Rebuilding reputations in mining

Rebuilding reputation in oil, gas and mining, Communicate October 2010

Rebuilding reputation in oil, gas and mining, Communicate October 2010
WEDNESDAY, 27 OCTOBER 2010 10:12
Deepwater Horizon, trapped miners, blood diamonds – the reputation of oil, gas and mining companies has been hit hard of late: So how can the extraction industries address concerns for the environment, the health and safety of employees and the welfare of local communities? David Benady reports in Communicate’s October cover story

p01_cover_oct.jpgAt a venue in London’s Westminster this month, chief executives from the 18 of the world’s top mining and metals companies will congregate to discuss a subject vital to the future of their industries – stakeholder relations. The mining bosses are likely to include Cynthia Carroll of Anglo American, Rio Tinto’s Tom Albanese, Marius Kloppers of BHP Billiton and Xstrata’s Mick Davis.

For most of the year, there is little love lost between these titans of the world’s subterranean treasury. The executives spend their time battling to snatch a greater share of the world’s mineral resources or plotting to take each other over. But every six months, they put these differences aside and sit down together to discuss ways of creating industry-wide policies on sustainability, the environment, health and safety, reducing poverty and ensuring the rights of local communities.

The gatherings are organised by cross-sector body the International Council of Mining & Metals. This month’s meeting is particularly timely, following a nightmare year for corporate reputations in the oil, gas and mining industries.

The oil industry’s image crisis has come to a head this year. BP’s oil spill in the Gulf of Mexico has highlighted the dangers inherent in deep water oil drilling and has shredded the company’s corporate image. In the snowy arctic wastes, Greenpeace is seeking to head off an arctic oil rush and campaigners in Greenland recently boarded and shut down an exploration rig owned by Edinburghbased Cairn Energy.

For the ICMM bosses, more relevant will be the fate of the 33 miners trapped 2,000 feet below ground in a collapsed Chilean mine, whose story has given a human face to the perils of deepcast mining. There is also the red hot issue of ‘blood diamonds’ which has unfolded daily in the media with a cast list of villains and participants that includes some of the world’s most famous celebrities and politicians. Along with the struggle between mining company Vedanta Resources and the Indian government over the fate of Indian tribal group the Dongria Kondh (see box), these stories have dominated the media this year and triggered widespread debate about corporate responsibility in the extraction business.

Oil, gas and mining companies are being forced to come clean about their activities to the public, local communities, governments and regulators. In cases of controversy, their investors need to be kept in the loop as well.

The role of stakeholder relations has become critical in the industry and the work of communications chiefs at these companies is now integral to their success in gaining licences to operate in countries around the world. Their ability to engage with a wide variety of groups will help determine the future winners and losers in the extraction industry.

Some believe that the creation of ICMM in 2001 and its tough requirements for social and environmental reporting, are transforming the mining industry’s relations with its stakeholders. A prime mover behind the body was Rio Tinto’s then chief executive Sir Robert Wilson, who saw that being granted access to mineral resources would depend on demonstrating corporate responsibility and a readiness to engage with NGOs, communities and regulators.

Rio Tinto’s global head of public affairs Robert Court says: “Once you put a mine in the ground it really needs to be there for decades. From the very outset until the mine’s closure we have relationships in place with local communities and stakeholders in the countries concerned.” This can involve everything from building health centres near mines to constructing school classrooms, undertaking training of local engineers and ensuring that local flora and fauna are preserved.

“This is still emerging, I wouldn’t claim we have it all right, we are still learning about human rights and climate change. This is a continuing area of complexity, but it is clear societal expectations will change,” says Court, a former British diplomat. As evidence of a pay-off from Rio Tinto’s policies on engaging stakeholders, Court points to a new joint venture for an aluminium mining operation in Ghana in partnership with China’s Chalco. “We are pretty clear Chalco chose us for that project because they know we are managing the social and environmental process well,” he says, and claims that Rio Tinto’s reputation for fairness will help it in negotiations with the Ghanaian government and local stakeholders.

This rosy picture of corporate responsibility by the mining industry is not shared by all NGOs. The London Mining Network, an alliance of human rights and development groups including the leftist Corporate Watch, accuses the industry of being an arch polluter and benefiting from the eviction of indigenous peoples. It claims there are “countless alleged examples” of labour rights violations and “environmental devastation perpetrated by Rio Tinto.”

Court says Rio Tinto “is always up for a debate,” when it comes to discussing these issues with NGOs, though he adds: “There is a spectrum of NGOs: some exist and campaign to prevent any exploration or mining. The chances of a happy accommodation with those are pretty slender. But it goes right through to those who say mining is a fundamental contribution to developing poor areas.” While developing a titanium dioxide mine in Madagascar, the company worked with NGOs such as the World Wildlife Fund, BirdLife International and Conservation International to protect the local environment. “We have invested for years in this and learned a great deal from it,” says Court.

The meteoric rise of the extractive industries over the past decade on the back of surging demand from China has coincided with the growth of online communications and 24-hour media. Every misadventure or conflict can rapidly become magnified and explode into a crisis. The growth of social media has been a boon to those mounting campaigns against corporations, as Rio Tinto has found out. Campaigners created a Facebook page entitled “Rio Tinto get the hell out of Madagascar.” The company gave a measured response, with the then head of digital media Bryan Smith quietly posting comments on the page directing people to the Rio website and explaining the company’s position. Clearly, social media has multiple uses for the industry, from providing easy access to information for investors to reassuring staff within the organisation about safety policies. But engaging with online critics is seen as an important role for communicators in this industry.

chart1.jpgchart2.jpgHealth and safety is a concern for those working in oil, gas and mining: death and injury are never far away. The Chilean mining disaster has dragged down perceptions of the industry’s safety record and the way companies respond to safety issues is a sensitive one. As Court says: “It would be unacceptable if one company were making strides in health and safety and not passing that learning on. So a lot of sharing of safety expertise does go on and the ICMM reaches out to experts in NGOs and to academics.”

Safety has also become a fundamental issue in the oil industry, given BP’s Gulf oil spill, its Texas oil refinery explosion which killed 15 workers in 2005 and its pollution scandal in Alaska in 2006. Some believe the oil industry could learn from the experiences of the mining sector. Tim Purcell, head of corporate responsibility consultancy CO3, says: “The ICMM is the best example of a cross-sector initiative out there. It is surprising the oil and gas industries have not gone down that route. Mining companies aren’t exactly in love with each other, but they get together around the table and discuss the issues. You can’t imagine BP and Shell doing that.”

At Tullow Oil, the rapidly growing London-based petroleum and gas company, head of environment, health and safety Graham Brunton plays down suggestions that oil and gas companies go it alone on stakeholder management issues. He points to the International Association of Oil & Gas Producers, though this is more concerned with regulatory issues. Then there is Ipieca, the oil and gas industry’s body for environmental and social issues founded in 1974. This brings together all the main oil and gas companies, though at the level of health and safety directors rather than at CEO level like ICMM.

Brunton describes Tullow’s approach to socialresponsibility as being “part of the company’s DNA.” He says: “We don’t use CSR consultants, but we do talk to NGOs to implement projects. We don’t just build a school, cut a ribbon and go. We resource it and make sure teachers get trained.” For instance, the company has worked with USAID and the German Development Service (DED) to run a maternity clinic built by Tullow in the Lake Albert area of Uganda.

Tullow, originally an Irish firm set up in 1986 and named after a town near Dublin, has grown quickly over the past 25 years to a turnover of half a billion pounds and production of 60,000 barrels of oil a day.

Brunton says: “The larger companies have had more experience and time to learn from mistakes and create structures and formalisation. We have grown so rapidly but we are not burdened by procedures and process and can adapt to situations quickly.”

Tullow recently set up an external affairs function to respond to the growing interest of NGOs in the company’s activities. The company hired former corporate lawyer Rosalind Kainyah from De Beers as VP of external affairs and CSR.

Kainyah says: “External affairs was set up a year ago and we’ll engage more proactively with NGOs to review CSR reports and engage with the Extractive Industries Transparency Initiative. We’ll have round-table discussions inviting them to comment with input in areas of environment, health and safety.

“Where we have a lot of engagement is on the ground in countries where we have operations such as Ghana and Uganda. This is where the impacts are felt the most and they have the greatest interest in what we do.” She says the company is undertaking a stakeholder mapping exercise to work out who the key focus of engagement should be.

“We want to maintain the spirit of meeting needs in a sustainable way, not engaging in knee jerk adhocism, but making it sustainable.”

Assessing how effectively stakeholder management is being addressed can take a number of forms, such as looking at performance in FTSE4Good and Dow Jones Sustainability indexes. The ICMM requires members to sign up to a reporting framework to demonstrate how they are meeting a set of ten principles which were forged from a three year multi-stakeholder engagement process. ICMM communications director Ben Peachey, a former BBC Online journalist, says: “This is why our organisation has legitimacy, it is the memory of where those principles came from and that whole process.”

He adds: “We have survey evidence of people looking at companies and seeing they are ICMM members and understanding that it demonstrates a commitment to best practice.” Meanwhile, Rio Tinto also carries out perception management research among thousands of stakeholders in the different markets in which it operates.

The heady growth of the extraction industries has forced companies to look further afield and open up new seams of mineral resources in fresh environments. At the same time, governments in developing countries, pressure groups and local communities have got smarter and louder in their dealings with oil, gas and mining companies. Corporate communicators and external affairs departments are becoming ever more crucial in enabling natural resources companies to build relationships with all those affected by their activities.



Vexing Vedanta

Dressing up as the blue-skinned Na’vi tribe from the film Avatar is one way of protesting about the mining industry’s treatment of indigenous peoples. When campaigners from tribal rights group Survival International donned the garb to protest at the London AGM of Vedanta Resources earlier this summer, they got the media coverage they craved.

Vedanta is looking to open a bauxite mine on a mountain in the Indian state of Orissa which is home to the Dongria Kondh tribal group. The tribe have lobbied hard against Vedanta’s plans which they say will devastate their way of life. Survival International has taken up the cause and run a campaign featuring celebrities such as Michael Palin, Bianca Jagger and Joanna Lumley, who voiced over a film about the Dongria Kondh’s plight.

Last month, the unexpected happened and Indian Environment minister Jairam Ramesh rejected Vedanta’s plan for the bauxite mine. He said the project breached environmental protection laws and raised concerns for the rights of local tribes. Survival International described the decision as “a stunning victory” for the tribespeople.

The set-back underlines perceptions that NGOs, governments and local communities have become more adept at mounting lobbying campaigns.


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