THE LISTED MINING SECTOR ESG RISKS - Novethic

September

2011

CSR StudyIn partnership with

THE LISTED MINING SECTOR & ESG RISKS

INFLUENCE OF NGOs ON THE BUSINESS AND REPUTATION

OF MINING COMPANIES

September

2011

http://www.novethic.com/novethic/french-sri/investment-ethics/sri-indices.jsp

2 Novethic 2011. The Listed Mining Sector & ESG Risks

© Novethic 2011Any full or partial reproduction of the content of this document is subject to Novethic’s authorisation. Any quotation or use of data must indicate the source.

Authors Cécilia de Foucaucourt & Juliette Van Wassenhove (BeLinked)

Thomas Lafarie & Anne-Catherine Husson-Traore (Novethic)

3© Novethic 2011. The Listed Mining Sector & ESG Risks

Overview Major mining groups generate colossal revenue worldwide: the assets of the 23

companies surveyed in this study totalise more than EUR 386 billion. They extract

raw materials in many countries and, to a greater degree than most sectors, have

to contend with enormous Environmental, Social and Governance (ESG) issues.

Civil society organisations regularly accuse them, both locally and internationally,

of environmental damage, dubious financial practices and violation of the rights

of local populations. This does not seem to have affected the outstanding financial

performance of the sector, which attracts a large number of investors. The study

focuses on a sample of about twenty large mining groups listed on European

markets. It examines how they report on their Corporate Social Responsibility (CSR)

policy, handle their ESG issues, work with civil society, manage conflicts with NGOs

and operate with those organisations that expose them for neglecting their ethical

responsibilities. The purpose of the study is also to alert investors to the ESG risks that

could jeopardise these companies’ business in the medium and long term. ESG risks

in the mining sector are substantial and potentially pose a serious material threat to

the business revenue. The lack of media exposure of mining groups has contributed

to an underestimation of the seriousness of these risks amongst investors. And yet…

Inadequate information

Extracting raw materials is frequently the main source of income in countries with poor

governance, while local populations often pay a high price for it without necessarily

benefiting from the wealth generated by the extractive activities. By listing mining

companies, a wide range of shareholder demands is added to an already complex

environment. In theory, these companies are expected to meet transparency

requirements, but few of them actually do. For well-informed, long-term investment,

investors must be able to assess the company’s risks and measure them against the

profits it generates. Jointly conducted by Be-linked and Novethic, this study shows

that these companies provide inadequate information considering the severity of the

issues and conflicts they face. This in itself constitutes a risk. The May 2011 London

IPO of Swiss-based mining giant Glencore, until then relatively protected from the

media spotlight, symbolises the paradox of the mining sector. The operation raised

EUR 7 billion in a very short time. But numerous NGOs regularly accuse the group

of poor accounting, fiscal, environmental and social practices, and it is currently

being attacked for breaching the OECD Guidelines and investigated by the European

Investment Bank (EIB). It has also been systematically excluded from all portfolios of

4 © Novethic 2011. The Listed Mining Sector & ESG Risks

the Swiss foundation Ethos. So rather, investment in Glencore could be considered a

risky security for long-term shareholders due to the group’s opaque reporting.

NGOs’ power of influence

To better understand how companies work on these issues, it is important to analyse

not only their reporting but also their relations with their external stakeholders. One

of the outcomes of this study is a mapping of civil society organisations that interact

with the mining sector. Grouped hereafter under the term “NGO”, they may take

various forms (community groups, non-governmental organisations, trade unions,

indigenous peoples’ organisations, charities, religious organisations, professional

organisations and private foundations) but they have a fundamental point in common,

they are all increasingly watchful of the environmental and social impacts of mining

thanks to their technical expertise. NGOs also represent a media strike force that

can damage companies’ reputations, can threaten mining groups’ local operations

through coordinated efforts, and at worst can file lawsuits that reach up to hundreds

of millions or even billions of dollars, thereby posing grave legal and financial risks.


Sample

The study analyses the communication of 23 mining companies listed on European

markets (17 are on the London Stock Exchange and 6 on the Paris Bourse). The

sample reflects the diversity of the extractive industry in terms of company origin,

geographical location of operations and types of elements (industrial, precious metals,

rare earth metals, diamonds, etc.).

hEADQuArtErs oPErAtING oFFICEsturNoVEr

2010(Euros)

INtErNAtIoNAL PrEsENCE

AngloAmerican London United Kingdom 23 228 19 countries

AngloGold Ashanti

Johannesburg South Africa 3 889 10 countries

Antofagasta Londres United Kingdom and Chile 3 227 9 countries

ArcelorMittal Luxembourg Rotterdam 54 985 60 countries

Areva Paris France 9 104 43 countries

BHP Billiton Melbourne United Kingdom and Australia

37 194 25 countries

Boliden Stockholm Sweden 4 093 7 countries

ENRC London Kazakhstan 4 652 20 countries

Eramet Paris France 3 576 8 countries

Evraz Luxembourg Russia 9 433 12 countries

Fresnillo Mexico City Mexico 993 1 country

Glencore Jersey Zoug, Switzerland 102 081 30 countries

Imerys Paris France 3 347 47 countries

Kazakhmys London Kazakhstan 3 417 1 country

Lonmin London South Africa 1 126 5 countries

Norilsk Nickel Moscow Russia 5 947* 5 countries

Randgold Jersey Africa 357 7 countries

Rio Tinto London United Kingdom and Australia

39 855 40 countries

Severstal Russia Russia 9 560 9 countries

Rusal Jersey Russie 7 728 19 countries

Vale Rio de Janeiro Brazil 31 887 38 countries

Vedanta London United Kingdom and India 5 583 4 countries

Xstrata Zoug, Switzerland

Switzerland 21 473 21 countries

* Turnover 2009


miNiNG SeCTOr iSSUeS aND riSKS HiGHliGHTeD BY NGOS

The study chose NGOs that were particularly active on mining issues. Although not exhaustive, the sample is representative and can be used to illustrate the extractive industry’s environmental, social and governance issues as seen by NGOs. By analysing these organisations’ methods and strategies, it also helps determine the risks incurred by mining businesses. The study includes a review of the nature of the relations entertained between the surveyed NGOs and the mining companies. What has emerged is that mining companies have trouble not only responding to attacks from NGOs and anticipating and managing the risks created by these organisations, but also, save a few exceptions, cooperating with them and using their expertise, especially regarding social issues.

7Novethic 2011. The Listed Mining Sector & ESG Risks

eNvirONmeNTal iSSUeS

Environmental NGOs may either be locally-focused and established in the communities

directly affected by the operation of a mine or have a national or an international

scope. Staff in these organisations (whose activities span from technical assistance to

advocacy), have an expertise that is comparable to that of engineers in the extractive

industry. Some members have even previously worked in the field. Similarly, the

impacts they shed light on range from local repercussions on the area surrounding

an operating site to consequences on a global scale.

Pollutions

The types of pollution vary depending on the type of mine and the mineral extracted,

but the insufficient treatment of extraction residue is the primary cause of pollution

highlighted by NGOs. The main types identified are from the mining of radioactive

elements such as uranium or thorium, and mercury and cyanide pollution from gold

and silver mining. Most extractive processes also produce toxic residues, essentially

due to heavy metals or other elements that degrade little (arsenic, lead, chromium,

etc.) and chemicals used to separate the mineral from gangue.

Air pollution

Pollution may be carried through the air, either directly (dispersion of radon, a

radioactive gas resulting from the disintegration of uranium, for example, or bauxite

dust from open-cast mines) or indirectly when the wind lifts and disperses particles

from slag heaps or when steam clouds and toxic dust form above sludge storage

lagoons.

Water and soil pollution

Water pollution is one of the impacts that is most documented by NGOs, be it

through groundwater infiltration or through wastewater run-off into bodies of water.

Both of these types of pollution then contaminate the soil within a given perimeter

surrounding sites.


Remediation/decontamination of mining sites

Depending on the regulations in place in the country of extraction and how well they

are applied by mining companies, pollution levels from mining may be more or less

under control. However, many NGOs stress the problem of those sites which operated

and have since closed before these regulations were implemented and which therefore

had no provisions made for their site remediation and waste treatment. Locally-based

organisations, including citizen groups, environmentalists and local religious groups,

often document and condemn these practices, which can be found in developing

countries, former Soviet Union countries as well as the United States. The major

difference then is in the resources and political importance given to site treatment.

Passed in the United States in 1980, the Superfund Bill remains one of the most

notable examples of national legislation that requires either the parties responsible

to finance the decontamination of the most dangerous sites for the environment and

health (mining and chemicals) or the government to pay in the place of insolvent

companies (30% of cases).

Destruction of biodiversity

Mining can potentially affect biodiversity throughout the entire life cycle of a project.

Due to growing demand for metals and minerals and dwindling resources in the most

easily accessible regions, mining is increasingly extending into isolated, previously

untapped ecosystems rich in biodiversity. Developing countries are particularly

concerned by this phenomenon, having encouraged foreign direct investment and

therefore welcomed a number of mining companies, to then be confronted at times

with the cost of the deterioration of local forests, streams and the natural flora and

fauna.

Deforestation

The development of mining is one of the main causes of deforestation, which affects

regions rich in forests and biodiversity such as Indonesia. For example, BHP Billiton,

with activities in the «Heart of Borneo», a region home to a number of endangered

species, developed a programme to protect the orangutans living there. This action

was highly criticised by environmental experts and NGOs, including Mines and

Communities and WWF (more moderately), which accuse BHP Billiton of having in

the first place pressured the government into lifting the environmental safeguards in

place to protect the region.


Threatened land and aquatic biodiversity

Many species of fauna are highly dependent on vegetation. Any activity that destroys

forests or vegetation near streams and swamps reduces the quality and size of the

habitat that is essential for the survival of land and water species. Interestingly,

biodiversity is the issue on which NGOs and mining companies collaborate the most.

Rio Tinto and BirdLife International recently joined forces to protect bird habitats in

certain areas of the United States and Africa. Another example is the International

Union for Conservation of Nature (IUCN, essentially considered an NGO), which

formed a partnership with the International Council on Mining and Metals (ICMM)

in 2002 to engage in dialogue on mining and biodiversity. The IUCN also set up

a «Working Group on Extractive Industries and Biodiversity» to explore common

ground between the conservation community and the mining sector.

Competition for water access

Water is a unique resource that is highly sought after by many different sectors for

conflicting purposes. It is indispensable in the mining industry, which needs large

amounts of water to process minerals.

OLCA, Barrick Gold and the water from the Andes

Since the mid-2000s, the Latin American Observatory of Environmental Conflicts

(OLCA) has been observing the development of the mining operations of Barrick

Gold in the Pascua Lama region in Chile and Argentina, where a large gold deposit

(along with silver and copper) lies surrounded by five glaciers.

One of the main issues raised by OLCA is the competition for water resources. The

region is primarily used for farming and is already experiencing water stress (the

demand for water exceeds available resources). Fifty percent of water reserves

depend not on surface glaciers but rock glaciers, located deep underground. The

operations plan does not appear to have any special provisions for this. OCLA reports

that since the start of explorations in 2009 the water available for agriculture has

diminished or even virtually disappeared. However, extraction processes would

require 370 litres of water per second once the site is actually in operation.


SOCial iSSUeS

Similar to environmental NGOs, NGOs that deal with the social part of mining issues

either are very locally-focused or have an international scope while supporting local

NGOs and bolstering their capacity. The social impacts of mining that they examine

are both controversial and complex. Admittedly, mining can potentially create wealth

(jobs, income, infrastructure, economic development for poor or remote regions), but

often this wealth is not distributed equally. Numerous NGOs particularly condemn the

appropriation of land from local communities and their forced displacement, impacts

on health, changes in social relations, destruction of the means of subsistence and

lifestyles of populations, social disintegration and the sometimes violent tension and

conflicts that break out due to mining.

Greenhouse gas emissions

Many mining projects have developed in the heavily wooded areas of tropical regions

that are vital for the absorption of CO2. On top of the reduced CO2 absorption resulting

from the deforestation of operating sites, mining and mineral transformation rank

among the processes that emit the most greenhouse gases (GHG).

Xstrata challenged in Australian courts

Xstrata Coal Queensland is set to open a mine in Australia with an annual

production target of 30 million tons of coal. When this coal is used, it is expected

to account for about 0.15% of global GHG emissions. Friends of the Earth Australia

and 10 farming land owners located in the vicinity of the project have initiated

legal proceedings to block the development. It is unprecedented for a court case

in Australia to hinge wholly on climate change grounds, which emphasises the

potentially devastating impacts the mine would have on the Great Barrier Reef,

which attracts one million visitors every year. Within the next few months, the

Australian courts have to decide whether the environmental and financial impacts

are sufficiently grave to cancel the opening of the mine.


Impacts on health

Dangerous substances and the water, air and soil pollution mentioned above can,

if not kept under control, have serious repercussions on the environment and the

health of workers and the communities located near the extraction sites.

Direct effects

Working in mines is dangerous as workers often face arduous working conditions and

a number of work-related accident risks: collapse, explosion, flooding, fire, etc.

Indirect effects

The indirect effects of mining include the increased occurrence of chronic illnesses

and respiratory diseases (silicosis, pneumoconiosis) linked to dust or water pollution.

Haphazardly built mining towns and camps also threaten food availability and safety,

worsening the risk of malnutrition.

Prostitution and sexually transmitted diseases

The massive influx of labour, consisting essentially of single men, into a mining region

creates conditions that tend to lead to an increase in prostitution and a rise in sexually

transmitted diseases. Mining companies are beginning to address this problem,

notably in Africa, where some have implemented HIV/AIDS prevention programmes.

Impact on agriculture

In addition to the potential pollution of soil and water indicated above, the launch of a

mining project on farmland prevents the community from using the land for farming

or grazing. According to NGOs, the financial compensation, if any, is rarely adequate

to make up for the destruction of the means of subsistence and the loss of farming

and fishing jobs.

Violation of human rights and labour rights

NGOs regularly accuse the mining sector of infringement of human rights and, in

some countries, labour rights. The NGO «International Rivers» and the International

Trade Union Confederation provide a recent illustration: in October 2010, while about


a hundred Zambian workers were demonstrating in a protest march towards the

Collum coal mine (owned and run by Chinese investors), two Chinese mine supervisors

opened fire on 13 Zambian miners. Although none of the shots were fatal, the decision

by Zambian prosecutors to drop the charges against the two supervisors – who would

not have understood the miners’ grievances as they do not speak the language –

came as an outrage to the Zambian people.

Surge in conflicts

NGOs, notably the World Rainforest Movement, blame the growing number of «war

professionals» or mercenaries, former army soldiers and officers recruited into mining

companies’ security services, for contributing to a climate of violence and tension.

Conflicts involving «blood diamonds» (in Liberia, the Democratic Republic of Congo

and Sierra Leone during the civil war) also highlight the role that the mining industry

can play in fuelling violence. The economic factors and political issues entrenched in

these conflicts can become difficult to handle for the mining companies involved. This

is partly why the Kimberley Process has been challenged (see page 33) by the NGO

that initiated it, Global Witness.

Rights of indigenous peoples

With the discovery of raw materials in the subsoil of regions inhabited by indigenous

peoples, these populations can be forcibly displaced following a consultation process

that NGOs find are normally superficial and a compensation deal that is rarely deemed

satisfactory. Mining also replaces the subsistence economies specific to indigenous

peoples with a new market economy, potentially eroding or even destroying their

traditional values and customs.

Although a growing number of mining companies are beginning to engage with the

communities surrounding mining sites, they should be developing a policy which

is adapted to the special requirements of these communities. Indigenous peoples

are very often dispersed and remote; their language is mostly different from the

national language, and their culture may be the cause for a block on a project to build

infrastructure (roads, mines, dams, etc.). A declaration was issued by the United

Nations that specifically sets out the rights of indigenous peoples.


«Free, Prior and Informed Consent»

«Indigenous peoples shall not be forcibly removed from their lands or territories.

No resettlement shall take place without the free, prior and informed consent of the

indigenous peoples concerned and after agreement on just and fair compensation

and, where possible, with the option of return.»

Article 10, United Nations Declaration on the Rights of Indigenous Peoples adopted

in 2007.

Right to land

The dispossession of land is increasingly condemned by NGOs. Traditionally, land

belongs to the local farming communities that use it, but the government owns the

mineral rights in most countries. As such, it is entitled to attribute the subsoil to

different mining companies. However, the subsoil cannot be used without occupying

the land, causing the displacement of local communities or indigenous peoples. For

example, the co-ownership by AngloAmerican, Xstrata and BHP Billiton of a coal

mine in the Cerrejon region (Colombia) has been condemned by NGOs since 2006.

Friends of the Earth Australia, PressurePoint and the Mineral Policy Institute accuse

the three mining companies of expropriating indigenous land, displacing the peoples

and paying them inadequate compensation. The organisations have filed a complaint

with the Australian National Contact Point for the OECD Guidelines.

Protection of cultural practices

By upsetting the traditional lifestyles of indigenous peoples, mining companies also

endanger their cultural practices. Some companies, such as Vale, occasionally commit

to protecting the practices that constitute the identity of indigenous peoples, but this

is still rare.


GOverNaNCe iSSUeS

The NGOs that focus on governance are rather specific. Issues surrounding extraction

have often been a secondary concern for these NGOs, which historically have a global

focus on international financial institutions (IMF, World Bank), financial flows, debt

issues, tax havens, etc. But these advocacy NGOs are also professional lobbyists

and have initiated the most remarkable campaigns and regulation efforts in the

sector, such as «Publish What You Pay» which has played a key role in creating and

shaping the Extractive Industries Transparency Initiative (EITI). Recently, the not-

for-profit institute Revenue Watch has developed the «Revenue Transparency Index»

to measure the transparency of 41 governments in their management of oil, gas

and mining extraction. Transparency about the amount of revenue generated from

extractive industries and how this profit is redistributed is one of the crucial levers

identified by civil society for improving the impacts of extraction on local populations.

Funding

Capital-poor but mineral-rich developing countries need the financing of international

mining groups to expand their mining industry. However, several NGOs believe that

economic development as it has been promoted by the Wold Bank, IMF and the

European banking authorities through free market policies, structural ajustments and

higher foreign direct investment (FDI) has in fact contributed to the devlopment of

mining by foreign companies at the expense of local populations.


Glencore and copper mining in Zambia: an active campaign

Five NGOs, including Sherpa and Friends of the Earth, have recently lodged a

complaint with the OECD against Glencore. Its Zambian subsidiary, Mopani Copper

Mine, allegedly deprived the Zambian government of about USD 550 million in

tax revenues between 2005 and 2008 by manipulating transfer prices. Mopani

Copper Mine supposedly sold a significant part of its copper production at a price

well below the market price to its Swiss-based parent company, which then sold it

at the market price. As a result, Glencore made no taxable profit in Zambia but it

did where its head office is located, in the canton of Zug, deemed by NGOs to be

a tax haven.

NGOs have also pointed the finger at the European Investment Bank for its role

in the case. The EIB was criticised for granting a EUR 48 million loan to Glencore

in 2005. The NGOs emphasise that it is not a public bank’s position to lend money

to a private multinational that is based in a tax haven and generates high profits.

Corruption

Mining often generates major revenues, in the form of operation rights and taxes,

which are useful for any developing country to invest in education, agriculture and

basic industry. Unfortunately, this development model is only theoretical. What we

are actually seeing is the emergence of an economy that relies on one dominant

sector, with the local oligarchy collecting the inflow of profits. Local leaders enjoy a

host of opportunities to make money from their decision-making power: granting

mining permits, fixing permit prices or tax rates on mining revenues, eliminating

(both environmental and social) regulatory requirements and so on. For example, the

World Bank estimated national mining production in the Democratic Republic of Congo

at USD 2 billion in 2008. Only USD 26.7 million in tax revenues was actually paid

into bank accounts, despite the actual tax rate (rights, royalties and miscellaneous

taxes) officially amounting to 46%. That is why the EITI is pushing governments and

companies to report all of the financial flows generated by mining. The NGO network

«Publish What You Pay» also encourages extractive companies to publish what they

pay governments, so that both NGOs and citizens can easily identify corruption.


Legislation on extractive industries

Several NGOs have decided to focus on the issues involving legislation on extractive

businesses by either condemning breaches of existing laws or lobbying for stricter

ones.

Condemnation of non-compliance with legislation

Sherpa, whose mission is to defend and support «victims of economic crimes in their

quest for justice», is the most active NGO in this area. The organisation currently

offers its legal support to workers on Areva’s mining sites in Gabon and Niger and the

former workers’ collective of COMILOG - a Gabonese mining company that belongs

to the French multinational Eramet.

Lobbying for stricter laws

The NGO Development and Peace initiated an advocacy campaign to improve the

Canadian bill on responsible mining (notably following a report on the environmental

and social impacts of gold mining in Honduras) before the House of Commons in

Canada.


Overview OF NGO/COmpaNY relaTiONS FrOm THe iNTerNeT iN SUmmer 2011

Company ngo nature of relationship

angloameriCan

Conservation international

CollaborationearthwatCh institute (europe)

Fauna & Flora international aCtionaid

denunCiation earthworks

Friends oF the earth uknatural resourCes deFenCe CounCil

war on want

anglogold ashanti

Conservation international CollaborationpaCt

aCtionaid

denunCiation

CaFodCCFd terre solidaire

berne deClaration

Ghana Coalition oF nGos in health GreenpeaCe switzerland

human riGhts watCh

Friends oF the earth

waCam

arCelormittal

Conservation international CollaborationCee bankwatCh network

denunCiation

european Coalition For Corporate JustiCe

FranCe nature environnement

Friends oF the earth international

Global witness

Green salvation Groundwork (Friends oF the earth south aFriCa)one world trust oxFam

sandbaG

southern aFriCa revenue watCh

sustainable development institute liberia

vaal environmental JustiCe allianCe

areva

habitat For humanity

Collaborationpartenariats pour les CompétenCes et l'emploi des autoChtones

alhak-n-akal

denunCiation

brainForest

Commission de reCherChe et d'inFormation indépendantes sur la radioaCtivité (Criirad)berne deClaration

network oF orGanisation For transparenCy and budGet analysis

NGOs carry out many denunciatory campaigns against companies relating to a wide

range of issues, but they may also collaborate with them.


entreprises ong type de relation

Bhp Billiton

Fauna & Flora international CollaborationGreeninG australia

swiss human riGhts platForm For Columbia (ask)

denunCiation Friends oF the earth australia

Friends oF the earth international

international rivers

eramet

brainForest

denunCiation Coordination For the deFenCe oF the south


glenCore

swiss CatholiC lenten Fund

denunCiation berne deClaration


bread For all

sherpa FranCe

KazaKhmys Global witness denonCiation

norilsK niCKel bellona denunCiation randgold international Federation For human riGhts denunCiation

rio tinto

birdliFe international

Collaboration

Conservation international

earthwatCh institute (europe)Fauna & Flora international the royal botaniC Gardens, kew

international union For Conservation oF nature

Friends oF the earth ukdenunCiation national wildliFe Federation

oyu toGloi watCh

rusal elora Collaboration

valeinternational Federation For human riGhts denunCiation sandy pond allianCe

vedanta

aCtion For southern aFriCa

denunCiation aCtionaid amnesty international

peuples solidaires/ aCtion aid

survival international

Xstrata

aurum CollaborationFriends oF the earth

denunCiation northern land CounCil

rhéébù nùù

Antofagasta, Boliden, ENRC, Evraz, Fresnillo, Imerys, Lonmin and Severstal are not included

in this non-exhaustive overview as no apparent denunciation campaigns undertaken against

them were visible on the internet in the summer of 2011.


riSKS liNKeD TO THe aCTiON OF NGOS

There is a considerable number of NGOs that focus on extractive issues. The vast

majority of these NGOs are hostile to companies in the sector. A few have taken a

neutral stance while offering support to the development of local communities. A

minority of them occasionally collaborate with companies.

This hostility is a key factor that determines the methods of action taken by NGOs,

imposes a certain number of risks on the mining industry and influences the normative

framework for the activity of extractive businesses.

mUlTiple aNGleS OF aTTaCK FOr iNCreaSiNGlY iNTeGraTeD iSSUeS

NGOs take a global approach to extraction issues, summed up in the expression

«the resource curse». The phrase stems from academic or international institutions’

works on economics, referring to the paradox whereby the populations of countries

rich in natural resources and dependent on extractive industries do not benefit from

the wealth created and remain poor. It is a system where financial benefits are taken

by the multinational firms that exploit the resources, the governments and certain

interest groups of producing countries, rather than being redistributed towards the

development, education and health of the population.

Network-driven development from local to international

The mining industry, in particular the multinational firms surveyed, operates on scales

that range from the local (the mining site) to the international (notably in terms of

access to public and private financing). NGOs intervene at all of these levels, each

requiring adapted methods of action.

NGOs’ effectiveness in contesting the mining sector lies in the networks through

which they collaborate. Thanks to their geographical, thematic, militant, and personal

dimensions, they have the capacity to circulate information, support the organisation

of local protests and coordinate action on a wide scale. A number of coalitions now


even have the status of NGO, such as London-based «Publish What You Pay», which

currently has NGO members in roughly 60 countries.

Methods used to denounce mining companies

Advocacy

This is one of the traditional and probably most visible methods used by NGOs.

Advocacy NGOs defend a cause, policy or group of people in the name of public interest.

They use a variety of communication techniques, particularly global media campaigns

endorsed and circulated by members of their networks. These organisations act as

a pressure group to influence company practice and define laws, regulations and

standards.

Capacity-building for communities and local NGOs

The general public is relatively unaware that NGOs are involved in this type of action.

The organisations are often national or international in scope and contribute (through

training, communication of procedures, information, etc.) to the improvement

of individual expertise and the institutional strengthening of one or more local

organisations, with a view to boosting their effectiveness.

Both of these methods are implemented by the majority of NGOs surveyed,

irrespective of size. Virtually all organisations implement one or both

methods along with the following paths of action:

Legal action

NGOs play a role in bringing cases before the courts in front of the jurisdiction of

mining sites or company head offices. Legal action also covers complaints against

multinational companies filed with National Contact Points (NCPs) for the OECD

Guidelines. That said, the role of NCPs is essentially one of mediation between

companies and NGOs or unions filing the case.

Appealing to the courts occurs in the minority of cases but has an enormous media

impact and can result in considerable financial consequences.

Circulation of information

NGOs continuously produce information, in the form of either a composite of local

information or surveys on the ESG impacts of companies and the mining sector.

Research reports, studies, newsletters establish the basis for legal action or media

campaigns.


Gabon: COMILOG against NGOs and citizen groups

In April 2011, the Gabonese courts deemed admissible the complaint filed by

a citizen group, four NGOs including Brainforest and a congressman from the

opposition party against COMILOG, a subsidiary of Eramet in Gabon. The charge

involved alleged pollution from the manganese mine in Moanda in the Haut-Ogooué

province. The collective is demanding XOF 490 billion (EUR 746 million) in damages.

Methods of collaboration

Impact studies

The most common way that companies draw on the expertise of NGOs is when

performing groundwork on a potential mining site by contracting them to carry out

evaluation surveys. Additionally they may work on environmental impact studies at

active and polluting sites as well as on social impact studies. The terms of collaboration

vary but often involve the full publication of the NGO’s findings, thus guaranteeing

their independence and credibility.

Support in the management of impacts

Numerous partnerships are focused on promoting biodiversity and integrating it into

the company’s management processes. Other partnerships involve small and large

scale remediation and rehabilitation of sites at the end of their project life. Little joint

work exists on the management of social impacts, except a few rare cases such as

the joint agreement between Areva, Médecins du Monde and Sherpa to create multi-

stakeholder health observatories or the work of the NGO CDA Collaborative Learning

Projects.


FrOm lOCal OperaTiONal riSK TO GlOBal repUTaTiONal riSK

As described above, NGO networks operate in the form of an «activist chain» linking

local NGOs (sometimes coordinated by only a few people) with global NGOs along

which information, expertise, mobilisation and methods flow. Besides their aim to

change a local situation, NGO campaigns also often have the underlying goal to alter

the practices of the entire company or group. NGOs’ action, through their campaign

objectives and operating methods, can thus result in both local and global risks for

the extractive companies.

For example, international Eastern European-based CEE Bankwatch Network led

a campaign against ArcelorMittal in May 2008 at the time of the group’s general

meeting, publishing a shadow annual report entitled «In the wake of ArcelorMittal: The

global steel giant’s local impacts». Its foreword summed up the philosophy of a large

number of NGOs active in the mining sector: «The challenges that communities face

living next to the ArcelorMittal plants described are not only the sexy environmental

issues that command daily headlines in the world’s media, such as climate change

and melting ice caps. Rather, as presented here, it is people’s day to day struggle for

environmental justice and an environment that is not harmful to their health and free

of pollution. While the world focuses on the global impacts, let us not forget that it all

starts at a local level – companies that have local impacts invariably impact globally

– and unless there is strong mobilisation from the ground, our unconnected global

responses are meaningless. This is what is presented here today, a connected global

mobilisation from the ground.»

Risks caused by NGOs

Operational risk

In addition to operational problems and extra costs caused by the high mobilisation

of local populations, NGOs’ action directly on mining sites can block construction or

operation and result in heavy financial consequences.

Legal risk

This risk can materialise in cases brought before the national courts in the countries

where the company operates and in complaints filed with NCPs for the OECD

Guidelines. However, the current trend is rather the development of class action suits


taken against mother companies before courts in developed countries where these

companies have their head office. The potential financial penalties then go along with

a much larger media risk for the company.

Investor risk

Large advocacy NGOs (Amnesty International, Greenpeace, Friends of the Earth,

etc.) practice shareholder activism or take specific measures to reach out to investors

and convince them to put pressure on companies either directly or by divesting from

those that they believe are acting irresponsibly. Vedanta, ArcelorMittal and Rio Tinto

have dealt with this type of action. Rio Tinto, for example, is one of the companies

excluded by the Norwegian sovereign fund.

Reputational risk

When several risks are combined, the practices denounced by NGOs pose a threat

to the company’s intangible assets, which make up a significant portion of a listed

company’s value (its global trademark, employee pride, potential to recruit, etc.).

They can also affect its access to financing.

Bougainville: From local operational risk to global legal risk

Between 1972 and 1989 through its subsidiary Bougainville Copper, the group Rio

Tinto ran one of the largest open-cast copper mines in Panguna, Papua New Guinea.

The group’s behaviour (mass environmental deterioration, racial discrimination,

etc.) sparked a rebellion among the island’s inhabitants that resulted in the closure

of the mine in 1989. According to several NGOs and the London Mining Network, the

company played a major role in the ensuing civil war. Rio Tinto allegedly supplied

the police and army with combat helicopters, pilots, petrol and soldier camps, while

pushing the government to crack down on the upsurge. This was to ensure that

the mine would be re-opened with the support of the government in place. The

group is currently involved in a class action suit in the United States filed by the

inhabitants of Bougainville. They accuse the mining company of participating in the

conflict which killed 10,000 to 15,000 people during the civil war that lasted from

1990 to 1997 and of being indirectly responsible for crimes against humanity. If Rio

Tinto denies these allegations, the lawsuit could be seriously damaging should the

inhabitants of Bougainville, supported by their current government, win the case.


pOOr pUBliC reSpONSe FrOm COmpaNieS ON THe eSTaBliSHeD riSKS

Despite the large number of conflicts opposing NGOs and companies, only a minority

of the companies studied report on these conflicts and any potential legal proceedings.

Namely, Antofagasta, BHP Billiton, Vale and Xstrata mention them in their reports,

but most remain silent and prefer to discuss what they do for the communities (see

table on p. 17). Vedanta pushes this strategy to the extreme. Despite the highly

publicised conflict with the Dongria Kondh tribe over the past several years, Vedanta

only emphasises the positive measures the company claims to have taken for the

Dongria Kondh (improvement in quality of life, help to preserve their culture) in its

2010 reports, making no reference to the conflict, even when the issue was debated at

its general meeting in 2010, and the project was blocked by the Indian government.

Vedanta, NGOs and the sacred mountain

In 2002, Vedanta’s Indian subsidiary Sterlite was granted a permit to build a plant

in the state of Orissa that would be used to transform bauxite into aluminium.

Vedanta intended to mine the bauxite deposits on Niyamgiri, a mountain on the land

of the Dongria Kondh tribe, and transform the bauxite directly at the plant nearby.

In August 2008, the Indian Supreme Court confirmed Sterlite’s right to mine on the

sacred mountain of the Dongria Kondh. NGOs reacted strongly, notably Survival

International, which thrust the story of the Dongria Kondh into the international

spotlight. The Dongria Kondh fought to prevent Vedanta from mining the bauxite

on the mountain, which they venerate as a temple as it is home to the spirit of the

god Niyam Raja. On 24 August 2010, India’s Environment Minister decided to block

the project.

The pressure from Survival International and other NGOs like Amnesty International

prompted the Church of England to withdraw its capital from Vedanta (it owned

about USD 6 million in shares). Other investors followed suit. The plant now lies

dormant at the foot of the hills, far from lucrative for Vedanta.


aNalYSiS OF THe repOrTiNG OF miNiNG COmpaNieS


meTHODOlOGY

The reporting of twenty-three listed mining companies was reviewed to analyse the ir

approach to the ESG issues they face and their relations with civil society.

Research in company reporting

This study reviewed public sources of company reporting available only on the internet

(2010 annual report or the 2009 annual report if the 2010 version was not yet

available, sustainable development reports or corporate social responsibility reports,

company websites, in French and in English).

Review of mining issues highlighted by civil society

This study examined public sources available online in French and in English between

March and August 2011. Issues associated with the extractive industry and sector

initiatives were systematically listed from the websites of NGOs and international

networks of NGOs (WWF, Friends of the Earth, Oxfam, etc.) that referred to the

sector as well as in global and regional Social Forums.

Relations between the mining companies and civil society

Cross searches were performed online using key words (NGO, civil society) and the

name of the company or group in French and in English.

The organisations working on the impacts of the extractive industry vary in size,

from the small community-based organisation focused on a very local issue to the

recognised international NGO that uses its media influence to lead campaigns on

global issues in the sector. Their vast number, their relations with each other and

with companies and the variety of methods used and topics covered form a complex

landscape.

Work by civil society in certain regions, notably Russian-speaking areas, was difficult

to access.

Given the research method, the actions of some local organisations, which are in

fact very active, could not be easily ascertained due to their lack of visibility online

(especially in developing countries).


Assessment tool

To assess the transparency of mining companies on their ESG issues and their

relations with NGOs, a table was designed with 18 criteria listing the information

required in their reporting. The questions fell into four categories: Regulations and

sector initiatives, External stakeholders, Environment and Society. They cover the

main points in relations between NGOs and mining companies. Further details are

provided from page 31 to page 46.

The initial questionnaire featured two other questions whose answers were withdrawn

from the study due to lack of information but nevertheless remain key points.

1. Does the company have a position dedicated to NGO relations? Having

a position dedicated to NGO relations is often an outward sign of a strategy of

maintaining specific relations with civil society.

2. Does the company collaborate with NGOs specialised in the fight against

corruption? The lack of any specific information on the fight against corruption in

partnership with NGOs illustrates the challenges these companies face in tackling

corruption in their reporting.


CO

mpa

Nie

S r

aN

KiN

G

rEPortING AND DIALoGuE: ComPANIEs wIth 15 to 10 PosItIVE ANswErs

This category includes the companies in the sector with the best scores for reporting. They often refer to NGOs in their annual reports and sustainable development reports and include them as stakeholders in their own right in their CSR strategy. Six companies rank in this group (AngloAmerican, BHP Billiton, Lonmin, Rio Tinto, Vale, Xstrata) and gave positive answers to more than half of the questions listed in the assessment table but provide incomplete information on certain key ESG issues such as the fight against corruption.

PArtIAL rEPortING: ComPANIEs wIth 4 to 9 PosItIVE ANswErs

This category includes companies that either report on their relations with NGOs and have established valuable partnerships (ArcelorMittal, Areva) or mention NGOs very little but have a developed CSR policy and reporting (Boliden is the best example). At the bottom of the table in this category are companies that report little either on their CSR strategy or relations with NGOs.

oPACIty: ComPANIEs wIth 1 to 2 PosItIVE ANswErs

This last category covers companies that are completely opaque (ENRC, Evraz, Glencore, Kazakmys, Severstal), with virtually no mention of NGOs and a rudimentary or even non-existent CSR strategy. They do not publish a sustainable development report and the «Corporate Social Responsibility» sections of the website or annual report are particularly insufficient.

AngloAmerican Vale BHP Billiton Rio Tinto Xstrata Lonmin

REPORTING AND DIALOGUE

ENRC Kazakhmys Evraz Glencore Severstal

PARTIAL REPORTING

AngloGold Ashanti ArcelorMittal Areva Fresnillo Antofagasta Norilsk Nickel Randgold Vedanta Eramet Rusal Boliden Imerys

OPACITY


Major multinationals communicate better than smaller

companies…

Five out of seven of the companies with the highest 2010 revenues

answered positively to more than half of the criteria identified

(AngloAmerican, BHP Billiton, Rio Tinto, Vale and Xstrata). The size

and diversity of their mining operations expose these companies to

greater risks, which they are required to manage accordingly. However,

even some medium-sized companies, such as Lonmin, can provide

satisfactory reporting on the issues and risks they face.

…But Glencore is the exception that proves the rule.

The No. 1 player in the mining sector ranks last of all for its reporting

on ESG issues, with one positive answer for 17 negative ones. Based in

Switzerland and listed in London, generating annual revenues of more

than EUR 100 billion and operating in numerous countries, paradoxically

the group currently published at the time of writing no annual report or

sustainable development report.

The companies reviewed maintain hazy, limited relations with

civil society organisations.

Aside from companies that never mention the term NGO, relations

between companies and civil society organisations can range from

simple interaction to a long-term strategic partnership. The quality of

information on these relations is however inconsistent. While several

companies take into account the concerns of stakeholders (principally

NGOs) depending on the impacts on their businesses or provide detailed

descriptions of the partnerships established with them, others merely

refer to NGOs in general terms without any further information.

KeY FiNDiNGS


French companies are no exception.

For the past ten years, listed French companies have been legally

required to inform their shareholders about ESG issues (Article 116

of the Law on New Economic Regulations). However, the three French

companies surveyed (Areva, Eramet and Imerys) do not show greater

transparency than the rest and rate among the average in this study.

They provide little information on their relations with NGOs, with

Imerys making no mention of them at all.

Russian and Kazakh mining companies are the least

communicative.

Companies based in Russia or Kazakhstan report very little on CSR issues

and virtually do not mention NGOs. As companies listed in Western

Europe, they are expected to provide reporting in these areas in English

for their shareholders. Out of the four Russian companies reviewed,

only Norilsk Nickel publishes a «Corporate Social Responsibility Report»

in English where it described aspects of its relations with NGOs for the

2009 financial year. The group has notably worked with NGOs on a

number of occasions at the Stillwater Mining Company site in the United

States, in which Norilsk Nickel holds a 53% stake. Indeed, development

outside former Soviet republics could be key in driving the company to

report on these matters.

However, major Russian mining groups following their privatisation in

the 1990s offen continue to play an important social role in communities

(education, health). They all show some form of social engagement,

defined as «philanthropy», «charity» or «sponsorship», implying that

relations with civil society are not considered strategic.


DeTaileD aNalYSiS BY eSG THeme

SeCTOr reGUlaTiONS aND iNiTiaTiveS

Here, the study looked at the degree of self-regulation in the sector, based on the

voluntary compliance of the companies surveyed with various standards, initiatives

and reporting systems.

• Does the company encourage the implementation of the Extractive Industries

Transparency Initiative (EITI) in the countries (non-OECD members) where it

operates?

• Does the company publish the amount of tax and operation fees paid in the

countries where it operates?

• If it is involved in diamond extraction, does the company apply the principles of

the Kimberley Process or other standards?

• Has the company signed the Voluntary Principles on Security and Human Rights?

• Does the company apply the principles of the Global Compact or the guidelines

of the Global Reporting Initiative (GRI), notably the directives in the «Mining and

Metals Sector Supplement»?

• Does the company have an official stance on compliance with the principles, texts

and conventions of the International Labour Organization (ILO)?

Guidelines for voluntary engagement

Extractive Industries Transparency Initiative (EITI)

The EITI was launched by the government of the United Kingdom. It is a coalition

of governments, companies, investors and NGOs, one of the largest of which is

Transparency International. In 2003, the EITI published its principles which aim to

increase the transparency of payments and revenues in the extractive industries. In

line with the objective of the NGO-led «Publish What You Pay» campaign, the initiative

requires compliant countries to make public the extractive revenues received and


requires companies to publish the amounts paid. As a result, local populations can be

well-informed about how their government is using extractive revenues, and in this

way reduce the risks of questionable financial practices and corruption.

The Dodd Frank Act passed in the United States on 21 July 2010 by US President

Barack Obama follows on from the EITI. The legislation requires oil, gas and mining

companies listed with the Securities and Exchange Commission (SEC) to disclose

payments to governments on a country-by-country basis. However, the main oil

companies listed on the New York Stock Exchange are currently pressuring the SEC

and US government to authorise exceptions for certain countries (Angola, China,

Qatar, etc.).

Global Compact

The Global Compact was initiated by the United Nations. Signatory companies are

committed to aligning their operations and strategies with ten principles in the areas

of the environment, human rights, labour and anti-corruption. They are required to

post an annual «Communication on Progress (CoP)», which presents the company’s

progress over the year in complying with the 10 principles.

Global Reporting Initiative (GRI)

Set up in 1997, the GRI defines sustainable development reporting standards and

features sector supplements. The GRI publishes regularly updated guidelines that

form a framework for preparing annual reports and sustainable development reports.

Each company joins on a voluntary basis and having the GRI check the compliance

with its guidelines is optional.

The GRI has a «Mining and Metals Sector Supplement».

Voluntary Principles on Security and Human Rights

These principles were launched in 2000 in response to a specific issue in the extractive

sector involving the breaches of human rights committed by security companies and

national armies employed by mining companies to ensure the security of their mining

sites.

Only 6 out of the 23 companies in the sample have signed the Voluntary Principles

on Security and Human Rights: AngloAmerican, AngloGold Ashanti, BHP Billiton,

Lonmin, Rio Tinto and Xstrata.


Kimberley Process

This international certification program launched in 2003, mobilises governments,

diamond companies and civil society organisations to prevent precious stones from

financing wars and guerilla warfare, as was the case in Liberia and Sierra Leone. The

Kimberley Process enabled governments plagued by illegal diamond trafficking to

improve their tax revenues. For example, in Sierra Leone following the application of

the Kimberley Process, official exports of «clean» diamonds rose from USD 10 million

in 2000 to USD 140 million in 2005. But today the Process has been challenged since

certification was granted to Zimbabwe and Democratic Republic of Congo, countries

that are believed to sell diamonds from mines where the army has been accused of

violence by a number of NGOs.

Out of the three companies that mine diamonds (AngloAmerican, BHP Billiton and Rio

Tinto), only the AngloAmerican subsidiary, De Beers, refers to the Kimberley Process,

stating that it is compliant.

Environmental and social sustainability standards of the World Bank

Given the environmental and social consequences of very large-scale mining,

multinationals now have to make commitments to comply with minimum standards

in order to ensure and finance their projects. The standards of the International

Finance Corporation are responsible for this role in the mining sector.

The IFC is a member of the World Bank group that deals with the private sector. Its

environmental and social review process, featuring eight performance standards, now

applies to all investment projects. The process «is an important factor in its decision

to finance the project or not, and will determine the scope of the environmental and

social conditions of IFC financing».

Strictly speaking, these standards only apply to investment projects financed by the

IFC, but in fact have set an international standard for managing impacts in general.


The criteria, which first took effect in 2006 and were updated in 2011, assess the

following aspects over the life of a project and its impacts:

1. Assessment and Management System of Social and Environmental Risks and

Impacts

2. Labour and Working Conditions

3. Resource Efficiency and Pollution Prevention

4. Community Health, Safety and Security

5. Land Acquisition and Involuntary Resettlement

6. Biodiversity Conservation and Sustainable Management of Living Natural

Resources

7. Indigenous Peoples

8. Cultural Heritage

Since 2010, the main points in these standards have been integrated into the GRI

guidelines for the mining sector, promoting convergence among voluntary engagement

frameworks that apply to mining.

International Council on Mining and Metals

The ICMM, International Council on Mining and Metals, was established in 2001 and

brings together:

• 20 mining and metals companies, including AngloAmerican, AngloGold

Ashanti, Areva, BHP Billiton, Lonmin, Rio Tinto, Vale and Xstrata, which were

part of the sample in the study;

• 31 national and regional mining and metals associations, including

Euromines, Eurométaux, the International Copper Association and the World

Gold Council.

Its purpose is to promote the application of best practices in sustainable

development among its members. This is achieved through publications on topics

such as indigenous peoples, human rights, planning for integrated mine closure or

mercury risk management. The ICMM also requires independent certification of the

annual assessment performed by each member on its performance as against the

organisation’s 10 principles:

1. Implement and maintain ethical business practices and sound systems of

corporate governance.


1. Integrate sustainable development considerations within the corporate

decision-making process.

3. Uphold fundamental human rights and respect cultures, customs and values

in dealings with employees and others who are affected by our activities.

4. Implement risk management strategies based on valid data and sound

science.

5. Seek continual improvement of our health and safety performance.

6. Seek continual improvement of our environmental performance.

7. Contribute to conservation of biodiversity and integrated approaches to land

use planning.

8. Facilitate and encourage responsible product design, use, re-use, recycling

and disposal of our products.

9. Contribute to the social, economic and institutional development of the

communities in which we operate.

10. Implement effective and transparent engagement, communication and

independently verified reporting arrangements with our stakeholders.

ICMM members are admitted on an opt-in basis. Only companies that have made a

formal commitment to comply with these principles can join the organisation.

In conclusion, these voluntary initiatives and standards have a definite knock-on

effect and expose companies to stronger pressure from their stakeholders. NGOs

verify that commitments are actually applied by companies and denounce all the more

harshly any practices that they believe are contrary to company claims. Regarding

uncommunicative companies like Glencore or the Russian and Kazakh groups, NGOs

focus on condemning existing practices and lobbying to force companies to change

and become more transparent.


eitiComplying companies

gloBal CompaCt

Signatories

gri Companies adhering to

the guidelines

angloameriCan

anglogold ashanti

antofagasta arCelormittal

areva Bhp Billiton

Boliden eramet enrC evraz fresnillo glenCore imerys KazaKhmys lonmin

norilsK niCKel randgold rio tinto

severstal rusal vale

vedanta Xstrata

23 10 12 12

OVERVIEW OF INDUSTRY INITIATIVES ESPOUSED BY INTERVIEWED COMPANIES


exTerNal STaKeHOlDerS: SCarCe FOrmal eNGaGemeNT wiTH NGO STaKeHOlDerS

This criterion examines how mining companies perceive civil society

organisations. Are NGOs considered strategic stakeholders, whose

opinions need to be taken into account in the company’s policy and

practices? If so, how is this viewpoint formalised?

• Has the company introduced a formal stakeholder consultation process that

includes NGOs?

• Has the company implemented an NGO relations strategy along the entire project

chain (from groundwork to assessment of practices)?

• Has the company set up partnerships with NGOs on CSR issues?

Formal NGO consultation process and NGO relations strategy

Eleven out of 23 companies, roughly half of the sample surveyed, have introduced

a formal stakeholder consultation process that includes NGOs. A single company,

AngloAmerican, obtained three positive answers having established partnerships

with NGOs on CSR issues, a stakeholder consultation process and an NGO relations

strategy that spans the entire project chain. It implemented a process called SEAT

(«AngloAmerican’s Socio-Economic Assessment Toolbox»), which defines the steps

to follow for each project and includes NGO consultation.

A number of companies have referred to a form of stakeholder consultation at one

time or another in the life cycle of a project. Eleven of them occasionally resort to

some example of stakeholder consultation.

Xstrata, for example, provides more detailed information based on quantitative data.

«Community consultation has been a particularly important activity across our global

footprint during the past two years as we have accelerated the pace of new growth

projects and expansion of existing facilities... We held nearly 3,000 meetings with

stakeholders in 2010, with more than 34,000 people attending» (p. 89 of the 2010

Sustainable Development Report).


CSR partnerships

Nearly half of the sample (11 positive answers and 12 negative answers) claim to

have CSR partnerships, although they vary in scale. The partnerships set up by

AngloAmerican, Areva and Vale seem more developed than the less strategic and

more sporadic collaboration organised by Fresnillo or Norilsk Nickel.

In addition to the quite innovative social performance education and training

programmes implemented for its employees, AngloAmerican has been working in

partnership with the NGO Care in several regions of the world since 2003. They

share their expertise and collaborate on programmes to prevent and fight against

HIV/AIDS in Lesotho and South Africa. Care also uses its field experience to assist

AngloAmerican in better meeting the needs of communities in the regions where the

company operates.

Areva signed an agreement with the non-profit organisations Sherpa and Médecins

du Monde to create joint health observatories around its mining sites in Niger and

Gabon. Although disputed by some NGOs, notably by the Commission for Independent

Research and Information on Radioactivity (CRIIRAD), this network, with the support

of the authorities in the countries in question, is the first of its kind. The purpose

of the observatories is to study the health of workers at Areva’s uranium mines

and the potential impact on the health of neighbouring populations. Should diseases

attributable to mining be found, the necessary treatment would be covered by the

group, in accordance with the terms of French medical coverage.

Vale, with the help of NGOs, collaborates with indigenous communities worldwide.

In New Caledonia for example, the company signed a sustainable development

agreement with the Kanak people in October 2009 to guarantee the ethnic group’s

participation in Vale’s environmental monitoring. The partnership also works to

preserve Kanak culture in New Caledonia.


eNvirONmeNT: DevelOpeD repOrTiNG BUT DeFiCieNT rOle OF NGOS

Environmental issues offer a basic idea not only of companies’ CSR

strategy on environmental reporting, but also of their policy on

managing the impacts specific to mining, by integrating the expertise of

environmental NGOs, notably to assess these impacts.

Although company communication on environmental policy generally features

relatively developed reporting, specialist NGOs are rarely mentioned. There were six

times more negative answers (79) than positive answers (13). Only Vale answered

positively to three out of four questions, followed by AngloAmerican and Rio Tinto.

As these companies’ environmental practices are strongly condemned by NGOs, the

mining sector unsurprisingly remains far from leaving the land of confrontation for

the road to collaboration.

Water and energy management policy

Most companies have defined environmental policies on their own initiative, but very

rarely with NGOs. The best example of this strategy is the Swedish company Boliden.

The group has taken a proactive approach to environmental issues, but does not

once mention NGOs in its sustainable development report. This certainly stems from

conflicts it faced in the late 1990s and early 2000s. Boliden was attacked by WWF

and Greenpeace following failures in dams linked to the mines that the company was

operating in Spain and the Arctic region. These highly publicised accidents and their

disastrous consequences (tidal waves of sludge containing highly toxic metallic

• Does the company have a water and energy management policy at its sites in

partnership with NGOs?

• Does the company have an end-of-life site rehabilitation policy in partnership with

NGOs?

• Does the company perform assessments on its impact on the environment and

biodiversity in partnership with NGOs?

• Does the company work with NGOs on the treatment of its impact on the

environment and biodiversity?


residue) pushed Boliden to review its environmental policy and learn the much-

needed lessons.

In terms of water and energy management, ArcelorMittal stands out because it formed

a steering committee for water. NGOs involved in the CDP Water Disclosure initiative

took part in this committee. With their help and other key stakeholders, ArcelorMittal

identified where it should focus the development of its water management strategy.

Vale is also extremely involved in energy management. With the Ethos institute and

the Sustainable Amazonia Forum, the Brazilian group supervised the publication of

an «Open letter to the Brazilian government on climate change» in which industrial

companies came together for the first time pledging to reduce their greenhouse gas

emissions. On the impetus of Vale, 30 companies had signed the document by the

end of 2009. The group also works with NGOs on water and energy management

issues through its Vale Fund for Sustainable Development.

Management of the company’s environmental impact in partnership with NGOs

Seven companies (AngloAmerican, BHP Billiton, Fresnillo, Norilsk Nickel, Rio Tinto,

Vale and Xstrata) state that they work with NGOs in the field to manage their impact

on the environment and biodiversity. Only two (AngloAmerican and Vale) clearly

report on the assessments of operations carried out in partnership with NGOs.

AngloAmerican included a biodiversity performance standard in its environmental

policy («The Environment Way»), which requires all projects and operations to perform

regular assessments of their impact on the environment. Several were performed

in partnership with Fauna & Flora International, helping AngloAmerican to assess

its exposure to risks of destruction of biodiversity. But Vale shines the brightest

when it comes to environmental partnerships with NGOs. Through its Vale Fund for

Sustainable Development, Vale regularly performs impact assessments and develops

biodiversity conservation and protection programmes with local organisations.

Rio Tinto works on its direct impacts with NGOs but also uses the system of land

swaps (see box). The group has set up partnerships with the NGOs Conservation

International, BirdLife International and Earthwatch Institute, which help to integrate

biodiversity issues into its environmental policy and better manage its direct impacts.


Fauna and Flora International is helping RioTinto achieve a «net positive impact» on

biodiversity in the future.

Controversial system of land swaps

Land swaps are based on the idea of compensation. The company buys parcels of

land with the same biodiversity qualities as the land being mined and turns them

over to an NGO to manage in order to compensate for the deterioration of the

parcel exploited by the company. This system is debated by environmental NGOs.

Some only see it as a gimmick used by mining companies to assert a «greener»

image without having to reduce their direct impacts on mining sites. For others,

compensation programmes like land swaps can be a valid solution, provided the

company works to improve its direct impacts at the same time.

Site rehabilitation policy with NGOs

Only two out of 23 companies, Randgold and Rio Tinto, have implemented a site

rehabilitation policy in partnership with NGOs. Specialised in gold mining and operating

primarily in Africa, Randgold began to develop a farming project in partnership with

NGOs (whose names were not mentioned in the 2010 annual report) to reduce the

impact of the closure of the Morila mine in Mali. Randgold expects this pilot project

to offer attractive economic alternatives to mining work and develop local business.

Rio Tinto has also set up several partnerships with NGOs on mining site rehabilitation

projects. In addition to working with the Royal Botanic Gardens on specific rehabilitation

techniques, Rio Tinto is participating in the «Eden Project», an educational visitor

attraction in southwest England devoted to promoting the sustainable use of the

planet’s resources. The project was developed on a former mining site to provide an

example of site rehabilitation after exploitation. The purpose of this partnership is to

develop a global centre for post-mine rehabilitation.

Other companies (Areva, Lonmin) develop site rehabilitation projects led with local

communities but do not specify whether NGOs are associated.


• Does the company show that it engages in local social dialogue with identified

representatives, unions or NGOs?

• Does the company have an official position on human rights (reference to

international conventions and standards or an internal charter) and/or the respect

of the rights of indigenous peoples (reference to international conventions and

standards or an internal charter)?

• Does the company perform assessments on its impact on local communities

(health, food safety, intangible sites and heritage) in partnership with NGOs?

• Has the company implemented a consultation and compensation policy in the

event of mining-induced displacement?

• Does the company have social engagement practices with NGOs?

SOCial: pOOr NGO/COmpaNY DialOGUe aND iNaDeqUaTe COmpaNY repOrTiNG ON impaCTS

Mining becomes acceptable essentially when companies can integrate well into a

region (respect for surroundings, communities and lifestyles) and comply with both

the regulations in effect and human rights, more specifically, those of indigenous

peoples. More negative than positive answers were given for these issues (67 positive

answers versus 71 negative answers). AngloAmerican, Areva, BHP Billiton, Eramet,

Lonmin, Rio Tinto, Vale and Xstrata were the most active companies with four or

more positive answers out of six.

Social dialogue

Eighteen out of 23 companies state that they have established global and local social

dialogue. The vast majority of companies claim to consult their employees and dialogue

with them through unions, pointing to unionisation rates. Some companies, such as

Areva, also refer to stakeholder maps created to consult with key representatives,

including NGOs.


Consultation and compensation policy in the event of mining-induced displacement

Six out of 23 companies state that they have introduced this type of policy. National

regulations exist on consultation and compensation but are often criticised by NGOs,

notably with regard to indigenous peoples. Only one-fourth of the sample declares

that a consultation and compensation policy has been put in place in the event of

mining-induced displacement (AngloAmerican, BHP Billiton, Lonmin, Randgold,

Vale et Xstrata), despite this being a critical aspect of the social impacts of mining.

Furthermore, often the policy merely comprises in fact occasional examples of

consultation with local populations rather than a genuine cross-company policy.

Randgold remains rather evasive, while AngloAmerican describes in its 2010

sustainable development report a single case of consultation with local populations

in Australia within the context of an exploration project. The group did not specify

whether this policy applies for each project.

Other companies take a global approach and state that they base their population

displacement policy on IFC standards. BHP Billiton states that in cases where

displacement and resettlement are unavoidable, they must «be consistent with the

requirements of the International Finance Corporation Performance Standard 5: Land

Acquisition and Involuntary Resettlement». But it also asserts that free, prior and

informed consent, which can be defined as full community support, «is only required

where it is mandated by law».

Issues involving the appropriation of land, involuntary displacement and resettlement

as well as compensation of communities nevertheless prevail as the most highly

criticised practices by NGOs.

Vale in Mozambique: a model case for best practice

Vale relocated 980 families in Mozambique to three districts neighbouring the

future mining region. It built 300 new houses as well as health and education

facilities. «Knowledge Stations», centres for human and economic development

that encourage cultural and sports activities and provide professional training

programmes, are being set up in these districts. Vale declares that it complied with the

IFC’s standards on population displacement (consultation, community involvement

throughout the process, social and economic studies to identify the populations

to displace and resettle, implementation of a grievance redress framework, etc.).


Assessment of the impact of mining on communities with NGOs

The preliminary impact study is essential, but virtually none of the companies report on

any assessments of the impacts of mining on local communities (health, food safety,

intangible sites and heritage) in partnership with NGOs, except Areva and Vale. Both

companies state that they perform these assessments with NGOs but in different

ways. Areva carries out its assessments by creating health observatories near its

mining sites in Niger with Sherpa and Médecins du Monde. Vale simply declares that it

runs «socio-economic assessments» with NGOs but provides no further information.

However, several mining companies, notably Eramet and Xstrata, carry out

assessments of the impact of their business on local communities without NGOs. In

Indonesia, at the Weda Bay Nickel site, Eramet conducted in-depth studies on public

health, local food habits and cultural heritage. The French group also conducted

ethnographic studies on a nomadic people living on and near the concession. Xstrata

explained that it also carries out «baseline studies and risk assessments to identify

and evaluate socio-economic impacts on local communities and the surrounding

region at each stage of an operation’s life cycle» and uses «the results to enhance the

benefits and anticipate and avoid any negative impacts». However, these initiatives

have not protected either of these companies from criticism by NGOs.

Official position on human rights and the rights of indigenous peoples

Mining companies must often deal with indigenous peoples who are living on the

potential mining site and would be affected by the mining operations. It is therefore

a delicate topic. This explains why the majority of companies issue an official position

on human rights (19 out of 23), while six of them have a specific position on the

rights of indigenous peoples (BHP Billiton, Eramet, Lonmin, Rio Tinto, Vale, Xstrata).

BHP Billiton and Rio Tinto refer to the United Nations Declaration on the Rights

of Indigenous Peoples, while Lonmin and Xstrata state that as members of the

International Council on Mining and Metals (ICMM), they support its position on

indigenous peoples. Ideally, they should commit to complying with both of these

texts…


Social engagement

The vast majority of companies (17 out of 23) claim to have a form of social

engagement with NGOs. The programmes implemented (most often with NGOs) are

rather similar and cover a variety of areas including health, education, development

of infrastructures, local economic development, sports, culture, etc. In the best

cases, programmes are put in place following an assessment of the communities’

needs. Their engagement can be broken down into three main categories (see chart

on page 46).

First are companies that do not report (Glencore) or report little on their engagement,

which could be referred to as traditional but undeveloped philanthropy. The second

and largest category includes companies with a more developed philanthropic

commitment that report more, but with stark contrasts ranging from vague mention

of projects carried out with NGOs (2-) to average reporting (2) to detailed and

quantified reporting (2+). The third category covers companies with a genuine

social engagement strategy reaching beyond philanthropy, which is integrated into

their global policy and described in their reporting. Observers can understand the

company’s views on the relationship between its actions and its impacts on sites and

local populations.


3GENuINE soCIAL ENGAGEmENt strAtEGy

ArcelorMittAl

BHP Billiton

rio tinto

VAle

XstrAtA

2+

PhILANthroPIC CommItmENt

AngloAMericAn

rAndgold

2AntofAgAstA

AreVA

erAMet

lonMin

VedAntA

2-

Anglogold

AsHAnti

fresnillo

KAzAKHMys

norilsK nicKel

rusAl

1

trADItIoNAL but uNDEVELoPED PhILANthroPy

Boliden

eVrAz

enrcseVerstAl

0glencore


variOUS viewpOiNTS ON THe iNFlUeNCe OF STaKeHOlDerS

The comparison of the Environmental, Social and Governance (ESG) issues related

to mining that are highlighted by NGOs and the analysis of the reporting of the 23

companies reviewed, show the gaps in the information available to stakeholders. Yet

this information is valuable for investors that integrate ESG criteria, e.g. signatories to

the United Nations Principles for Responsible Investment (PRI). NGOs that campaign

against certain mining practices are now trying to mobilise them to join their cause.

To better understand this emerging trend, the study looked at how alliances are used

to push the mining sector into changing its practices. Three viewpoints were collected

from the various players involved: an extra-financial rating agency, EIRIS, a listed

mining company, Eramet, and an NGO that works on mining issues, Sherpa.


EIRIS

EIRIS is an extra-financial rating agency created in 1983 in the United Kingdom. It

provides investors with ESG assessments on 3,000 companies worldwide and alert

systems that warn when companies breach major international conventions. In July

2010, a few days before Vedanta’s general meeting in London, EIRIS published a

report on the company’s bauxite mining operations in the Orissa region of India, in

partnership with Amnesty International. The report showed that when a company

does not seriously take ESG issues into account, its business model can be affected.

This served as a warning for Vedanta shareholders. A few months later, the Indian

government announced that it was blocking the project, causing Vedanta’s share

price to plummet by 30%.

In your opinion, is mining one of the riskiest sectors for an investor?

Mining, like the oil and gas industries, is unique in its exposure to all potential

environmental and social risks. Some of these risks can have serious financial

consequences for an investor. These may notably be due to the temporary closure

of a site, caused for example by fatal mining accidents, accidental pollution, drought

restricting access to water – indispensable in mining processes – the loss of operating

permits, and so on. Reputational risk is also crucial for firms investing in this sector,

with numerous breaches of international standards having been uncovered by various

organisations.

What is the least an investor can demand from a mining company to limit risk taking?

The Voluntary Principles on Security and Human Rights, the Extractive Industries

Transparency Initiative, the ICMM’s Good Practice Guidance and the United Nations

guidelines for business and human rights (the «Protect, Respect and Remedy»

framework by special representative John Ruggie adopted in June 2011) provide

strong starting points for an approach designed to limit an investor’s risk.

tyPhAINE DE borNEsENIor ANALyst


Which risks in the mining sector concern your investor clients the most?

Investors seem to accurately detect the risks that will have a direct impact on the

populations surrounding the mining site: local pollution, threats to biodiversity, water

access, population displacement, use of security forces, etc. This is probably because

these are the risks most monitored by NGOs and covered in the media.

Are the publically available documents adequate for investors to decide to invest in a mining company?

If an investor wants to identify the ESG risks to which the company is exposed,

it is better to ask directly. Let’s take an example: in politically unstable regions,

mining groups subcontract the security of the mine to private companies. The means

used by these private companies to fulfill their role are not publicly reported, nor

is any interaction with public security (police, army). Investors should contact the

company directly to review the agreements and procedures in effect to make sure

that these armed guards are sufficiently controlled to avoid any violation of human

rights. Investors should also obtain directly from the company thorough assessments

of impacts on the environment, particularly on biodiversity and relations with local

populations.


ERAMETEramet is one of the three French companies reviewed in the study. It is one of the

main producers of metal alloys, namely manganese and nickel, and special high

performance steel, used for example, in aeronautics. Eramet is also involved in major

projects to develop new metals such as lithium, niobium, rare earth elements and

recycling. The mining group employs 14,000 people in about 20 countries spanning

five continents. Since 1999, Eramet has integrated companies into its scope, which

currently includes Société Le Nickel (SLN) in New Caledonia and COMILOG in Gabon.

The group’s current development and the Weda Bay nickel mine project in Indonesia

have raised its profile and contibute to attracting attention from NGOs.

What is your communications strategy on your sustainable development policy?

Until last year, our corporate culture was more focused on discretion. We did not

give prominence to reporting on our commitments but rather about the initiatives

already implemented and the availability of information online was not emphasised.

We have revised our strategy. Our current sustainable development policy began

in 2010, the year we also adopted an ethics charter. The following months were

devoted to deploying this policy internally. We essentially wanted to «do first and talk

later». We adjusted our strategy and decided to be more ambitious with our external

communication. More concretely, our website will be entirely overhauled between

now and the spring of 2012, with the launch of theme-based websites on projects

that are the focus of NGO campaigns, such as Weda Bay in Indonesia.

This project earned Eramet the 2010 Pinocchio Award from Friends of the Earth. What was your reaction and how do you work with NGOs on this now sensitive subject?

There are two essential dimensions. The first is that the decision whether or not to

launch this project, to build a nickel mine and processing plant, will not be taken

until the end of 2012. The project would cost an estimated USD 3 billion. To find the

required financing, we clearly have to meet the highest international environmental

and social standards. The site was reviewed by MIGA, an organisation that works

with NGOs, which granted its certification in July 2010. We should have increased our

communication about this guarantee for the Weda Bay project, particularly on the

CAthErINE tIssot-CoLLE ExECutIVE VICE PrEsIDENt, CommuNICAtIoNs & sustAINAbLE

DEVELoPmENt


Internet, as it is important proof of the credibility of our operations. Until then, we had

opted for more local reporting, in Indonesia itself. The Pinocchio Award seemed unfair

as it is supposed to «reward» strategies of false communication. Yet we had virtually

not said anything online about the project . We have decided to respond by launching

a dedicated website by the end of the year. It will explain all of the programmes we

have introduced locally in three languages, French, English and Indonesian.

What does your membership with the EITI represent and what programmes are you developing in line with this membership?

Having joined in 2011, we are recent members, but this move is perfectly in line with

the group’s strategy. We are prepared to comply with the transparency principles

advocated by the EITI and supported by countries that are important to us, such as

Gabon. We are convinced that the fight against corruption, which is the objective

of the EITI, is essential for the development of democracy and actually creates an

economic environment that is favourable to companies like ours.

Do your shareholders ask about the ESG issues associated with your mining businesses?

Our board of directors is very concerned with this aspect of our strategy. The

appointment of Total’s Senior Vice President of Sustainable Development, Manoelle

Lepoutre as a director illustrates this clearly. We are beginning to receive some

questions in writing from shareholders about our sensitive projects, but they remain

marginal. No questions were raised about the ESG aspects of our major projects

at either our 2010 or 2011 general meeting. However, we hope that investors and

markets will eventually differentiate between companies that comply with the highest

environmental and social standards in their sector and those that do nothing and

attribute a premium to the former. This is not yet the case, far from it.


shErPA Sherpa is a not-for-profit organisation set up in 2001 to protect and defend victims

of economic crimes. It brings together legal advisers and lawyers from a variety of

backgrounds and works in conjunction with civil society organisations worldwide. Its

campaigns focus on two main areas: condemnation of illicit financial flows and pressure

to set up a restrictive legal framework for multinational companies concerning CSR,

i.e. how these firms incorporate environmental and social issues and relations with

their stakeholders into their businesses.

What wrongdoings committed by mining companies are condemned by NGOs like Sherpa?

Mining companies basically embody all of the problems arising from environmental,

social and governance issues. By the very nature of their operations and the countries

in which they operate, they very often chalk up environmental damage, human rights

violations and poor governance.

NGOs like Sherpa can focus on any number of issues. We have decided to use our

legal skills to help victims. The «innovative legal forces», as we’ve been nicknamed,

must design new solutions, either legal or quasi-legal (also referred to as «soft

law»), or a mix of the two, to force multinationals to be more responsible about

their businesses. Today, the main obstacle is that mining groups deny responsibility

for damage caused by their subsidiaries, citing their autonomy as legal entities. We

believe that solutions can be found in current laws as they exist. We are convinced

that, through their sustainable development commitments, parent companies will

become more accountable for the actions of their subsidiaries and perhaps, in the

future, of their suppliers.

sANDrA CossArt hEAD oF thE GLobALIsAtIoN AND humAN rIGhts ProGrAmmE

wILLIAm bourDoN PrEsIDENt


Are you surprised by the lack of information available from the 23 companies in our sample?

Unfortunately, we are not surprised at all. We have always been convinced that as

long as the publication of extra-financial information is a product of companies’ good

will, without any real penalties for those who choose not to do so, we will never see

much more than this tactical jabbering.

Isn’t the lack of information and transparency all the more shocking when these

multinationals enjoy and use unprecedented means of communication to persuade

us that they are the new benefactors of humanity?

To be useful – not just to the company but also to the civil society – this information

must be relevant, reliable and comparable from one company to another and from

one year to another. It must be available to the various stakeholders. As such, it

must be used to prevent certain negative impacts and reduce the number of victims.

As pressure and the organisation of the local and international civil society mount,

mining companies will no longer merely be able to take note of the damage, without

it affecting their businesses, as illustrated by the Vedanta case in India.

How can it constitute a legal risk and of what type?

Legal risk implies financial risk in these ESG issues. For example, the risk of a mining

project being blocked can entitle financial partners to compensation. Employee safety

risks can entitle them to damages. Companies can also lose the right to operate in a

country and thus be denied major contracts. More generally, the risk of a lawsuit, not to

mention fines and penalties, can cost astronomical sums. A prime example is Texaco/

Chevron being fined by Ecuador courts more than USD 8 billion in damages (increased to

USD 18 billion if Chevron does not issue a public apology) in a lawsuit that lasted 18 years.

These risks will only get worse with the global economic crisis and the scarcity of

resources. «Global managers» must understand that extra-financial reporting

eventually leads to better risk prevention and in turn a reduction in negative costs.

You referred Glencore to the Swiss National Contact Point for the OECD Guidelines?

Indeed, Sherpa and four other organisations filed a complaint, a «specific instance»

to use the OECD term, with the Swiss and Canadian National Contact Points (NCPs)


against Glencore and First Quantum for financial and accounting discrepancies by

their Zambian subsidiary, Mopani, in order to evade taxation in Zambia.

The allegations are based on the results of a 2009 audit performed at the request

of the Zambian authorities, with support from the Norwegian government, by the

firms Grant Thornton and Econ Pöyry. The anomalies revealed include an unexplained

increase in operating costs, stunningly low reported volumes of extracted cobalt when

compared to similar mining companies operating in the region and manipulations of

copper selling prices in favour of Glencore, which constitute a violation of OECD’s

«arm’s length» principle.

The result of those various processes was to lower by several hundred millions dollars

Mopani’s net income for the 2003-2008 period, thereby substantially reducing the

amount of tax paid by the company. Those actions are all the more deplorable when

one considers that the Mopani consortium operates in an already attractive fiscal

environment, one highly favourable to foreign investment, featuring massive financial

and tax exemptions granted by the Zambian government.

Our involvement is based on the fact that multinational corporations’ tax evasion,

when averaged per year over the last ten years, amounts to a global net loss of USD

400 to USD 440 billion for developing countries.

What does the company risk? What was the impact of this complaint being filed?

Remember that this is a quasi-legal procedure. We hope that the NCPs will acknowledge

the violation of OECD Guidelines by Glencore and First Quantum, ensure that the

companies pay the taxes owed to the Zambian government and obtain a commitment

from the delinquent companies to comply carefully with the OECD Guidelines and the

laws and regulations applicable in Zambia.

Following the announcement of Glencore’s exclusion from loans granted by the European

Investment Bank (EIB) pending its own investigation, the Zambian government

appeared to plan to claim the unpaid taxes in Zambia from the Swiss multinational.

This new balance of power in favour of tax justice shows how important it is for

Europe to support countries that fall victim to tax evasion and refuse loans from the

EIB to companies that practise it. The Swiss NCP has recently accepted the complaint

and will review the case. However, we are aware of the limits of this «soft law». It

is not enough. It requires pressure from civil society and consumers to be binding.


Otherwise mining companies are insensitive to it and unresponsive in the court of

public opinion. They will be required to become increasingly so, as attested to by

Glencore’s recent position.

Do you think that a lack of CSR reporting is compatible with being listed on the stock market?

If a company of Glencore’s size is floated on the stock market, and investors do not

require greater transparency, this is very telling. It shows once again that, unfortunately,

shareholders continue to attribute value only to short-term profitability. Although in

some cases being listed encourages transparency, it should not hide the fact that the

genuine stock market driver remains the increase in the listed value. Sustainable

development, transparency, human rights and environmental issues should clearly

not be left exclusively to the judgement of shareholders and investors, even socially

responsible investors. They require national, European and international regulations.

56 © Novethic 2011. The Listed Mining Sector & ESG Risks

CONClUSiON Environmental impacts and social issues, in particular the distribution of wealth,

community involvement and respect for local cultures, are topics that will continue

to fuel action and condemnation by local and international NGOs. They will affect the

site operation rights needed by mining companies and can challenge rights already

granted. Companies are expected to be asked for stronger and stronger guarantees

with regard to the respect for local peoples and the environment in order to obtain or

keep financing from public institutions and those long-term investors that take ESG

criteria into account in their investment policies.

In the years to come, the mining sector will have to contend with risks that will be

at the same time more acute and more complex to manage. Investors have two

options. On the one hand, they can favour the short-term returns from the high

prices of extraction materials. The profits generated by companies with less virtuous

methods of managing impacts may look more attractive at first glance. However,

pressure from NGOs is growing. This can jeopardise some of their operations, their

reputation and eventually have a negative impact on their share price.

Need for transparency

Or, investors can favour companies that may show less immediate profitability but

limit their ESG risks. For this type of investment to be profitable in the medium and

long term, investors need to target companies that have clearly identified these risks

and provide convincing answers to prevent them. To do so, investors require from

companies quality information on the environmental and social aspects of mining

projects. In any case, they can play an important role in pushing listed mining groups

to promote higher transparency and better practices in managing the impact of their

businesses on the regions where they operate.

The types of relations maintained with NGOs by the clear majority of the companies

surveyed show that progress must be made to develop strategies involving these

organisations to contribute to the optimisation of the management of their ESG risks.

NGOs can, where necessary, offer expertise and know-how on regions and populations

where companies lack these resources. Even the existing partnerships are often

poorly put to use. They are inadequately covered and explained and therefore do not

improve the perception of these companies.

Announcing voluntary commitments is not enough but remains a necessary first step


towards better management of the social and environmental impacts of the company’s

businesses. Once compliant with one or more sets of standards (EITI, Voluntary

Principles, etc.), the company must report on its initiatives in the area concerned.

NGOs, governments and civil society will be all the more watchful to ensure that the

commitments are followed with action. To measure their progress, companies have

to set public targets and report on their advancement. In this area, the mining sector

undeniably has room for improvement.


TaBle OF CONTeNTS

INtroDuCtIoN 3-4

sAmPLE 5

mINING sECtor IssuEs AND rIsks hIGhLIGhtED by NGos 6-25

Environmental issues 7-10

Social issues 10-13

Governance issues 14-16

Overview of NGO/ company relations 17-18

rIsks LINkED to thE ACtIoN oF NGos 19-25

Multiple angles of attack for increasingly integrated risks 19-21

From local operational risk to global reputational risk 22-24

Poor public response from companies on the established risks 24-25

ANALysIs oF thE rEPortING oF mINING ComPANIEs 26-46

Methodology 27-28

ComPANIEs rANkING 29-31

Key notes 30-31

DEtAILED ANALysIs by EsG thEmE 32-46

Sector regulations and initiatives 32-36

External stakeholders: scarce formal engagement with NGO stakeholders 37-38

Environment: developed reporting but deficient role of NGOs 39-42

Social : poor NGO/company dialogue and inadequate company reporting on impacts 42-46

VArIous VIEwPoINts oN thE INFLuENCE oF stAkEhoLDErs 47-55

Interview of Typhaine de Borne, EIRIS 48-49

Interview of Catherine Tissot-Colle, ERAMET 50-51

Interview of Sandra Cossart & William Bourdon, Sherpa 52-55

CoNCLusIoN 56

Be-linked Business & Community Intelligence is a consulting

firm whose strategy and management is entirely dedicated

to NGO-company relations. Our mission is to integrate

the work of civil society organisations into the heart of a

company’s business plan in an innovative way, to create

sustainable economic, social and environmental value.

www.be-linked.fr

A subsidiary of the Caisse des Depots, Novethic is a centre

of research on Socially Responsible Investment (SRI) and

Corporate Social Responsibility (CSR) as well as being a

leading media resource on sustainable development.

www.novethic.com

Novethic’s CSR researchNovethic analyses companies’ communication practices on specific Environmental, Social or Governance (ESG) issues likely to be of interest to investors in view of the impact which they may have on the companies in the medium and long term.The aim is to see whether or not companies’ CSR reporting and strategies meet the expectations of those investors concerned about extra-financial issues. These studies relate to issues which are still emerging but which are already contested in the public domain and are likely to affect a significant number of European listed companies

belonging to different sectors of activity.

THE LISTED MINING SECTOR ESG RISKS - Novethic

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