sharing in governance of extractive industries
As part of the build up to The Responsible Extractives Summit 2016, we are analysing some of mining, oil and gas industry’s biggest social and environmental challenges by interviewing experts in the area and asking them to share practical tips and their own experiences.
The Responsible Extractives Webinar Series kicked off with an hour-long webinar on partnering with local communities (available to view here.) We were privileged to be joined from 2 experts in the area;
The conversation included live polling and a Q&A session with the audience. I have grouped a few of the issues into four themes for you below, or you can view the whole webinar for free here
The main themes that came out of the conversation, -which were relevant for both speakers - can be summarised effectively with an acronym: TEAM (Time, Engagement, Agreements & Mind-set):
Time is an important element in managing successful partnerships, and as Colin mentioned in the online discussion, “It’s never too early to engage.” Engaging early is important, if you want to build a relationship, trust and loyalty, because it takes time and cannot be rushed.
Colin advised that it is important to slow down, take your time & allow people who are seeing this for the first time to come to terms with the situation.
Dennis agreed, adding that “It takes time to build trust, and it takes more time to rebuild trust.”
The context behind taking time to build relationships was explained when we looked at the communities in Western Australia. Considering that the indigenous communities there are living as they have done for thousands of years, the scale and speed of impact on mining
means that it is a relatively quick learning curve for a community that has remained unchanged prior to mining.
20% of attendees stated loss of trust with indigenous communities as their biggest challenge when managing partnerships, and it takes time to build relationships and trust. It was also mentioned that if you take time to establish networks and partnerships at an early stage, that
this will benefit you during a downturn because you have built up loyalty.
Also, throughout the lifespan of a mining project, social investment budgets and financial elements of agreements will fluctuate and projects may become suspended. It is important to communicate this to your partners at an early stage. It is also important to understand that your
plans will change given time after consulting with the community.
Colin mentioned that it is “important to communicate the long term vision” of the project, as well as the aim to have a long term vision for the community.
This was also mentioned at The Responsible Extractives Summit last year, where former Shell chairman Sir Mark Moody-Stuart said “We pride ourselves in the resource industry for being long term thinkers, and this is sometimes a bit of a myth when you look at our approach
to the outlook, it’s normally heavily coloured by the last couple of years. The lesson to be learned is that we do need to take a longer term approach.”
A good question asked was how to build relationships if the community have already been impacted by mining. Dennis suggested that it may be an advantage because it is likely that the community will understand mining, and a lack of understanding can be a big issue for a
green field site. However, if the previous company has been a bad operator, you need to work hard to distinguish yourself and build trust.
Finally, time will impact local content; workforce and business development takes a lot of time and effort, but it is important to build up skills that will benefit the community in the absence of an extractives industry. Dennis mentioned a mine in Mexico that is going through closure,
and stated on the back of it that it’s important to look after communities when you’re the main economic driver. Dennis said that although there are a lot of recommendations and regulations on environmental aspects of closure, there’s not enough around the social aspects
(there are some case studies and insights from Ethical Corp here).
It should also be noted that in the world of the internet, TV and social media, First Nations partners will be looking at your other projects with interest, so it’s important to leave a positive social legacy.
Indigenous communities’ lives are built on relationships. While it may take time to build trust, once the trust has been built, that trust stays.
Colin explained Cameco’s 5 pillar strategy where they put community engagement in the middle, the reason being that if you perform community engagement in the right way, you’ve got a better idea of how it’s going to go.
Some advice for engaging communities is to start from the grass roots and get involved in what they are doing. This could mean getting involved in health programs, helping school students know about their options, or even becoming involved in sports and pastimes. The best tip is to talk to indigenous peoples about things that they are interested in.
When asked, 57% of the audience state that managing community expectations was their biggest challenge. Advice around managing expectations included being honest, open and explaining from the start how mining works. On top of this, it’s important to continue communicating when downturns inevitably occur. Again if your early engagement has been successful in building trust, things will be much easier when low commodity prices hit.
Engagement should be culturally appropriate, but the most beneficial way to engage is to grow capacity. It is also essential to do the grass roots work; being involved in education and health programs, whilst being careful that it doesn’t impact existing relationships.
One final piece of advice was that you need to be open; you may have lots of ideas about things that you want to do, but it’s important to know that these will likely change after discussing them with the locals.
Successful partnerships with a community require well thought out agreements that clearly state the expectations and capabilities throughout the lifespan of a mine.
These agreements should cover local employment, use of local suppliers and any financial elements such as royalties and equity sharing. What’s more, the price fluctuation of commodities and impact on revenues or investment need to be communicated in the document to prevent conflict later on.
Dennis mentioned that NewGold measure their performance against the agreements with 1st nations partners and ensure that they are responsible. The aim being that they go above and beyond what is written on the agreement.
One lesson that NewGold learned from a previous project was that if a community is new to mining then they could miss out on opportunities. To combat this, NewGold now employ someone who is responsible for maximising opportunities for 1st nations business at their mines.
The context of these agreements will change depending on where your operations are located or at what stage your project is in. For example, Canada may have a larger focus on development skills and business and social investment may be more prevalent at an early stage.
In Australia, work is undertaken with Native Title Agreements, which includes indigenous land use agreements, and spells out that the indigenous community are partners. Not all projects will have a legal agreement; however, it is important to act as though you have an agreement.
Agreements with other organisations will also help manage your relationship with indigenous communities. For example, agreements with governments, health organisations, non-governmental organisations and other extractive companies can help your social performance effort by sharing skills, knowledge and resources.
Our speakers both mentioned situations where they have seen mining companies of an area collaborate to the benefit of the town, which is good for all parties. One example of this was an entrepreneurial program that Dennis started in Cobar, New South Wales back in 2009; where all mines were invited to share in terms of management and cost. The idea behind this project was to have someone co-funded by local industry and government whose sole job was to assist people in starting small business.
Lastly, another prevalent theme was that of ensuring that your mind-set is correct. Firstly, Dennis mentioned that “we have spoken a lot about risks and costs involved with local partnerships, but you should also think in terms of the tangible benefits.”
For example; building local capacity with the local community creates an engaged and cheaper workforce, which is a real boom for any company. Colin also highlighted the company’s need for local knowledge, saying “Don’t assume that you know what is best, ensure that what is put in place is reflective of that.”
This mind-set should be taken into account when speaking about your budget. Rather than just decreasing budget, you should consider resources needed to fulfil your commitments and conditions and justify the expense based on your resource activities.
When implementing your strategy, you should also operate as part of a project team, involving a communications team and a project manager.
Another important approach is to treat your partners like they are from government. This means involving high level executives and board members to ensure that they understand the long term cost savings and the need to make CSR a core part of the business, as without partnerships, your projects will not get off the ground. It is just as important as exploration and production.
So when thinking about your own company’s relationships with Indigenous communities, consider the TEAM element
To find out more about The Responsible Extractives Summit 2016 clic... and see how you can improve. I hope that you found this analysis useful.
The next complimentary webinar Mind the gap: Overcoming the challenges in local content for mining, oil & gas is open for registration.Click here to ensure that you don’t miss the analysis
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