In a wide-ranging interview with Critical Resource, Gary Goldberg argues that the ‘license to operate’ is often key to protecting share-holder value, and highlights lessons from the delayed Conga project in Peru
These days M&A often fails due to social issues
“Most mergers and acquisitions tend to fail these days on social rather than technical issues, so getting stakeholder engagement right up front is important. This includes understanding culture and expectations inside and outside the gate. Employees are often the best barometers of and ambassadors to host communities and governments. In order to do that companies need to make sure they have the strategy, and internal capabilities and systems in place to effectively understand and manage the risks. Teams looking after mergers and acquisitions tend to focus on the financial and commercial aspects of the deal but pay less attention to the social side of things. Understanding the social side of a project is a key part of the due diligence process. In this way the work we do on social responsibility should be seen as an investment, not a cost.”
Winning the social license is a never ending process
“Implementing a culture of social responsibility is very much like implementing a culture of safety in that it requires visible leadership, and is about creating a change in behaviour. Ultimately both safety and social responsibility are never ending processes, and work best when employees are equipped and engaged. You can never rest on your laurels; you need to create a shift in mind-set so that staff understand that earning the social license to operate is an on-going process which thrives on open communication. Newmont has been working hard to build that culture. One challenge is working out where the accountability lies. It can’t all be managed from Denver [Newmont’s head office], eventually the people on the ground are accountable.”.
Advisory panels help firms to understand stakeholders
“One thing I’ve seen work well for us in Ghana is our advisory board. It is made up of key opinion leaders from within the community: educators, ex-government officials, and business people. They all bring different perspectives and a rich array of experience. The group informs our regional leadership team about issues that they need to be aware of, and acts as a sounding board to test out ideas. In countries where companies do not have long standing relationships in place this structure is particularly important. It is important to be able to talk with the local people on the ground to get beyond generic risk reports.”
A ‘low profile’ can lead stakeholders to assume the worst
“We established a strong technical approach at Conga [Newmont’s copper-gold project in northern Peru], as we do everywhere else in the world. From a social perspective we did a lot of work engaging stakeholders, and carrying out hundreds of meetings with communities along the way. However our experience developing and operating the Yanacocha mine next door influenced our thinking. When we were building our social license at Yanacocha the Shining Path Maoist guerrillas were active, and therefore our approach was to keep a low profile. However we learnt at Conga that if you don’t tell people what you are doing they will assume the worst.
In December 2011when I visited Peru I heard that 60% of the time people turn on the tap in Cajamarca they don’t get water, and they blame the mine. In technical terms the mine staff know that they haven’t done anything to adversely affect the water supply or quality. However the population has quadrupled since we built the mine so we have affected demand, and in that indirect way we were part of what caused that change. What you see around the world is that metal prices have dropped and everyone is reassessing how to do responsible development while not thinking too short term. We’ve done some good work at Conga, but there were political events that changed the context for us. Despite the setback we experienced, many people now support the project; I met the president not long ago and he remains very supportive of development.”
The Catholic Church is a key stakeholder
“Recently a number of leading mining CEOs, myself included, met with representatives of the Pontifical Council on Justice and Peace to discuss the mining industry’s social performance, and what the path forward might look like. The very fact that we are having a dialogue is positive. While the industry has not always done well in the past – its performance is improving. The key is building better relationships with people on the ground, and the ideas that have been coming together in some of the initial discussions with the church are encouraging. The fact is that the mining industry is not solely responsible for solving major social issues – but we do have a role to play in partnering with governments, civil and religious institutions to develop sustainable solutions. I’m hopeful that the dialogue will continue, and ultimately it will be beneficial for everybody.”
Expectations are as high in poor as in rich countries
“My view is that mining companies have to meet acceptable standards for social, economic and environmental responsibility no matter where they are. When I visited Conga and spoke to residents around the reservoir we are developing, communities wanted the same things they wanted when I worked at Bingham Canyon [Rio Tinto’s copper project in Utah] in the USA: they wanted their children to go to school and become engineers and work for the company. There are human commonalities which are consistent no matter what country you are working in. Companies need to listen to communities to understand what they want and what they expect from a project. It is vital not to be seen as arrogant, telling communities and other stakeholders what they need. That is true anywhere in the world.”
Picture: (c) Andy Cross