unique social and environmental challenges, but sharing experiences between companies is a healthy approach and something that the Council on Ethics encourages
Follow-up analysis, 2013
The Council on Ethics aims to arrange meetings with the remaining companies during the first half of 2013, to complete a follow-up of the analysis based on the companies’ sustainability reporting for 2014.
Why is this investor initiative important?
- Mining activities have considerable impact´s on the environment and people.
- Resource exploitation often takes place in countries with weak legislation.
- Companies should systematically address environmental issues, human rights, anti¬corruption, health and safety, and this should be an integral part of operations.