Companies are facing dual pressures to halt operations and cut costs but also help overwhelmed host governments cope with the COVID-19 crisis. Amid competing pressures there is an opportunity for the natural resource sector to improve its reputation and protect strategic interests by demonstrating genuine support and pursuing innovative intervention at a difficult time.
By Kim Park, Associate
The COVID-19 crisis has sent shockwaves throughout the global economy and devastated lives and livelihoods alike. Developing countries in Africa and Latin America are especially vulnerable. In these regions, healthcare systems are often ill-equipped to deal with crises and many governments lack the financial firepower to mitigate the economic hardships caused by the global pandemic. Governments everywhere are facing the tough choices of imposing lockdowns and travel restrictions that will cut off the economic lifelines keeping many afloat.
The severe social and economic impact of the pandemic will likely heighten the pressure on resource companies to deliver benefits to affected communities and countries at a time when they will be facing their own operational and financial constraints. While in many ways a gargantuan challenge, the situation offers an opportunity to demonstrate ‘corporate statesmanship’ to maintain and strengthen the support of stakeholders.
What can companies do to position themselves in a way that protects them from emerging risks and enables them to capitalise on future opportunities?
Show ‘corporate statesmanship’ by taking responsibility and remaining committed
- In many cases, resource companies will be facing what appears to be a no-win situation of pressure on their cost base along with pressure from host governments to avoid lay-offs and to help the response. Experience from the Ebola crisis however shows that stakeholders have long memories for companies that stay the course during difficult times, meaning that where possible companies’ strategic interests may be best protected by taking responsibility and showing commitment during the crisis.
- This crisis has brought fresh impetus to the debate around the role of responsible corporates and led to a push for C-suites to drive ‘corporate statesmanship’. With the impact of the crisis sharpening tensions around inequalities and driving broader ESG pressures, companies’ responses in terms of how they treat all their stakeholders will come under scrutiny in the long run. The crisis presents an opportunity for the resource sector to improve an image which has not always been positive. Showing responsibility, support and solidarity during these very difficult times can redress trust deficits and build support within host countries.
- Part of the emerging notion of corporate statesmanship will entail adopting a strategic approach to the support that companies provide, based on coordination with all actors involved in planning recovery. Companies need to avoid creating unrealistic expectations about their ability to deliver, but should focus on targeted interventions that can make a big difference. Activating networks to draw on disease management expertise in universities can be extremely valuable, as can using private sector capacity to collect data on evolving economic impacts to prioritise tailored, data-informed action over ‘grand gestures’.
Pro-actively capitalise on opportunities for swift early action
- The private sector can often act faster than governments and NGOs in responding to crises. Many extractive companies will already have established relationships and communication networks with local communities. These can prove valuable when it comes to preparedness, for example in spreading awareness about hygiene, social distancing and self-isolation – including in leveraging trusted voices to dispel fake news or unhelpful notions, for example that self-isolation is a form of punishment.
- Preparing the workplace to mitigate the risk to employees and, where appropriate allowing operations to continue, can help minimise the impact on both company earnings, government revenues and local livelihoods. Introducing strict protocols on hygiene and identifying symptoms early helped prevent outbreaks in many workplaces during Ebola. Where possible, companies should adopt creative solutions to facilitate remote and flexible working arrangements. Ramping up internal communications can reassure staff and monitor their well-being. Several companies have reduced fly-in fly-out movement and introduced staggered shift start times or team A/B working.
- Established local networks can help feed information back to relevant authorities. Companies can draw on their local contacts to gather information for those coordinating the response. This can help to report cases swiftly, ensure community needs are understood and promote the adoption of effective strategies. The Ebola outbreak showed the importance of listening to communities’ responses to government measures to ensure effective implementation and avoid unintended consequences.
Adopt and communicate an approach of ‘we’re in this together’ to strengthen trust with local stakeholders
- There have been reports that in some countries, the coronavirus is viewed as ‘imported by foreigners’ and companies may therefore be blamed for cases, regardless of the original route of transmission. This is particularly likely in remote areas where there is artisanal and small-scale mining (ASM) adjacent to a project, or when a company is the only employer of expat workers in that area. Companies should naturally take appropriate measures to reduce the risk of infection or transmission among its staff, communicate these proactively and clearly counter false perceptions.
- Ultimately, the most effective means of avoiding a ‘blame game’ is to demonstrably assist with the response (see below) and be part of the solution rather than seen as the cause of the problem. Particularly in areas with little state presence or resources, even simple actions such as making printers available to produce information leaflets or using company vehicles to distribute supplies can go a long way. Communications around such measures must be carefully calibrated to promote an approach of ‘we’re in this together’ and avoid allegations that the company is arrogant or simply helping out of guilt because it is to blame for localised outbreaks.
- Multinational companies could also consider advocating solidarity vis-à-vis home governments, many of whom are under pressure to prioritise the needs of their own populations. One of the main lessons from the first Ebola outbreak, as stated by the World Health Organization in 2015 is that “shared vulnerability means shared responsibility and therefore requires sharing of resources”. Unlike Ebola, however, the global nature of the COVID-19 crisis has already seen countries ban exports of medical goods and may well result in foreign aid budgets being cut. Such moves will likely hit developing countries hardest, impacting both the humanitarian situation and the operating environment.
Where possible, mobilise resources and help coordinate the private-sector response
- Although companies will be facing their own financial pressures, many remain in a position to mobilise resources that can significantly contribute to the local response. In doing so, it is important to manage expectations around the limits of resources available and to show tact in communications with local authorities to avoid embarrassing under-resourced governments. Local support should also be coordinated with relevant focal points to avoid confusion and duplication of efforts.
- Many companies have already pledged financial donations to support struggling healthcare systems, while there have been numerous examples of in-kind support. Several mining companies are manufacturing sanitiser at their facilities, while some of the energy majors are providing free fuel to emergency services and healthcare workers. Companies with significant capacity around crisis management have also been providing open source material or sharing best practice advice.
- Crucially, companies can support coordination of the private sector response and public-private collaboration, if possible, through existing mechanisms. Where such coordination or networks are lacking, companies or industry associations like chambers of mines can play a helpful role in initiating them. Nigeria’s private sector has set an early example by forming the Nigerian Private Sector Coalition Against COVID-19.