In a wide-ranging interview with Critical Resource, Sir Robert Wilson, former chairman of BG Group and Rio Tinto, distils lessons on how to secure assets from social and political risks, based on his decades at the helm of resource companies
Firms must really listen to what governments want
“Companies need to make a really intense effort to try and understand government priorities and, as far as they can, develop plans that reinforce those priorities. Too often companies talk to host governments along the lines of: ‘this is our plan, would you approve it; it’s going to bring all these economic benefits to the nation’. But they need to start a dialogue with the government before that. They need to ask: what are the key things that the government is trying to achieve, is it industrial development, education, etc.? And to what extent can those be built into the development plan?
For example, if a company is going to build a port, it should find out whether it would be a government priority to have a multi-user port. This can cost a lot, or relatively little, depending on whether it is built into the planning stages of a project.
While it can cost more, being longer-sighted in this way can help establish the company as a good citizen in its host society. Companies also need to think about how they create a sustainable future for the local people once the project is gone. If a company is not contributing to the long-term benefit of its host society, it is surely going to run into problems.”
Manage social interactions, not social impacts
“Even today we still talk of social impact studies. This is a reflection of the wrong sort of thinking. The language is simply wrong. We should not be talking about social impact; we should be talking about social interaction on a continuing basis. Social impact language reflects the idea that a study is done to measure the company’s social footprint and then remediate its consequences. It is unhelpful because it creates the illusion in the mind of managers, some of whom have not been heavily exposed to local social issues, that when the social impact study is done, and its recommendations are carried out, that is the end of the matter.”
Learn the soft skills – or risk being blindsided
“Leaders in a lot of companies are engineers by background. Yet soft skills also must be accepted as core skills – and become part of the corporate culture. Stakeholder engagement is a process which necessitates openness and continuous relationship building, whether that is with the local communities surrounding a project, or regional or national government. You have to hear what the concerns are, otherwise you will be blindsided by them.
For example, in Chile in the 1970s, when the elected Allende government nationalised the copper industry, nationalisation was supported by all the key political parties. The companies were blindsided because they had completely lost touch with the concerns of the political community. It comes back to the same lesson: companies were living in their own world, doing their own thing as if they were not a part of the country and the local community.”
Boards must keep managers on their toes on this area
“Boards should oversee ‘license to operate’ issues. It is not something that should be totally delegated to the External Affairs team. Corporate memories in this area are not reliably long-term. People get diverted towards the problems of today and relegate some of the longer-term issues. A structure which gives a board committee oversight of this area ought to provide a vehicle for identifying when management is not meeting its obligations in this area, and to keep management on its toes. You cannot ever neglect ‘license to operate’ issues, because the job is never done, it’s a continuous process.”
Climate change: a dire need for leadership from governments
“Some companies have made significant efforts to address climate change, but I sense that the commitment is faltering. This is not surprising when we see the muddle that is apparent in many governments on this issue. There was more momentum from the corporate sector on climate change 10 years ago than there is today. It has dwindled because governments have not been able to get their own act together, let alone collectively get their global act together. What we have is a mishmash of policies. In the absence of forward thinking government leadership, it is unclear what more some of the more forward thinking companies could have done.
This lack of government leadership is a negative thing, but it is a political reality because of the mismatch between the time horizons of government and the timescale of the challenge. It is not easy to bridge that gap in practice. Governments need to evolve a new way of how they address long-term issues – whether they are related to climate change or to do with major infrastructure investment. These issues should be removed from the day to day political battles. This is, of course, easier said than done.”