CSR, Sustainability and the Mining Business
Complacency is not an option for a changing world that’s digitally connected
By Joseph Kirschke, News Editor-Mining

Process manager Gonzalo Manrique uses a model of the proposed mine at the Quellaveco project to ‘dialogue table’ with the Moquegua community.
(Photo courtesy of Anglo American).

An unprecedented, seismic race is underway. It is so fast and furious it almost escapes logic. Geographically, its bounds have no limits. It stretches across remote Andes mountain peaks, desolate Sahara plains, beyond rugged valleys in Australia, Kazakhstan and Appalachia, and deep inside the forests of tropical Southeast Asia.

But despite nurturing one of history’s greatest global commodities booms since the beginning of the last decade, the global mining industry itself remains a largely silent one—as it has for generations. To the public, news exists: of CEOs and boardroom intrigue, protests, labor unrest, of shareholders and their stock. Yet these offer a mere glimpse of something far bigger: Modern daily life without minerals, metals or fuels, that is, would be impossible—a fundamental notion few outside the business even grasp.

This is no accident. For while today’s geologists, prospectors, engineers and miners toil day and night, their tradecraft is also infused by a humility few fathom with any depth. It’s unique and essential to an industry teeming with individuals who journey great distances to obscure places where risk and innovation collide head-on—all inspired by the idea that there is no challenge that technical or engineering solutions can’t handle.

But as the world grows smaller, more transparent and more frenetically beset by emerging market and consumer technology demands, the mining narrative now faces one of its greatest sea changes: The advent of Corporate Social Responsibility or CSR. Or Sustainability or Social License to Operate, or, as others have termed it, the “Triple Bottom Line”—“people, planet, profit.”

Editor’s Note:
Ties between mining companies and the communities, stakeholders and governments hosting their operations through Corporate Social Responsibility (CSR) are seldom well-defined. Maintaining these constantly fluctuating relationships and initiatives, however, can be as labor-intensive, complex and emotionally and psychologically taxing as the process of mineral extraction itself.

The idea of responsible business is nothing new. But despite massive worldwide economic growth since the 1990s, endeavors to instill and enhance best corporate practices have only recently gathered steam for mining companies after global environmental and human rights scrutiny fueled by social media. Nonetheless, it is also a fast-moving space and awareness, expertise and international norms—from within and without—are evolving with breakneck speed.

That’s why we at E&MJare directing an increased focus on mining CSR and sustainability—in all its forms. The following articles will initiate a broad multimedia campaign (including blogs and webinars)—with further print coverage. We welcome as many diverse participants as possible to a dialogue of the utmost importance to mining companies—and many other players—amid one of the biggest industrial and consumer-driven commodity booms the world has ever known.

What Makes a Mine ‘Responsible’?
After two decades of rapid global private sector growth, cross-industry CSR itself remains relatively new—though it has generated vast participation. Pharmaceuticals, agriculture, tourism, manufacturing and chemicals all have their CSR footprints. In ways, the most high-profile CSR of all has been the push for renewable forms of energy—or “cleantech.”

Mining CSR, in the words of miningfacts.org, a Canadian website, refers to “voluntary actions undertaken by mining companies to either improve the living conditions (economic, social and environmental) of local communities or to reduce the negative effects of mining projects. By definition, voluntary actions are those that go beyond legal obligations, contracts and license agreements.”

Most often, according to the Fraser Institute, a Canadian think tank, this CSR usually consists of investments in infrastructure (e.g., schools, roads, hospitals, health equipment, electricity, clean water and drainage repairs), investments in building social capital, (e.g., information on HIV prevention, family planning and improving hygiene), and investments in human capital (e.g., providing education, training and skills). Other activities include fostering microbusiness, aquaculture, crop cultivation, animal rearing and textile production, while technology maintains environmental standards.

No mining CSR implementation is easy: Ongoing evaluation must be tailored to local needs; trial and error is inevitable, and environmental, social and economic factors predominate—some of which can halt a project in its tracks. Although direct land use by an operating mine is limited, for instance, the process affects huge areas via emissions and waste. Mining and exploration pose equal challenges. To reach deep deposits, access is needed to land thousands of times bigger than the mine itself; frequently, areas that are inaccessible because they’re already in use—or, rather, populated.

“It’s not a short process,” said Bruce Harvey, global practice leader-communities and social performance at Rio in an interview with Achieve, a magazine produced by consulting firm SKM. “It’s not transactional; it can’t be done by commercially focused lawyers. It must be made in a multidisciplinary way with sociologists, anthropologists, with legal help and with resourcing to community groups.”

One way or the other, based on a growing consensus, CSR is no longer an optional balance sheet expense as miners push ever-deeper beyond “tier one” areas to mine for all the things our changing world requires.

Vale engineers work as volunteers to improve education in the Brazilian State of Maranhão. (Photo courtesy of Vale)

Risky Business
Beyond biotic impacts, mines can also increase local food and housing costs, and sometimes generate an influx of immigrants, accompanied by pressure on public health and public services, with prostitution, gambling and alcohol consumption added to the mix.

“Quantitative evidence confirms what many have long known or suspected: Capital project delays due to ‘above ground’ or non-technical risk issues are substantial and more common than any other technical or commercial factors,” said Michael Oxman, director of Advisory Services at BSR, a CSR consulting firm.

Many inside, and outside, the mining community agree. Accounting advisory firm Ernst & Young ranked “maintaining a social license to operate” as its No. 4 risk facing the mining and metals sector in 2011 and 2012. This includes “increased expectations” from governments and communities, while building “strong partnerships with stakeholders and communities right from the start so they understand every aspect of the project.”

Statistics by the Observatory of Mining Conflicts in Latin America, for example, underscore this: 176 mining projects in the region, it reported, are in conflict with 231 communities—five extending across national borders.

CSR can also be used as an excuse to trigger resource nationalism when a government exceeds taxation through increased royalties or all-out ownership. All can be “implicit recognition that CSR programs are coming up short in having a transformational impact on their host countries,” said James Smither, head of the mining and engineering practice at Maplecroft, a U.K.-based risk advisory firm.

In some cases, of course, even careful community ties can be irrelevant in the eyes of a predatory government. Last year, for instance, despite support from 43 indigenous communities near South American Silver’s Malku Khota mine in Bolivia, three opposed groups managed to bring unwanted attention from President Evo Morales whose government went on to appropriate the silver project—one of the world’s largest—wholesale.

CSR issues can leave miners equally prone to other Ernst & Young-outlined risk factors—including skills shortages, poor infrastructure access, as well as fraud and corruption.

A Long Haul for the Majors
It starts with basic respect. Harvey cited Rio Tinto’s own relations with Australian aboriginal communities as an example: Since 1996, Rio developed an Aboriginal and Torres Strait Islander Policy with indigenous leaders. This evolved to include regional development and land access agreements; community capacity building; cultural heritage recognition; and governed funding bodies supporting indigenous Australians to pursue their own ideas and initiatives.

Rio isn’t alone, of course. Most major global mining companies have serious CSR commitments—including Newmont Mining Corp., Barrick Gold Corp., BHP Billiton, AngloGold Ashanti Ltd., Vale S.A., Glencore Xstrata, Anglo American and Freeport McMoRan Copper & Gold Inc. Yet through their size and high profiles, the majors have also learned from hard lessons.

Many of these, whether through perception or reality, linger to this day. Last year, for example, RepRisk, a business intelligence firm covering environmental, social and governance issues, released a report of the Most Controversial Mining Companies of 2011; these included allegations of human rights violations, environmental degradation and worker unrest. Among them were Newmont Mining Corp., BHP Billiton, Glencore International, Freeport McMoRan Copper & Gold Inc., Rio Tinto, Barrick Gold Corp. and Anglo American.

Given the anti-industry bias in the public arena, it’s not surprising best corporate practices go unnoticed. “There’s often not a lot of focus on what’s been happening in the media,” said Michael Torrance, an associate at Norton Rose Fulbright, an international law firm, who blogs on sustainability at www.lexsustineo.com. “The impression is nothing’s been done.”

That is, until something goes wrong. “When someone is accused of a violation, you see non-performance over actual performance,” said Joanne Petrini, an associate vice president for the Environment of AECOM, a global engineering consulting firm.

The definition of CSR among miners can be elusive—which is a problem in itself. Some even call it “sustainababble.”

Multinational mining companies aren’t the only ones with CSR programs. Prospectors, engineers, juniors and midsized miners across the board understand the need for sustainable development. But overall, according to consultants like Martin Neureiter, owner of the Austrianbased CSR Company, “consistencies” are the mid size to smaller mining companies that have “screwed up really bad and have learned from their experience; often we’re called in when there’s already problems,” he said.

Human rights violations associated with militaries and armed actors charged with protecting mines have long been a concern, as well as potential abuses toward some of the world’s 30 million artisanal and small-scale miners.

Then there is violence against local union mine workers. In 2009, for instance, Alabama’s Drummond Co was sued for allegedly funding Colombian paramilitaries who preyed on people near the 120-mile rail linking Drummond’s two inland mines to its Caribbean port. The coal mining company declined to comment, according to Bloomberg News.

Barrick Gold’s Social Responsibility Advisory Board (left to right): Gare Smith, Aron Cramer,
Elizabeth Dowdeswell, John Ruggie and Robert Fowler.

The Human Rights Agenda
An emphasis on human rights constitutes the latest paradigm shift within mining CSR, given the remote terrain where miners are landing, according to experts. Health and safety reporting emerged 30 years ago, followed by environmental initiatives in the early 1990s, noted Smither, while human rights have only been prioritized in the last half-decade.

This is widely credited to the work of Harvard University professor John Ruggie who, from 2005 to 2011, was the UN secretary general's special representative for business and human rights, and author of the UN Guiding Principles on Business and Human Rights. Its conditions on corporate responsibility to protect human rights have been widely adopted by institutions including the International Finance Corp. (IFC) and the EU. The principles also enjoy strong support among international businesses and civil society groups; Ruggie is now a special consultant to Barrick Gold Corp.’s CSR Advisory Board.

This is helpful for an industry progressively more technology-intensive over the past 20 years; rather, as mining operations increasingly import outside workers, tensions with unemployed community members can escalate, noted Smither.

Companies like Freeport McMoRan Copper & Gold Inc. have been sensitive to this. Last year in Indonesia, where its subsidiary operates one of the world’s largest copper-gold mines in West Papua province, Indonesians represented 99% of its workforce, of whom 34% where indigenous Papuans. The Phoenix-based miner also employed 200 Native Americans at its U.S. operations, while 98% of its Tenke Fungurume mine workers in the Democratic Republic of Congo (DRC) were Congolese nationals.

Rio’s initiative also makes it the largest private employer of indigenous Australians nationwide with 2,400 workers. “We prefer to think of it as an interest-driven approach rather than a position-driven approach,” Harvey said, “and so far we’ve been very successful.”

Harvey said the potential for volatility when a mine project begins cannot be overestimated. “There’s a great deal of disruption to the way of life,” he said. “So there are imbalances, local authority hierarchies are disturbed and it brings potential for the fabric of society to be pulled apart.”

This means approaching communities via stakeholder engagement is always a nuanced process, said Luis Ore, founder of Orasi Consulting Group Inc. In many developing nations, he said, understanding the communal nature of an area near a mine can help investors from more individualistic countries reach an understanding and prevent the emergence of any kind of hostile coalition.

The first priority involves getting permission to meet the leader of the community where the mining is to take place, Ore noted, and while the rules are obvious, they remain ignored by many. “You start by networking—you need to be honest, sincere and transparent,” he said. “It’s not manipulation.”

In some cases, however, an over-cautious, yet counter-productive approach precludes audits of human rights and other CSR-related initiatives. “There can be for common purposes overemphasis on engaging permits on ‘let’s get the permit and let’s worry about the rest later,’” said Oxman. It frequently doesn’t work.

NGOs: For Better or Worse
When it comes to conflict involving mining operations, NGOs, or nongovernmental organizations, often lead the charge. These range from local, communitybased organizations to regional activist groups to international, high-profile nonprofits, including the World Wildlife Fund (WWF), Oxfam, the Nature Conservancy, Human Rights Watch and Amnesty International.

The Geneva-headquartered International Labor Organization (ILO) and UN bodies such as its Human Rights Committee provide oversight, but smaller NGOs are also fast emerging as miningfocused and global, said Smither.

In human rights, Global Witness exclusively evaluates environmental and human rights effects of extractive sector companies and Survival International supports indigenous communities; and Mines and Communities operates a website that tracks activities of mining companies. Others include the U.S.-based Solidarity Center, and the Institute for Global Labor and Human Rights; Norway, who is also prominent, is home to the Center for Research on Multinational Corporations and South Africa’s Lawyers for Human Rights, added Smither.

On the other hand, there has also been a proliferation in think tanks, NGOs and other public policy organizations, especially within universities, aimed at educating the mining community—and the world beyond—on CSR extractive sector matters. These include the Center for Energy, Petroleum and Mineral Law and Policy at the University of Dundee in the U.K., the Center for Social Responsibility in Mining at the University of Queensland in Australia and the Vale Columbia Center on Sustainable International Investment at Columbia University.

But in the field, many miners feel “adversarial” toward activist NGOs, said Smither. “However, transparent, two-way discussion is increasingly emphasized by many firms,” he said. “Such organizations can have an extremely useful role on the mining sector’s behalf.”

“As watchdogs, they can alert businesses to abuses they may have been unaware of within their sphere, but beyond immediate compounds or management offices,” Smither added. “In addition, they can provide warnings to other mining projects to help avoid replicating similar outcomes.”

Most all NGOs employ social media platforms—including the networking site Facebook and the video sharing service YouTube—to chronicle issues concerning the mine—pro and con.

Codelco now offers classes on mineral extraction in two high schools in Rancagua, Chile.

NGOs: The Pros vs. the Cons
A significant number of NGOs have far more nefarious motives, though. These interests can include financial gain and backing from parties including local governments seeking to extort money from the miners, wealthy landowners opposed to their presence, along with military actors and other outside groups.

The consequences of anti-mining NGO activities have been analyzed by Novethic, a CSR research firm and Belinked, a consultancy facilitating relationships between the non-profit and corporate sectors. “They constitute a powerful media force that can damage mining companies’ reputation but can also come to represent a much greater operational risk,” said the 2012 report.

Both Paris-based groups noted that even though miners represented 70% of new companies on the London Stock Exchange in 2011, “NGOs can threaten the local activity of mining companies and these conflicts can turn into court battles ending with a compensation bill that can reach several hundred million dollars.”

A growing number of non-profits, which document and protest alleged violations at mining operations around the world through first- and second-hand sources, are also strongly unconvinced that CSR is effective in its current form without more regulation; they emphasize this on social media.

Protest BHP Billiton and Mining Watch Canada are among them: “There are problems throughout the sector and it’s not just rogue actors; voluntary codes of conduct we see as really weak,” said Ottawabased Program Coordinator Ramsey Hart. “Companies, we’re finding, still have major problems at the project level.”

According to Protestbarrick.net: “Despite some of Barrick’s major abuses coming into light, the company has been able to maintain—within select circles—a reputation for Corporate Social Responsibility. Meanwhile, around the world, Barrick’s name is still associated with corruption, abuse and environmental harms.”

Voluntary and Global Frameworks
In her book, The Rise of Global Corporate Responsibility: Mining and the Spread of Global Norms, Hevina Dashwood presents a different view. “Voluntary industry associations institutionalize rules and procedures that make it difficult for firms to change their minds about the externalities they are prepared to absorb, conferring the benefit of legitimacy to the efforts of the firms.”

The consequences of CSR failures can also have dire repercussions in terms of industry reputation—and access to capital, said Torrance. “A laggard will bring scrutiny from your government, and foreign governments,” he said. “It will be important when they’re doing exploration undergoing their feasibility and financing.”

Lonmin Plc was hit hard after South African security forces, in the biggest massacre since the Apartheid era, killed 44 workers at its platinum mine near Rustenberg last year. The U.K.-based miner’s stock plummeted almost overnight. Unrest at the mine has since prompted Moody’s Investors Service, Standard & Poor’s and Fitch Ratings to downgrade the credit rating of Africa’s largest economy, according to Bloomberg News, citing deteriorating social stability as a contributing factor.

Vedanta Resources, another U.K. company, encountered its own crisis after a campaign of civil disobedience by the Dongria Kondh, a tribal people opposed to its open-pit bauxite mine in the state of Orissa in eastern India. The community objected to the location of the mine in the hills of Nyamgiri, with which they have religious connotations.

In 2009, a British government agency, the U.K. National Contact Point, which oversees international business conduct for the Organization for Economic Cooperation and Development (OECD), publicly reprimanded Vedanta for failure to “assess the implications of its actions on the community;” the company had already built a bauxite mine on the foothills of the mountains.

The evolution of global standards has led to their being “codified,” said Oxman. “The good news is that, because of how these standards have evolved, it’s become less discretionary than in the past—it becomes a map,” he said. “It’s not about building a school and walking away, it’s also about who’s going to teach and build communities and accountability over time.”

The government of Canada, home to two-thirds of the world’s mining companies, 1,000 of which have exploration projects in 100 countries, has aggressively sought to establish CSR and transparency frameworks for its companies at a global level. In June, for instance, Prime Minister Stephen Harper announced new mandatory reporting standards for Canadian extractive companies to enhance transparency in the payments they make to foreign governments.

Ottawa has come under repeated criticism by NGOs for being too soft on mining sector violations overseas. But Transparency International (TI), one of the world’s top anti-corruption non-profits, has acknowledged recent progress by Canadian companies. The Berlin-based TI said last year that “with 34 ongoing investigations, Canada joins Australia and Austria as the most improved enforcers.”

In the U.S., similar disclosure requirements were passed under the 2010 Dodd-Frank Act, which mandates that publicly listed companies disclose payments to governments on a country-bycountry, per project basis. The EU Parliament has passed similar legislation.

In addition to guidance from governments and international associations, miners are also expected to adhere to the frameworks of the IFC Performance Standards on Social and Environmental Sustainability and the Mining and Minerals Sector supplement to the Global Reporting Initiative (GRI).

One of the biggest breakthroughs has been the implementation of the Equator Principles (EP), a credit risk management framework to assess, determine and manage social and environmental risk in project finance transactions more than $10 million. In 2003, the EPs were first adopted by 10 global financial institutions; there are now more than 79 in 27 countries worldwide. In all, the EP, which also follows IFC standards, covers more than 70% of international project finance debt in developing nations. “The market is driving compliance,” said Torrance.

Established in 2000, meanwhile, the Voluntary Principles on Security and Human Rights are significant in aiming to limit abuses by private security companies and armies employed by mining companies to protect operating sites. Along with the UN Global Compact, ISO 26000, the Extractive Industries Transparency Initiative (EITI), was launched in 2003 encouraging group businesses to publish revenues obtained from mining and signatory states to communicate total sums of revenue from mining.

International CSR advocacy is further led by a number of groups and associations with an international reach. These include the UN Global Compact and the European Commission’s Renewed EU strategy 2011-2014 for Corporate Social Responsibility. One of the most prominent such organizations is the Londonbased International Council on Mining and Minerals (ICMM) led by CEOs representing the world’s top miners, requiring many companies to abide by 10 sustainable development principles. They include ethical business practices, sustainability, and health, safety and human rights considerations.

But these impose complexities as well. “All these standards have become systematized,” said Oxman. “The expectations are therefore higher—and to maintain momentum on a commercial budget is one of the challenges companies face.”

South Africans hold a memorial service for the nearly three dozen people killed in the Marikana incident (August 2012).

Progress and Progress Denied
Further collaborations have emerged between Canadian government agencies, NGOs and mining companies. One of the most successful is the Devonshire Initiative, an international development forum for international organizations and mining companies. The DI enhances “incountry capacity to allow communities, regions and countries to more visibly realize the benefits of Canadian mining investments,” and has the Canadian International Development Agency (CIDA) as a member.

Other short-term public-private mining partnerships, however, have come under criticism—in particular, three CIDA pilot projects involving the World University Service of Canada and Rio Tinto Alcan in Ghana, Plan Canada and Iamgold Corp in Burkina Faso, and World Vision Canada and Barrick Gold Corp. in Peru; CIDA is providing $6.7 million and the other partners have pledged $3 million over the coming years.

“Would we try it again? Probably not,” Plan Canada President Rosemary McCarney told The Toronto Star in January. “It’s upsetting to donors, people are mad; the reality is that working with any mining company is going to be a problem—there are going to be (employee) strikes and spills. Is it worth it? Probably not….”

The project offers job-skills training for impoverished children 500 km away from Iamgold’s operations in the Sahel nation. Nonetheless, “four out of five” donors, she added, have “given us the benefit of the doubt,” and she conceded that “I think this program is good for children.”

Barry Carin, a professor at the University of Victoria, posed a different set of questions in iPolitics, a Canadian publication. “Critics complain that CIDA is subsidizing so-called ‘corporate social responsibility’ projects put in place by very profitable companies—helping the mining industry put a positive spin on negative environmental and human rights records.”

World Vision itself, one of the world’s most reputable NGOs, said as much from the beginning. “We have to be realistic here. There is a self-interest on the part of every party,” it said. “But anything we can do to encourage and advocate for better mining practices and support the communities they are displacing or affecting, we’re contributing to a better lifestyle and environment for them.”

The situation left the mining companies feeling burned, according to others in the development community. “I think the mining companies feel misunderstood,” Care Canada Chief Executive Kevin McCort also told The Star. “They went into this partnership with expectations of good development and came out of it with bad press.”

But mining companies have been forging humanitarian partnerships among their own. In April, South Africa’s Randgold Resources, AngloGold Ashanti Ltd., Avnel Gold Mining Ltd., Resolute Mining Ltd. and Iamgold Corp. donated $3.15 million to support humanitarian efforts by the Malian government in wake of unrest following an unsuccessful 2012 coup attempt.

Last year, mining companies in Mali also donated $735,000 to a drug administration program by the U.S. Agency for International Development (USAID) to fight local endemic diseases. Randgold also donated 60 tons of rice and millet to the Red Cross for distribution in the northern part of the country, hardest hit by a refugee crisis from clashes between government forces, Tuareg separatists, regional al-Qaeda loyalists and other militants.

Power and the People
In general, profits in mining-heavy nations themselves often elude the people who live there. “Our mining sector contributes to 20% of our export revenue,” said Sinkinesh Ejigu, Ethiopia’s mining minister at Sydney’s Mining for Development Conference 2013 in May. “But its contribution to GDP is very low— only 5%—this we are trying to enhance.”

In the Dominican Republic, Barrick Gold Corp. did this by successfully uniting local communities with local officials, NGOs and the Canadian Embassy to decide “by community vote what the communities wanted done with the funds they will start receiving once the mine starts full operations,” Peter Sinclair, vice president of Corporate Social Responsibility for Barrick, told Forbes’ CSR blog.

Less conventional CSR in public-private initiatives are no stranger to the Balkans, said John Aston, owner of Aston Eco Management, a project consulting firm. One included coordination with the EU for a field trip allowing 20 Romanian students to visit French Guyana for greater perspective on how their region would change from a pending mining project.

“It was cultural,” said Aston, “but as part of it they were taken to natural resources areas to see what was good and the worst case scenarios.”

Promises and Relationships
CSR can be framed as a marriage—to some, one of devotion, to others, one of convenience. Harvey, like many, sees both. “We don’t do it because we’re good people,” he told Achieve. “We are good people. But we don’t do it for that reason—we do it because it’s good business and we want societal stability to sustain our operations across two or three generations.”

At April’s African Mining Indaba conference, incoming Anglo American CEO Mark Cutifani sounded more altruistic. “We must understand we are integrated with the communities,” he said in Cape Town, South Africa. “A hole in the ground, a waste dump that intrudes the visual landscape or a tailings dam that covers a children’s playground are all manifestations of local compact.

“We are more important to the future success of our world than any other industry I know,” he added. “It’s time we stood up and be true to the responsibility that position demands of us.”

Anglo American, the world’s biggest platinum producer, has made good on such pledges. In 2012 and 2013, it was the only U.K. mining company among the nation’s top 30 businesses to be recognized by the Business in the Community Corporate Responsibility Index. It was also the top miner in the Dow Jones Sustainability Index and was acknowledged by the Carbon Disclosure Leadership Index.

Samantha Hoe Richardson, Anglo American’s head of Sustainable Development and Energy, said that, at Emalahleni in South Africa, the company developed a special water treatment plant. “We’re putting more water into catchment than we’re taking out,” she told Planet Bmagazine last year, “in the process, supplying 15% of the community’s requirements; the plant’s gypsum byproduct is being recycled for use in building homes, creating business and employment.”

As the World Turns
These and other examples reinforce how the dynamic between miners below ground and communities above has always been important. But it’s been globalization—the explosion in private sector growth through trade and business worldwide—that has truly speeded things up.

Following the collapse of the Soviet Union and capitalist-based reforms in China in the early 1990s, goods, services, and people spread the globe with unprecedented speed and breadth. European and, later, U.S.—mining companies dominated offshore growth beginning in the 19th century. But with the end of the Cold War, as market economies began to open in eastern Europe, Asia, Latin America and Africa, mining laws were incentivized to promote foreign investment inflows. For example, between 1985 and 1995, 35 countries changed or enacted mining laws, while Soviet and Chinese companies, which had mined in their own territories, began to look beyond their borders.

Through the 1990s and onward, Internet and other technologies, coupled with government moves to create freetrade zones, accelerated this dispersal; the result has fed into a surge of industrial-based growth energizing “emerging market” economies—places where, by 2050, it’s been estimated that 64% of the population will be urbanized.

In the U.S. alone, through the course of the 20 th century, demands for minerals soared from 160 million tons to 3.3 billion tons. The average American now consumes 37 million lb of minerals, metals and fuel over the course of a lifetime—including 2,000 lb of copper, 6,000 lb of aluminum, 1,000 lb of lead and 1,000 lb of zinc per person. This also means each American uses 40,000 lb of new minerals annually.

A New Age of Industry
Since 2000, however, the picture has changed: Asia has industrialized the most, and the fastest, amid soaring fertility rates and urbanization from greater access to global capital markets. By 2025, some 2.5 billion Asians will live in cities, at 54% of the world’s urban population, and 2013, according to the International Monetary Fund (IMF), will be the first year emerging market economies represent more than 50% of global GDP.

China’s ravenous appetite for minerals and metals has stoked the greatest global commodity “super cycle” of all time, with a record exploration budget high, according to the SNL Metals Economics Group, at $13.75 billion in 2008—a 677% increase over 2002. A 42% drop after the downturn has since been countered by an all-time high of $20.53 billion in 2012, reported SNL, despite a European austerity crisis, political deadlock in Washington and a Chinese slowdown.

India has also been a source of global growth with the world’s No. 2 population, and 7.5% growth since 2000. However, New Delhi’s own economic reforms didn’t arrive until later owing to the country’s complex political system. Still, Indian GDP growth is forecast to join the world’s top three economies by 2030.

The impact has been tectonic. The International Energy Agency (IEA) predicts world energy demand will soar 30% by 2035—creating a huge demand for industrial metals and other resources—as $37 trillion will be needed for energy infrastructure in that period. Of all raw resources besides water, fossil fuels are at the top followed by bulk metals. By 2015, coal is also expected to surpass oil as the world’s most widely used fuel as China remains the top world energy consumer.

As a result, other parts of the world are booming directly because of this growth in Asia and elsewhere. More than half of all metal exports from Indonesia and Australia, for example, went to China, as did Peru’s. More than 30% of Brazilian and Chilean metals also went to China. In 2012 Latin America overall represented 25% of global exploration funds, according to the SNL Metals Economics Group after mining in the region skyrocketed to $305.8 billion in 2011 from $90.1 billion in 2001. Chile, Mexico, Brazil, Peru, Argentina and Colombia accounted for the majority.

In Africa, extractives accounted for one-third of growth since 2003, with exploration allocations increasing 17% in 2012. Nigeria, the most populous nation on the continent, noted the UN, may exceed America’s population by 2050. By then, noted Goldman Sachs, India, Brazil and Mexico will have also joined the U.S. and China as the world’s top economies.

Changes and Legacies in Mining Communities
In ways, these geopolitical forces have also shifted in favor of some of the miners seeking to accommodate this expansion. Places inaccessible to miners in the early 1990s, for lingering Cold War proxy violence, like the Democratic Republic of the Congo (DRC) or places like Mozambique or Angola, are once again on the map.

But very often, mining companies bring stability with their own presence to such frontier markets, according to Petrini. “Working in those environments is difficult—oftentimes, companies can have a stabilizing effect in those areas, if they do what they do right,” she said.

Then there are the more subtle challenges in developing and emerging market economies—such as strengthening democratic institutions and growing middle class populations. Latin America offers a solid example, noted Alejandra Martin, an advisory services manager for BSR.

“In Argentina and northwestern Mexico, many young, educated urban families have migrated to rural areas to form utopian communities that celebrate organic culture,” she said. “To them, foreign mining companies represent the same capitalist ills they were running from in the first place—they have been joined by rural school teachers, taxi drivers and small business owners to organize against mining.”

Mining legacies specific to other emerging markets often carry a formidable challenge, too, said Ingrid Jane Watson, acting director at South Africa’s Center for Sustainability in Mining and Industry (CSMI), which trains and educates managers, practitioners and regulators in sustainable development in Africa.

The impact of Apartheid rule’s past on the continent’s biggest mining country has been one of the most serious, according to Watson; these include undeveloped local governments ill-equipped to assume power after the regime’s end in 1994. “There is an important role for local government, but local government doesn’t always have capacity,” she said, leaving high expectations for miners. “You’re expecting mining companies to be a social developer.”

In this vein, in the Northern Cape Province of South Africa, Anglo American Kumba Iron Ore has become an active part of the community. In particular, in the John Taolo Gaetsewe district with the country’s highest infant mortality and HIV/AIDS infestation rates, Anglo has established a fleet of nine free mobile health clinics with services including screening for diseases and infections, eye testing, dental care and surgery.

But mining itself is a hot-button issue for its brutality and integrality to maintaining South Africa’s economy under white-majority rule, noted Watson. The massacre by security forces at Marikana last year was a case in point.

There is good news for the world’s top platinum producing nation, however. A new Truth and Reconciliation Commission, similar to the one established in 1995, is now allowing South Africans to explicitly understand mining sector abuses during Apartheid. “Mining carries a lot of baggage, and history is a huge hurdle in terms of moving forward,” added Watson.

Overlapping history and cultural norms also heavily neutralize human rights dialogues for Asian-based mining companies, according to Richard Welford, chairman of CSR Asia in Hong Kong. “Culturally, if you look at Western companies, and if you look at the history of human rights, you look at the rights of the individual,” he said. “That doesn’t fit in with countries where communities are more important.”

In the end, all developing nations have compelling tales to tell: stories of proud histories and cultures often riven with suffering and humiliation—and miners paving their way into their CSR terrain will contnue to listen. Ore noted that former colonial nations share deep skepticism toward foreign mining companies—often justifiably so. “We’ve always been mining countries, so there’s a lot of resentment, a lot of mistrust,” said Ore. “The Spanish didn’t just take gold and silver—they took our self-esteem.”

Mining Sector CSR in the Age of Social Media
By Joseph Kirschke, News Editor-Mining

The irony was as thick as the cloud formations that shroud one of the world’s largest, and most troubled, copper and gold mines, run by a majority-owned subsidiary of Freeport McMoRan Copper & Gold Inc., miles high in the mountains of Indonesia’s remote West Papua province, and visible from outer space.

Last year, some 12,000 miles away, more than two dozen demonstrators converged on the Phoenix headquarters of Freeport, which also operates in Peru, Chile and the Democratic Republic of Congo (DRC), accusing it of human rights violations. “No blood for copper!” they chanted, “No blood for gold!” They touted signs in English and Spanish. Some wore masks of Guy Fawkes in the spirit of Anonymous; one woman wielded a megaphone.

Before uploading it onto YouTube, someone chronicled it all with a handheld, high-resolution video camera or smartphone application. At no time in history could images, videos and content of protests, environmental degradation, violence or other abuses—however real or fictional—be transmitted with such speed and mobility to so many different audiences worldwide—regardless of CSR.

Social media is a relatively new phenomenon. Founded in 2004, the social networking site Facebook is social media’s pre-eminent platform with more than 1 billion users in 70 languages. LinkedIn, with 225 million members across 200 countries is a similar outlet for working professionals launched in 2003; three years on, Twitter became an online micro-blogging sensation allowing users to share text messages up to 140 characters called “tweets.” Last year, the video sharing network YouTube reported 4 billion views.

Despite the mining industry’s prowess with technological innovation, it is also steeped in tradition, and so the social aspects of this fast, constantly evolving digital revolution remain uncomfortable ones, according to Giles Crouch, president of Media Badger, a Canadian research and consulting firm. “The social activist groups are becoming more sophisticated,” he said. “And we’re talking about a traditional industry that operates in a very traditional way.”

In many cases, meanwhile, activist nongovernmental organization (NGOs) only draw attention to miners after there is a problem, bypassing the good news—which is often a lot, including CSR programs— distorting the broader narrative. “They’re tending not to pay attention until after something has become a problem,” said Crouch. “Truth doesn’t always matter; it’s about perceptions.”

And the deck has long since been stacked—especially with respect to NGOs, with a global reach. The World Wildlife Fund has 900,000 followers on Facebook and 700,000 on Twitter; Greenpeace International has more than 1 million followers on Facebook and nearly 500,000 on Twitter.

There’s little denying the need to hold mining companies accountable for serious environmental or human rights violations through multimedia, say observers. “I think it’s giving a voice back to the people,” said John Aston, owner of Aston Eco Management, a project consulting firm active in central Europe. “It’s a catch-22 because some are activists from outside the area—but it’s to give people a voice.”

By nature some mining institutions are suspicious of emerging trends like social media—while others just don’t take it seriously. “A lot of companies see it as being used by a bunch of kids—their wives or their own children,” said Crouch.

Yet company representatives are fast facing foreign officials armed with unexpected information through social media— sometimes from hostile groups—which they may not be prepared to fairly confront or properly contextualize. “So they’re blindsided,” said Crouch.

The best solution for mining companies is adherence to global and national standards and institution of CSR best practices, according to Michael Torrance, an associate at Norton Rose Fulbright, an international law firm, who blogs on sustainability at www.lexsustineo.com. “The best strategy is implementing these standards—and being able to show it through transparency,” he said, “and you do it through publicity.”

This includes cooperation with NGOs like Revenue Watch and Global Witness and the Extractive Industries Transparency Initiative (EITI), an international standard promoting revenue transparency and accountability in extractives companies.

Protestors in Arizona, however, were probably unaware that one of Freeport’s advisory directors is Gabrielle K. McDonald, a civil rights attorney who served as a judge of the International Criminal Tribunal for the former Yugoslavia in the Hague for six years, and was its president from 1997 to 1999. Freeport is also Indonesia’s biggest taxpayer at $1 billion a year, and has numerous initiatives in environment biodiversity, education, health, and other community programs in West Papua and at its other mines around the world.

But mining companies are catching up with the social media equation—and Freeport is one of them. In his blog miningman.com, Jamie Ross noted the use of social media by Rio Tinto and Freeport McMoRan to relate news about recent accidents. The initiatives, the Australian engineer noted, are “quite a departure from approaches previously taken in similar circumstances to severely limit access to information and, in so doing, allow third parties or rumor to control ‘the truth.’”

Just as the local and national media began to cover April’s pit-wall landslide at Rio’s Kennecott Utah Copper mine in Bingham Canyon, for instance, high-resolution images were immediately available on the company’s Flickr album, Ross noted. Rio officials also took pictures from helicopters and at the pit’s edge.

The next month witnessed a fatal underground tunnel collapse at Freeport’s Grasberg mine in West Papua. Soon after, added Ross, company officials began posting a series of photos detailing dramatic rescue efforts on their Facebook page.

These and other cyberspace initiatives have improved media perceptions of the incidents and the companies. “Overall, they have been much more positive to the image of the mining companies involved, and the mining industry in general,” he said. “They have spoken considerably about the efforts under way to recover the situation and show the true concern those companies have for those situations.”

All this belies one very important point—one perhaps no better illustrated than the use of social media itself. “A picture really does tell a thousand words, and to a media and public that don’t know much about what the inside of a mine looks like,” Ross said, “these pictures tell them we are doing our best, and that we do think these events are truly catastrophic.”

Mining’s Contribution to Sustainable Development
By Dr. Anthony Hodge

The extraction and processing of minerals to provide services important to human society has gone on for millennia. The resulting metals and minerals play a vast, essential and evolving role in today’s society, a role that will continue far into the future, inevitably expanding to include usages that are not currently understood.

However, in some communities and regions, the environmental and social legacy of mining and metals manufacturing is far from positive. In the early 1990s, concerns linked to this observation led some to question whether in certain circumstances the presence of a mineral endowment was a kind of “resource curse.” We now know that this does not need to be the case. If managed responsibly and effectively, mining and metals manufacturing can and will provide a foundation for achieving the kind of life that different cultures seek.

But what does this “managed responsibly and effectively” really mean? Minerals and metals are a critical part of developing a modern society—providing essential products, wealth, jobs and opportunity. But in some countries, these resources have been misused and squandered, fueling conflict and political unrest. There have been disputes over land use, property rights, environmental damage, transparency of revenues, and a growing debate about the distribution of the spoils.

At the same time, demands for a “green” and/or “low-carbon economy” are growing. Critically, the millennium development goal of reducing poverty must be met. In reality, for human kind to walk more lightly on the earth and to achieve the poverty reduction that is needed across the world, we need evolution that is marked by innovation, creativity and sensitivity. These needed approaches are not possible without mined metals and minerals.

The International Council on Mining and Metals (ICMM) was formed in 2001 to catalyze change and enhance the contribution of mining, minerals and metals to sustainable development. Our 21 member companies employ close to 1 million of the 2.5 million people working in the mining and metals sector worldwide. These companies have some 800 operations in 62 countries and produce many of the world’s commodities—38% of the gold, 30% iron ore, 37% platinum and 34% nickel (World Mineral Production 2004-2008, British Geological Survey 2010). These operations place our members on the front line in dealing with the many complex environmental and social issues apparent today.

Mine projects follow a life cycle that starts with exploration and proceeds through construction, operation, closure and post-closure. Something that is little understood is that across this full life cycle, a 20- to 30-year operating mine can involve five to seven generations of “relationship” between industry and host community at a given location. The seven generation perspective of many indigenous peoples has a practical and direct application to mining and metals operations.

In following a path that is responsible and effective, an approach is called for that is built on a full understanding and explicit recognition of all benefits, costs, risks and responsibilities that accrue to all parties that are affected. This is a tough challenge and inevitably entails collaboration to ensure that an equitable distribution of these is achieved.

Each one of these—benefits, costs, risks and responsibilities—is complex when viewed from the perspectives of different interests. But all must be considered.

For example, from a country-level macroeconomic perspective, the generation of foreign direct investment, foreign exchange and government revenues are all important. At the local level, however, it is the direct benefits of jobs, infrastructure and community services that become critical to consider. It is here that a community’s confidence can be enhanced in achieving the future that it wants for itself.

When developing a mine, companies risk the capital of their investors to create the project and ultimately generate a return. However, communities too face risks, in terms of the effect mining has on their way of life over the long term.

Importantly, if we are to ensure that the needed balance of benefits, costs and risks is achieved, all parties—government, company and community—carry certain responsibilities that must be clearly assigned and resourced if we are to ensure that accountabilities are maintained and learnings drawn out that will lead to performance refinement and improvement over the long term.

The industry has made significant progress in the last 20 years, but there is much to do. The long-term nature of mining provides an opportunity to be a partner with communities over multiple generations. If the activities are designed and implemented in a way that reflects the overlap in values of all the parties—government, company and community—then there is a tremendous opportunity for a positive contribution over the long run.

Importantly, within the mining and metals industry, there is a key role for collaboration as well.

Mines often occur in clusters and, when they do, collaboration between companies to address service and infrastructure needs of projects and communities alike is critical if the possible efficiencies are to be achieved—not only for the mine projects, but also for the region, and not only for the time of operating mine, but also for long after. Small players in the industry are nimble, agile and fast movers. Large companies have the resources and the technical skills. There is an opportunity to value and benefit from each other’s skills and strengths. Seen in this way, the mining and metals industry is a complex, interdependent web of players.

Aristotle said it is not always the same thing to be a good man and a good citizen. We need to become better at communicating what the real contribution of the mining and metals industry is, how we can redefine this contribution, make it stronger and ensure it is better understood across the world. Open and transparent decision-making will enhance trust and respect. A full and open treatment of strengths and limitations is essential. Listening and hearing others concerns as well as our own is essential.

If you ask engineers to design something so that the ecosystem after you have finished is just as nimble and just as capable of reproducing, they will accept that challenge and find a solution.

You may ask: what is the value of mining to your country—can it be a bridge to a better future? Our answer is yes, if the process is done responsibly and effectively. Learning our way forward to being more responsible and effective, strengthening our contribution to sustainable development is the task before ICMM, its members and the industry as a whole.

Dr. Hodge is president of the International Council on Mining and Metals (ICMM), a membership organization for performance and sustainability improvement in the mining and metals industry.

SKM’s Insights Enable Greater Returns for Shareholders and Society
By Dr. Nick Fleming

As the world’s population grows and developing nations become more affluent, demands for resources continue to escalate. These resources are being extracted from progressively more difficult or distant locations, bringing their own challenges and risks.

This is occurring within a backdrop of mounting sovereign debt and an expanding array of complex challenges: a changing climate, heightened social expectations, fast global communications that heighten visibility and transparency, new regulations and pricing regimes, and economic values being placed on what were once “intangibles” like biodiversity.

These translate into increasing costs for development and management, challenging the value of assets and commercial viability of projects.

While private and institutional sources of finance remain available to fund resource development and enable infrastructure, investors are closely scrutinizing the projects and their proponents to verify the quality of projects and their capacity to retain and grow in value over time.

In this context, well-governed and forward thinking organizations recognize that “business as usual” is no longer a recipe for success and, in fact, presents material risks to the corporate balance sheet and reputation.

Indeed, many organizations—both private and public—are seeking step-change productivity improvements just to remain viable. These operating conditions demand that companies “achieve more with less” via smarter commercial, stakeholder and technical solutions that sit well under the banner of “sustainable development.”

Of course, many organizations persist with outdated resource development and operational practices, only to be impacted by the actions of aggrieved stakeholders and regulatory reforms initiated by reactive governments.

It’s little wonder, then, that the costly actions to remedy stakeholder concerns and environmental impacts are interpreted as the cost of sustainable development. Indeed, a large, yet declining group of businesses still perceive that sustainable development is “just a green issue” that will delay their business activities and impose additional costs on project development.

Yet these are myths, the opposite is often true: Sustainable development can save time, cost, resources and reputations.

What does it mean to develop “sustainably”—whether a capital project or an organization? We suggest that it means getting “fit for the future”—ensuring an organization or its capital assets are useful, (resource) efficient and producing goods or services that are relevant and valued (by shareholders and stakeholders) throughout their economic life.

Unfortunately, all too many business leadership and project teams continue to unwittingly apply traditional mindsets and practices without sufficient scrutiny on this question of “fit for the future.” Critically, this means projects are often conceived— with major capital allocation consequences—without taking important factors into account. Projects then get fixed at a later date and at additional cost to make them sustainable (that is, “less bad”) instead of designing them smartly to be “good” from the outset.

The good news is that these habits and outcomes can be corrected, relatively easily, and often in a way that results in a substantial reduction in the total cost of ownership of an asset, reduced risk, and better social and environmental outcomes. Through experience on development projects worldwide, we have consolidated insights that enable much better results, time after time:

1) Systems thinking—By facilitating genuine connection between people across functions, disciplines and the supply chain, their knowledge and insights can also connect to enrich understanding and identify “joined up” solutions.

2) Integrated risk analysis—By examining the nature and interrelationship of risks of different types over the project life cycle, not just the planning and construction phases that are typically frontof-mind during project development, important strategic risks are identified that often go unnoticed.

3) Stakeholder analysis—Fostering a real empathy for stakeholders who have both an interest and influence over project success engenders greater ownership and desire for win-win solutions.

4) Solution focus—Maintaining the collective focus on finding solutions that transcend business as usual regularly unleashes smarter and cheaper solutions. For example, rather than mitigating risks, we seek to eliminate risks by design.

5) Selling the benefits—Conveying the merits of smart solutions in terms of their short- and longer-term or whole-of-life financial, risk, social, and environmental benefits helps to gain support for the product of collaborative thinking and design.

6) Integrated delivery—Maintaining focus to ensure smart solutions are effectively implemented, retaining integration and integrity of the solution through the delivery process, particularly when scope changes arise. Otherwise, the likely stream of benefits will be eroded. We are confident that, effectively applied, these insights can achieve cost savings in the order of 20% or more.

It’s these sorts of results witnessed across the world and across industries that provides the basis for our confidence and excitement. Far more cost-effective, productive, valueenhancing and sustainable solutions are available to the mining industry now.

With the courage of leadership and project managers to challenge their thinking and with effective facilitation to support the design, engineering and execution process, progressive mining companies can unlock far greater returns for their shareholders and society.

Dr. Fleming is the chief sustainability officer for the global operations of Sinclair Knight Merz, a leading consulting, engineering and project delivery firm. He has more than 20 years of experience leading multidisciplinary projects in mining, water, natural resource, infrastructure and defense sectors. He operates as a strategist and integrator of technical disciplines dealing with aspects of strategic project design, organizational change and leadership, and decision support. As chairman of the Sustainability Taskforce of Infrastructure Partnerships, Australia, and a director of the Board of the Infrastructure Sustainability Council of Australia, he is also the recipient of an Honorary Fellowship at the Asian Foresight Institute.

The Dragons Enter: Chinese Mining Companies Shake the World of Sustainability
By Joseph Kirschke, News Editor-Mining

Six years ago, an advance team preparing for then-Chinese President Hu Jintao’s state visit to Zambia, Africa’s leading copper producer, made an unpleasant discovery: Mass protests awaited his groundbreaking event at the Cambeshi copper mine where Hu would announce the commissioning of a $200-million smelter.

Despite China Non-Ferrous Metals Corp.’s (CNMC) $130 million contribution to its rehabilitation, one of Zambia’s largest mines was also among its most controversial: Six workers, officials learned, were gunned down by Chinese managers there the year before and 50 workers died in a plant explosion in 2005; it had since ballooned into a nationwide political scandal. Pledges of $800 million in new investment aside, the damage was done: Hu’s movements were restricted to the capital, Lusaka.

When it comes to Chinese outward mining investment, such scenarios are emblematic of a worldwide trend. Chinese miners have been scouring the planet for decades. But with ramped-up industrialization beginning in 2000, unbridled access to state capital, few shareholder pressures and little CSR to speak of, moreover, they often leave many more responsible, transparent Western companies behind in the global commodities race.

Chinese miners do have their work cut out for them: with 10 cities with populations topping 10 million, the Chinese mainland is facing shortfalls in nearly all essential mineral commodities needed to fuel its spastic economic growth rate—especially copper, iron ore, bauxite, aluminum, uranium and magnesium. Nationally, China’s 10 largest companies, except banks, were in the extractive sector, based on foreign direct investment or foreign assets.

GovernmentMetrics International, a corporate governance research firm, meanwhile, noted that only one-third of directors at Chinese-listed companies are independent compared with 75% in the U.S.; only one-fifth of independent directors seem to have relevant experience in their sector, reflective of a patronage system that has long pervaded the Chinese Politburo and the country’s ruling elite.

China’s State Owned Enterprises (SOEs) themselves date back to the 1949 foundation of the People’s Republic and ascent of its Communist Party, followed by a nationalization drive that lasted more than five years. First announced in 1998 and launched in 2000, mining sector SOEs seeking overseas expansion got a push from Beijing’s so-called “Going Out” policy, to accommodate industrial growth. In 2004, the government granted further foreign exchange and financial help.

Initially, a majority of Chinese companies stayed grounded in early development and exploration projects amid increased asset costs, while China Minmetals Corp.’s Noranda takeover bid in Canada faltered. But after China weathered the 2008-2009 global recession—as its economy exceeded Japan’s as the world’s second-largest— China’s miners were able to disperse their interests and operations more widely. Since 2009, meanwhile, Beijing has prioritized its SOEs overseas as levers for domestic growth.

In the first six months of 2011, Chinese entities announced 75 acquisitions in the global mining sector worth $4.7 billion, according to PricewaterhouseCoopers (PwC), a U.K.-based professional services firm. Citibank has reported 217 mergers and acquisitions involving Chinese companies since 2003, with a market value of $50 billion.

By last year, as China’s slice of the world economy increased—now more than 10%— so, too, has its piece of the planet’s minerals reserves. As the world’s No. 1 energy consumer, China uses more coal than the rest of the world combined, buys more gold than any other nation and sources 40% of its copper. But while China has its own vast mineral reserves—including prolific coal and ore deposits—many have been shuttered in wake of industrial accidents, environmental disasters and other concerns; much of these go unreported.

China’s National Bureau of Statistics has recorded outflows of $100 billion in foreign direct investment between 2004 and 2010. The Chinese Ministry of Commerce has also reported that, as Chinese overseas investments exist in 180 countries, one out of every $7 in outbound foreign direct investment stock flows into the mining sector. Last year, Chinese SOEs in the Fortune 500 also soared by half—to 66—over 2008. Through these, China has invested billions in everything from cultural projects—or “stadium diplomacy”—to free-trade zones to massive infrastructure projects; visits by top national leaders are routine.

For Western miners, it’s hardly a level playing field. “Many countries hosting Chinese investment have said that, as an emerging market itself, and as a country without a colonial legacy, China understands their development needs better than companies coming from the developed world,” said a 2012 report by the Transatlantic Academy, a Washington think tank. “They appreciate the fact that China operates a policy of noninterference in local issues and does not lecture them on work practices, human rights and the environment.”

China and Beijing-backed SOEs have also launched multibillion dollar loan, grant, and construction and mining projects across Latin America in Bolivia, Ecuador, Peru, Venezuela and Colombia. As the world’s No. 1 copper buyer, China has also forged close ties to Chile, the ore’s top producer and as a lead trade partner of Brazil with its vast copious iron ore.

Chinese SOEs are increasing their presence in countries like Canada and Australia in the face of suspicion and hostility. But it is in Latin America and Africa where China’s SOEs thrive most: often beyond scrutiny they would face in developed nations; they frequently bring entire Chinese communities with them, including housing units, restaurants—sometimes even newspapers, printed exclusively in Mandarin.

But inexperience comes with the magnitude of the aid and projects, according to many analysts. Since founding the Institute of Contemporary Observation (ICO), a Shenzhen-based civil society organization dedicated to labor development and CSR in 2001, Liu Kaiming has seen inexperience trump cultural values. “The leaders of companies lack the knowledge of communication with stakeholders,” he said, “and don’t have awareness of international human rights or environmental standards.”

Practices by Chinese mining companies overseas, he added, often mirror their activities on the mainland, where transparency and government oversight are even less stringent than in developing nations. “In terms of CSR, Chinese companies do a worse job domestically than they do overseas, because overseas they have to face the critics—from nongovernmental organization (NGOs) or trade unions and independent media,” said Kaiming.

“The governmental officials and companies have stated every year they would improve their record on environment and safety,” he said, “especially after a big accident, but the situation has not changed yet in China, nobody can monitor them.”

Internal Chinese statistics bear this out. In 2011, The China WTO Tribuneissued a survey of CSR reports released across sectors on the mainland between Q1 and Q4 of that year. Mining companies, according to the study, came in last at 4.9%, behind utilities at 5.9%, and well behind supply chain indicators at 37.7%.

Elsewhere, less formal parts of the Chinese mining sector have had an impact as well—such as illegal miners in Africa, including more than 11,000 who migrated from Shanglin in Guagnxi province to Ghana, Africa’s No. 2 gold producer in 2006. These wildcat miners, many of whom spoke only Mandarin, arrived via local and Ghanaian connections from a region where gold reserves eroded after mining there first began in the 1980s.

But in June, the situation soured following recent violence, threats, arrests and government condemnation, Chinese officials from Shanglin flew in to represent miners. It was no good. Foreign Minister Alhaji Mohammed Mumuni told Bloomberg News of an “unholy alliance” between the miners and local businessmen “affecting our environment in a very deleterious way and we need to stamp it out.” By month’s end, 169 of them were deported as their equipment was trashed and looted while some of the mines themselves were set ablaze.

Nationalist voices also resonated in the media. “Ghanaians freely welcome all visitors without exception,” read an article in The Chronicle, a local newspaper. “But we do not suffer gladly those who abuse our hospitality.” On arrival at Guangzhou’s Baiyun International Airport in June, Meng Tianming, a 40-year-old miner, put it differently. “I barely escaped death,” he told News China.

Chinese mining companies, unsurprisingly, face local challenges in Latin America as well. In 2009, two security guards were killed when 20 gunmen stormed Peru’s $1.4-billion copper-molybdenum Rio Blanco mine owned by the U.K.-based Monterrico Metals Co., a unit of the Chinese Zijin Mining Group 520 miles north of Lima.

Company mine manager Wu Jian attributed the incident to sabotage by “political and economic” interests. "This is evidently an act of terror, of violence,” he told Canal Nto “scare investment away, to create an image of instability.” President Alan Garcia ordered a full investigation and “of agitators, looking to sow violence and slow investment projects.” Since its 2007 acquisition by Zinjin, Monterrico agreed to an out-of-court settlement with 33 Peruvians after they were tortured by security forces for protesting the mine’s opening in 2005; Peru is one of the world’s top copper and silver producers.

But Beijing’s commerce and environmental protection ministries have introduced a series of responsibility guidelines for Chinese companies overseas, emphasizing local labor rights and environmental protection. “When investing abroad, most Chinese enterprises understand the need for responsibility,” said Ministry of Commerce spokesman Yao Jian. “However, some enterprises are not experienced in the work of environmental protection, social responsibility and need the guidance of the Chinese government.”

They have a lot of catching up to do, though. “Right now, Chinese firms are on a steep learning curve—but then 10 years ago overseas investment by China was close to zero,” said Paul French, a partner in the research company Access Asia-Mintel in a publication by Ethical Corp. “The curve was never going to be anything but steep.”

Since Hu Jintao’s visit to Zambia, where copper represents 60% of exports, trouble has continued to flare, punctuated by an extensive Human Rights Watch report documenting ongoing violence, environmental degradation and worker exploitation at Chineses-owned mines. Nonetheless, Zambia remains one of China’s biggest destinations for foreign investment—including CNMC, to the tune of $2 billion.

As featured in Womp 2013 Vol 09 - www.womp-int.com