sharing in governance of extractive industries

The Extractives Industry in the spotlight

Coltan is not a world known to most consumers and yet it is significant not least because of its importance to our mobile phones. The average citizen barely gives a thought to the various materials that are so much a part of everyday, but when it comes to the activities of the Extractives Industry one soon discovers that people often have a jaundiced view. To those in management and leadership roles this elucidates much of the daily challenge that they face; on the one hand they are expected to continue to provide those products that modern society demands at an affordable price, whilst on the other hand leaving the natural world alone. It is inevitable that conflict ensues.

Concerns and protest takes various forms. On 4th December 2013 members of the Bangladeshi Diaspora gathered in London to protest outside the London AGM of GCM Resources (www.gcmplc.com)  The ‘Hands off Phulbari’ campaign was eager to voice its concerns about plans for a major open cast coal mining development that they claim will result in upwards of 14,000 local residents being displaced. Of course there is another side to the story, especially as Bangladesh currently has unreliable power supply and is desperately in need of fresh employment opportunities. Invariably the key criticism comes down to communication and the decision making process, with local communities feeling as if decisions have been taken out of their hands and the perception created of a neo-colonial approach to dealing with legitimate concerns. Protests and legal action in regard to another British mining giant have been taking place in India with Vedanta (www.vedantaresources.com)  have been foiled for the time being at least with regards to possible activity in a region associated with minority communities. Such communities have particularly close physical and spiritual relationships with the environment, something that often appears utterly alien to those that run major mining multi-nationals (http://www.survivalinternational.org/films/mine)

Recent research into Emotional Intelligence (EI) has revealed that there is a marked difference between the quotients scored by CEOs and Managers. The former invariably operate at a distance, often hermetically sealed from my of the day to day pressures and points of conflict, whilst the latter are expected to handle and settle situations, to such an extent that they by their very nature will often iron out and even filter much of the negativity before it ever reaches Board Room level. Various leaders and managers have a collective vested interest in managing the flow of information and this is something we are all familiar in bland communiqués, up-beat annual reports and situation assessments that that are Micawberesque in their optimism. Naturally share prices and investor confidence is of paramount importance, but there is also a danger that lines of communication become weak and that complacency sets in. Set-backs are routinely dismissed as mere irritants. Anyone who has listened to the sophistry and semantics by Petronin (www.petrotrin.com)       concerning a series of recent oil spills off Trinidad will recognise the dangers when those in leadership roles fail to grasp the gravity of the situation.

It is essential that those that work in the Extractives Industry have a clear understanding of some of the challenges faced by the sector. The following certainly shed some light on the enormity of the task faced on a day to day basis:

  • Vagaries of the international financial and commodity markets
  • Complex financial mechanisms required to put major investments together
  • Poor regulatory frameworks, especially in emerging markets
  • The frequent need to operate in remote and inhospitable locations
  • A lack of reliable data, especially in Frontier Markets
  • The vast capital outlay and the likely time lag until there is an prospect of a return on the investment
  • The ever present threat of corruption
  • An absence of local capacity in regard to skilled workers in certain fields
  • The unremitting negative publicity that rains that assails the sector
  • Inaccurate reporting
  • Protest groups that are increasingly creative and occasionally threatening

An effective leadership team would do well to remember that it is better able to understand the true dynamic if it is imbued with empathy as this can help in the understanding of the origins of protest. Here are some of the most common reasons why people and communities react with such hostility to the activities of the Extractives Industry:

  • Nimbyism (NIMBY – Not In My Back Yard)
  • Fear and mistrust
  • The secrecy surrounding commercial plans
  • A lack of transparency
  • Marginalisation
  • Insensitivity
  • Over blown claims on the part of the mining companies and or their partners
  • An absence of consultations or retrospective consultations
  • Threats and intimidation
  • Past experience

The sad fact is that the entire sector tends to get tarred with the same brush. That said, there are many examples of good practise and it is imperative that these are both shared and celebrated. Anyone who has ever read the Action Plan entitled: Making Finland a leader in the sustainable extractive industry (https://www.tem.fi/files/37130/TEMjul_22_2013_web_04072013.pdf) will recognise what I am talking about.

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