By Daniel Litvin and Carola Kantz – This article originally featured in the Mining Journal publication, Mining Environmental Management
Recent controversies faced by the Indian mining firm Vedanta may bring a smile to the lips of western mining executives.
Executives of big western mining houses sometimes complain – though mostly in private – that the firms they are now compet-ing against from fast-growing developing countries such as China and India face fewer external pressures to apply high and costly social and environmental standards. As a result, worry the western companies, these firms have an unfair competitive advantage. But a brief look at the recent string of controversies faced by Vedanta Resources, a firm with its roots and most of its operations in India (albeit listed in London), suggests some interesting levelling pressures are beginning to emerge.
In November India’s Supreme Court placed a bar on a big mining project Vedanta is proposing in Orissa. This has been opposed both by tribal groups in the area and also environmentalists. The court asked Vedanta to present fresh proposals incorporating greater protection for the rights of local people. In recent months, the firm has also been targeted in various campaigns by western-based NGOs such as Christian Aid, which have criticised aspects of its environmental and social performance in India and also Zambia. To top it all, a few months back, the Norwegian government pension fund sold its shares in Vedanta following a review by its advisory “Council on Ethics” of allegations against the company over environmental and human rights issues.
Vedanta strenuously denies all the allegations made against it. It also says sustainable development is “at the very heart” of its business strategy. But what is most interesting about the controversies engulfing Vedanta is less the details of the arguments. It is more the fact that an Asian-focused firm is now experiencing exactly the sort of multi-pronged critical campaigns from multiple stakeholders – local, national and global – which the big western firms have been accustomed to for over a decade, and which encouraged them to significantly ratchet up their own standards during this period. True, Vedanta is relatively unusual in that it is London listed, which makes it an easier target for the western NGOs than entirely domestic Asian firms. Similarly, having its operations in India also makes it more likely to be criticised than are, say, Chinese firms, simply given the thankfully healthier state of civil society in India.
Even so, Vedanta’s case also may illustrate a deeper shift underway: resource multinationals from countries such as China and India may now be starting to feel more exposure to external pressures over sustainability issues than many observers had assumed. As such firms grow in size, perceived influence and global reach, they naturally start to feature more on the radar of activist national and international groups looking to improve corporate behaviour (or to score political or publicity points). In their home countries, these firms are often facing growing public awareness & regulatory pressure over environmental issues (that includes in China as well as India). And in their foreign ventures, they are as liable as western companies to evoke suspicions among communities and host governments that they are operating in their own, rather than the national, interest – with all the risks of backlash that brings.
This process of levelling of external pressures is slow for sure (Chinese firms remain relatively insulated from international public opinion). But Vedanta’s experience is not the only recent example of such pressures increasing on Asian companies. The western mining firms naturally should welcome this process as it helps level the competitive playing field for them – but not show their pleasure in public of course.
© istockphoto.com/Michael Fuller