My vision for the future of the mining industry

By Team: Private Sector Engagement 10th Feb 2014
Industry in Brazil Industry in Brazil © CARE

CARE’s Gianluca Nardi works with the mining industry in Latin America, promoting multi-sector dialogue, revenue transparency, accountability and sound community development practices. He outlines the eight key issues the industry needs to get serious about to significantly improve the lives of poor people in the communities where it operates.

The mining industry is a major social, economic and environmental actor in many of the countries where CARE works. It represents both huge development risks and opportunities and has the potential to either stimulate development processes 1 or hinder them. 2

The risks, on the one hand, include destruction of the natural environment, and so-called Dutch Disease 3, fuelling inequality, corruption, conflicts or even civil wars. The opportunities, on the other hand, can be in the form of employment and enterprise creation around the local supply chain and benefits for low income groups arising from appropriate distribution and spending of large amounts of tax revenues and/or royalties collected by the government or social funds.

The quality and inclusiveness of local institutions as well as private sector practices make an important difference in the impact that the mining industry can have, with private sector practices being especially important in countries with fragile or undemocratic governments.

There has been clear and positive progress in improving some of the negative impacts of mining over the past decade following a recognition at the highest level that this sector was facing significant problems in reputation, sustaining profits, access to new assets and maintaining investor and employee confidence. 4

Some industry leaders are ahead of others in promoting internal policies and tools to comply with international industry standards 5 and improve their performance in areas like community development, stakeholder engagement, health and safety, and environmental impact. Many governments in resource-rich countries are negotiating for a better share of the revenues from mining and are promoting better regulatory frameworks on revenue transparency, consultation and environmental protection. This has been particularly the case of Latin America.

But, driven by the increased demand for minerals, the industry is moving toward increasingly socially and environmentally sensitive areas, for instance affecting indigenous communities, national parks or glaciers; new companies are competing with large multinationals; governments, workers and communities are becoming increasingly assertive in their demands and the industry is experiencing new types of conflict as we have seen in South Africa or Peru.

What CARE is calling for

Within this context CARE recognises that there are still areas where a lot more needs to be done. Mining companies are still punching below their weight in terms of having a positive impact on development. They should adopt a positive attitude towards creating social and environmental value and abandon a defensive approach based on risk calculation and remediation. At CARE, we would like to see further enhancement in the mining industry’s social and environmental performance this year:

1. Gender: Often, men have better access to employment opportunities from the mining industry, and better access to the consultation processes and compensation, while the costs such as family/social and environmental disruption fall most heavily on women. 6 A stronger gender lens should be adopted within the mining industry in order to make sure that women have the same level of access to the benefits and opportunities of the mining industry as men, and that they are not more affected than men by the risks. Good progress has been made around equal employment opportunities, less on the other areas.

2. Tax avoidance: The top 10 global mining companies have an estimated 6,000 subsidiaries, many of which are located in tax havens. Tax avoidance, secret mining deals and illegal financial transfers are depriving Africa of the benefits of its resource boom, according to ex-UN chief Kofi Annan. Mining companies should play fair on taxes with developing countries, disclose their tax arrangements in a more transparent manner and open the discussion with host governments and local civil society.

3. Conflict: The mining industry has in the past fuelled social and environmental conflict and even civil wars especially in sub-Saharan Africa. The mining industry should therefore ensure it is adopting a consistent conflict sensitive approach across all its activities and the activities of its suppliers and business partners, including their community development initiatives. Appropriate tools and guidelines are currently available 7 and they should be adapted to the reality of each specific project and operation with the support of specialised organisations.

4. Human rights: Human rights violations have always been a strong concern around the mining industry, and there is an ongoing effort to fully implement the UN Guiding Principles on Business and Human Rights. However, there is still a lot to be done to mainstream a human rights lens across the whole supply chain, especially in projects in developing countries with tight timeframes and financial pressures. The mining industry of the future should have a zero tolerance policy on Human Rights violations across all the activities of its core business and of its supply chain, employing the same level of effort as on Health and Safety during the past decade.

5. Fossil fuels:  Emissions from fossil fuels are the primary driver of climate change, according to the IPCC’s latest assessment report 8. Immediate action is required and coal should remain in the ground if global warming is to be limited to below 2 degrees Celsius. The mining industry should not only adopt emissions reduction and energy saving policies, but move one step forward and also adopt a zero CO2 and greenhouse gases emissions target by 2030 (or other deadline to be agreed upon). The coal industry is the most polluting within mining in terms of impact on climate change and companies should phase it out in the medium term in a coordinated effort between the private sector, governments and civil society at international level. Leading mining companies in the coal business should lead the sector and set the example by starting discussions with national governments on strategies to move away from coal-based energy generation.

6. Environmental performance: Mining companies should work together toward raising the bar of social and environmental performance in host countries, as this would improve public perception of the industry, create social and environmental value and transform their positive social and environmental record and capacity into a competitive advantage over new players. Actions could include lobbying for the host governments to improve revenue transparency, social and environmental standards, and consultation processes in the countries where they operate. Funding mechanisms could be created at industry level for civil society organisations to engage into independent advocacy activities for this aim.

7. Multi-sector dialogue: Mining companies should recognise that large scale positive impact can only be achieved when the three sectors – public, private and civil society – work toward the same aims. Governments and civil society should be key partners for mining companies and the private sector should support neutral spaces for multi-sector dialogue around mining and sustainable development in the countries where they operate. Progressive mining companies should also be committed to contributing to specific development objectives, like the MDGs or post-MDGs.

8. New technologies: The mining industry spending on R&D concentrates on new technologies to reduce the costs of mineral exploration. Equal attention should be given to new technologies that might help reducing negative social and environmental impacts, and at the same time have a strong business case. Examples include the development and adoption of new technologies to recycle used minerals from urban dumpsites, recycling of tailings (mine dumps), more efficient desalination technologies, and adoption of mobile technologies for more effective stakeholders’ engagement.

CARE is working with the mining industry in the UK, Canada, Peru, India, Ecuador and Brazil with different roles, including advocacy to improve revenue transparency and community consultation processes, promoting multi-stakeholders dialogue, improving mining companies community development practices, and strengthening local communities’ and civil society capacities.

 



Footnotes

1. Positive examples include Botswana, Chile, Indonesia and Malaysia that managed to stimulate development through their mineral wealth among other factors
2. Very negative examples include DRC, Ivory Coast, Liberia and Sierra Leone where violent conflicts have been partly funded by the sale of diamonds
3. From the Financial Times Lexicon: Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market. It also leads to higher levels of cheap imports and can lead to deindustrialisation as industries apart from resource exploitation are moved to cheaper locations
4. ICMM website, our history
5. the Rio Declaration, the Global Reporting Initiative, the Global Compact, OECD Guidelines on Multinational Enterprises, World Bank Operational Guidelines, OECD Convention on Combating Bribery, ILO Conventions 98, 169, 176, the Voluntary Principles on Security and Human Rights, UN Guiding Principles on Business and Human Rights (pdf), the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas
6. World Bank, Gender and Extractive Industries
7. See International Alert, Conflict-Sensitive Business Practice: Guidance for Extractive Industries. Conflict-Sensitive Business Practice: Guidance for Extractive Industries (pdf)
8. IPCC, 2013: Climate Change 2013. The Physical Science Basis. Summary for Policymakers

Gianluca Nardi

Gianluca Nardi joined CARE in 2005. He is Senior Women’s Economic Empowerment (WEE) Advisor based in Brazil and he leads the Women in Value Chains component of the WEE strategy globally. His main areas of expertise are market facilitation, women’s empowerment, micro-enterprise development, rural development, private sector engagement and working with extractive industries.

With over 15 years of experience working in various management and consultancy roles in Brazil, Nicaragua, Angola, Cambodia and Italy, in both the private sector and NGOs, Gianluca holds a Masters in International Development from the University of Ferrara, an ILO Diploma on Markets Facilitation, a diploma in Extractive Industries and Sustainable Development from the Catholic University of Lima, and a certificate from the Advanced Social Management Programme from the University of Cambridge and the University of Queensland CSRM.