Miners urged to sharpen up CSR reporting

By Laura Syrett, James Sean Dickson
Published: Wednesday, 29 October 2014

FTSE 100 businesses still lag on human rights disclosures; Water access key to both miners and communities

An extractive industries panel at the UK House of Commons in London said in October that mining companies need to acknowledge their corporate social responsibility (CSR) reporting obligations, under a revision to the UK Companies Act 2006.

The Companies Act amendment came into force on 1 October 2013, and requires that quoted companies report on their social, community and human rights issues “to the extent necessary for an understanding of the development, performance or position of the company’s business”.

Mining companies listed on the UK’s FTSE 100 include Rio Tinto, BHP Billiton and Anglo American. According to James McNally, technical director at mining consultancy, Wardell Armstrong, very few businesses are comprehensively reporting on their CSR, although miners are not necessarily among the worst offenders.

Access to water was highlighted as one of the key areas of conflict between miners and communities, with panellists saying that the extractive industry’s use of this limited resource needs to be balanced with direct human needs.

Members of the panel noted how water access was more than a technical issue, and that how a mining company approaches the potential challenges of water supply can significantly alter its social licence to operate, as well as its economic viability.

“Water security is a growing risk for mining companies as environmental regulations become more stringent,” Elizabeth Adey, principal community and environmental specialist at Wardell Armstrong, said.

She also pointed out that the ratings agency Moody’s last year named water scarcity as one of the key factors that could negatively affect a mining company’s credit rating.

Benefits of good water CSR

Access to water was acknowledged by all panel members to be a human right, and speakers highlighted the importance of appropriate usage in countries with arid climates. The panel said that, ultimately, the lack of a social licence to operate through poor community engagement can result in delays, or in the some cases, project cancellations.

“Problems often occur with junior miners moving into mining from exploration,” McNally told IM. “They get locked into wrangles with local communities as the demands of different groups increase,” he added.

McNally also said that Anglo-Australian miner, Rio Tinto, was at the forefront of good CSR. “They have to be - it’s part of their business model,” he said.

Managing the issue

The production of shale gas via hydraulic fracturing (fracking) is one extractive industry at the heart of water usage concerns, given the large input required.

Many countries such as Algeria, despite their large theoretical resources, are unlikely to be able to develop their shale gas potential without significant changes to water use policy.

An iterative management approach was encouraged by Ken Haddow, a former 28-year Rio Tinto employee, now working as an independent consultant on CSR, who said that compliance with guidance on human rights cannot just be procedural, and noted the delaying effect on projects that fall short of the required level of community engagement.

“Almost all mining companies will have a CSR section on their website - the problem lies in delivery,” he said. “CSR is not integral enough to the execution of mine development plans,” he added.

He further noted that this approach requires active consideration and criticism of each development and new piece of information.

The 2013 amendment to the Companies Act applies throughout a company’s supply chain, the panel explained, a step unanimously regarded to be a positive move.

Harrison Mitchell, director of consultancy and auditing firm, RCS Global, considered that this legislative push is encouraging companies to consider their supply chains outside of the four main conflict minerals - gold, tantalum, tin and tungsten - outlined by the US Dodd Frank Law.

“I think we will see ripple effects spreading out to affect other minerals,” Mitchell said, especially given the developing trend towards greater public scrutiny and consumer engagement with the ethics of raw material sourcing.

Chile’s Minister of Mines, Aurora Williams Baussa, noted how water use in mining/unit of ore processed had fallen in her country as a direct result of investment in metallurgical processing research.

According to calculations by Baussa’s office, Chile has the world’s largest lithium reserves and is the second largest producer of this mineral, as well as hosting the world’s second largest boron deposits, of which it is the third largest producer and the sixth largest potash reserves, of which it is the eight largest miner.

Water is a significant concern for Chilean miners, given that the Atacama Desert, in which many of the country’s lithium, iodine and other mines operate, is the driest place on earth. Water must therefore be supplied by pipe from the sea, following purification, and this involves pumping it up to heights often over 2,000 metres above sea level.

In Chile, 74% of water used in mining projects is now recycled, Baussa explained. Given that this is technically possible elsewhere, its usage was encouraged by the panel.