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Study: To Avoid Losses, Companies Need to Engage with Local Communities

One of the major realities of mining in foreign areas is the involvement with habited communities. Issues with local people and social protests are a gr...

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|May 14|magazine7 min read

One of the major realities of mining in foreign areas is the involvement with habited communities. Issues with local people and social protests are a grave decision mining companies have to come to grips with or face potential financial losses says a recent study by the University of Queensland.

The research firm, Centre for Social Responsibility in Mining cited one multi-billion project where the costs caused by protests amounted to $20 million a week in delayed production. The reaction against mining developments, however, doesn’t occur entirely from local communities.

The study said a Credit Suisse report from 2012 indicates the impact from governance, social and environmental risks across the Australian stock market was $21.4 billion, of which resource projects accounted for $8.4 billion. The report specified Queensland as one of the main locations mining companies have been forced into lengthy and costly legal battles by activists and landholders.

According to the report’s author, a community conflict has the capability of costing a company $100 million a year.

“Interviewees estimated that around $10,000 is lost for every day of delay in lost wages and the costs of maintain an exploration camp.”

So what can mining companies do to prevent these losses?

Community engagement figures prominently in the Sustainable Development Framework adopted by the International Council of Mining and Metals (ICMM). The organization guides miners on upholding human rights, respecting cultures and contributing to “the social, economic and institutional development” of the communities where companies operate.

London-based AngloAmerican has implemented a variety of community-engagement programs in recent years, including Social Way. The program involves the company using its skills and resources at the local, national and international levels at host communities as well as recognizing the special status and needs of indigenous people.  AngloAmerican also utilizes its SEAT (Socio-Economic Assessment Toolbox) program for managers, which provides the guidance and support framework for managers through the processes of community engagement and sustainable development. At the company’s Sishen iron ore mine in South Africa, AngloAmerican employed its SEAT process to engage the local community and as a result, the mine operates a wellness clinic that is now open to the community.

To continue successful mining in new areas, mining companies must be aware of the local communities and the impact they play. Engaging in a collaborative process with communities benefits all parties involved and assures sustainability in an environmental sense, a community sense and a business sense.