THE DRIVERS AND PERFORMANCE OF CORPORATE ENVIRONMENTAL AND SOCIAL RESPONSIBILITY IN THE CANADIAN MINING INDUSTRY
by
Andrew McKinley
A thesis submitted in conformity with the requirements
for the degree of Masters of Arts
Geography Department and Center for Environment
University of Toronto
© Copyright by Andrew McKinley – 2008
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THE DRIVERS AND PERFORMANCE OF CORPORATE ENVIRONMENTAL AND SOCIAL RESPONSIBILITY IN THE CANADIAN MINING INDUSTRY By: Andrew McKinley MA Dept. of Geography and Center for Environment, University of Toronto, 2008
Abstract
Corporate Social Responsibility (CSR) is a movement which seeks profitable
solutions to environmental and social problems facing corporations and society. In this
document firm level drivers of CSR adoption are examined to develop a business case for
social/environmental factor integration, built on the link between each driver and
profitability. A review of CSR is followed by an examination of a set of short case
studies involving the Canadian mining industry and an analysis of the
environmental/social efforts of mining organizations, focusing on the industry’s
environmental performance and its relationship with aboriginal peoples. It is argued that
a positive link exists between firm level profitability and environmental/social
performance in the Canadian mining industry. As a result, mining firms have undertaken
initiatives which have led to improved environmental and social performance.
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Acknowledgements
I would like to thank the following people and organizations for their contribution
to this thesis project:
• Prof. Pierre Desrochers (supervisor), Prof. Kathi Wilson (committee member),
and Prof. Richard DiFrancesco (committee member) for their support and
guidance
• Dr. Karen Richardson for her guidance in the early stages of the project
• The Mining Association of Canada and Pierre Gratton for their participation
• The Social Sciences and Humanities Research Council for their financial support
• The Arthur and Sonia Labatt Foundation for their financial support
• The University of Toronto, the Department of Geography, and the Center for
Environment
Thank you all very much, without your help this project would not have been
possible.
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Table of Contents
ABSTRACT ..................................................................................................................................................II ACKNOWLEDGEMENTS ....................................................................................................................... III SUMMARY...............................................................................................................................................VIII UNIVERSITY OF TORONTO THESIS REQUIREMENTS ................................................................ XI ACRONYM GUIDE..................................................................................................................................XII PART I: DEFINING CONCEPTS AND DRIVERS OF CSR.................................................................. 1 1.0 INTRODUCTION .................................................................................................................................. 1 1.1 STUDY OBJECTIVES .......................................................................................................................... 3 1.2 METHODOLOGY ................................................................................................................................. 4 1.3 CORPORATE SOCIAL RESPONSIBILITY: DEFINITION ........................................................... 6
1.4 Origins, History, and Socio-Economic Drivers ............................................................................... 8 1.5 Critiques and Debates ..................................................................................................................... 11 1.6 Key Questions to Address ............................................................................................................... 16 1.7 Summary of Firm Level Drivers .................................................................................................... 16 1.8 Is CSR Profitable? ........................................................................................................................... 20 1.9 Can CSR Produce Acceptable Levels of Social/Environmental Performance? ......................... 21 1.10 CSR: Conclusions and Issues to be Addressed............................................................................ 23
2.0 DRIVERS OF CSR INTEGRATION: LINKING PROFITABILITY AND CSR.......................... 24 2.1 Legal Dimensions ............................................................................................................................. 24 2.2 Avoiding Regulation and Influencing Policy ................................................................................. 26 2.3 Liability and Risk Management ..................................................................................................... 27 2.4 License to Operate ........................................................................................................................... 29 2.5 Investor Pressure ............................................................................................................................. 30 2.6 ESG Factor Integration in Practice................................................................................................ 33 2.7 Transparency, Accountability, Reporting, and Disclosure .......................................................... 36 2.8 Verification, Labeling, and Reporting Standards ......................................................................... 39 2.9 Reputation Management ................................................................................................................. 40 2.10 Branding Management.................................................................................................................. 41 2.11 Marketing and Ethical Consumerism .......................................................................................... 42 2.12 NGOs and Activism ....................................................................................................................... 44 2.13 Business-NGO Partnerships ......................................................................................................... 46 2.14 Eco-Efficiency ................................................................................................................................ 47 2.15 Innovation and the Porter Hypothesis ......................................................................................... 48 2.16 Corporate Employees .................................................................................................................... 49 2.17 Strategic CSR ................................................................................................................................. 49
3.0 INDUSTRIAL ECOLOGY AND CORPORATE SOCIAL RESPONSIBILITY........................... 51 3.1 Industrial Ecology............................................................................................................................ 51 3.2 A Genealogy of Industrial Ecology and Industrial Metabolism .................................................. 53 3.3 Situating Industrial Ecology: Related Terminology ..................................................................... 55 3.4 Industrial Ecology in Practice ........................................................................................................ 57 3.5 Critiques of Industrial Ecology....................................................................................................... 59 3.6 Industrial Ecology Summary .......................................................................................................... 60
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4.0 ABORIGINAL PEOPLES AND RESOURCE DEVELOPMENT .................................................. 61 4.1 THE CANADIAN MINING INDUSTRY: DEFINITION AND PROFILE .................................... 67 5.0 THE MINING INDUSTRY’S PAST CSR PERFORMANCE ......................................................... 71
5.1 The Mining Industry’s Past Environmental Performance........................................................... 72 5.2 The Mining Industry’s Past Performance with Aboriginal Peoples............................................ 78
6.0 DRIVERS OF CSR IN MINING......................................................................................................... 84 6.1 Legislative Compliance in Mining .................................................................................................. 84 6.2 Avoiding Regulation and Influencing Policy in Mining ............................................................... 85
Case Study 1: Strategy Statement by Gordon Peeling ...................................................................... 85 Case Study 2: The Canadian Mining Industry and Climate Change............................................... 88
6.3 Liability and Risk Management in Mining.................................................................................... 90 Case Study 3: The Aurul Mine Case and The Kisladag Mine.......................................................... 90 Case Study 4: Lake Pinchi................................................................................................................. 92 Case Study 5: Reserve Mining – Lake Superior ............................................................................... 93
6.4 Licence to Operate In Mining ......................................................................................................... 95 Case Study 6: The Voisey’s Bay Nickel Mine ................................................................................... 95
6.5 Investor Pressure, ESG Factor Integration, and Mining ........................................................... 100 Case Study 7: Ivanhoe Mining in Myanmar ................................................................................... 103
6.6 Transparency and Accountability in Mining .............................................................................. 105 Case Study 8: Royal Oak Mining Bankruptcy Case ....................................................................... 106
6.7 Reporting and Disclosure in Mining ............................................................................................ 108 Case Study 9: The CDP and GHG Disclosure ................................................................................ 108
6.8 Verification, Labeling, and Reporting Standards in Mining ..................................................... 110 Case Study 10: TSM External Verification..................................................................................... 110
6.9 Reputation Management in Mining ............................................................................................. 111 6.10 Branding, Marketing, and Ethical Consumerism in Mining ................................................... 112
Case Study 11: The Ekati Diamond Mine, Certification, and Aboriginal Involvement ................ 113 6.11 NGOs and the Mining Industry.................................................................................................. 120
Case Study 12: MiningWatch Canada and the Pascua Lama Gold Mine ..................................... 121 6.12 Business-NGO Partnerships in Mining...................................................................................... 124
Case Study 13: The Northern Bathurst Island National Park ....................................................... 125 6.13 Eco-Efficiency and Industrial Ecology in Mining ..................................................................... 128
Case Study 14: Inco Energy Efficiency Campaigns ....................................................................... 128 Case Study 15: Industrial Ecology – Falconbridge-Noranda Recycling ....................................... 130
6.14 Corporate Employees in Mining................................................................................................. 133 6.15 Strategic CSR in Mining (Drivers in Mining Conclusion) ....................................................... 133
PART II: LINKING CSR AND IMPROVED ENVIRONMENTAL AND SOCIAL PERFORMANCE: ................................................................................................................................... 135 7.0 THE WHITEHORSE MINING INITIATIVE: SETTING THE STAGE..................................... 136
Case Study 16: The Windy Craggy Deposit..................................................................................... 137 7.1 The Whitehorse Mining Initiative: Envisioning the Future....................................................... 139 7.2 The Whitehorse Mining Initiative: Immediate Impact .............................................................. 151
8.0 CSR PERFORMANCE: POST WMI ABORIGINAL – INDUSTRY RELATIONS................... 153 8.1 Post WMI Aboriginal – Mining Industry Relations: Significant Progress ............................... 154
Case Study 17: The Raglan Mine .................................................................................................... 156 Case Study 18: The Musselwhite Mine ........................................................................................... 158
8.2 Post WMI Aboriginal – Mining Industry Relations: Continuing Challenges .......................... 161 9.0 CSR PERFORMANCE: POST WMI ENVIRONMENTAL PERFORMANCE ......................... 164
9.1 Transparency and Related Issues................................................................................................. 165
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9.2 Mine Closure, Reclamation and Abandoned Mining Sites ........................................................ 166 Case Study 19: Newmont Gold: Golden Giant Mine Closure ........................................................ 167
9.3 Biodiversity Impact Management ................................................................................................ 169 9.4 Energy Use and Greenhouse Gas Emissions ............................................................................... 174 9.5 Acid Rain and Toxic Pollution...................................................................................................... 178 9.6 Acid Mine Drainage....................................................................................................................... 181 9.7 Tailings Management .................................................................................................................... 182 9.8 Industrial Ecology and Recycling................................................................................................. 186 9.9 Post WMI Environmental Performance: Conclusion................................................................. 189
REFLECTIVE CONCLUSION .............................................................................................................. 191 FUTURE CONSIDERATIONS .............................................................................................................. 195 WORKS CITED ....................................................................................................................................... 197 Appendix 1: WMI Accord Vision Statement ......................................................................................... 221 Appendix 2: TSM Guiding Principles..................................................................................................... 223 Appendix 3: General Explanation of TSM Performance Levels .......................................................... 224
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Table of Figures
Figure 1 : Industrial Ecology Operates at Three Levels (Chertow 2000, 315).............................. 57
Figure 2 : Aboriginal Communities (red) and Areas Covered by Comprehensive Land Claim Agreements or Treaty Agreements (green). Constructed from NRC (2008).............. 64
Figure 3 : Aboriginal Communities (Red) and Large Scale Active Mining Operations (All other symbols) NRC (2008)................................................................................................... 79
Figure 4: Proposed Northern Bathurst Island Park Boundaries (Spence & Gratton 2002) ......... 127
Figure 5 : TSM 2006 Energy Use and Greenhouse Gas Emissions Management Assessments (Taken directly from MAC 2006, 5) .............................................................. 176
Figure 6: TSM 2004 Energy Intensity and GHG Emissions Intensity Performance (Taken directly from MAC 2004b, 6) .............................................................................................. 177
Figure 7 : Mining Industry Sulfur Dioxide Emissions From 1988 to 2005 (Taken directly from MAC 2006, 13) ........................................................................................................... 178
Figure 8: Mining Industry Major Pollutant Reductions from 1992 to 2005 (Taken directly from MAC 2006, 12) ........................................................................................................... 179
Figure 9: Mining Industry Major Pollutant Reductions from 1992 to 2005 (Taken directly from MAC 2006, 12) ........................................................................................................... 180
Figure 10: TSM 2006 Tailings Management Performance (Taken directly from MAC 2006) .................................................................................................................................... 184
Figure 11: 2003 Intake and Outflow of Recycled Materials (Taken directly from MAC 2004b, 11) ............................................................................................................................ 187
Figure 12: Quantities of Recycled Materials Utilized by Company in 2003 (Taken directly from MAC 2004b) .................................................................................................. 188
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Summary
In this thesis the Corporate Social Responsibility (CSR) movement is examined
with the intention of answering two questions of central importance to this developing
field:
1) Can active CSR management improve corporate profitability?
2) Can profit driven CSR substantially improve corporate environmental and
social performance?
Following a review of other relevant topics, including industrial ecology,
aboriginal peoples and resource management, and a profile of the Canadian mining
industry, these questions are addressed through a mixture of literature review and case
studies drawing from the Canadian mining industry. As a background, the Canadian
mining industry’s past1 CSR performance is examined, with emphasis on their
interactions with aboriginal peoples and the environment; these two areas are the focus of
the analysis throughout this document.
In order to answer the first question, a drivers based approach is undertaken. It is
argued that each driver motivates CSR adoption in the Canadian mining industry by
linking CSR performance and firm profitability. Each driver is discussed and supported
by one or more case studies from the mining industry. The major drivers identified
through this analysis include, in order of appearance:
• Legal Dimensions and Legislative Compliance (Regulations)
• Corporate Policy Initiatives Aimed at Avoiding Government Regulation
• Liability and Risk Management
• Obtaining a ‘License to Operate’ and the ‘Social License to Operate’
1 Past CSR performance refers to the pre- Whitehorse Mining Initiative era. This is discussed in more detail in later sections.
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• Investor Pressure, Environmental, Social, and Governance (ESG) Factor
Integration in Investment Decision Making, and Investor Activism
• Demands for Transparency, Accountability, Reporting, Disclosure, and
Verification of Performance
• Industry Standards and Consumer Labelling
• Reputation Management
• Branding, Marketing, and Ethical Consumerism
• NGO Activism
• Business-NGO partnerships
• Eco-efficiency and Industrial Ecology (potential benefits of)
• Innovation and the Porter Hypothesis
• Employee Pressure and Participation
• Strategic CSR
It is argued that in combination, these drivers affect both a company’s
environmental/social performance and its profitability. Many of these drivers, however,
are still emerging and it is clear that they have developed more rapidly for large
companies and companies in high impact sectors (such as mining).
The second question, Can profit driven CSR substantially improve corporate
environmental and social performance? is the more difficult to answer and will likely
prove to be the more controversial as the movement continues to expand. In this thesis,
this question is addressed by examining the mining industry’s recent environmental and
aboriginal relations initiatives and by contrasting them to the industry’s historic
performance on these issues. As with the previous section, the analysis is undertaken
through a literature review and by highlighting relevant case studies. As will be
discussed, the major CSR turning point for the mining industry was the 1994 Whitehorse
Mining Initiative (WMI). The process leading to this initiative, along with the agreement
itself, is summarized and analyzed in later sections, as is the mining industry’s post-WMI
relationship with aboriginal peoples. The argument is made that while much progress has
been achieved since the early 1990s, some significant problems persist.
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The environmental analysis yields similar results. After discussing the mining
industry’s major environmental initiative, the Towards Sustainable Mining (TSM)
framework, it is argued through an issue-based analysis that the industry’s environmental
performance in the areas of transparency, reporting, disclosure, and third party
verification is commendable. The case is made that the mining industry’s can also boast
much success in areas such as biodiversity impact management, acid rain causing
emissions, toxic pollution, tailings management, recycling, eco-efficiency, energy
efficiency, and in their promotion of industrial ecology type interactions. However, in
areas such as acid mine drainage and greenhouse gas emissions, problems persist. In
addition, while the mining industry has dramatically improved their planning for the
closure and remediation of new and currently operating mining sites, the hazardous,
costly, and highly polluting legacy of abandoned and orphaned mines remains a
persistent problem for mining companies and Canadians.
It is argued that following the WMI the mining sector substantially improved their
environmental performance and their treatment of, and relations with, aboriginal peoples.
In both cases, however, significant problems persist despite ongoing efforts on the part of
mining executives. Thus, the answer to the second question appears to be positive, as
profit driven CSR initiatives can substantially increase social and environmental
performance. However, some issues are complex, persistent, constantly evolving, and
difficult to resolve. It is therefore not surprising that some problems remain unresolved
and will require additional efforts.
To summarize, the evidence presented in this thesis indicates that the CSR
movement constitutes far more than ‘green-washing’ and elaborate public relations
campaigns. In the case of Canadian mining, it is argued that improved profitability and
social/environmental performance are linked. These conclusions support the argument
that, as the movement continues to evolve and expand, it will have a substantial impact
on improving the environmental and social performance of corporations.
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University of Toronto Thesis Requirements
This thesis has been presented to the University of Toronto, Department of
Geography and the Center of Environment to fulfill the requirements of the joint
Geography-Environmental Studies MA degree.
The CSR framework, although multi-disciplinary in practice, is informed by many
concepts that are of interest to geographers. The topics discussed in this thesis relate to
the work of geographers, including faculty at the University of Toronto who study closely
related subjects, such as Prof. Rodney White, Prof. Pierre Desrochers, and Prof. Kathi
Wilson (among others). Geographers who study such diverse topics as environmental
geography, resource management, natural resource policy, ecological modernization,
industrial ecology, sustainable development, and aspects of cultural geography that
address the interaction between aboriginal people and non-aboriginal Canada, should find
the material contained in this thesis of interest. Due to its multi-disciplinary nature, this
thesis approaches subjects that are of relevance to the geographic subfields of
environmental geography, economic geography, and social/cultural geography. For these
reasons, this author believes that this thesis falls within the purview of the department of
geography. In addition, due to the emphasis on analyzing the changing environmental
performance of the Canadian mining industry, this thesis also meets the requirements of
the Center for Environment.
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Acronym Guide
• AFN: Assembly of First Nations (Canada)
• AMD: Acid Mine Drainage
• CDP: Carbon Disclosure Project
• CNF: Canadian Nature Federation
• CPP: Canadian Pension Plan
• CSR: Corporate Social Responsibility
• EIA: Environmental Impact Assessment
• EITI: Extractive Industries Transparency Initiative
• ESG: Environmental, Social, and Governance (factors in SRI investing)
• GHG: Greenhouse Gases
• GRI: Global Reporting Initiative
• IBA: Impact Benefit Agreement
• IE: Industrial Ecology
• IM: Industrial Metabolism
• IS: Industrial Symbiosis
• ISO: International Standards Organization
• MAC: The Mining Association of Canada
• MEND: Mining Environmental Neutral Drainage – A joint federal MAC AMD
research program.
• MICCL: Myanmar Ivanhoe Copper Company Limited
• NGO: Non-governmental organization (examples, Red Cross, Greenpeace, etc.).
For the purposes of this thesis, aboriginal groups are not considered NGOs.
• NOAMI: National Orphaned/Abandoned Mines Initiative
• PRI: Principles for Responsible Investing – a UNEP-FI and Mercer Investment
led voluntary SRI principles pact
• SARWG: Species At Risk Working Group
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• SRI: Socially Responsible Investing
• TBL: Triple Bottom Line (reporting, accounting, auditing, the ‘triple’ refers to
social,
environmental, and financial factors)
• TEK: Traditional Ecological Knowledge (of aboriginal peoples)
• TSM: Towards Sustainable Mining
• UNEP-FI: United Nations Environment Programme Financial Initiative
• WMI: Whitehorse Mining Initiative
1
Part I: Defining Concepts and Drivers of CSR
1.0 Introduction
Corporate Social Responsibility (CSR) is a rapidly emerging corporate movement
which seeks to find profitable solutions to environmental and social problems facing
modern firms, their customers, and society at large. To be successful, however, its
proponents must learn to apply this framework in a way that answers legitimate critiques
from both the left and the right of the political spectrum. In other words, proponents of
this approach must be able to demonstrate that its adoption simultaneously increases
profitability and social/environmental performance.
Two key questions now dominate the debate concerning the objectives, outcomes,
and legitimacy of this movement:
1. Can active CSR management improve corporate profitability?
2. Can profit driven CSR substantially improve corporate environmental and
social performance?
In this document, the underlying firm level drivers of CSR adoption are examined
through a literature review and Canadian mining case studies in order to better
understand profit-driven corporate environmental/social programs. The Canadian mining
industry forms the focus of this analysis and this thesis will examine those issues which
have been of greatest importance to this industry over the last thirty years; namely the
environment and the industry’s relationship with aboriginal peoples. Canadian mining
has been chosen as the focus of this analysis for several reasons:
• Mining represents an established, visible, and suitably sized industry within
Canada.
• As an industry, mining is associated with higher than average environmental and
social impacts and is hence sufficiently experienced with CSR issues and their
management.
2
• Mining companies in Canada are sufficiently forthcoming, studied, and publicized
for adequate amounts of information to be collected.
• In regards to CSR issues, the Canadian mining industry is among the most
progressive heavy industries in Canada.
While CSR has not received a great deal of attention within economic and
environmental geography, the outcome of an analysis of this type does bear relevance to
a variety of topics discussed within those fields. In particular, CSR can contribute to the
ongoing ecological modernization debate within geography. Proponents of both CSR and
ecological modernization argue that social and economic advancement can be compatible
with long term environmental (and social) protection. In the case of CSR, proponents
argue that profit motivated corporations can find ways to fit environmental and socially
responsible conduct within the confines of the corporate form; in the case of ecological
modernization, the broader argument is made that technological and social developments
can make environmental protection and economic development compatible (Spaargaren
& Mol 1992; Spaargaren 2000; Porter & Kramer 2006). Critics of both ecological
modernization and CSR argue that there are fundamental problems within the current
economic system that would prevent the emergence of any meaningful ‘sustainable
development’, particularly if capitalist agents (such as corporations) are allowed to
‘voluntarily’ pursue reconciliation between the process of modernization and
environmental concerns (Gouldson & Murphy 1997; York & Rosa 2003; Doane 2004).
Due to these similarities, CSR can be seen as a microcosm of the broader ecological
modernization debate, one which focuses specifically on the corporation as an institution
within the larger capitalist economic system. Thus, an analysis which examines the
drivers and outcomes of the CSR approach can be seen as a contribution to the more
comprehensive debate concerning ecological modernization.
3
1.1 Study Objectives
There are two major issues in the literature that need to be addressed if this
framework is to be successful in the corporate world, namely:
1. Can active CSR management improve corporate profitability?
2. Can profit driven CSR substantially improve corporate environmental and
social performance?
These questions are examined in this thesis in the context of the Canadian mining
industry. The first question is addressed through the following means:
• A literature review outlining the field of CSR and other related concepts, such as
industrial ecology and aboriginal resource management.
• Drivers which link firm level environmental/social performance and profitability.
• Real world examples of these drivers in action, taken from short case studies
involving the Canadian mining industry. These case studies illustrate how
business self-interest led to improved corporate practices.
• Discussions with industry managers and strategy makers regarding the importance
of various drivers in motivating CSR adoption, both generally and in regard to
specific case studies.
The second question is addressed in the following ways:
• A literature review of CSR and related concepts such as industrial ecology and
aboriginal resource management.
• A review of the past social and environmental performance of the Canadian
mining industry prior to its major CSR turning point, the Whitehorse Mining
Initiative (WMI), along with other environmental/social activities.
• A review of the Canadian mining industry’s post-WMI environmental/social
initiatives and performance to assess the ability of profitability driven initiatives
to positively impact social and environmental performance.
4
• Discussions with industry managers and strategy makers regarding their pre- and
post WMI CSR performance and initiatives.
1.2 Methodology
Due to the diverse set of subjects addressed in the course of this thesis a wide
variety of academic and non-academic sources will be employed as part of the research
process. This is broken down by section as follows:
• Literature Review Sections: ‘Literature review’ sections are based primarily on
peer reviewed journal articles and books, but also include a substantial amount of
industry publications, such as internal reports, feasibility studies, and
policy/management documents.
• CSR Drivers Section: The drivers section can be characterized as a literature
review.
• Drivers Case Studies/CSR Performance Case Studies: The case studies presented
in this document are constructed from a variety of sources including publicly
available and internal industry documents, peer reviewed literature, media
accounts, and documents.
• Pre-WMI CSR Performance: The pre-WMI performance of the Canadian mining
industry is qualitatively discussed through a literature review on the subject.
• Post-WMI CSR Performance: Information regarding the mining industry’s post-
WMI initiatives and their impact is derived from sources similar to those used in
the ‘Drivers Case Studies’ sections.
As can be inferred from the previous bullet points, the bulk of this thesis consists
of a broad literature review of various documents, including a large number of ‘internal’
studies, memos and briefing documents, reports, transcriptions of speeches by industry
leaders, press releases, and material gathered through the attendance of presentations
made by industry personnel. This documentation was made available by individuals
authorized to do so. For example, most of the Mining Association of Canada (MAC)
5
source material is not readily available publicly and was gathered either by obtaining
printed or electronic copies directly from industry representatives (such as MAC staff),
by searching through industry press releases, by attending special presentations, or by
searching through the MAC’s ‘members only’ online database, which was accessed with
special permission. Information obtained through this process can therefore not be
considered sensitive or restricted and presents no significant ethical issues.
Much of the literature employed in this thesis (as alluded to above) originates
from corporate sources. This researcher recognizes that caution is warranted when using
sources of this nature and that they offer a ‘corporate’ (and hence potentially biased)
opinion of the issues and events discussed. For this reason, this researcher recognizes that
the material presented in this thesis is somewhat influenced by this ‘corporate’
perspective. However, in order to present a balanced and non-biased analysis, this author
attempted to utilize academic, third party, media, and activist sources as a means of
complimenting and tempering the corporate literature employed in this thesis. For most
issues/case studies the analysis employs a mixture of corporate and non-corporate
materials. In addition, this author selected corporate material that originated from
reputable organizations (such as the Mining Association of Canada), the analysis focuses
on materials that have been thoroughly reviewed by third party stakeholders (such as the
WMI reports) or even verified by third party auditors (such as the TSM reports), and
documents were employed that made an honest assessment of the industry/company’s
failings as well as their successes. Lastly, in later sections ongoing environmental and
social problems related to Canadian mining are examined in detail in the interests of a
fair analysis. Because these safeguards have been employed, this author believes that this
thesis represents a balanced and accurate analysis.
The retrieval, review, and interpretation of ‘unpublished’ or ‘internal’ documents
represents the main ‘original’ contribution of this thesis. Access to this material enabled
the preparation of the most in depth synthesis on CSR in the Canadian mining industry
that this author is aware of, the broader diffusion of previously private information on a
number of case studies, and the reinterpretation of some well known ones.
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1.3 Corporate Social Responsibility: Definition
“Every product, brand, company, and service will soon be telling
a story and they all need to be good…”
-Kingfisher CSR report2
The term Corporate Social Responsibility (CSR) refers to an emerging movement
which seeks to incorporate social and environmental factors into regular business
decision making, business strategy, and accounting, with the intention of increasing the
environmental and social performance of any given corporation in a manner that is
beneficial to the business, society, and the environment (Hawkins 2006; Industry Canada
2006; Johnson 2007; Knight 2007). Industry Canada (2006) defines the idea as:
“An evolving concept that is generally understood to be the way firms integrate
social, environmental, and economic concerns in their values, culture, decision
making, strategy, and operations in a transparent and accountable manner, thereby
establishing better practices within the firm, creating wealth, and improving
society.”
As Knight (2007) explains, CSR is an umbrella term encompassing a variety of
closely related terminology:
“Corporate social responsibility defines itself as socially inclusive, and its stated
terms of reference are the community and the environment. The language of
accountability, transparency, sustainability, business ethics, corporate citizenship,
and triple bottom line (social and environmental as well as financial impact)
reporting permeates CSR discourse about the social role of corporate activities
and corporate relations within a globalizing civil society.”
2 Quoted in (Johnson 2007)
7
Thus, CSR is closely related to the study of business ethics, corporate
accountability, corporate citizenship, corporate legal responsibility, triple bottom line
reporting, ethical management, public relations, and responsible business (Hopkins 2003;
Mullerat 2005; Thomas 2005; Walsh & Lowry 2005; Industry Canada 2006; Knight
2007). The integration of these ideas into various aspects of corporate management has
coincided with an emerging understanding among corporate leaders of the inherent link
between the environment, society, and the operations of business, as well as the potential
for CSR performance to influence profitability (Johnson 2007).
CSR attempts to deal with a broad range of social and environmental issues and it
is generally agreed that the public interpretation of corporate responsibility has grown
over time to gradually incorporate an increasingly diverse set of social and environmental
obligations (Anderson 1989). The main issues surrounding this field include3:
• Environmental stewardship and ecological behaviour
• Aboriginal relations
• Community involvement and obligations
• Accountability, transparency, and reporting
• Corporate governance and ethics
• Product health and safety
• Labour rights
• Human resource management (including worker health and safety)
• Human rights
• International development and poverty issues
• Corporate philanthropy and employee volunteering
• Public relations
• Government relations (especially in developing world)
• Investor relations
• Legal compliance
3 List amalgamated from Anderson (1989) and Industry Canada (2006).
8
For the purposes of this document, the terms ‘CSR’, ‘responsible business’, and
‘corporate responsibility’ are used interchangeably and are meant to convey the same set
of ideas.
1.4 Origins, History, and Socio-Economic Drivers
While the expression “CSR” might be recent, the underlying concept is not and
the debate over the social obligations of businesses has been a topic of interest in
academic circles since the birth of the modern corporation (Cheney et al. 2007). The
emergence of the modern ‘responsible’ business movement can be traced back to the
post-WWII era when rapid growth in the power of the corporation, as well as its impact
on society and the environment, fuelled discussions concerning business ethics and the
obligations of corporate entities (Cheney et al. 2007). Bowen (1953), for example, argued
that “we are entering an era when private business will be judged solely in terms of its
demonstrable contribution to the general welfare.” Corporate leaders of the time
responded to these discussions in a limited fashion, with most deciding to limit ethical
business4 behaviour to corporate philanthropy and charitable activities (Cheney et al.
2007). Only a small number of ethical business pioneers attempted to integrate CSR-type
considerations directly into business practice and these initiatives were generally shaped
according to the personal ethical convictions of a corporation’s leader. Henry Ford’s
famous philanthropic ‘sociology’ department, for example, undertook social initiatives
that were consistent with the middle class American ‘family values’ of its founder
(Seeger & Hipfel 2007).
During what Elkington (2004) calls the ‘first wave of environmentalism’ (1960s
and 1970s) there was a growing recognition of the environmental impacts of corporations
and an emerging emphasis in the Western World on environmental legislation to regulate
corporate activities. This movement was part of the Keynesian-inspired5 rapid growth in
4 The term ‘CSR’ was not in common use during this period but is used for simplicity by this author. 5Keynesian refers to the interventionist style of socio-economic management advocated by the famous economist John Keynes. This is generally understood to include interventionist economic management
9
legislation and regulation that dealt with the social aspects of corporate behaviour,
concerning such issues as labour relations, women’s rights, race, product quality and
safety, and the obligations of a corporation to the community (Cheney et al. 2007). In the
United States, for example, landmark legislations established the Occupational Safety and
Health Administration, the Equal Opportunity Commission, the Consumer Product Safety
Commission, and the Environmental Protection Agency. Corporations responded to
increased state intervention by becoming increasingly politically, socially, and
environmentally active through the formation of environmental management and public
affairs offices, through increased lobbying, and strategic philanthropy (Cheney et al.
2007).
In the 1980s, a neo-liberal backlash against these policies resulted in a wave of
privatization and deregulation. These policy changes, coupled with increasing corporate
concentration and globalization, increased the scope and diversity of corporate social and
environmental impacts (Crowther & Rayman-Bacchus 2004; Cheney et al. 2007).
Following the lead of governments and influential academic institutions, business
people’s concerns with corporate social responsibility declined during this period
(Crowther & Rayman-Bacchus 2004).
Rayman-Bacchus (2004) argues that momentum for the responsible business
movement built throughout the 1990s, in part, as a backlash against neo-liberal social and
economic policy and the singular emphasis on profit maximization that characterized the
1980s. By 1997 the sales of the top 200 corporations accounted for approximately ¼ of
world economic activity (Wheeler & Sillanpaa 1997). Corporate concentration and
globalization on this scale, as well as the birth of truly global civil movements and the
globalization of communications/media, contributed strongly to the renewed emergence
of CSR in the 1990s (Ougaard 2004; Rayman-Bacchus 2004). The transition towards
responsible business as a mainstream management paradigm during the 1990s is
exemplified by the growth of environmental staff, extra-legal compliance, NGO-industry
partnerships, and the activity of many industry leaders (Pearce 1991; Johnson 2007). involving strong regulation, high levels of government spending, and government participation in the economy (Cheney et al. 2007).
10
As Rayman-Bacchus (2004) and Mcmillan (2007) argue, a series of high profile
corporate environmental, social, and governance disasters from the late 1980s to the early
2000s seriously challenged the legitimacy of the corporation and greatly increased the
public, governmental, and investor pressure for better CSR performance. Incidents such
as the Exxon Valdez oil spill, the Brent Sparr/Shell fiasco, the Union Carbide Bhopal
disaster, the collapse of Enron and Worldcom, the Tyco inquiries, nearly continual NGO
campaigns against corporations such as McDonald’s, Nestle, Shell, Nike, Wal-Mart, and
Coca-Cola, major incidents of financial mismanagement at top firms such as Merrill
Lynch and JP Morgan, and a variety of other international and national level corporate
social, environmental, and governance failures have resulted in very low public levels of
corporate trust (Monaghan 2004; Rayman-Bacchus 2004; Walsh & Lowry 2005; Cheney
et al. 2007; Knight 2007; Mcmillan 2007; Seeger & Hipfel 2007). These disasters
affected some of the largest and most recognizable brands and corporations in the world,
contributing strongly to the renewed interest in environmental/social management. In
Nike’s case, for example, the NGO-led anti-sweatshop campaign was initially dealt with
“through traditional crisis management tactics including denial of responsibility, evasion,
blame, displacement, attacking critics, and the use of internal auditing reports” (Knight
2007). It quickly became evident, however, that Nike could not win a legitimacy war
against powerful NGOs and developing country governments and this eventually
motivated genuine CSR reforms. These reforms set the standard for the sports garment
industry and Nike’s major competitors have followed their example (Knight 2007).
Lastly, Bhuyan & Senapaty (2004) argue that the responsible business movement
should not be viewed as an outcropping of ethics discourses or a result of an ethical logic,
even though CSR was first articulated as an ethical argument, but rather as a result of
‘general public expectation’ arising from the socio-economic pressures discussed above.
11
1.5 Critiques and Debates
Though the integration of CSR into mainstream management and financial
practices is gaining growing acceptance, it remains a controversial subject. Popular
critiques and debates are listed below (in approximate order of importance):
• CSR Is Not Profitable: The question “Is CSR really profitable?” is easily the
most studied and debated aspect of this emerging field. A variety of studies have
been generated dealing with each side of this debate. Doane (2005), for example,
argues that the idea that “the market can deliver both short-term financial returns
and long-term social benefits” is a ‘myth’. Simultaneously, authors such as
Crowther (2004) argue that there must be some profitability dimension to CSR
otherwise leading firms would not be pursuing it as aggressively as they have
been over the last few years. The ongoing debate on this subject has led many
researchers to conclude that the link between responsible business practices and
financial performance is ‘inconclusive’ (Porter & Kramer 2006), although Conrad
& Abbot (2007) argue that the link is an essential one if the field is to remain
successful. This debate is examined in more detail in the next section.
• CSR Violates Fiduciary Duty: Fiduciary responsibility is the legal responsibility
of an asset or corporate manager to manage their assigned portfolio in the best
interests of the investors who actually own those assets. Typically, this entails
‘maximizing returns without undue risks’ (Kiernan 2007). Some believe that
responsible business initiatives (and Socially Responsible Investing) will damage
returns and increase financial risks and that this contradicts fiduciary guidelines
(Kiernan 2007; Seeger & Hipfel 2007). Others have argued that CSR adoption is
well within fiduciary law – and may even be required to fulfill this responsibility
(Freshfields Bruckhaus Deringer 2005). As with the previous heading, arguments
over fiduciary responsibility typically center on whether or not responsible
12
business practices increase corporate returns. The legal dimensions of this debate
are discussed in more detail in later sections.
• CSR Initiatives are Devalued by the Left: Many ‘left’ leaning civil society
groups, academics, and advocates of social or environmental causes heavily
criticize CSR adoption. These critics often argue that the corporate responsibility
movement is nothing more than a marketing ploy aimed at disguising poor
corporate conduct and increasing sales without making any meaningful changes to
social or environmental performance (Hopkins 2005; Cheney et al. 2007) and that
there is a disjuncture between the claims made by corporations, their actual
performance, and the level of performance critics believe they should attain
(Doane 2004). As Cheney et al. (2007) explain “From the left, CSR is viewed as
at best a public relations strategy for complacency and control; at worst, an
illusion arising from an oxymoron – a misunderstanding of the social potential of
the corporate form.” This critique is made more relevant by the fact that corporate
‘green-washing6’ is believed to be fairly widespread (Frankental 2001). For
example, the inclusion of British American Tobacco on the Dow Jones
Sustainability index is often cited as such an instance (Doane 2004). The division
of the left on this issue is further exemplified by the very different reactions to a
recent high profile case where the former head of the Sierra Club of America,
Adam Werbach, began working as the chief sustainability consultant to Wal-Mart
(who have expressed their desire to reform their environmental and social
performance) (Sacks 2007). Many corporations argue that criticism from left
leaning civil groups, academics, and advocates undermine the value of their CSR
work. Thus, the essential question raised by leftist critiques is whether or not
responsible business initiatives can actually produce improved corporate
environmental/social performance.
6 Green-washing describes a phenomenon where a corporation makes erroneous claims about their environmental or social performance, for marketing or other purposes (Frankental 2001).
13
• CSR Initiatives are devalued by the Right: ‘Right’ leaning academics and
business people often argue that it is not the responsibility of businesses to
manage or deliver high levels of CSR related performance. As Milton Friedman
(1970) wrote in an influential essay, “the only social obligation of business is
profit maximization.” In his opinion, the appropriate way to deal with CSR related
issues is through “political mechanisms, not market mechanisms.” As Cheney et
al. (2007) summarize “From the perspective of neoliberal economics, CSR is
wrong-headed: a violation of the principles of free enterprise and a confusion of
roles of the private, governmental, and non-profit sectors.” Following Friedman’s
logic, responsible business initiatives should only be the concern of a corporation
if it is directly linked to the profitability of that business and its profit
maximization motive (Hopkins 2005). Thus, as with the first two headings in this
section, the link between CSR and profitability is a key issue.
Other less prominent critiques of the field include:
• CSR Measurement and Reporting Is Inconsistent: Both critics and proponents
agree that the measurement, reporting, transparency, and accountability of CSR
performance is underdeveloped. As Waddock & Graves (1997) and Ougaard
(2004) explain, measurement and reporting of responsible business issues is
inherently difficult as reporting is voluntary and there is no agreed upon standard
of reporting for most topics. Standards are needed to provide legitimacy to CSR
activities, to translate activity into value, to protect a corporation’s investment in
environmental/social programs, to level the playing field as much as possible, and
to prevent ‘freeloaders’ and green-washers (Oakley & Buckland 2004). Initiatives
such as the Global Reporting Initiative and a variety of other reporting tools and
standards are now being developed and distributed in order to address this issue
(GRI 2002). This topic is discussed in more detail in later sections.
14
• CSR is Applied in an Ad Hoc or Generic Manner: Many proponents of the
field argue that the effectiveness of CSR integration has been limited by the ad
hoc or generic application of responsible business principles by many
corporations. As a solution to this, Strategic CSR (discussed later) would involve
the incorporation of responsible business practices into the core operations,
management, and strategy of a business in order to maximize outcomes and their
effect on profitability (Porter & Kramer 2006).
• CSR is a Management Fashion: Managerial ‘fashions’ are notorious and some
theorists argue that CSR integration and green business are merely the latest
fashion. As Zorn & Collins (2007) discuss “…whether CSR/sustainable business
is a management fashion is open to debate…” Crowther & Rayman-Bacchus
(2004) studied this question directly and concluded that, although the responsible
business movement bears some of the signs of a management fashion, the concern
with corporate social responsibility is part of a wider social movement and it is
likely that the pressures which drive adoption will continue to increase. Zorn &
Collins (2007) concluded that CSR is likely to become less fashionable as it
becomes normalized in business practices. Like quality control and human
resource management issues dealing with race and gender, they expect
responsible business considerations to mature into a mainstream management
paradigm that goes out of fashion only because it becomes normalized in business
practice (Peters 2004; Zorn & Collins 2007).
• CSR is Mainly the Concern of Companies with Large Market
Capitalizations: Critics of CSR have often stated that only large cap
corporations, and generally those with highly visible publicly consumed brands,
are concerned with responsible conduct. Although it is true that large corporations
are the first to adopt CSR principles (which is not necessarily a problem since
they account for a majority of global economic activity) Industry Canada (2006)
and Johnson (2007) argue that national firms, medium sized corporations, and
even many small businesses are finding many reasons to work within a
15
responsible business framework. Many of the drivers that apply to large firms also
affect smaller ones and the activities and demands of large firms and investors can
significantly impact their smaller business partners. As evidenced by the example
of the Canadian mining industry (discussed in detail later) even corporations that
do not market directly to the public have good reason to adopt a CSR framework
and downward pressures are beginning to extend throughout the supply chain.
• Corporations are not Qualified to Deal with CSR Issues: Scholars have argued
that it is not the role of corporations to deal with complex social issues such as
poverty or the environment and corporations generally do not have personnel who
are qualified to do so. Governments should instead take responsibility for these
issues, leaving business managers to their area of expertise (Ougaard 2004).
16
1.6 Key Questions to Address
As discussed in the previous section, there are two major critiques of CSR that
need to be addressed if this framework is to be successful:
1. Can active CSR management improve corporate profitability?
2. Can profit driven CSR substantially improve corporate environmental and
social performance?
These questions are addressed through literature review in the following sections
and the conclusions stated therein are supported by evidence presented in later sections of
this document. First, the firm level drivers that link CSR performance and profitability
are summarized.
1.7 Summary of Firm Level Drivers
The recent growth in responsible business activity arises from a variety of socio-
economic drivers. These include globalization, increased corporate concentration, the
historical shift from Keynesian to neo-liberal policies and economics, the growing
strength of civil society movements, and a variety of high profile corporate disasters that
were related to environmental/social performance (as discussed in the previous sections).
In addition to these ‘macro’ drivers, the recent wave of CSR is also motivated by a
variety of firm level drivers which many business people and researchers believe link
performance to corporate profitability. Each of these firm level drivers is discussed in
more detail in later sections. Firm level drivers are (in alphabetical order):
• Civil Society Groups and Consumer Activism: Responsible corporate
behaviour may be undertaken to reduce the chances of damaging attacks by
powerful civil society groups (ex. NGOs), to respond to criticisms from such
groups, in order to respond to or avoid consumer activism, and in order to form
strategic alliances with civil society groups (ex. Corporate – NGO partnerships).
17
Civil society groups exist representing all issues related to CSR; this includes
groups which identify with causes related to the environment, aboriginal peoples,
race, gender, human rights, consumer protection, etc. (Ougaard 2004; Tracey
2004; Knight 2007).
• Employee Relations: Many firms find it difficult to attract and retain top talent
and numerous studies indicate that firms which have high levels of CSR
performance are better at dealing with this problem (Porter & Kramer 2006).
• Innovation: Responsible business behaviour and the new ways of managing a
corporation that accompany it can lead to innovation (Porter & Kramer 2006).
• Investor Pressures: Increasingly investors demand high levels of performance
and disclosure on environmental, social, and governance issues. The advent of
Socially Responsible Investing (SRI), shareholder activism, and Environmental,
Social, and Governance (ESG) factor integration in investment decision making
provide a strong motivator for CSR action and reporting from corporations
(Adams et al. 2004; Clarke & de la Rama 2004). Large global SRI initiatives
include the UN-led Principles for Responsible Investing pact and the international
Carbon Disclosure Project (Conference Board of Canada 2007; Mercer
Investment Consulting 2007).
• Legislation: There is a significant legal dimension to CSR activities and a great
deal of responsible business behaviour is motivated by legislative requirements
(Seeger & Hipfel 2007). In the past this was the primary driver of
environmental/social management activity at the corporate level (Cheney et al.
2007). New types of legislation are motivating broad changes in corporate
behaviour, such as mandatory environmental and social performance reporting
legislation in such nations as Norway, Denmark, The Netherlands, Australia,
Sweden, France, and England (Clarke & de la Rama 2004; Monaghan 2004).
• Liability: Many firms undertake CSR behaviour as a means of avoiding future
liability and as a form of risk management (Crowther 2004b).
18
• Marketing/Branding: Many corporations attempt to use responsible business
initiatives as a marketing tool and will try to attract socially and environmentally
conscious customers through related marketing and branding (Knight 2007).
• Operational Efficiency: Responsible corporate behaviour can often be linked to
increases in operational efficiency. (ex. Energy use reduction can simultaneously
provide environmental benefits and save money).
• Permissions, Licensing, and Community Relations: A company’s reputation
can significantly impact its ability to acquire permissions and licenses required to
operate. Many corporations find it increasingly difficult to operate without the
consent of local communities (Porter & Kramer 2006).
• Policy Influence: Many corporations undertake CSR type activity in order to
influence public policy. Firms may attempt to ‘self-regulate’ in order to
discourage government intervention and may also attempt to use positive
performance as a justification for deregulation (Ougaard 2004; Conrad & Abbot
2007).
• Pre-emptive Compliance: Some CSR behaviour is motivated by the desire for
pre-emptive compliance to anticipated regulation. For example, many firms are
already voluntarily cutting greenhouse gas emissions in Canada, anticipating
regulation in the near future (Ougaard 2004).
• Reputation: Many firms undertake responsible business initiatives in order to
protect or enhance their public reputation. Good reputation is useful for marketing
purposes and in order to gain project related permissions, to avoid unanticipated
local resistance, and to avoid attacks from civil society groups (Ougaard 2004;
Porter & Kramer 2006).
• Societal Pressure: Societal pressure for high levels of CSR performance is
growing rapidly. In a 1999 Price WaterHouse Coopers poll, for example, it was
found that 60% of citizens want companies to go beyond their traditional goal of
profit maximization to include other broader societal objectives (Dunphy et al.
2003).
19
• Strategic CSR: Many corporations have demonstrated the potential for CSR to
become a core element in a corporation’s long term strategy and profitability.
Strategic CSR involves practicing environmental/social management in a way
which provides long term value to the corporation while maximizing
performance. This is achieved by integrating CSR objectives into a company’s
core business strategy, by identifying the issues that are most relevant to the
corporation, and by pursuing initiatives in areas which the corporation is most
able to positively affect (Birch 2004; Hart 2005; Porter & Kramer 2006; Bullis &
Fumiko 2007).
• Transparency, Reporting, Accountability and Verification: As mentioned
earlier, it is now a legal requirement that corporations report on some aspects of
their CSR performance in Norway, Denmark, The Netherlands, Australia,
Sweden, France, and England (Clarke & de la Rama 2004; Monaghan 2004). Due
to the demands of investors, new reporting legislation, and pressure from civil
society groups, many corporations now find it necessary to provide increased
transparency and report on their social, environmental, and governance
performance. There are also pressures to increase corporate accountability on
corporate responsibility issues and many are calling for third party auditing and
verification of environmental/social performance (Bennet & James 1998;
Monaghan 2004). Many attempts to standardize the reporting and measurement of
CSR performance exist; chief among these are the Global Reporting Initiative and
the international Carbon Disclosure Project (GRI 2002; Conference Board of
Canada 2007). Triple Bottom Line (TBL) reporting is now a well known
methodology which involves the inclusion of environmental, social, and financial
information within standard corporate procedures (Elkington 1997; Elkington
2004). Transparency and reporting make it more difficult for a corporation to hide
poor performance.
20
It should be clear from this list that a diverse set of drivers motivate CSR adoption
at a firm level. While these drivers vary in importance between firms and sectors, many
have the potential to impact profitability. Each of the firm level drivers is discussed in
more detail in later sections.
1.8 Is CSR Profitable?
As mentioned earlier, a variety of studies have been conducted addressing the link
between CSR management and profitability. This is the key question concerning
responsible business initiatives for many businesses and the issue which will decide how
far voluntary management can go (Hopkins 2003). As Peters (2004, pp.214) argues
“…CSR will not sustain itself unless it has a capitalist imperative – unless it is shown to
make good business sense.” As Bullis & Fumiko (2007) point out, the proven
profitability of environmental/social management has the potential to silence Friedman’s
(1970) argument against CSR integration in normal business practices.
It appears that a tentative consensus on this question is beginning to emerge in the
literature, linking CSR to financial performance, competitiveness, and profitability
(Industry Canada 2006; Macintosh 2007). King & Lenox (2001), for example, conducted
a review of studies which examined the link between environmental performance (as a
major facet of the field) and profitability. King & Lenox (2001) reviewed the work of
Spicer 1978; Muoghalu et al. 1990; Hamilton 1995; Hart & Ahuja 1996; Klassen &
McLaughlin 1996; Nehrt 1996; White 1996; Russo & Fouts 1997; Karpoff et al. 1998;
Dowell et al. 2000. From this review, and their own large scale industrial study, they
were able to conclude that “…previous empirical work suggests that firms with high
environmental performance tend to be more profitable, but questions persist about the
nature of the relationship…” (King & Lenox 2001). Simpsons & Kohers (2002)
performed a similar review examining 100 CSR-profitability studies and they also
concluded that, generally speaking, environmental/social performance can be linked to
profitability, though this is not a clear cut relationship.
21
Evidence from the business side of this debate further supports the CSR
performance-profitability link and in a recent poll it was found that 79% of CEOs agreed
that “…sustainability is vital to the profitability of any company…”
(PriceWaterhouseCoopers 2005). Further evidence for this link is offered by the growth
of CSR activity itself, as Crowther (2004) argues, it is unlikely that leading firms would
be investing large amounts of capital in responsible business initiatives if there was no
potential payoff.
Thus, as King & Lenox (2001) and Simpsons & Kohers (2002) concluded, there
appears to be a positive link between CSR performance and corporate profitability.
However, the nature of this relationship remains difficult to describe and Simpsons &
Kohers (2002) argue that the difficulty and inconsistency of CSR reporting/performance
measures is largely to blame for the confusion surrounding the performance-profitability
link. King & Lenox (2001) argue that although CSR performance and profitability can be
positively linked, issues of context, the nature of this relationship, and how a corporation
can form this link remain relevant. Many corporations who have invested in responsible
business initiatives have not seen substantial returns, and as with any investment
opportunity, if CSR is applied badly and out of context then it can be ineffectual at both
increasing performance and profits. In light of this the question is no longer “Does it pay
to be environmentally and socially responsible?” but “When and how does it pay to be
environmentally and socially responsible?”
1.9 Can CSR Produce Acceptable Levels of Social/Environmental Performance?
Authors such as Doane (2004); Ougaard (2004); and Porter & Kramer (2006)
have argued that the responsible business movement has failed to produce acceptable
levels of corporate and environmental performance, that most CSR to date has been
cosmetic, and that the only meaningful increases in performance have been in areas that
are legislated or through initiatives that are overtly profitable for the business. While this
may be an overly pessimistic outlook, and certainly CSR performance should definitely
22
not be discredited because it is profitable, it is true that performance increases to date
have been limited in many sectors. However, authors such as Hopkins (2003); Hart
(2005); Hawkins (2006); Porter & Kramer (2006) and others provide many examples of
corporations or even entire industries where profitable responsible business initiatives
have been undertaken with dramatic environmental/social performance increases. Until
relatively recently there has been only limited corporate understanding of CSR, its
drivers, and the link between performance and profitability and so it is not surprising that
high levels of monetary and strategic commitment to the idea, and consequently high
levels of performance, have not yet occurred. These factors, coupled with the emerging
nature of related legislation, reporting practices, and standards, have limited CSR’s
effectiveness to date. However, it is likely that aspects of this field will continue to
become increasingly public, that the drivers behind it will continue to intensify, that
legislation, reporting practices, and standards will continue to mature, and that the link
between performance and profitability will become increasingly clear (Hopkins 2003;
Crowther & Rayman-Bacchus 2004; Hart 2005; Hawkins 2006; Industry Canada 2006;
Zorn & Collins 2007). Increases in the prevalence, maturity, and impetus for CSR
adoption should lead to increased commitment to the concept, and increased experience
at managing environmental/social issues in the corporate world, eventually leading to
better performance and minimum standards.
23
1.10 CSR: Conclusions and Issues to be Addressed
If CSR is to be successful proponents must learn to apply this framework in a way
that answers the legitimate critiques that come from both the left and the right of the
political spectrum, that is, proponents of the concept must be able to simultaneously
demonstrate that responsible business initiatives increases profits and
social/environmental performance. The question is no longer whether CSR can be
profitable and lead to high levels of corporate social and environmental performance,
instead, researchers should now be concerned with examining when and how it can best
impact profitability and how it can best be applied to maximize environmental and social
performance. These questions form the secondary focus of this thesis.
24
2.0 Drivers of CSR Integration: Linking Profitability and CSR
In this section the micro-economic (firm level) drivers that link profitability and
CSR performance are discussed through a literature review. Each of the drivers discussed
is important to virtually every business, though some are particularly relevant in certain
industries or sectors. It should be noted that all of the drivers discussed are interrelated
and the distinctions made here are somewhat arbitrary. For example, the desire to protect
corporate reputation is closely related to marketing, legal compliance, risk management,
community relations, and other issues. Although each of these is dealt with in separate
sections, these interrelations are noted. It will become clear in later sections that each of
the drivers discussed has had a significant impact on motivating responsible business
initiatives in the Canadian mining industry.
2.1 Legal Dimensions
Because CSR deals with the responsibilities of corporate entities and their
managers a significant legal dimension is present in almost all applications of the
concept. Some aspects of responsible business are heavily regulated (ex. corporate
governance) while others areas of activity have little direct legal oversight (ex. online
privacy controls). As with the rest of the drivers discussed in this paper, the legal
dimensions of CSR are approached in this section within an environmental and social
performance context.
Until recently, legislative controls that forced certain types of responsible
business behavior were the primary motivational factor in corporate environmental/social
management. In the past “…discussions of minimal legal obligation were often framed as
the organization’s maximum ethical obligation…” (Seeger & Hipfel 2007). It remains
true that a great deal of CSR activity is directly mandated by national and international
laws governing labor, environmental performance, corporate governance, social behavior,
25
etc. (Martin 2005). Prosecution of a company or even executives can result from
violating such laws and so corporations are effectively forced to undertake CSR-type
behavior whenever it is legally mandated (Saxe 1990). As a response to this reality many
researchers attempt to define responsible business practices as a ‘voluntary activity’,
separating activity that is legally mandated from that which is done for other reasons.
Other writers, including this author, take the view that it is very difficult to distinguish
between ‘voluntary’ and ‘non-voluntary’ behavior and that a variety of motivational
factors (drivers) make virtually all CSR behavior non-voluntary in practice, even if it is
not explicitly mandated by law (Gunningham 2007; McBarnet 2007). For this reason a
distinction between voluntary and non-voluntary CSR is not pursued in this thesis.
From a legal perspective any differentiation between voluntary and compulsory
activity is difficult. Legal authors such as Lundbald (2005) & Glinski (2007) argue that a
great deal of CSR activity (especially in developing nations) lies in an ambiguous zone
between what is clearly legally required and what is clearly not legally required. As
Martin (2005, 91) states “…a line between CSR voluntary action and what the law
requires is often rather thin…” Due to provisions in sales law, advertising law, labor law,
environmental law, quality control law, tort law, and other areas, corporations are
required to undertake environmentally and socially responsible behavior; though what the
law specifically requires is often poorly defined (Glinski 2007). Thus, while some
responsible business behavior is directly motivated by legislative controls (ex. explicit
pollution caps) most is only partially motivated by legal considerations and the desire to
work within the ‘spirit of the law’, that is, the desire to act cautiously and responsibly in
light of legal ambiguity (reasons for this are discussed subsequently). As discussed in
later sections, new kinds of disclosure and accountability legislation are creating a whole
new playing field and many are calling for greater corporate transparency given the
emergence of corporate self-regulation (Martin 2005; Zerk 2006).
26
2.2 Avoiding Regulation and Influencing Policy
In the last twenty years there has been a growing emphasis on industry self-
regulation, to the point that some governments have almost completely deregulated
certain issues (Haufler 2001). Industry self regulation has risen dramatically as a large
number of corporations, industry groups, governments, and standards organizations have
created corporate codes of conduct that commit corporations to certain standards of
behavior (Rudolph 2005). Typically these codes attempt to standardize corporate
behavior and ‘raise the bar’ on environmental/social performance through peer pressure
and collective action (Zerk 2006). The wave of self regulation has been motivated by the
same factors that motivate CSR more generally, though the desire to shape public policy
and to fill ‘governance gaps’ has also been important in motivating industry initiatives
(Haufler 2001; Rudolph 2005).
Many corporations have chosen to act ‘within the spirit of environmental/social
law’ through self regulation. In part, corporations undertake this non-compulsory
behavior in order to avoid governmental regulation and in order to retain control over
issues that are vital to industry profitability. Corporations and industry groups are almost
universally against increased regulation based on the belief that governments are
inefficient, prone to political capture, illogical, and difficult to deal with. Most
corporations and industry groups prefer to self regulate in order to demonstrate to the
public and policy makers that governmental intervention is unnecessary (Conrad &
Abbot 2007; Gunningham 2007; Tallontire 2007). As Haufler (2001, 22) states, “in many
cases corporate voluntary initiatives are designed to reaffirm that indeed the government
does not need to intervene; it is a defensive mechanism to prevent regulation.” This type
of behavior is exemplified by the high tech sector which has made extensive efforts to
self regulate and even police online activity in order to avoid the imposition of costly
government oversight. Most industries recognize that ultimately self regulation can only
achieve the goal of preventing governmental regulation if they are effective at managing
27
CSR related issues. Thus, self regulation activities can motivate improved
environmental/social performance.
Corporations also undertake self-regulation in order to fill in perceived
‘governance gaps’, that is, in order to govern where governments are unable or unwilling
to do so. This is especially common in developing nations where weak and corrupt
institutions cannot provide the type of stability that highly competitive industries need to
survive (Haufler 2001; Hirschland 2006; Bottomley & Forsyth 2007). Numerous studies
have examined this growing phenomenon and it is increasingly recognized that non-
government entities such as NGOs, standards organizations (ex. the ISO, the Forest
Stewardship Council), and corporate groups are finding ways to fill in these governance
gaps (Hirschland 2006). This type of activity is especially pertinent for multi-national
corporations that have operations all over the world and are hence required to operate
under a variety of regulatory frameworks. Because these corporations are difficult to
regulate on an international scale, but are still held accountable for misconduct by their
domestic customers, many choose to self regulate and maintain certain standards
throughout their international operations (Zerk 2006). Self-regulation schemes such as
published ‘codes of conduct’ can be legally binding under some circumstances, and so it
is important for corporations to abide by these codes once they are established. In labor or
contractual disputes, for example, it can be argued in court proceedings that a company or
manager has violated a company’s stated code of conduct and this argument has been
accepted in the past (Lundbald 2005).
2.3 Liability and Risk Management
Liability and risk management practices also motivate responsible business
activity and industry self regulation. Many corporations undertake CSR management
activities as a form of risk management, attempting to understand and mitigate risks from
environmental disasters, social backlash, brand damage, and liability resulting from poor
environmental and social performance (Rudolph 2005; Hawkins 2006). Many of the other
28
drivers discussed in this document (ex. brand and reputation protection, NGO relations)
can be seen as forms of risk management (Banks & Dunn 2003; Hawkins 2006). As
Hawkins (2006, 128) explains “…developing an environmental and social strategy is a
significant element of implementing effective risk management …” Managing the risks
associated with environmental and social performance has grown in importance in the
last two decades and examples abound of corporate disasters resulting from poor risk
management.
Because a corporation is considered a legal ‘person’ in the eyes of the law,
corporations can be sued and held responsible (liable) for damages just as a normal
person can, although limited liability7 somewhat constrains the impact that a lawsuit can
have on corporate directors and shareholders (Crowther 2004b). Liability is another
major motivator in adopting management practices for environmental and social conduct
(Saxe 1990). Firms manage liability first by adopting management practices that attempt
to prevent disasters and poor environmental/social performance that could lead to
lawsuits, and second, by attempting to demonstrate that they operate with ‘due diligence’
if they are ever forced into court proceedings. Due diligence is a vital factor in court
proceedings and corporations with strong management and oversight on environmental
and social issues are more likely to be able to defend themselves from lawsuits by
arguing that they acted with ‘due diligence’ by taking reasonable extra-legal precautions
through strong CSR management (Saxe 1990; Lundbald 2005; Glinski 2007). A
proliferation of large scale environmentally related corporate liability cases in the late
1980s and early 1990s made liability a major issue for a variety of corporations. This has
had lasting consequences on the ability of high risk business ventures to obtain operating
insurance and especially insurance for environmental liability. Typically such insurance 7 Limited liability is a legal term that applies in most of the developed world. This describes the situation where a shareholder or a manager in a corporation is only liable (legally responsible) for the debts of that corporation equal to the value of their own holdings. So, if a shareholder’s shares are worth $1 each but liability resulting from debt or a lawsuit exceeds this amount, the maximum amount that a shareholder is responsible for is the $1/share that they have invested in the company. They cannot be made to pay for any outstanding debts. This limits the effectiveness of liability and there have been cases where firms have been sued for environmental liability costs that exceed the value of their company. In such cases, the firms usually go bankrupt and the costs are taken on by the government, society at large, or are never paid (Crowther 2004b).
29
will only be issued at a reasonable price if certain management protocols are met (Lewis
& Saul 1993).
2.4 License to Operate
The term ‘license to operate’ refers to a firm’s ability to acquire the necessary
legal and political permissions to conduct their business in a given region or community.
Gunningham (2007) explains the license to operate as both a literal and figurative term,
that is, it simultaneously describes the ability of a corporation to obtain legal licenses (ex.
Zoning permits, construction permits, etc.) and the ability for that corporation to obtain a
‘social license’ whereby the majority of the citizenry acknowledge the legitimacy of that
business’s operations8. While often overlooked in the CSR literature, the ability of firms
to obtain a social and legal license to operate has emerged as a significant driver of
responsible business initiatives, particularly in the developed world (Porter & Kramer
2006). The rise of NIMBYism, societal stigma regarding the health and environmental
effects of heavy industry, and the emergence of community protectionism have resulted
in a pervasive curtailing of the license to operate for many businesses. This phenomenon
most often manifests itself as well publicized conflicts between community,
environmental, and social activists and corporate developers of heavy industry, resource
extraction, waste management, housing developments, and large retail (Burke 1999).
Persistent community opposition to the opening of Wal-Mart stores in the United States
provides a vivid example of the emergence of this problem. The license to operate can
have a significant impact on business operations, as Burke (1999, XIV) explains:
“…companies, therefore, that do not balance strategic intent with community
expectations are likely to find their business aims and opportunities thwarted and,
8 In business circles this type of thinking is known as ‘legitimacy theory’ the basic premise of which is that the public does not believe that a corporation has an inherent right to exist and that society grants a corporation the right to exist and operate on a transitory basis. As such, a corporate manager must continuously be concerned about the public image and hence ‘legitimacy’ of their corporation (Magness 2006).
30
even more damaging, discover that their license to operate becomes increasingly
curtailed. And the more a company’s license to operate is curtailed, the more its
ability to achieve a competitive advantage decreases…at the same time, the
public’s changed expectations present significant economic opportunities for
companies…”
The emergence of the license to operate problem arises from increased activist
effectiveness and the shift in licensing and permitting processes from state and federal
agencies to municipal governments throughout the developed world. Because municipal
governments are far more responsive to local pressure, this shift has made it more
difficult for certain industries to obtain legal licenses where the ‘social license’ is lacking;
that is, corporations find it very difficult to move through the permitting and licensing
process if local communities are in opposition to a particular project (Burke 1999). This
phenomenon motivates CSR activities as many corporations (including Wal-Mart in the
last few years) undertake active and public management of their environmental and social
impacts with the hope of convincing local communities that they are ‘good corporate
citizens’ deserving of the necessary permissions to operate (Porter & Kramer 2006).
2.5 Investor Pressure
Investor pressure and the socially responsible investing (SRI) movement are
major drivers of CSR activity (Clarke & de la Rama 2004; Scholtens 2006). It is this
author’s opinion that SRI and CSR mirror one another, that is, both are motivated by
many of the drivers discussed in this document and that these two movements are
intimately related. Like CSR, SRI is motivated by a variety of drivers including NGO
activism, liability issues, disclosure and transparency initiatives, etc. The main avenue by
which SRI investors affect and communicate with corporate managers is through
Environmental, Social, and Governance (ESG) factor integration methodologies. Due to
31
the growing importance of SRI, and its similarity to the broader concept of responsible
business, some background on the SRI movement is offered as follows.
ESG factor integration describes a diverse and emerging set of evaluation tools
employed by the financial and investment fields in order to make ‘socially responsible’
investment decisions which incorporate these traditionally extra-financial factors. ESG
factor integration seeks to provide the mechanics behind the rapidly growing Socially
Responsible Investing (SRI) movement which itself tries to “…make lucrative investment
choices that have a positive impact on the world…” (Blodget 2007). In practice ESG
factor integration involves developing finance and investment oriented evaluation tools
that address the environmental, social, and governance sustainability of an investment
opportunity9 by implicitly acknowledging these factors as well as the expansion of
investment time horizons, policies that are consistent with fiduciary good governance,
and the encouragement of active ownership and the utilization of ownership powers10
(Mercer Investment Consulting 2007). Advocates of this emerging approach to
investment decision making hope to employ a rational approach to the incorporation of
ESG factors in order to simultaneously provide higher investment returns, environmental
benefits, better corporate governance, and social benefit to society at large (Kiernan
2007; Mercer Investment Consulting 2007). Because governance tools are already highly
developed, in the following sections the environmental and social aspects of ESG factor
integration are the primary focus.
There are many reasons for the current emergence of the Socially Responsible
Investing (SRI) movement and the development of ESG factor integration tools to serve
that movement. Factors that motivate SRI include societal and customer expectations,
marketing, a company’s reputation, new ESG performance and disclosure legislation,
pressure from powerful and influential NGOs, increased recognition of the legitimacy of
ESG factors, the emergence of widely publicized global ranking systems, and the growth
of investor activism (Porter & Kramer 2006; McGeachie 2007). Many of these SRI
9 ‘Investment opportunities’ can include anything that an investor would traditionally consider as a potential investment such as infrastructure, real estate, or investments into publicly traded companies. 10 Each of these is defined and discussed in more detail under the third heading.
32
drivers are very similar to the drivers of CSR. Other factors that have influenced the
development of the SRI movement include renewed emphasis on environmentally related
risk management (made increasingly relevant in light of climate change) and the
emergence of ‘universal owners’ (Porter & Kramer 2006). A universal owner is a
“…major institutional investor (notably pension funds, insurance companies, and some of
the largest endowments and foundations) who have now become so large and broadly
invested that they in essence collectively own a piece of the entire global economy. They
hold investments in virtually every asset…” (Kiernan 2007). The emergence of the
universal owner phenomenon has occurred rapidly as large institutional investors have
coalesced and generated gigantic pools of capital that can now be diversified globally due
to the new opportunities offered by globalization. This creates a modern ‘financial
tragedy of the commons’ where universal owners are forced to address the externalities
created by one business or industry as they are likely to impact the returns on their other
investments. This creates an incentive for a universal owner to minimize the negative
externalities and maximize the positive externalities created by each of their investments.
Given the emergence of the universal ownership phenomenon, it is not surprising that
large institutional investors (particularly pension funds and insurance companies) have
led the SRI movement (CPP 2007; Kiernan 2007). This phenomenon is especially
important in Canada, where large institutional investors dominate the investment market
(Magness 2006).
All of these factors have contributed to the rapid growth of the SRI movement and
the growing emphasis on the creation and implementation of ESG tools that explicitly
incorporate these risks, opportunities, and requirements into rational investment decision
making. Given the motivating factors discussed, it is not surprising that 75% of global
investment managers surveyed by Mercer Investment Consulting in 2006 believed that
ESG factors have a material impact on investment performance. More importantly, 75%
also believed “that environmental and social factors will be integrated with mainstream
investment decisions within 10 years…” (Ambachtsheer 2006).
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2.6 ESG Factor Integration in Practice
ESG factor integration has received international attention and has spread
significantly as a result of several global SRI initiatives. The most prominent of these is
the international Principles for Responsible Investing (PRI) project which has been led by
UNEP-FI11 and Mercer Investments. The PRI has sought to mainstream ESG factor
integration by gathering the voluntary commitment of some of the world’s largest
institutional investors. To date over 200 large investors representing 9 trillion US in
assets have voluntarily agreed to abide by the PRI’s core principles, committing these
organizations to the integration of ESG factors in financial decisions (Mercer Investment
Consulting 2007).
The first step to ESG factor implementation is the generation of meaningful ESG
information. To this end, a variety of institutional investors, NGOs, and governments
have pushed for companies to provide disclosure on ESG factors12. Investors believe that
“…disclosure is the key that allows investors to better understand, evaluate, and assess
potential risks and returns, including the potential impact of ESG factors on a company’s
performance…” (CPP 2007). With the quantity and quality of disclosure increasing
rapidly, new ESG auditing and evaluation techniques are constantly being developed.
The information generated through the use of these techniques is then translated into a
variety of indices that seek to rank companies based on their ESG performance. In theory,
this information can then be translated further to determine how ESG factors could
impact financial outcomes in order to incorporate these factors fully into financial
decision making (Innovest 2007; Fowler & Hope 2007; Kiernan 2007). With this
information in hand, investors have developed a variety of tools aimed at ESG factor
implementation and better portfolio management. These include:
11 United Nations Environment Program – Finance Initiative 12 Disclosure means that companies are being asked to quantify and report on their ESG performance. A prime example of this is the Carbon Disclosure Project which commits companies to measure and disclose their greenhouse gas emissions (Conference Board of Canada 2007).
34
• Active Ownership: When an investor (as a shareholder owning a piece of a
company) regularly exercises their voting rights and other shareholder rights in
order to express their opinion on ESG issues, this is referred to as active
ownership. Engagement and shareholder activism are forms of active ownership
(CPP 2007). Blodget (2007) argues that active ownership approaches are the most
promising way to deal with ESG factor implementation while maximizing returns.
• Engagement: Engagement occurs when investors (as shareholders) open a
dialogue with the company and directly request information or action on ESG
issues (CPP 2007).
• Shareholder Activism: When investors use their voting and owner’s rights to
actively and publicly challenge the management of a company in relation to ESG
issues, this is referred to as ‘shareholder activism’. Amnesty International’s “share
power” campaign is an example of this (Amnesty International 2007).
• Screening/Divestment: If an investor refuses to invest in a given company or
sector for ESG or ethical reasons, this is implemented through screening or
divestment. For example, many healthcare pension funds will not invest in
tobacco companies. Divestment occurs when an investor sells their stake in a
company for ESG or ethical reasons, thus removing themselves from that
company. Most investors do not like to divest or screen poor ESG performs
because it lowers portfolio diversity (hence increasing risks) and may result in the
exclusion of strong financial performers such as tobacco, oil and gas, etc.
(Blodget 2007).
• Positive Weighting: Positive weighting occurs when an investor uses ESG data
to preferentially invest in high ESG performers. Following this method, a larger
percentage of their investment funds are allocated to investment opportunities that
have a high ESG performance rating, without completely eliminating poor
performers. This strategy helps to alleviate some of the problems created by
screening/divestment while still incorporating ESG factors (Blodget 2007).
35
• Best in Class Selection: This occurs when an investor uses an ESG performance
index (such as Innovest ratings) to choose the top performers in each industry or
economic sector. The investor will then invest in these ‘top performers’ and
exclude the ‘poor performers’ without completely excluding any sector. In
practice this could mean, for example, that the ESG top 10% of oil and gas
companies are invested in while others are not. Again, this avoids some of the
problems created by screening/divestment (Blodget 2007).
Like CSR within the business community, within the investment community SRI
and ESG factor implementation is a heavily debated subject. Many investors believe that
ESG factor implementation should not have a formal place in investment decisions while
others argue that these factors are essential considerations for rational investment
decision making. The major issues of contention and criticism in ESG factor integration
are summarized as follows:
• ESG and Investment Returns: There is still considerable disagreement about the
effects of ESG factor implementation on financial returns (Blodget 2007; Kiernan
2007). Blodget (2007) argues that ESG factor integration will necessitate reduced
investment returns but that this is worth the increases in ESG performance.
• Conflicts over Fiduciary Responsibility: Fiduciary responsibility is the legal
responsibility of an asset manager to manage their assigned portfolio in a manner
which ‘maximizes returns without undue risks’ (Kiernan 2007). Some believe that
ESG factor implementation will damage returns and decrease portfolio diversity
(hence increasing risk) and that this contradicts fiduciary guidelines (Kiernan
2007). However, others argue that ESG factor integration is well within fiduciary
law – and may even be required to fulfill this responsibility (Freshfields
Bruckhaus Deringer 2005).
• Major Disparities Between Rhetoric and Action: Researchers such as Kiernan
(2007) have criticized the SRI movement saying that while support of SRI
36
initiatives (such as the PRI) have been widespread, action has been extremely
limited. Fowler & Hope (2007), for example, argue that less than 1% of global
assets are currently managed with strict ‘sustainability’ factors incorporated. In
addition, many ‘ethical’ organizations do not practice ESG factor implementation,
including the United Nation’s own employee pension fund (Kiernan 2007).
• ESG Indices and Ranking Schemes are Subjective: Fowler & Hope (2007)
argue that ESG indices and ranking schemes are still highly subjective and that
they have not been comprehensively studied to judge their effectiveness.
• ESG Factor Integration Does Not Address the Root of the Problem: Kallio
(2006) and other theorists argue that the root of current environmental problems,
such as the continuous growth paradigm, assumptions about the amoral nature of
business, and the political nature of environmental issues, are not addressed by
SRI.
2.7 Transparency, Accountability, Reporting, and Disclosure
In recent years there have been significant calls for increased corporate
transparency and accountability13 with particular emphasis on issues pertaining to a
corporation’s finances, governance, and social/environmental performance. Proponents of
CSR transparency and accountability hope that by making the actions of managers open
to public scrutiny, and by holding those managers accountable for the environmental and
social impacts of their business, corporate managers will be motivated to achieve higher
levels of performance. As Crowther (2004) argues, transparency and accountability have
been present in corporate financial accounting since the mid 19th century and these
practices have proven essential for the diversification of investments and the maintenance
of the manager-owner separation that is a reality in most modern corporations.
Transparency and accountability in financial accounting, reporting, and auditing were
13 Transparency describes the degree to which the activities, decision making, and management of a corporation are made public. Accountability describes the degree to which the corporation, its managers, and its employees are held responsible for the activities of the corporation.
37
originally designed to protect investors in a public company by imposing a duty of
financial responsibility upon managers. Advocates of transparency and accountability in
social and environmental performance believe that these principles of responsibility
should be extended to include aspects of CSR performance (Crowther 2004; Oakley &
Buckland 2004). Achieving CSR transparency and accountability is the goal of the
reporting, disclosure, verification, labeling, and standardization initiatives discussed in
the following two sections. Activists, investors, the media, and governments have created
significant pressure on corporations to become more transparent and increase
accountability for immoral or illegal actions (Monaghan 2004; Magness 2006). Currently
mandatory reporting (in various forms) has been legislated in Norway, Denmark, The
Netherlands, Australia, Sweden, France, Germany, Switzerland, and England (Monaghan
2000; Martin 2005; Roselle 2005).
The primary means by which CSR transparency is achieved is through the
tracking, reporting, and disclosure of environmental/social performance. Until recently
public reporting and disclosure was limited to the generation and reporting of financial
information as stipulated by corporate accounting laws. As mentioned earlier, this type of
disclosure activity was undertaken in order to force a corporation’s managers to report to
the corporation’s stock owners (Magness 2006). In recent years annual reporting has
increased in complexity, and in many companies, a variety of social, environmental, and
other information is now disclosed through annual reports or special performance
reports14 (Crowther 2004; Magness 2006). The growth of these reporting activities is
exemplified by the fact that by 2000 over half of Fortune 500 companies produced
publicly available sustainability reports (GRI 2002).
The most heavily discussed approach to CSR reporting is known as Triple Bottom
Line (TBL) reporting, the ‘triple’ referring to financial, environmental, and social
measures of corporate performance (Elkington 1997). The ‘triple bottom line’ approach,
which was first proposed by John Elkington in 1994, is now a well recognized and
mainstream management paradigm, although the logistics associated with it are still
14 For example, sustainability, environmental, or community relations reports.
38
developing (Elkington 2004). The growth and recognition of the TBL concept has
resulted from evidence that suggests that TBL activity (like CSR more generally) is
linked to overall management quality (Adams et al. 2004). Furthermore, many theorists
and business people argue that tracking environmental and social performance has the
potential to impact income by identifying cost reductions and mitigating related risks
(Bennet & James 1998). As Magness (2006) explains, “A substantial body of evidence
supports the allegation that there is a strategic element to the disclosure process”.
Reporting and disclosure have also been advanced significantly by several high profile
voluntary disclosure initiatives including the Global Reporting Initiative, the Carbon
Disclosure Project, and the UN led Principles for Responsible Investing projects (GRI
2002; Adams et al. 2004). These initiatives, and hundreds of smaller industry level
projects, have sought to promote CSR related reporting and standards (Ougaard 2004).
Despite these efforts, corporate reporting has not been as effective as many hoped
for and this approach is heavily criticized as being inconsistent (both between and within
corporations), minimum standards are often seen as insufficient, CSR reporting is often
characterized as ‘greenwash’, and the accuracy of corporate claims have been
consistently questioned. These issues are attributed to the relatively new and evolving
nature of reporting tools, the lack of strong legislation dealing with this issue, the inherent
difficulty associated with environmental/social measurement and reporting, and the lack
of consistency in reporting approaches (Waddock & Graves 1997; Crowther 2004; Doane
2004). As Magness (2006) states “Much of the prior literature finds little agreement
between companies’ environmental performance and their discussion (if any) of that
performance. If disclosures are supposed to provide accurate information about actual
performance, then disclosure often fails.” As discussed in the following section, these
challenges have motivated a new wave of CSR reporting, one which involves
verification, labeling, and standardization approaches.
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2.8 Verification, Labeling, and Reporting Standards
In order to increase the effectiveness of reporting and disclosure a variety of
reporting standardization, third party verification, and auditing projects have been
undertaken. These projects seek to increase the effectiveness, accuracy, and legitimacy of
CSR reporting by standardizing reporting practices, measurement, and disclosure criteria
through the use of standardized evaluation tools or third party auditors (Monaghan 2004).
While these approaches are not yet mainstream, they are becoming increasingly common
and some relatively well developed examples of third party verification do exist. Semi-
public authorities such as the Forest Stewardship Council, the ISO (and its environmental
reporting standards), organic certifiers, fair trade certifiers, and carbon reductions
certifiers have established well developed and well recognized third party verification
techniques in their respective environmental and social fields (Monaghan 2004; Ougaard
2004). Where third party verification and labeling schemes are extensively developed,
such as with the Forest Stewardship Council’s forest friendly wood and paper industry
auditing and labeling programs, third party verification has been shown to be very
effective at motivating improved CSR performance (Monaghan 2004; Rock et al. 2006;
Angel et al. 2007). A significant reason for undertaking third party verification and
auditing of responsible business claims is to defend the legitimacy of ‘green’ products.
As a result, a variety of efforts exist that are intended to address the problems associated
with green-washing through labeling, advertising standards, verification, and independent
auditing (Ongkrutrasksa 2007). The continued growth of reporting standards, third party
verification, and auditing will motivate higher levels of CSR related disclosure and better
quality reporting. As this occurs, the pressure for corporate managers to produce high
levels of environmental/social performance will intensify.
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2.9 Reputation Management
Many corporations undertake CSR activities in order to protect their reputation15
and the ‘good name’ of the corporation and its associates. In this section reputational
considerations that are not expressly linked to product marketability are discussed; topics
related to marketing are addressed in the following sections.
Many corporations value their reputation and good name even if they are
relatively non- responsive to consumer pressures16. A good reputation is very hard to
create and relatively fragile; a single high profile incident can create lasting negative
sentiments in a community or the public at large17 (Haywood 1994; Ali 2003).
Reputation also operates synergistically with other drivers, and having a good reputation
(as an industry or as an individual company) is beneficial when attempting to influence
public policy, when faced with liability lawsuits, for investor confidence, when
attempting to attract, motivate, and retain employees, when dealing with NGOs and other
civil groups, and when a corporation is seeking necessary permissions and
accommodations from local communities (Haywood 1994; Burke 1999; Brady 2005). In
addition, a good reputation is very important in forging long term business associations
and in trust building with business and non-business partners (Haywood 1994; Myles &
Schoening-Thiessen 2003). As Haywood (1994) explains, trust is a vital component of
business operation and stakeholders who work with a corporation care about its
reputation as this is what they perceive most strongly. For these reasons managing
reputation is a vital part of corporate management and many executives spend a great
deal of effort addressing this aspect of their businesses (Porter & Kramer 2006). As 15 Corporations undertake CSR management, in part, in order to protect their image and the image of their products. This driver is divided into three sub-sections; reputation, branding, and marketing/ethical consumerism. Each of these topics is closely related to the others but they are arbitrarily separated here for ease of analysis. 16 Some corporations, especially supply chain industries such as mining, do not deal directly with the public and so they are not directly susceptible to consumer pressures. However, as shown in later sections, with some products the mining industry has reasons to be responsive to consumer pressures. 17 This is evidenced by the fact that high profile incidents that are over a decade old continue to have relevance for companies such as McDonalds, Shell, Exxon, and Nike.
41
Ongkrustraksa (2007) states, “It is obvious (from numerous high profile examples) that
notable corporate giants deem it a must to promote corporate images that reflect their
environmental awareness and involvement”.
A great deal of empirical work has been focused on attempting to quantify the
relationship between profitability and corporate reputation. It has been found that the
reputational damage from CSR related disasters can exceed the direct costs of the
disaster; in the case of the Exxon Valdez oil spill, for example, it is estimated that
investors lost 10% of the value of their Exxon holdings following the spill. However,
cleanup and liability costs only accounted for half of this loss and the remaining 5% is
attributed to long term damage to Exxon’s reputation and the ongoing losses that entails
(Davies et al. 2003). A comprehensive study of cases like this found that the long term
reputational damage associated with environmental violations and disasters usually
equals or exceeds the losses associated with clean up and legal penalties (Karpoff et al.
2007). For these reasons, the empirical link between a corporation’s profitability, its
environmental/social performance, and its reputation has been recognized by corporate
managers for more than a decade (Haywood 1994; Brady 2005).
2.10 Branding Management
Brand management is closely related to reputational management, though it is a
term that is usually used more exclusively to describe the marketing related aspects of
corporate image management. Branding is a key strategy for a variety of corporations and
some of the most successful brand managers (ex. Coca-Cola, Intel, IBM, McDonalds,
etc.) have created brand names that are worth billions of dollars (Haywood 1994).
Empirical analysis of brand value has found that up to 85% of a corporation’s value is
found in their brand names (Roselle 2005; Macintosh 2007). These brands are
simultaneously extremely valuable and extremely vulnerable, and brand image is a
corporate weak spot that is often exploited by activist (Hayward 1994). Examples of high
profile brand name attacks abound, for example the McLibel McDonalds fiasco or the
42
Nike Sweatshop problems, and such incidents can cause extensive damage to very
valuable brands. In extreme cases, brand attacks can result in consumers ‘voting with
their feet’ by abandoning a popular brand, resulting in rapid declines in product sales
(Hawkins 2006; Macintosh 2007). Brand management has become increasingly complex,
important, and difficult in light of the globalization of production and sales, the growth of
effective international civil movements (ex. NGOs and consumer activism, discussed in
later sections), and the growth of internet communications (Hawkins 2006; Macintosh
2007). Because brand image reflects the activities of the parent company and its supply
chain, many top brand managers now attempt to defend their brand names through pro-
active management rather than the traditionally defensive ‘damage control’ approach
(Hawkins 2006). Increasingly this type of brand management is becoming closely linked
to CSR performance and consistently good environmental/social performance has been
shown to increase brand resiliency and minimize damage from accidental occurrences
(Roselle 2005; Macintosh 2007).
2.11 Marketing and Ethical Consumerism
In addition to the other reputation related issues discussed in the previous
sections, corporations undertake responsible business activities for a variety of marketing
purposes. ‘Green’ and ‘ethical’ marketing has become a mainstream marketing strategy
in the last two decades resulting in a huge growth in ‘green’ and ‘ethical’ products
(Ongkrutraksa 2007). In addition, many corporations undertake ‘cause based’ or
‘community based’ marketing as a means of promoting their products while undertaking
CSR activities (Burke 1999). Wal-Mart, for example, makes extensive use of community
involvement programs wherein they provide staff or funding to support local eco-
initiatives, sports teams, and other causes as a marketing tool (Martin 2005). While
linking environmental/social performance to marketing has resulted in some very positive
43
performance improvements, there are many well publicized issues18 surrounding both
ethical marketing and ethical consumerism. Nevertheless, terms such as ‘fair trade’ and
‘organic’ have now become mainstream and this has corresponded with a huge growth in
ethical consumerism.
Ethical consumerism is an approach that attempts to reduce the impact of
consumer activities by offering and effectively marketing products which are more
socially or environmentally responsible than their traditional counterparts. Growth in this
field has been incredibly rapid with European household expenditures on ‘ethical’
products, for example, doubling in just five years (Co-operative Bank 2007). In the
United States it is estimated that approximately 10% of Americans are ‘soft’ ethical
consumers, occasionally willing to spend more for socially or environmentally
responsible products. This number has grown rapidly and the number of committed
ethical consumers is climbing (Ongkrutraksa 2007). In Europe ethical consumerism is far
more developed and comprehensive studies suggest that approximately 6% of Europeans
are committed ethical consumers while total ethical product market-share in industries
such as food, drink, and clothing is approaching 10%. This represents phenomenal
growth given that as little as ten years ago total market-share of ethical products would
not have exceeded 1% (Co-operative Bank 2007). Sectors where ethical consumerism is
most prevalent include the food and drink industry, clothing, consumer financial services,
tourism, and energy (Co-operative Bank 2007). It is clear that corporations will want to
capitalize on the emergence of ethical consumerism by offering appealing ethical
products. As discussed in later sections, verification and labelling of such products has
the potential to drastically increase the standards by which ‘ethical’ products are judged.
18 It should be noted that ethical marketing and consumerism have been heavily criticized by some activists who argue that corporate marketing claims are far behind corporate performance (Ongkrutraksa 2007). Authors such as Williams (2007) have argued that the impact of ethical consumerism is limited and that phrases like ‘green consumerism’ are inherently oxymoronic. As stated earlier, this author accepts that greenwashing (and associated phenomenon with social causes) is currently widespread and that there are many problems in current ethical consumerism practices. Efforts to address this problem are discussed in section 4.8, chief among these are efforts to introduce mandatory labelling and verification.
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2.12 NGOs and Activism
Non-Governmental Organizations (NGOs) have been instrumental in the creation
of pressure for high levels of CSR performance, especially since the 1980s. The birth of
global NGO movements (due to such factors as telecommunications, globalization, and
increased funding) has substantially changed the international business climate and
NGOs are now seen as central player in the determination of world economic, social, and
environmental policy. Large scale private NGOs (those not directly linked to a religious
organization or the government) have existed for approximately 150 years and by 2000
nearly 45,000 NGOs existed worldwide, addressing a wide variety of CSR related issues
through a diverse set of operational approaches (MacLean & Nalinakumari 2005). Some
NGOs (ex. Greenpeace) undertake radical activism activities while others (ex. World
Wildlife Fund, Red Cross) limit themselves to project implementation and mainstream
advocacy. Generally speaking, NGOs tend to be structured around a single issue or set of
issues (ex. Child poverty, or development generally) with large, well funded, and well
organized NGOs acting as major advocates for every significant CSR related issue
(MacLean & Nalinakumari 2005; Porter & Kramer 2006). As Ali (2003) argues, NGOs
act as a buffer between government, businesses, and the public (though rarely as a
mediator) and are usually seen as representatives of issues of public interests that are
perceived to be inadequately addressed by governments.
As NGOs have risen in power and effectiveness the corporate world has been
forced to acknowledge their influence. These corporations simultaneously have the
potential to significantly punish corporations for poor environmental/social performance
and to reward them for strong CSR performance. This is because NGOs have become
highly effective at impacting corporate legislation, legitimacy, reputation, the ability of a
corporation to acquire permissions and licenses, marketing, branding, and the availability
of investment capital. NGOs are now deeply involved in setting global CSR policy and in
many nations (particularly in the developing world) they are as important as national
45
governments when setting the social and environmental agenda. This is exemplified by
the fact that by 2002, 2,236 NGOs had United Nations consultative status (MacLean &
Nalinakumari 2005). As MacLean & Nalinakumari (2005, 3) explain, “In essence, NGOs
are beginning to act increasingly like governmental regulatory agencies, issuing a new
generation of de facto ‘regulations’ in the form of standards, guidelines, and
certifications.” MacLean & Nalinakumari (2004) explain that:
“…until recently, it has been governments that have defined corporate
responsibility; companies have tracked the environmental, health, safety, and
social responsibility metrics dictated by those government-defined laws and
regulations. Not surprisingly, business executives have responded to EHS&SR
issues narrowly, viewing them as government-regulatory or public relations
problems, respectively. In the future, however, NGOs increasingly will define a
new generation of metrics, certify the results, rank relative performance, and set
the minimum thresholds that stakeholders will see as representing responsible
corporate behavior.”
NGOs reinforce the legitimacy of their standards and projects both by rewarding
companies that adhere to their responsible business guidelines and by punishing those
who do not. These opposing aspects of the NGO-corporate relationship are discussed by
examining the impact of activism and NGO-business partnerships in the following two
sections. For the purposes of this paper, aboriginal groups are not considered ‘NGOs’ and
are discussed separately from environmental, human rights, and development
organizations.
As alluded to in earlier sections, nearly continual NGO campaigns against
corporations such as McDonalds, Nestle, Shell, Wal-Mart, and Coca-Cola, as well as
thousands of smaller activist campaigns, have had a substantial impact on corporations
(Monaghan 2004; Rayman-Bacchus 2004; Walsh & Lowry 2005; Cheney et al. 2007;
Knight 2007; Mcmillan 2007; Seeger & Hipfel 2007). Many corporations now fear that
they will be subject to what is known as an ‘NGO swarm’ and the significant impact that
46
activism can have on a corporation’s finances is well recognized. It is safe to say that by
2008 nearly every major corporation or brand has been exposed to some form of activist
attack (Hawkins 2006; Porter & Kramer 2006; Brenden et al. 2007). NGO activists have
become increasingly effective at causing financial damage to corporations; this is
exemplified by the Shell/Greenpeace Brent Sparr fiasco where high profile Greenpeace
activism over the disposal of a mobile oil rig resulted in Shell loosing 50% of its market-
share in Germany, with similar losses in other European nations. It took Shell over a year
to recover to its previous sales levels following the incident and Shell may have lost as
much as $480 million US as a result of Greenpeace’s intervention (Davies et al. 2003).
The growth of tactics such as boycotts, shareholder activism, high profile media
campaigns, and litigation has changed the perception that it is easier to deal with activists
than the CSR problem (Haufler 2001). This reality has motivated many corporations to
pursue higher levels of environmental/social performance and to form productive
partnerships with NGOs.
2.13 Business-NGO Partnerships
NGOs have a virtual monopoly on legitimacy and in many contexts they are seen
by the public as the legitimate defenders of the public interest, far ahead of corporations
and even governments (MacLean & Nalinakumari 2004). As Tracey (2004, 131) states
when discussing NGO-business partnerships, “as cynicism grows, business credibility
has never been more valuable – and never harder to achieve.” In light of this reality,
corporations have increasingly sought to form productive partnerships with receptive
NGOs (Tracey 2004). These partnerships transcend the archetypal business-NGO
partnership of the past, which could typically be characterized as a relationship between a
philanthropist and a charity. In recent years corporations have sought to work closely
with NGOs by providing funding, logistic resources such as employees, equipment, or
information, by working closely with NGOs in implementing projects, and by actively
seeking input in their CSR management activities. In exchange, NGOs offer corporations
47
legitimacy, marketability, protection from other NGOs19, certifications, political
concessions, and other forms of support. The potential for mutually beneficial
interactions between NGOs and businesses, centered on improved corporate
environmental and social performance, has led to the formation of a variety of high
profile partnerships in recent years and many corporate analysts now recognize that
forming a long term and productive relationship with a large NGO is among the most
productive ways to implement CSR (Birch 2004; MacLean & Nalinakumari 2004; Porter
& Kramer 2006). The NGO-business partnership approach has been a major focus of the
Canadian mining industry in recent years; this is examined in more detail in the case
studies.
2.14 Eco-Efficiency
Eco-efficiency, from a corporate perspective, involves finding ways to increase
the energy and materials efficiency of operations and product creation activities so that
output per unit of energy or materials increases. Generally this term is understood to
include energy efficiency, materials use efficiency, recycling, waste reduction, pollution
reduction, and the development of by-products industries (Madden et al. 2006). Eco-
efficiency is subsumed by the industrial ecology framework and this framework informs
the subsequent discussion of eco-efficiency in the Canadian mining industry. Increasing
operational efficiency, it is argued, conserves energy and materials and is thus
environmentally and social beneficial. Because eco-efficiency initiatives provide a
relatively rapid and easy to understand way of reducing production and operating costs
corporations were receptive to this approach long before the advent of environmentalism
or social justice movements (Desrochers 2007). Efficiency is a core business principle
and so eco-efficiency is often used as an entry point for introducing other forms of CSR
management (Hawkins 2006). In the corporate literature dramatic examples of eco-
19 Working closely with an NGO and gaining its ‘seal of approval’ can help protect a corporation from damaging campaigns from other NGOs, given the public legitimacy that this relationship can confer upon a corporation.
48
efficiency related cost reductions abound including 3Ms much publicized pollution and
waste reduction programs that saved the company $500M US in the 1990s, contributing
strongly to that company’s performance, and Dupont’s significant energy and waste
efficiency programs that added $250M US in value between 1991 and 1995 (Hart 2005).
Hundreds of smaller scale examples of eco-efficiency are present in the corporate
literature (Hawkins 2006; Madden et al. 2006). It has also been argued that eco-
efficiency efforts can lead to corporate innovation in other areas (discussed in the
following section). The relatively easy to achieve cost reductions associated with eco-
efficiency serve as a key driver for responsible business management activities.
2.15 Innovation and the Porter Hypothesis
In the mid 1990s, much scholarly attention was devoted to the Porter Hypothesis
which makes the claim that devoting attention to environmental performance can
encourage firm level and economy wide innovation that leads to better economic
performance. Originally the hypothesis was articulated to describe the relationship
between environmental regulation and innovation, though Porter has since expanded his
definition to include other ways in which ‘attention’ is devoted to environmental issues,
including CSR (Porter & Kramer 2006). Porter’s argument is built on the assumption that
resources are not used optimally throughout the economy and that well designed
regulation or CSR attention can identify more efficient ways of using resources (Porter
1991; Porter & Van der Linde 1995; Porter & Kramer 2006). While this argument
underpins some of the work in industrial ecology and is well supported in the CSR
literature, it is heavily debated – particularly when it is applied at a macro-economic level
(Levinson et al. 2006). Nevertheless, the potential for responsible business activities to
encourage innovation (and eco-efficiency, as presented in the previous section) is an
argument that is well recognized in corporate circles (Porter & Kramer 2006). Because
the Porter Hypothesis is a contentious theory involving a wide variety of variables, it
would be too great a task (for the purposes of this thesis) to evaluate the occurrence of
49
this phenomenon in mining. Thus, no section involving this driver and the Canadian
mining industry is offered.
2.16 Corporate Employees
The personal ambitions, ethics, and opinions of corporate employees and
managers play a significant (and somewhat obvious) role in CSR integration, though this
driver is often overlooked in the literature due to its ephemeral nature. As Henriques &
Sadorsky (1999) and Willard (2005) argue, the managers and employees of a corporation
have a significant impact on how responsible business concerns are addressed and
implemented, with personal biases, preferences, and attitudes intimately linked to this
process. As society turns towards recognizing environmental and social issues (generally)
this is reflected in the opinions and actions of corporate employees. While the attitudes of
corporate employees are influenced by the other drivers discussed in this document,
fundamental attitudes, opinions, and ethics can prove somewhat intangible.
In addition to the impact that employee attitudes have on CSR adoption and
implementation, responsible business initiatives themselves can impact employee
performance. As indicated by many studies, the reputation of a corporation and the desire
to work for a ‘good’ company can be a major driver of responsible business practices.
Particularly in companies that require a highly skilled workforce, high levels of CSR
performance have been shown to enhance a corporation’s ability to attract and retain
talented employees while also increasing worker satisfaction and profitability (Burke
1999; Fannon 2003; Roselle 2005).
2.17 Strategic CSR
Each of the drivers discussed so far has motivated a wide variety of CSR activity
and approaches in the corporate world. Most recently the primacy of corporate
responsibility issues, and their effect on profitability, has motivated some innovative
50
managers to reorient their operations towards Strategic CSR. As Bullis & Fumiko (2007,
326) state, “As organizations strive for integration, environmental concerns may be
moved further into the central core of the organization. This suggests that environmental
concerns are integrated into strategy.” Corporations that practice strategic CSR seek to
integrate environmental/social considerations and goals into their core business strategy
by identifying and acting upon the issues which are most pertinent to their business. As
Porter & Kramer (2006, 3) describe it, “the principle (sustainability) works best for issues
that coincide with a company’s economic or regulatory interests.” This approach has
been undertaken by many leading companies, including many firms in the mining
industry (Birch 2004). The strategic CSR approach involves integrating social and
environmental factors into a corporation’s core value proposition, in a similar fashion as
issues such as quality control and brand management were integrated during past
management revolutions. Following this logic Dupont, for example, undertakes strategic
CSR by integrating pollution control, energy efficiency, brown field redevelopment,
green product development, community outreach, and other initiatives into the core of
their business operations (Hart 2005). Corporations that practice this approach seek to
maximize the benefit that is derived from responsible business initiatives by restructuring
part of their operations and core objectives around those initiatives. The potential
profitability payoff associated with this approach is a final driver that motivates CSR
adoption.
51
3.0 Industrial Ecology and Corporate Social Responsibility
In the following sections an introduction to the concept of Industrial Ecology (IE)
is offered as a supplementary theoretical construct which will inform many of the issues
and examples discussed throughout this document. In practice CSR and IE are closely
related to one another; while CSR thinking can help a corporation set sustainability goals
and integrate concepts of social and environmental responsibility into their core business
strategy, IE concepts and tools provide the mechanisms by which some of CSR’s
ambitions can be fulfilled (Korhonen 2003; Waage et al. 2005). Industrial ecology, and
the closely related sub-topics of Industrial Symbiosis (IS) and Industrial Metabolism
(IM),20 directly study the mechanisms by which aspects of responsible business can be
implemented, through approaches that include eco-efficiency, analyzing ‘symbiotic’
partnerships between organizations (ex. Corporate – NGO partnerships), green
accounting, design for the environment, and resource productivity analysis (Esty & Porter
1998; Chertow 2000; Elkington 2004). Industrial ecology concepts and tools have been
developed to simultaneously increase profitability and environmental performance and
hence they are compatible with CSR (Esty & Porter 1998; Jackson & Cliff 1998). Many
of the responsible business initiatives undertaken by the Canadian mining industry either
employ IE tools or fall within the IE framework.
3.1 Industrial Ecology
Industrial ecology is a relatively new and prescriptive perspective which seeks to
transform the current industrial system by placing it within, and modeling it after, natural
systems (Jelinski et al. 1992; Lifset 1997; Gallopoulos 2006). As a key analogy that
motivates the field’s thinking, industrial ecology relates the flow of energy, resources,
and wastes in modern industry to their natural corollaries arguing that an “Ecological
20 These concepts are defined and distinguished more fully in later sections.
52
system operates through a web of connections in which organisms live and consume each
other and each other’s waste. The system has evolved so that the characteristic of
communities of living organisms seems to be that nothing that contains available energy
or useful material will be lost.” (Frosch 1992). Following this analogy, industrial ecology
seeks to emulate mature ecological systems in order to reduce environmental impacts
through maximized efficiency of energy and resource inputs and the minimization of
unutilized waste (Jelinski et al. 1992). Industrial ecology argues that traditionally
industry operates in a ‘linear’ fashion, creating ‘open’ resource and energy loops where
“The flow of material from one stage to the next is independent of all other flows.”
(Jelinski et al. 1992). This leads to ‘end-of-pipe outcomes’ where both useful and useless
(waste) products are generated as part of the production process. It is argued that in
mature ecosystems all resources loops are ‘closed’ and that nearly all resource utilization
in nature results exclusively in products that are useful to other organisms – anything that
is generated as ‘waste’ by one organism is eventually taken up by another as food.
Following the natural model, industrial ecology seeks to ‘close’ the industrial loop so that
all waste products and available flows of energy are put to a productive use (Jelinski et
al. 1992; Lifset 1997; Gallopoulos 2006). This involves the evolution of increased
complexity and interconnectedness within the industrial system (Ruth 1998). Under this
framework, industrial ecologists are concerned primarily with the study of “Local,
regional, and global flows of materials and energy in products, processes, industrial
sectors, and economies.” (Lifset 1997). It has been argued that industrial ecology, unlike
many other industrial concepts, explicitly acknowledges that technology cannot replace
the biosphere and that industrial processes must be made to operate sustainable within the
ecosystems that they function in (Bourg & Kietsch 2006).
53
3.2 A Genealogy of Industrial Ecology and Industrial Metabolism
The field of industrial ecology is highly multi-disciplinary and has gradually
coalesced from work that was done in the fields of systems thinking and analysis,
ecology, economics, social geography, economic geography, environment, resource
productivity analysis and from industry itself (Ayres 1969; Ayres 1989; Frosch 1992;
Jelinski et al. 1992; Esty & Porter 1998; Fischer-Kowalski 1998; Fischer-Kowalski &
Huttler 1999; Korhonen 2003; Kronenberg 2006). Industrial ecology seeks to offer
connections among these fields and the systems that they study (O’Rourke et al. 1996). Esty & Porter (1998) discuss how the oldest roots of industrial ecology, in an
analytical sense, arose from industry itself and the study of resource productivity. From a
business perspective the study of optimizing resource use, minimizing waste, and
increasing efficiency has been undertaken wherever it offered a competitive advantage to
a firm. Historically the costs of inputs, waste disposal, liability, and regulation motivated
business thinking in this area. This is confirmed by Desrochers (2002; 2007) who
discusses historical manifestations of industrial ecology and industrial symbiosis21.
Desrochers argues that ‘loop closing’ industrial ecology behavior has been part of
industry since the industrial revolution and that many industries have actively engaged in
the application of industrial ecology projects such as recycling and the use of byproducts
(for example, the birth of the glycerin industry as a byproduct of soap manufacturing).
Through these initiatives industry has found ways to increase efficiency and turn waste
into useful products. In the past business displayed early industrial ecology behavior
where market factors, liability, engineering capability, and available technology
permitted. This was part of normal business analysis and practice in a variety of
industries by the 1920s (Desrochers 2007). Even Marx22 recognized this, stating “The
capitalist mode of production extends the utilization of the excretions of production and
consumption. . . The so-called waste plays an important role in almost every industry…” 21 Industrial symbiosis and its relationship to industrial ecology is discussed later. 22 Quoted in Desrochers (2007, 362) from Marx, Capital, Volume III, n.p.
54
While the origins of industrial ecology type interactions are found in business, the
study of these systems first arose from the systems analysis tradition, developing into a
separate field of study relatively recently (Fischer-Kowalski 1998; Fischer-Kowalski &
Huttler 1999). The theoretical precursor to industrial ecology, industrial metabolism,23 is
credited to the economist and theorist Robert Ayres (originally a physicist) who first
proposed the term in relation to his work on materials flow analysis. Ayres proposed the
idea that natural systems all have a ‘metabolism’ surviving on inputs of energy and
materials which are then transformed by organisms and turned into waste. Waste is then
reprocessed and used by other organisms. Similarly, Ayres argued, society has a
metabolism which takes in energy and resources and processes them through industry,
thus creating products and waste. The difference that Ayres saw between industry and
natural systems is that while nearly all waste is reused in nature, very little waste is
reused in industry (Ayres 1969; Ayres 1989; O’Rourke et al. 1996; Fischer-Kowalski
1998; Fischer-Kowalski & Huttler 1999; Korhonen 2003). The concept of industrial
metabolism links natural and industrial metabolic processes through Ayres’ metaphor.
Thus, industrial metabolism is primarily concerned with the flow of materials and energy
going through the industrial system (Ayres 1969; Ayres 1989; Korhonen 2003).
While industrial metabolism is the theoretical precursor to industrial ecology, the
expansion of ecological and environmental knowledge and the increasing demand for
such knowledge motivated the creation of a more holistic industrial metaphor. This lead
to the eventual articulation of the industrial ecology metaphor discussed above. The
primary differences between industrial ecology and industrial metabolism are scale and
place. When first proposed by Frosch & Gallopoulos (1989) the term industrial ecology
was meant to go “…somewhat beyond the metabolic analogy, in the sense of carrying the
analogy to another level…” (Frosch 1992). This ‘other level’ involved not only viewing
industrial systems as analogous to their natural equivalents, but also as a part of the
world’s ecology. In this way industrial systems are seen to influence, and be influenced
by, the ecosystems that they function within (Frosch & Gallopoulos 1989; Frosch 1992;
23 Industrial metabolism is also known by the closely related term ‘Societal Metabolism’.
55
Lifset 1997). Initially there was some debate over which of these two terms should be
applied to the growing perspective, however, industrial ecology eventually emerged as
the dominant terminology. This shift reflected the fact that while ecology is a science,
metabolism is a phenomenon, and the idea that ‘metabolism’ is encompassed by the term
‘ecology’ (Lifset 2004). Debate over which term was to be dominant in this emerging
field was essentially silenced in 1996 when Robert Ayres himself published a book
entitled Industrial ecology: Towards closing the materials cycle (Lifset 1997).
3.3 Situating Industrial Ecology: Related Terminology
Industrial symbiosis is a third metaphor that is closely related to industrial
ecology and industrial metabolism. The symbiosis metaphor “…builds on the notion of
biological symbiotic relationships in nature, in which at least two otherwise unrelated
species exchange materials, energy, or information in a mutually beneficial manner – the
specific type of symbiosis known as mutualism…” (Chertow 2000). Industrial symbiosis
is particularly informed by geographic thinking and is hence concerned with industrial
ecology type interactions as they occur between industrial entities in close geographic
proximity24 (Chertow 2000).
Together industrial ecology, industrial metabolism, and industrial symbiosis
summarize most of the thinking in this area of study. While each of these terms has been
defined already their relationship to one another is further clarified by Chertow (2000).
Chertow (2000) argues that industrial ecology is a more general term that seeks to
encompass the arguments and work of a wide range of fields but especially the closely
related work of industrial metabolism and industrial symbiosis. As shown in Figure 1,
Chertow (2000) believes that industrial ecology analysis can be divided into three
categories based on the type and scale of interaction25:
24 Desrochers (2002) argues that industrial symbiosis need not be limited to ‘close geographic proximity’ but that it should also consider interactions at a regional (city wide) scale or larger. 25 Fichtner et al. (2004) have also tried to create an Industrial Ecology classification system based on interaction and project characteristics.
56
• Facility or Firm Level: Often the level most pertinent to industry analysts, this
level applies industrial ecology concepts to individual firms. Analysis in this area
has focused on design for the environment, pollution control, green accounting,
resource productivity analysis, the environmental competitiveness of a firm,
corporate responsibility, etc. (Esty & Porter 1998; Chertow 2000).
• Inter-Firm Level: At this level industrial ecology examines the interaction and
creation of industrial ecology type linkages between firms. Analysis at this level
usually falls within the label industrial symbiosis and includes product life cycle
analysis, the study of eco-industrial parks, industrial sector initiatives, efforts at
byproduct utilization, etc. (Chertow 2000; Desrochers 2002; Fichtner et al. 2004;
Desrochers 2007; Ristola & Mirata 2007).
• Regional/Global Level: At this level industrial ecology studies interactions at a
regional, global, or industry wide scale. Analysis at this level usually falls within
the label industrial metabolism and is primarily concerned with budgeting and
accounting, energy and materials flow analysis, dematerialization, and
decarbonization (Chertow 2000).
Thus, as Chertow (2000) argues, industrial ecology can be seen as a more general
term which encompasses the closely related analysis offered by firm level studies,
industrial metabolism, and industrial symbiosis.
57
Figure 1 : Industrial Ecology Operates at Three Levels (Chertow 2000, 315)26
3.4 Industrial Ecology in Practice
In practice industrial ecology is studied and implemented by a diverse group of
academics, researchers, planners, and industry people. While the concept of industrial
ecology is founded in a relatively simple metaphor in practice the field is highly technical
and complex, hence it is primarily oriented towards a highly educated and professional
audience; one which is receptive towards a more progressive industrial vision (Jelinski et
al. 1992). Due to its highly technical nature industrial ecology has not been approachable
by an amateur audience and it has been primarily practiced and studied in the developed
world. Furthermore, many tools developed by the field of industrial ecology have not
been extensively mobilized by the mainstream environmental movement (O’Rourke et al
1996). As discussed earlier, industrial ecology is informed by a diverse array of fields and
academic traditions and in practice the concept is used by people in each of the fields
mentioned already, though it is also applied by engineers, industrial designers, and
business people (Ayres 1969; Ayres 1989; Frosch 1992; Jelinski et al. 1992; Esty &
Porter 1998; Fischer-Kowalski 1998; Fischer-Kowalski & Huttler 1999; Korhonen 2003).
26 Diagram taken directly from Chertow (2000, 315).
58
The application of industrial ecology concepts has resulted in a shift from ‘end-of-
pipe’ approaches to environmental problems towards more holistic strategies that
incorporate environmental considerations into planning and design (O’Rourke et al.
1996). It is argued that industrial ecology must be implemented in a pro-active,
integrated, flexible, encompassing, and business friendly manner (Jelinski et al. 1992).
Industrial ecologists, when applying industrial ecology concepts, have worked closely
with industry and projects have been highly responsive to the needs of business and
economic conditions (Jelinski et al. 1992; Esty & Porter 1998; Korhonen 2003;
Desrochers 2007). Industrial ecology studies and the tools that emerge from them tend to
focus on the following real world applications:
Firm Level Application
• Pollution prevention (Korhonen 2003)
• Clean technology (best available technology) (Korhonen 2003)
• ISO 14001 standards (Korhonen 2003)
• Eco-Management and Auditing schemes (Korhonen 2003)
• Corporate Social/Environmental Responsibility (Korhonen 2003)
• Resource and Energy Productivity Studies (Esty & Porter 1998)
Inter-Firm Level Application
• Eco-Industrial Parks with numerous industries exchanging waste, energy, and
materials27 (Chertow 2000; Fichtner et al. 2004; Chertow 2007)
• Recycling and Byproducts Industries (Desrochers 2002; Desrochers 2007)
• Product Life-Cycle analysis (Chertow 2000)
Regional/Global Application
• Material and energy flow studies (Ayres 1969; Ayres 1989; Chertow 2000)
• Decarbonization and dematerialization (Chertow 2000)
27 One of industrial ecology’s (and more specifically industrial symbiosis’) most famous case studies involves the Kalundborg industrial park in Denmark where numerous industries exchange a variety of waste products (including steam). This symbiosis network includes an oil refinery, power station, gypsum board factory, pharmaceutical plant, the city of Kalundborg, and others (Chertow 2000).
59
As the globalization of industry increases these economic and geographic scales
are becoming less distinct and some tools apply on multiple scales, ex. product life-cycle
analysis (O’Rourke et al. 1996; Chertow 2000). Due to the rapid growth of the field these
tools are continually growing in sophistication and number.
3.5 Critiques of Industrial Ecology
Industrial ecology is a field that has coalesced rapidly from a variety of other
disciplines, and as is typical of emerging disciplines, industrial ecology has been
subjected to internal debates and criticism. O’Rourke et al. (1996) reviewed the main
critiques of this field and identified several dominant criticisms. First and foremost it was
argued that “…industrial ecology is currently a broad umbrella of concepts rather than a
unified theoretical construct…” Furthermore, O’Rourke et al. (1996) stated that:
• The field is poorly defined (Allenby 2006)
• The field’s tools continue to have methodological weaknesses
• The strategies employed by the field are often not the best way to reach its
ultimate environment goals (as they compare to reduced consumption strategies
for example)
• Implementation reflects the needs of industry too heavily and not the ideas
expressed in the literature
• It is not a holistic solution to environmental problems and does not deal with
some issues well (ex. Biodiversity….It has been countered that industrial
ecologists do not claim to offer a complete solution to all environmental
problems)
• Social considerations are systematically excluded from analysis and the social
impacts of industrial restructuring are neglected (Vermeulen 2006).
• Considerable dissension exists within the field between those who advocate
incremental change and those who argue for more revolutionary adoption of
industrial ecology principles
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In addition, Desrochers (2002; 2007) has argued that the field of industrial
ecology (and specifically industrial symbiosis) has been pursued too narrowly
geographically, that it has overemphasized public planning over private sector initiatives,
and that industrial ecology type interactions have been present in industry for far longer
than the field typically acknowledges. Other authors have argued that the current
industrial ecology framework fails to adequately incorporate issues raised by parallel
discourses concerning scale and business ethics (Randles 2007), that industrial ecology
has been selective in its use of ecological metaphors and that this has created a theoretical
and empirical bias in the field (Wells 2006), and that slow progress in implementing
industrial ecology results from underdeveloped analysis of social factors and social
processes (Vermeulen 2006).
Although these criticisms are noteworthy, O’Rourke et al. (1996) also
acknowledged the
importance of the field and the ongoing efforts to address these theoretical and practical
shortcomings. In recent years the work of Chertow (2000) and others have helped to
more tightly define the field and its concepts.
3.6 Industrial Ecology Summary
In summation, industrial ecology is a relatively new and highly multidisciplinary
field which constructs itself around a central metaphor, relating the functioning of
industrial systems to their ecological counterparts while also seeking to place industry
within its ecological context. In this definitional section this metaphor has been explored,
the genealogy and origins of the field have been discussed, and the term has been
differentiated from closely related terminology including industrial symbiosis and
industrial metabolism. Lastly, the theoretical and real world application of industrial
ecology concepts were discussed, as were critiques of this emerging and dynamic field.
61
4.0 Aboriginal Peoples and Resource Development
A significant social dimension of the Canadian mining industry’s CSR
performance involves their interaction with aboriginal peoples who are affected by, or
involved in, mining activities. This has been one of the most important social issues
which the Canadian mining industry has dealt with throughout its history and especially
in the last thirty years. In later sections the history of the interaction between the mining
industry and aboriginal peoples is discussed in detail. In this section a general
background on aboriginal peoples and resource development in Canada is offered.
Ali (2003) describes three general stages in the history of Canadian aboriginal
resource development (post European arrival). The first of these occurs from the 16th to
the 18th century when aboriginal peoples were actively engaged in warfare and armed
conflicts with European settlers over land and resources. As a result of these conflicts
many aboriginal populations were displaced from their historic territories (especially in
southern Canada), their cultures were severely disrupted, and many experienced disease
and warfare related population crashes. Once European settlers had effectively eliminated
any chance of large scale armed resistance the governments of North America established
political mechanisms that would allow the remaining aboriginal populations to be
effectively managed and controlled. This constituted the second stage (early 19th century
to middle 20th century) of aboriginal resource development and it involved the creation of
Indian Affairs departments and the resettlement of aboriginal people (more or less
permanently) to reserves and treaty areas. Typically aboriginal peoples were relocated
into areas that were viewed to be ‘wastelands’ with little foreseeable economic value at
the time of resettlement (northern Canada for example).
The third stage that Ali (2003) describes is the ‘modern’ stage of aboriginal
resource development, beginning in the late 20th century. During this period the politics
of aboriginal resource development changed significantly as the “political system… has
matured sufficiently that outright violation or manipulation of aboriginal rights is
62
unlikely…” This stage corresponds with the rapid growth in the demand for, and
discovery of, resources within aboriginal reservations and areas claimed by aboriginal
peoples. Between 1950 and the early 1990s conflicts over resource development in
aboriginal areas grew rapidly as aboriginal peoples demanded compensation for resource
development within their land and increased legal recognition of their land rights. This
has led to high profile resource related conflicts in Canada and legal challenges brought
forth by aboriginal people that questioned the legitimacy of the resource development
system and the corporations that operate within it (Hipwell et al. 2002; Breen 2007).
Prior to the 1980s, however, resource developers found it relatively easy to circumvent
aboriginal opposition and it was common for development to take place on aboriginal
lands without consent or compensation (Bankes & Sharvit 1998; Hipwell et al. 2002).
In 1982 the amendment of the Canadian constitution resulted in the formal
recognition of aboriginal land rights, the removal of the constitutional power of the
federal government to withdraw aboriginal land title, and the formal recognition that an
agreement between the federal government and aboriginal title holders is a legal
requirement if resource development is to occur on aboriginal lands (Bartlett 1991).
These significant legal changes set the groundwork for a major legal effort in Canada
during the 1990s to settle aboriginal resource conflicts permanently and to clear up legal
confusion that was becoming a major barrier to resource development and the ability of
aboriginal people to benefit from resource utilization (Bartlett 1991). Since the signing of
the first comprehensive land claim agreement in 197528, most of Canada’s remaining
aboriginal nations have been involved in permanent land claim settlement negotiations
that involve the interpretation of antiquated treaties signed during the colonial era, the
recognition of aboriginal people’s land claims, negotiation of their legal rights,
stipulations for self government, the creation of legislated mechanisms for aboriginal
consultation in resource planning, the recognition of resource rights, and compensation.
28 The first comprehensive land claim settlement was the James Bay Northern Quebec Agreement signed in 1975 by Hydro Quebec, the Province of Quebec, the Federal government, the Cree nations of northern Quebec, and other smaller aboriginal groups. This agreement involved the settlement of Cree land claims and a compensation package as part of the approval process for the Hydro Quebec James Bay hydro-electric mega-project (Hipwell et al. 2002).
63
Many of Canada’s aboriginal people’s now live under permanent ‘comprehensive’ land
claim agreements that have attempted to settle all legal issues surrounding land claims
(Mainville 2001; Hipwell et al. 2002). Comprehensive benefit and land claim agreements
have settled land claim issues in much of Canada though significant conflicts continue,
especially in British Columbia and Labrador, as shown in Figure 2 (below). Ultimately it
is the federal government’s goal to settle all land claims in Canada and negotiations are
ongoing (Ali 2003). Since the inception of the comprehensive land claim agreements, and
a variety of other legal changes in Canada, it is now impossible for a mineral resource
developer to operate on aboriginal owned lands (where comprehensive claim agreements
are settled) without signing a benefit agreement that usually includes cash payments,
environmental mitigation clauses, employment guarantees, and other forms of
compensation (Keeping 1998). In addition, many lands that are claimed by aboriginal
people, even if they are not officially owned or part of a reserve, require aboriginal
consultation on the part of the mineral resource developer if development is to occur (Ker
1996; Hipwell et al. 2002; Ali 2003). These changes have significantly altered the nature
of resource development in much of Canada and the interaction between resource
developers and aboriginal peoples.
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Figure 2 : Aboriginal Communities (red) and Areas Covered by Comprehensive Land Claim Agreements or Treaty Agreements (green). Constructed from NRC (2008)
Because aboriginal consultation and compensation is now a legal requirement for
resource development in much of Canada a variety of mechanisms for aboriginal
communities’ input and negotiation have been developed. As Hipwell et al. (2002) and
Mitchell (2002) explain, common mechanisms for consultation and negotiation include:
• Aboriginal Resource Development Committees/Corporations: Aboriginal people
often form resource development committees or corporations that evaluate
proposals and negotiate the terms of development, guidelines, and compensation
agreements.
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• Co-management: Co-management boards have been established to oversee and
manage a variety of resource development projects. These boards can be created
either by federal government agreement or by contract between a developer and
an aboriginal group. Typically management boards of this nature have mandatory
representation ratios (ex. 50% mining industry and 50% aboriginal representation)
and have the power to make decisions on issues that pertain to aboriginal peoples,
the environment, and resource management.
• Impact Benefit Agreements: Impact benefit agreements are signed between an
aboriginal group, a developer, and sometimes government representatives. These
agreements delineate what types of compensation are to be given to an aboriginal
group in exchange for the right to develop natural resources on their lands. Impact
benefit agreements are sometimes entered into voluntarily and are legally required
in areas that are governed by a settled comprehensive land claim agreement.
• Joint Ventures and Aboriginal Owned Companies: Many aboriginal groups now
participate directly in resource development through the creation of aboriginal
owned development corporations or through joint venture projects.
Regardless of the mechanism used to negotiate the licensing and compensation
associated with modern aboriginal resource development, it is typically the case that
agreements involve the following: (Hipwell et al. 2002)
• Stipulations for environmental protection, remediation, and efforts to minimize
environmental impacts29
29 Ali (2003) argues that while the interests of aboriginal peoples and the environment are often aligned, this relationship has been heavily overemphasized in the past. In reality aboriginal peoples are not automatic environmental stewards and they are primarily concerned with the welfare of their communities and their collective future. Thus, it is not surprising that first nations have been engaged in a variety of conflicts with the Canadian environmental movement, even though these groups are often de facto allies. Ali (2003) discusses examples where aboriginal peoples have approved the disposal of nuclear waste on their lands and other environmentally damaging activity that has been heavily resisted by Canadian environmentalists.
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• The incorporation of aboriginal input in resource planning and decision making
and the recognition of traditional ecological knowledge (TEK)
• Financial compensation for damage done to aboriginal lands and profit sharing
arrangements
• Stipulations regarding aboriginal employment and training
As discussed in later sections, changes to Canadian law and the structure of
resource developer-aboriginal interactions has significantly impacted mining
development in Canada and the effects of that development on aboriginal people and the
environment.
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4.1 The Canadian Mining Industry: Definition and Profile
The ‘Canadian mining industry’, as referred to in this thesis, is meant to describe
the operation of mineral and metals extraction within Canada and the corporations who
participate in this activity. This includes corporations that are foreign owned if they have
significant operations within Canada. Because all mining firms that operate within
Canada are subject to the same laws, regulatory requirements, environmental procedures,
and stakeholder obligations the ownership of firms is considered a non-issue for the
purposes of this thesis. In addition, nearly all of the major mining firms that operate in
Canada maintain national level offices in Canada and operate as multi-national
corporations headquartered in a variety of first world nations (many within Canada).
Because these corporations are primarily large multi-nationals headquartered in the first
world, their experience with CSR and the issues discussed in this thesis is similar
regardless of where they are situated. References to the Canadian mining industry do not
include oil and gas companies (although Syncrude and Suncor are MAC members).
Generally, this thesis includes the mineral and metals extraction companies that are
members of the Mining Association of Canada (MAC), with the exception of oil-sands
developers who are excluded from this thesis for several reasons. First, oil-sands
companies are growing too rapidly at this time to be assessed using the methodology
employed in this thesis, and second, because the issues associated with oil and gas
operations are very different from those associated with minerals and metals mining. In
addition, radioactive mining30 is not discussed in detail in this thesis. Although Canadian
radioactive mining operations are amongst the largest in the world, the environmental and
social issues related to radioactive mining are very different than minerals and metals
mining and are not comparable to the results discusses in this thesis.
Primarily, this thesis focuses on the major mining companies that are members of
the MAC, and smaller ‘junior’ companies are not analyzed in detail. Whenever the 30 Radioactive mining refers primarily to uranium mining, though other radiological elements are also mined in small quantities, such as radium.
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‘Canadian mining industry’ is referred to, this term is meant to describe the large metal
and aggregate mining companies who are members of the MAC. These large ‘senior’
companies account for the majority of mining in Canada (MAC 2007). The MAC is the
figurehead of the Canadian mining industry, representing the industry in political matters
while attempting to facilitate collective action on a variety of issues, including CSR.
Large mining firms31 discussed in the course of this thesis include:
• Barrick Gold Corporation (Canadian owned)
o Gold producer
• BHP Billiton (Australian owned)
o World’s largest mining company, produces diamonds and other minerals
in Canada
• Camenco (Canadian owned)
o Uranium producer
• De Beers Canada (Foreign owned)
o Diamond producer
• Diavik diamond mines (Canadian owned, jointly owns the Diavik diamond mine
with
Rio Tinto)
o Diamond producer
• Falconbridge (Formerly Canadian owned, now owned by Swiss/British Xstrata,
retains management in Toronto)
o Nickel and copper producer
• Hudbay Minerals Inc. (Canadian owned)
o Zinc, copper, and precious metals
31 Note that several large Canadian mining firms have been acquired by other mining companies in recent years and have been renamed; both the historic and the newer names are used in this thesis depending on the context. Noranda and Falconbridge are now owned by Xstrata and are known by that name, and Inco is now known as Vale-Inco.
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• Inco (Formerly Canadian owned, now part of the Brazilian multi-national Vale
Resources, renamed Vale-Inco, retains management in Toronto)
o Nickel, copper, cobalt, precious metals producer
• Noranda (Formerly Canadian owned and independent, acquired by Falconbridge
and then by Xstrata)
• Placer Dome (Canadian owned)
o Gold producer, precious metals
• Quebec Cartier Mining Company (Canadian owned)
o Iron ore producer
• Teck Cominco (Canadian owned)
o Zinc, coal, copper, gold, specialty metals producer
Each of these mining companies is described in more detail in later sections
(where applicable).
Mining is one of Canada’s largest industries and has been a major contributor to
the economy and the development of remote regions for over a hundred years, though the
industry has been especially active since the 1960s (Dungan 1997). Canada is one of the
world’s largest producers of a variety of base and precious metals and is heavily involved
in the international mining community, with approximately 3000 mines under
management internationally (Hipwell et al. 2002; MAC 2007). Within Canada the mining
industry employed 369,000 people in 2006, contributing $40 Billion to Canada’s GDP
and 17% of the nation’s annual export revenues. The Canadian mining industry is the
primary employer in hundreds of small and medium sized communities throughout
Canada but also has a major presence in the economy of the larger cities; Toronto is the
world’s leading mining finance city, generating 38% of worldwide finance for mining in
2006, Vancouver houses the world’s largest cluster of exploration and junior mining
companies, and Montreal has significant iron ore and aluminum processing expertise and
mining research institutions (MAC 2007). Also, mining is a very important industry to
aboriginal communities as 1200 aboriginal communities lie within 200 km of a producing
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mine and the mining industry is the largest employer of aboriginal people in Canada
(MAC 2007). In addition, the mining industry in Canada contributes significantly to
secondary industries such as transportation, shipping, research and development,
environmental, engineering, and legal industries throughout Canada. Lastly, mining
contributes a large amount of revenue to the provincial and federal governments in the
form of taxes and royalties payments; this contribution totaled $4.7 Billion in 2005
(MAC 2007).
Currently the mining industry is experiencing a major boom due to high primary
resource prices (MAC 2007). However, the industry has been notoriously volatile in the
past and highly sensitive to fluctuations in international resource markets. Because
mining is a high risk industry most mines are created as joint risk ventures between
several large multi-national firms, many of whom are Canadian owned or headquartered
in Canada. Because mining is simultaneously a ‘high impact’ industry from an
environmental perspective and the sole industry in many remote areas in Canada, the
industry has been forced to recognize the primacy of environmental and social concerns
in its business operations. As Ali (2003, 48) explains “…environmental concerns and
community issues are all too often a major impediment to implementation of mining
projects. Environmental concerns are becoming increasingly important cost consideration
for mining companies and have led to the formation of inter-industry collaboration on
environmental initiatives…” This has motivated early CSR adoption in the Canadian
mining industry as it compares to other industries.
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5.0 The Mining Industry’s Past CSR Performance
Before the drivers of CSR implementation are discussed, it is important to
examine the historical environmental/social performance of the mining industry. While
this author recognizes that some forms of responsible business behavior were undertaken
by mining firms long before the formal emergence of the field, this thesis attempts to
demonstrate that in most respects the mining industry’s turn towards improved
environmental/social performance is a relatively recent phenomenon; one which has
resulted from the drivers discussed in later sections. As discussed subsequently, the
mining industry’s environmental and social performance was much worse in the past than
it is now, though it has been improving steadily since the establishment of the Whitehorse
Mining Initiative (WMI). As Charlie Catholique of the Lutsel K’e Dene First Nation
stated when discussing past mining industry practices, “Most of the social and
environmental costs are not taken into account by the mining companies, what is taken
into account is the right to get the benefits at the lowest costs; this is what they will do,
and they will do what it takes to achieve that” (MiningWatch Canada 2001). As discussed
in later sections, the major CSR breaking point for the industry was the WMI which was
undertaken from 1992-1995. Reasons for selecting this event as the industry’s departure
point are discussed in more detail later. For now, the discussion of ‘past’ environmental
and social performance in the following two sections refers to the pre-WMI period
(essentially pre-1990s). Finally, a variety of examples and case studies of past mining
industry CSR performance are presented throughout this thesis, particularly in the
Drivers in Mining sections. These examples are not re-iterated in the following two
sections, but illustrate environmental and social issues that the industry faced in the past.
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5.1 The Mining Industry’s Past Environmental Performance
Until relatively recently a variety of environmental issues created by mining
activities were either partially managed or not managed at all. As a result, the mining
industry has caused significant environmental damage within Canada historically, and
much of its negative reputation arises from this legacy (Ali 2003). In this section some of
the historic (and sometimes ongoing) environmental impacts associated with mining in
Canada are summarized. Throughout this document a variety of specific case studies are
presented which illustrate in detail the environmental problems that have historically
resulted from mining. Environmental impacts that are summarized as follows:
• Abandoned Mines and Toxic Sites: Among the most significant historic legacy
of the mining industry past environmental negligence are abandoned mines and
toxic mining sites. Similar to urban brown-fields, abandoned and poorly
decommissioned mines litter the Canadian landscape presenting physical dangers
in the form of loose sediments (and potentially landslides), collapsing tunnels,
open shafts, and dangerous equipment. More significantly, it is estimated that
10,000 abandoned mining sites in Canada are contaminated with significant toxic,
and sometimes radioactive, material. Very few of these sites have been accessed
to quantify their toxicity and no national inventory of abandoned and toxic mining
sites exists. This material continues to pollute nearby water and air through the
processes described in other headings in this section (MiningWatch Canada
2001). Due to poor environmental management and the absence of
closure/decommissioning plans, virtually all mines up until the 1970s and 1980s
were simply abandoned once their productivity was exhausted. It is only in the
last two and a half decades that mining companies began planning
decommissioning and remediation as part of the mining development process.
These sites continue to impact human health, wildlife, and the environment and it
73
is unlikely that the majority of these sites will ever receive the funding necessary
to undertake cleanup procedures (MiningWatch Canada 2001).
• Acid Mine Leakage: Acid mine leakage is one of the most serious and least
publicized problems associated with mining in Canada. This problem results from
the fact that most non-ferrous metals exist in nature as sulphides and/or are
intermixed with iron sulphides. When separation occurs as part of the refinement
process large amounts of iron sulphides are left exposed to the atmosphere (where
they were previously underground) and slowly these minerals begin to oxidize.
When this process occurs in the presence of water it creates sulphuric acid which
then contaminates and acidifies freshwater systems. Acidification not only kills
fish and other aquatic organisms directly, it also contributes to the leaching of
trace metals that were not recovered during the mine’s operation. These materials
are dissolved by sulphuric acid and contaminate local water supplies with toxic
heavy metals. This process was little understood in the past and is widespread in
Canada due to poor tailings management and poor decommissioning of mining
sites, which often results in mines flooding. Unaddressed liabilities and damages
related to this problem are huge in Canada and are estimated to total between $2
and $5 Billion (Sanchez 1998).
• Air Pollution and Greenhouse Gas Emissions: When the process of acid mine
leakage occurs in the absence of water, the oxidization of sulfur containing rocks
produces SO2 gas instead of sulfuric acid. This gas contributes significantly to the
creation of acid rain and emissions from mining operations are now the largest
source of this gas in Canada.32 The significant acid rain problems in the Sudbury
basin, for example, are not solely a result of smelting activities as many believe
but are, in part, also the result of oxidation of sulfuric tailings. While the mining
industry has significantly improved its ability to prevent SO2 emissions from
tailings and smelting activities, the significant legacy of abandoned mining sites,
32 National efforts to reduce acid rain causing emissions have significantly reduced the acid rain problem in Canada. As early as the late 1970s and early 1980s mining companies were actively managing their emissions of acid rain causing gases (Brooks 1986).
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and their huge tailings heaps, continue to emit large quantities of this gas. The
mining industry has also contributed significantly to the creation of suspended
particulates by creating large tailings heaps that give off fine dust particles (which
are often toxic) in windy weather. Again, dust emanating from abandoned mining
sites continues to be a significant problem, and operating mines also produce
large amounts of potentially toxic particulates. Minerals extraction and processing
also contributes significantly to climate change and certain operations, in
particular steel/aluminum smelting and concrete baking/mixing, create huge
quantities of CO2 and other greenhouse gases. This is an ongoing problem that is
proving difficult to deal with and the mining industry has openly acknowledged
that it is among the worst greenhouse gas emitters in Canada, second only to oil
and gas in terms of industrial GHG emissions (Paszkowski 2000). Lastly, the
mining industry also contributes to air pollution through the operation of
machinery and through the significant consumption of fossil fuels throughout the
mining production cycle (Evans 1997; Sanchez 1998).
• Biodiversity Impacts: Some mines disrupt the habitat of endangered species,
though metals and mineral mining is generally considered to be less of a threat to
biodiversity in Canada than other resource industries such as tar sands
development, logging, agriculture, and fisheries. Nevertheless, mining can disrupt
habitats and can put pressure on wildlife through habitat destruction, noise
creation, pollution, and the building of roads. These changes can seriously impact
wildlife populations and biodiversity, particularly in aquatic ecosystems where
acid mine drainage, sedimentation, and heavy metal leakage has the greatest
impact (Dearden & Mitchell 2005; Yakovleva 2005).
• Disruption in Remote and Sensitive Areas: Much of Canada’s mining activity
occurs in remote and sometimes sensitive ecosystems that have not previously
experienced large scale development. In such cases, mining infrastructure, such as
roads and airstrips, has paved the way for other types of development. Mining
75
activities can disrupt these areas and cause ecological damage of various types
(Dearden & Mitchell 2005; Yakovleva 2005).
• Garbage: In addition to the more serious types of pollution and the generation of
industrial waste discussed under other headings, mining camps, exploration
activities, and mining operations can leave significant amounts of garbage and
abandoned equipment in areas that are otherwise pristine. Garbage from mining
activities litter the Canadian landscape (MiningWatch Canada 2001; Ali 2003).
• Radioactive Mining: Canada is the world’s largest producer of radioactive
materials and northern Saskatchewan holds the world’s largest uranium mining
operations. While radioactive mining in Canada has been closely regulated since
the birth of this industry during World War II, it is an accepted reality that
radioactive mining will create contamination, through tailings and leaching, that
persists in the environment for very long periods (thousands of years).Uranium
mining in northern Saskatchewan, like mining in other regions, did not involve
planned decommissioning until the 1980s and so significant radioactive pollution
contaminates former mining areas. Much of this contamination in Canada, and
particularly in northern Saskatchewan, occurs on aboriginal lands and the uranium
boom in that region severely impacted remote aboriginal communities that were
still dependent on hunting and fishing prior to the Second World War (Kuletz
1998; Parsons & Barsi 2007).
• Sedimentation: Mining can destabilize large amounts of sediment which were
otherwise stable and hence lead to large increases in erosion and river
sedimentation. ‘Brown rivers’ that are chocked with sediment from mining
operations are well known within Canada and increased sedimentation can impact
the availability of fresh water for other industries, freshwater wildlife and fish
stocks, and the availability of clean water for human consumption. Sedimentation
can continue long after mining operations have ceased and many Canadian rivers
still experience heightened sedimentation levels years after mine closure (Ali
2003).
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• Tailings Management and Spills: Mine tailings consist of waste rock that is
produced during mining, separation of target minerals, and refining. By weight,
mining operations produce many times more tailings than they do useful material
and dealing with this waste is a significant problem in mine management. Many
tailings are toxic or radioactive, but even when they are not, disposing of them is
a significant problem due to issues such as acid mine leakage. In the past the
mining industry usually dealt with tailings either by leaving them exposed on the
surface near a mine, by using them to build ‘tailings mountains’ or by dumping
them into large bodies of water (such as the great lakes). Each of these methods
creates significant environmental problems, especially because the tailings heaps
can form loose aggregates that can be prone to landslides and also because the
tailings can leak toxic materials, acids, and greenhouse gases. More modern
mining operations deal with the tailings problem by backfilling underground
mines, by re-filling and re-vegetating over open pit mines, or by constructing
tailings ‘ponds’ which consist of large depressions that are filled with tailings
materials and surrounded by artificial walls designed to contain the tailings and
runoff . These ponds are now actively managed and various technologies are
employed to contain toxic leachate within the pond (MAC 1998; MAC 2003).
Unfortunately, tailings management is not perfect and many examples of
mismanagement have resulted in disastrous tailings spills. Large tailings ponds
can contain hundreds of tonnes of toxic material and so tailings spills can create
cataclysmic environmental damage on par with large oil spills.
• Topography and Water Pattern Changes: Mining activities significantly
impact local topography and it is now common for entire landscapes, hillsides, or
valleys to be completely altered by mining activity. In addition, many types of
mining require water flow alterations, the construction of dams, and pumping of
underground aquifers. Developments in Canada are large enough that these
changes impact topography, water flow, and erosion patterns significantly and can
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even impact local weather patterns. Large scale landscape changes have occurred
as a result of mining in many parts of Canada (Ali 2003).
• Water Pollution: Mining activities can contribute significantly to the
sedimentation of water supplies, their acidification, and the leakage of heavy
metals and other toxins into freshwater systems (as examined in other headings).
In the past mining activities had a very negative impact on Canadian fresh water
resources and the different forms of pollution described have caused ecological
disruption, impacted wildlife, and human health (Evans 1997; Sanchez 1998; Ali
2003).
• Wildlife Impacts: Pollution, habitat destruction, and environmental disruption
have all impacted wildlife populations around mining sites. These impacts were
particularly severe in the past when miners regularly harvested wildlife
populations for food supplies and when the environmental impact of mining
activities was less well managed. As discussed in the biodiversity heading, these
disruptions can impact wildlife populations and alter ecological dynamics
(Yakovleva 2005). In northern Canada mining activities, and the associated
pollution, have contributed to the contamination of wildlife resources and the
‘toxification’ of wildlife species. In many regions this problem is so severe that
some wildlife species contain levels of toxins that make them unsafe to eat and so
aboriginal people have been forced to abandon traditional wild-food consumption
(MiningWatch Canada 2001).
Each of these environmental issues impacts human health, the economy, wildlife,
and ecological integrity. Many of these impacts are illustrated vividly by the case studies
in the following sections. While these environmental issues were not given serious
attention by the mining industry until the 1970s, and not addressed in a comprehensive
way until the late 1980s, the mining industry has undertaken considerable work in the last
two decades in order to address these environmental problems with the objective of
making mining in Canada more environmentally friendly. However, there has been
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considerable debate in the environmental and mining communities over whether or not
mining can ever be truly ‘sustainable’ (Evans 1997; Ali 2003). While it is true that
minerals and metals are not renewable resources (though they can be recycled), it is also
true that nearly no minerals and metals stocks are in threat of exhaustion and almost all
mining products will be accessible long into the future (Ali 2003). Ali (2003) and other
proponents of sustainable mining argue that in order for mining to be considered
‘sustainable’ we need to look past the nature of the resource itself. As Ali (2003, 22-23)
argues, “…while mining clearly has had a deleterious impact on the environment, it has
also had a profoundly positive impact on the development of industrial establishments
and our modern way of living…mining can be a prelude to sustainable development if we
are willing to absorb a certain degree of permanent impact…”. Sustainable mining, as it
is articulated in recent years, recognizes that mining can simultaneously impact the
environment and provide a ‘spring board’ for long term economic growth; this tension is
resolved by attempting to reduce the environmental impact of mining as much as possible
while maximizing the chances of long term environmental and social returns. This
perspective acknowledges explicitly that the mining industry is, by its very nature, a high
impact industry and even the most strictly managed mining operations will have a
negative environmental impact. However, in virtually every area the mining industry’s
environmental performance has improved substantially since the 1970s and 1980s due to
improved management practices; in later sections the mining industry’s efforts in this
regard are discussed in detail.
5.2 The Mining Industry’s Past Performance with Aboriginal Peoples
As discussed in the background section 6.0 Aboriginal Peoples and Resource
Development, a significant social dimension of the Canadian mining industry’s CSR
performance involves their interaction with aboriginal peoples who are affected by, or
involved in, mining activities. This has been one of the most important social issues
which the Canadian mining industry has dealt with throughout its history and especially
79
in the last thirty years. Currently 1200 aboriginal communities are located within 200 km
of mineral and metals activities, and 36% of aboriginal communities are located less than
50 km from one of the primary mines developed in Canada (AFN 2001). In addition,
thousands of other mining operations have occurred on or near aboriginal lands
historically and the industry is the nation’s largest employer of aboriginal peoples (MAC
2007). This constitutes a very high level of contact between the mining industry and
aboriginal communities, resulting from a long history of mining within and near
aboriginal lands. As shown in Figure 3, aboriginal people throughout Canada continue to
have close contact with the mining industry.
Figure 3 : Aboriginal Communities (Red) and Large Scale Active Mining Operations (All other symbols) NRC (2008)
Until very recently aboriginal people had very little say in mining decision
making, their interests were rarely considered fully, they received few benefits, and they
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bore most of the social and environmental burden of mining development. As Hipwell et
al. (2002, 4) describe “…Since the industrialization of mining in Canada, Aboriginal
people have had little say in decision making regarding mining near or on their ancestral
lands, and have borne most of the costs and received none – or only negligible –
benefits.” In early Canada, when mining was first coalescing into a modern industry
within the nation, mineral developments extended into remote areas that had witnessed
very little development and modernization. In many cases the creation of a large mining
project near an aboriginal community provided the historic catalyst that brought countless
aboriginal communities into the modern world. Mining, like forestry and early military
developments, created access to aboriginal communities that had previously been isolated
and mining developments brought with them pipelines, communications, roads, trains,
and other technologies that rapidly restructured aboriginal society. Until relatively
recently this development process was undertaken with little consideration of aboriginal
populations and so mining developments, intentionally and unintentionally, caused
massive damage to aboriginal communities. Mining booms brought with them alcohol,
disease, discrimination, violence against aboriginal peoples, ecological disruption,
pressure on wildlife, timber, and water resources, and technological changes that
shattered aboriginal society. While these effects were bad enough, the ‘bust’ that
typically followed pre-WWII mining developments left altered aboriginal societies with
degraded ecosystems and cultures that could no longer live effectively off the land while
also lacking a modern economic base (Crowe 1974; Hipwell et al. 2002). The highly
damaging boom and bust cycle of the mining industry, the industry’s ability and desire to
develop remote regions, and governments’ desire to extend its control into the north to
facilitate mining (and other resource developments) have been major factors historically
that have contributed to the plight of aboriginal peoples and the assimilation of those
peoples into Canadian society (Crowe 1974; Ali 2003). While this pattern of exploitation
began more than two hundred years ago with events such as the Yukon gold rush, as late
as the 1970s and 1980s many aboriginal communities in northern Canada had not
experienced significant industrial developments until mining projects invaded their
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territories, usually without permission and often by force (Crowe 1974; Hipwell et al.
2002). Thus, this pattern of development and exploitation continued up until very
recently (changes to the development process are discussed later). As a result of this
pattern of development aboriginal peoples have suffered cultural and spiritual
degradation (including the loss of oral traditions and languages), they have lost access to
large amounts of traditional land, alcoholism, suicide, and personal violence have become
endemic, the creation or exacerbation of gender inequalities has occurred, and many
sacred sites have been destroyed or degraded (Whiteman & Blacklock 2000; Hipwell et
al. 2002). Generally benefits have been limited to wages (usually sub-standard compared
to non-aboriginal workers) and access to consumer goods; it is only recently that impact
benefit agreements have become a standard part of mining in Canada.
These disruptions are intimately linked to the environmental degradation that has
resulted from mining developments in the past, as discussed in the previous section.
While both Hipwell et al. (2002) and Ali (2003) caution that there is not a perfect overlap
between environmental and aboriginal interests, it is certainly the case that environmental
degradation has negatively impacted aboriginal peoples and accelerated cultural change.
In particular, the loss of access to land, the contamination or removal of wildlife and fish
resources, and the loss of water and timber supplies has made traditional ways of life
impossible for many communities (Hipwell et al. 2002). Abandoned mining sites, many
of which are contaminated, represent a lasting legacy of the mining industry’s past
environmental performance. Aboriginal peoples have not been exempt from this legacy
and at least nine large scale and highly toxic mining sites occur within aboriginal
communities territories (possibly more). Many of the approximately 10,000 toxic
abandoned mining sites in Canada are located close to aboriginal communities and these
communities are subject to the water and air pollution created by these environmental
hazards. This has caused increased cases of pollution related diseases (including cancers)
in some of the worst effected communities. The exposure to these toxins is amplified by
the widespread consumption of wild foods by aboriginal peoples. In addition to the toxic
sites, many non-toxic abandoned mines occur close to aboriginal communities that
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present physical hazards in the form of landslides, open shafts, pits, and other dangers
(MiningWatch Canada 2001). Thus, environmental degradation associated with mining
has also adversely affected aboriginal peoples. Lastly, as Callicott (1989) discusses, the
destruction of the natural environment is (generally) an affront to aboriginal culture and
spirituality. In the MiningWatch Canada (2001) document After the Mine: Healing our
Lands and Nations a variety of aboriginal leaders offer testimonials about the impact of
mining and toxic sites.
As Sam Gull, of the Waswanipi Cree community (Quebec) writes33:
“In their territory, the people use the land, and there are five mining towns on the
edge of the territory…There are many closed mines…At mine start up, the
Waswanipi Cree were involved in a process for the certificate of operation, and
negotiated employment opportunities and closure requirements. It took about two
years for the closure of the site. Much of it is now remediated, but there are still
questions about matters like the residual pond and where the outflow is. The
outflow was monitored for a year after closure, but they don’t know if it still is.
For the other mines that have operated and closed down, we know of no
restoration plans, since the First Nation was not involved. There are many clean-
up issues for the closed mines, as well as security issues…There is no monitoring
of the tailings, and they are affecting camps in the area. Younger teens (12-14
years of age) have gotten into closed mines, and even shafts, since there are no
watchmen on location…we are sure that contaminants must be getting into the
groundwater…The First Nation negotiated 25% of jobs, but the jobs are
professional ones. There was to be a training program, but it never happened.”
The experience described by Sam Gull is common to many aboriginal
communities, as evidenced by the other testimonials that describe similar experiences in
33 Sections removed in interest of length.
83
the MiningWatch Canada (2001) document. It should be evident from these statements
and the preceding discussion that the mining industry’s legacy in terms of their relations
with, and treatment of, aboriginal peoples is very poor. The situation has improved
markedly since the 1980s, in part due to legislation and the legal recognition of aboriginal
land rights (as examined in detail in later sections). However, legislation is not the only
cause of industry reform and even in regions where no formal aboriginal land settlements
exist the mining industries performance has improved significantly (Hipwell et al. 2002).
Some case studies which illustrate the mining industry’s past and present relationship
with aboriginal peoples are presented in the following sections.
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6.0 Drivers of CSR In Mining
In the following sections the drivers of CSR adoption (as reviewed earlier) are
presented in the context of the Canadian mining industry. Through this discussion and the
examination of a variety of case studies the relationship between environmental/social
performance and firm level profitability are explored in order to answer the question, Can
active CSR management improve corporate profitability? It is argued that each of the
drivers discussed, in different contexts and to varying degrees, motivates responsible
business initiatives in the Canadian mining industry.
6.1 Legislative Compliance in Mining
Mining within Canada is a heavily regulated industry and all aspects of CSR
behavior including environment, aboriginal relations, and social performance are
influenced, at least partially, by federal and provincial regulations. The mining industry is
obliged to conform to regulations and some of the industry’s responsible business activity
is heavily regulated and monitored. Increasingly large areas of social and environmental
performance, however, are not regulated directly and hence their management falls into
the ‘voluntary’ definition of CSR (Natural Resources Canada 2008). This is especially
true in the last decade, during which the federal and provincial governments, as well as
the industry itself, have worked towards streamlining regulation beginning with the
tabling of a report entitled Streamlining Environmental Regulation in Mining in the
House of Commons in 1996 (Minister of Natural Resources 1997; Natural Resources
Canada 1998). The mining industry’s contribution towards deregulation, and how they
have encouraged it, is discussed in the subsequent section. In the social realm, the
recognition of aboriginal title has actually resulted in less aboriginal related mining
regulation, as provisions for compensation and operation guidelines are now largely
negotiated directly between the mining companies and aboriginal groups, leaving
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government on the sidelines (Natural Resources Canada 2008). Because this is not a
public policy analysis, no case study regarding the impact of regulation is offered for this
section; it is sufficient to state that legislation definitely influences CSR behavior.
6.2 Avoiding Regulation and Influencing Policy in Mining
As alluded to earlier, large industries with political clout often undertake
corporate responsibility management activities in order to avoid regulation or influence
policy. The logic behind this type of activity is that, by convincing the government and
the public that a particular issue is well managed by industry, the industry in question
hopes that there will be no reason for the government to intervene. The Canadian mining
industry, through the Mining Association of Canada (MAC), is an active lobbyist that
regularly engages governments on matters of public policy. One of the main reasons
behind major CSR reforms in the mining industry during the 1990s was an attempt to
influence the public’s perception of mining, the mining regulatory regime, and hence the
effects of regulation on the profitability of Canadian mining and its ability to attract
investments.
Case Study 1: Strategy Statement by Gordon Peeling
As Gordon Peeling, CEO of the Mining Association of Canada (MAC) explained
in a pivotal 1998 presentation, due to poor public image in relation to their social and
environmental conduct the Canadian mining industry had created a significant public
backlash by the 1980s, resulting in the federal and provincial governments moving
towards heavy mining industry regulation. As Peeling (1998, 1-2)34 describes, when
discussing the situation in the late 1980s:
34 Peeling’s 1998 speech represents a major policy statement from the MAC and provides an excellent explanation of why the industry entered into the WMI accord. For this reason, this speech is referred to numerous times throughout this thesis.
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“First, there was rapid increase in the creation of parks and other protected areas,
substantially reducing the land available for exploitation. Second, in allocating
these lands, governments made arbitrary decisions, the most notorious example
being the Windy Craggy deposit. Third, after more than 20 years of negotiation,
Aboriginal claims are still not settled, leading to uncertainty in mineral tenure.
Fourth, there has been a rapid increase in environmental regulation, increasing
companies' costs and leading to project delays. In summary, by 1992 the
Canadian business climate was marked by an atmosphere of public distrust, policy
uncertainty, over regulation, and unpredictability.”
The atmosphere that Peeling describes was one of the major reasons for the
mining industry’s CSR performance turnaround. In the early 1990s the industry
responded, as Peeling (1998, 2-3) describes35:
“The first objective was to build trust with Canadians, and the chosen field of
action was environmental. The second was to build alliances, and the method was
to seek accommodation with other interest groups36. The third was to build
momentum for policy change. The method was political mobilization at the grass
roots level… To repair the investment climate in Canada, our first task was to
build trust and restore the credibility of the mining industry with respect to the
environment. We could not attack other elements of the investment climate until
our environmental reputation was dealt with. We needed to show concrete action
and concrete results in order to establish environmental credibility. The industry
took a wide range of environmental initiatives…This series of initiatives has
established the members of The Mining Association of Canada as serious players
in the environmental arena. Credibility has been established with governments
and the media, and to some extent with environmental groups …”
35 Some short sections that elaborate on these points have been removed in order to limit the length. 36 ‘Interest groups,’ he later explains, included community organizations and aboriginal peoples.
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The environmental initiatives referred to by Peeling are discussed and examined
in detail in later sections. Peeling (1998, 7-9) goes on to explain that, as a result of these
actions:
“…mining is now in the limelight. More Canadians now view mining as a
responsible and exciting industry, an industry of the future. More importantly,
government policies have begun to change. In 1994, the federal government
announced a comprehensive approach to the streamlining of regulations, and
mining was chosen as a priority sector. In 1995, the federal budget provided a
small measure of tax relief for mine reclamation expenses, the only sectoral
initiative contained in the budget. In 1996, the government adopted a new mineral
and metals policy which is highly favorable to the industry. Among other things,
it commits the government to follow a scientific risk-based approach to
environmental regulation, to promote the continuing safe use of metals, and to
improve decision making processes for land access. Parallel policy changes have
begun to emerge also at the provincial level of government, particularly in the
simplification of regulation. For example, in 1996, federal and provincial
ministers of environment agreed to a comprehensive approach to the
rationalization of environmental regulation in Canada…”
It is clear from the comments of Gordon Peeling, the CEO of the Mining
Association of Canada (MAC) and one of the most important figures in the Canadian
mining industry, that the desire to influence the public policy and regulatory regime
within Canada was a major driver of corporate responsibility reforms and the
establishment of the WMI. As Peeling alludes to, reputation (aka public image) and the
industry’s ability to attract investment were also major factors that motivated CSR
reform.
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Case Study 2: The Canadian Mining Industry and Climate Change
The mining industry’s approach to the climate change issue further illustrates
their attempts to self regulate for the purposes of discouraging government regulation.
The minerals and metals mining industry is one of Canada’s largest energy consumers,
utilizing approximately 2% of Canada’s annual energy consumption (7.18% of energy
consumed by industry) and creating 1.91% of total direct and indirect GHG emissions in
Canada (MAC 2003b; CIM 2005)37. These numbers distinguish the mining industry as
the nation’s second largest GHG emitting sector, after oil and gas. Emissions in mining
originate primarily from potash and iron ore mining, as well as concrete mixing and
steel/aluminum smelting. While the industry does have a serious GHG emissions
problem, they have also been major leaders in emissions reductions. This was recognized
in 2001 when the MAC (as the industry’s representative) and five member companies
were collectively awarded the Voluntary Challenge Registry (VCR) Gold medal for
voluntary reductions and reporting initiatives. The MAC was only the third industry
association to win this prestigious award38. From 1990 to 1999 the metal mining sector
decreased energy consumption by 25.6% and improved energy intensity (energy per unit
output) by 8.2%. Smelting (non-ferrous) and refining increased its energy consumption
by 2.8% but managed to improve its energy intensity by 11.9% over the same period.
This coincided with a 24.7% reduction in net GHG emissions and a 13.8% improvement
in GHG intensity (GHG emissions per unit output). Similarly, smelting (non-ferrous) and
refining decreased GHG emissions by 1.8% and improved GHG intensity by 15.9%
(Paszkowsi 2001). This has been achieved, in part, due to strong commitments to GHG
37 These numbers are current as of 2005. Mining consumes 0.75% of the nation’s energy and 2.29% of the energy consumed by all industries, smelting consumes another 1.25% of the nation’s annual energy use and 4.89% of that consumed by all industries (CIM 2005). Mining industry GHG emissions numbers vary depending on the document consulted, but generally they are estimated to be just below 2% of Canada’s total. 38 VCR was established in 1997 as a non-profit partnership between industry and governments across Canada. Its main objective is to encourage and evaluate voluntary GHG emissions reductions (Paszkowsi 2001).
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emissions leadership, transparency, reporting, accountability, and disclosure initiatives
(CIM 2005). The industry has continued to reduce emissions since 1999, on track with
their voluntary emissions goals (MAC 2003b).
Despite their leadership in GHG emissions reductions, the industry is very
adamantly against Kyoto related GHG regulation of their operations. They argue that,
while they are willing to cut emissions on a voluntary basis and have done so, Kyoto is
poorly designed, and its strict ratification will put the Canadian industry at a disadvantage
compared to foreign competitors, given that all of the industry’s largest competitors (the
USA, Russia, Australia, China, and India) have not ratified the Kyoto Protocol, and that it
will impose increased energy costs in an industry where energy accounts for 15-30% of
production costs (MAC 2003b). Thus, the mining industry has argued continuously that it
should be allowed to self regulate its GHG emissions unless its major competitors are
brought into an internationally binding framework. The industry’s anti-regulation stance
was made clear in a briefing document presented at the mining ministers annual
conference, wherein it was stated “Canada’s ratification of the Kyoto Protocol poses a
serious strategic business challenge, and if not properly addressed could result in some
mineral processing shifting outside of the country… For many years, the industry has
worked continuously to improve existing processes to reduce greenhouse gas emissions
(GHG) and improve energy efficiencies at its operations to achieve a competitive
advantage…” (MAC 2003b, 22). While the industry is not in favor of Kyoto style
regulation, especially if their international competitors are exempted of such constraints,
it has advocated subsidies, technological investments, and other non-regulatory methods
of GHG emissions reductions and is highly critical of the federal government’s inaction
on climate change. The industry argues that the absence of a clearly articulated non-
regulatory (or quasi-regulatory) strategy creates considerable business uncertainty for
GHG intensive industries and that a progressive and stable national level GHG reduction
plan is needed (MAC 2003b). This stance reflects the industry’s progressive, yet
nuanced, approach to domestic environmental issues.
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It is clear from the presentation by the CEO of the MAC, Gordon Peeling (1998),
and from the mining industry’s approach to climate change that self-regulation and
responsible business initiatives are motivated, in part, by the desire to influence public
policy and avoid government regulation.
6.3 Liability and Risk Management in Mining
The Canadian mining industry has had extensive experience with liability and risk
management issues and this is a prime motivator of CSR adoption in this industry.
Mining projects are among the most risky industrial enterprises because of the large
capital investments involved, the uncertainty of mineral markets, and because of the
potential for environmental and social disasters and the associated liability (Ali 2003).
Mine tailings management has been one of the most important risk management issues
for the Canadian mining industry and this issue will serve as an example of risk
management and liability as a driver of corporate responsibility practices. However, it
should be noted that this is only one of many areas where the mining industry faces
significant environmental and social risk management and liability issues (Gardiner &
Gladwin 2004).
Case Study 3: The Aurul Mine Case and The Kisladag Mine
On January 30, 2000, 130,000 cubic meters of cyanide, arsenic, and copper
tainted water, containing approximately 50-100 tons of cyanide, were released into the
Lupes and Somes rivers after a dyke containing a tailings pool from a gold mining
operation burst in southern Romania. This resulted in the contamination of a major
hydrological system that distributed the pollutants over a large area eventually
contaminating much of southern Romania, Hungary, and Yugoslavia (Thorpe 2001). The
environmental damage that resulted from this disaster was quite severe including the
contamination of drinking water for 2.5 million people, a massive fish kill with serious
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ecological ramifications, a collapse of the local fishing industry, and several cases of
human poisoning (UNEP 2002). The political fallout following this disaster was, not
surprisingly, very severe. While an estimate of the total damages has not been conducted,
Aurul mining (the company involved) is currently the target of a lawsuit put forth by the
government of Hungary claiming $100M US in damages and a separate class action
lawsuit from citizens and members of the fishing industry which is expected to seek
$200M US in compensation. It is estimated that Aurul will be forced to pay a minimum of
$300M US in fines, clean-up costs, and settlements. Although Canadian companies were
not involved in this spill the political fallout from the event resulted in a major
crackdown on gold mining operations in Europe, negatively affecting a variety of
Canadian owned foreign gold operations. Among the worst affected Canadian operations
was the Eldorado owned Kisladag gold mine operation in Turkey, one of the largest gold
mines in the world. Following the Aurul spill a major review of European gold mining
operations was conducted and it was found that the Kisladag mine’s environmental
management protocols and environmental impact assessment were insufficient to meet
the requirements of strict environmental risk management standards. After being in
operation for only one year, the Kisladag mine was closed in July 2007 following a
Turkish high administrative court injunction. It is important to note that Eldorado had not
been involved in a major tailings spill and that the Kisladag mine had a very good safety
record in its one year of operation. Nevertheless, risk management procedures were
deemed insufficient and the mine was closed, highlighting the importance of risk
management practices for the mining industry’s operation (Infomine 2008; The Canadian
Press 2008). Canadian investor analysts such as McGeachie (2007) have criticized
Eldorado saying that it is because of their lack of publicized cyanide management, waste
minimization, and stakeholder engagement procedures that the mine was closed. While
Eldorado expects that the mine will be able to reopen in 2008, the delay caused by their
risk management shortcomings and the court’s injunction is expected to cost the company
millions, given that the mine was supposed to amount to 50% of the company’s annual
gold production by 2008 (McGeachie 2007; Pett 2008).
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Case Study 4: Lake Pinchi
The Canadian mining industry has had similar problems with mine tailings risk
management within Canada. While a spill of Aurul’s size and impact has not occurred in
Canada, many other smaller spills have. As recently as 2004, for example, a mercury
tailings dam collapsed during (ironically) environmental reclamation work near the
former site of a Teck Cominco mercury mine near Lake Pinchi, British Columbia. As a
result of this spill between 6,000 and 8,000 m3 of rock, dirt, and waste water containing
mercury were spilled into Lake Pinchi. Due to redundancy systems and solid
management the effects of the spill were considered relatively small, given that the lake
was already heavily contaminated with historic mercury pollution (Teck Cominco 2005).
Nevertheless, the political and media backlash from this event was not favorable and the
Tl’azt’en aboriginal nation, who claim the area as a traditional land as part of an unsettled
land claim, have used this incident as an opportunity to vilify Teck Cominco as part of an
ongoing lawsuit (Pierre 2005).
Liability is closely related to risk management and improper tailings disposal, and
the absence of associated risk management procedures has created a variety of serious
liability problems for Canadian mining companies. In the Lake Pinchi case, for example,
the spill was considered unimportant (in part) because Lake Pinchi is already
considerably tainted by mercury pollution. The Pinchi Lake mercury mine was operated
by Cominco Ltd.39 from 1940-1944 (with very poor environmental management40) and
again from 1968-1975 (under moderate environmental management) as Canada’s only
major mercury mine (Teck Cominco 2005). During the mine’s operation considerable
amounts of mercury laden tailings water was purposely disposed of within the lake,
resulting in persistent mercury contamination within the water supply and local wildlife
(especially fish) (Fournier 2003; Weech et al. 2004). This contamination occurred
39 Cominco is now part of Teck Cominco. 40 Teck Cominco admits that mercury contaminated water and sediments were sluiced directly into the lake from 1940-1944 (Teck Cominco 2005).
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without notifying the residents of the nearby Tl’azt’en village of Tache, located 50 km.
from the lake. In addition, mercury laden tailings were provided to the community for
road construction, further contaminating the groundwater. As a result of this
contamination, and the fact that the Tl’azt’en were not notified of the contamination and
hence continued to drink local water and eat char, whitefish, trout, lid cod, suckers,
Kokanee salmon, beaver, and moose from Lake Pinchi for five decades following the
pollution, long term mercury poisoning affects virtually the entire Tache community
(approximately 1200 people). In part, these problems resulted from the fact that no
warning was given to the Tl’azt’en until 1969 when warning signs written in English,
which most Tl’azt’en could not read, were posted near Lake Pinchi (Fournier 2003;
Pierre 2005). As a result of this very serious mismanagement of tailings pollution risks,
Teck Cominco now faces a large scale liability lawsuit, filed against them by the
Tl’azt’en in 2003 (Fournier 2003). Although the lawsuit remains unresolved, it could cost
Teck Cominco millions in damages. Teck Cominco has stated that the mercury pollution
is due to historic pollution resulting from improper management and has begun its own
voluntary remediation, monitoring, and clean- up efforts at the Lake Pinchi site, spending
approximately $3 million thus far. They have also argued that pollution of this nature
would never occur under current management practices (Teck Cominco 2005).
Case Study 5: Reserve Mining – Lake Superior
A final example of risk management failure in the Canadian mining industry
involves the Reserve Mining Corporation which operated a major iron mine on the
northern shore of Lake Superior. The Reserve Mining iron operation, which operated
during the 1970s, employed 3300 people and supplied 12% of US annual iron ore
consumption during its operation. As part of the mine’s operation Reserve Mining was
authorized by the government of Ontario and the federal government of Canada to dump
considerable quantities of rock tailings, which were non-toxic and contained no additives,
into Lake Superior where they would fill a trench 900 feet down. At the time this was
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considered a reasonable disposal method, given that no toxins were involved. However,
several years after the mine began operation small asbestos-like fibers began appearing in
local drinking water. Fibers matching those found in the drinking water were found in
tailings rock and scientists speculated, but could never prove, that the fibers in the
drinking water came from mine tailings and had the potential to cause cancer (like
asbestos). As a result, the US federal government sued Reserve Mining in Canadian
court, seeking an order to prevent dumping in the lake. No damages could be claimed
since the fibers were never proved to be dangerous. Reserve Mining did not see any other
economical option for tailings disposal and so they entered a long and costly legal battle
rather than changing their disposal practices voluntarily. After spending millions in court
Reserve Mining was eventually ordered to either close the mine or dispose of the tailings
elsewhere. Reserve Mining complied with this order, though it seriously affected the
profitability of their operation, given that they had planned, positioned, and developed the
entire mining project with lake disposal in mind (Saxe 1990). Although there was never
any evidence that Reserve Mining had caused harm to human health, they had clearly
failed to adequately calculate the risks associated with disposing of their tailings in the
lake. It is highly unlikely that a modern mining operation in Canada would undertake
lake disposal, regardless of tailings toxicity, and for emergency response and risk
management reasons virtually all mines are now planned with backup tailings disposal
plans (MAC 1998; 2003).
The political fallout experienced by Eldorado’s Kisladag mine following the
Aurul spill, the Pinchi Lake spill and pollution lawsuit, and the Reserve Mining Lake
Superior lawsuit are all examples of how risk management failures and liability have
affected, and continue to affect, the Canadian mining industry. Incidents such as those
described have served as a major motivator for CSR adoption and related risk
management within the industry.
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6.4 Licence to Operate In Mining
In a recent report Newmont Gold (2003) stated “The social license is the
acceptance and belief by society and, specifically, our local communities, in the value
creation of our activities, such that we are allowed to access and extract mineral
resources.” The problem of obtaining a license to operate is particular pervasive for
heavy industries (such as mining) and this has served as a major driver of corporate
responsibility initiatives for such businesses. This is the case for several reasons: 1 –
Aboriginal people have significant legal control over licensing within their territories and
typically require resource developers to adhere to high levels of environmental and social
performance if licensing is to be granted (Keeping 1998). 2 – It is often the case that
communities will not grant licensing for the expected duration of a project and hence
licenses are prone to frequent renewal (Burke 1999; Roselle 2005). In mining, for
example, it is not uncommon for a smelter to be given a five year operating license when
the company which builds it requires twenty years of operation to provide a return on
their investment. As such, the company will require several licensing renewals during the
term of operation. 3 – Mining projects are widely perceived to entail high risks of social
and environmental damage (Burke 1999; Roselle 2005).
The difficulty in obtaining and retaining a license to operate motivates high levels
of CSR performance and the desire to keep ‘good terms’ with the community (Yakovleva
2005; Gunningham 2007). This is illustrated by the Voisey’s Bay case.
Case Study 6: The Voisey’s Bay Nickel Mine
In 1994, one of the largest nickel deposits yet discovered was found by a junior
exploration company near Voisey’s Bay, Labrador, leading to a major staking rush and a
great deal of excitement within the mining industry. By 1995, over 250,000 claims had
been staked in the area and the ultimate holder of the mineral rights, Voisey’s Bay Nickel
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Company41, was sold to Inco for $4.3 billion after an extensive bidding war between
several leading mining firms (Hipwell et al. 2002; Ali 2003; Gibson 2006). After a series
of exploratory drillings, it was determined that the commercial value of the deposit
exceeded $25 billion and Inco began making plans to build a large nickel mine and
associated processing facilities (Ali 2003). However, the staking, exploration, and sale of
the mineral rights had occurred without consulting the provincial government of
Newfoundland, and more importantly, without consulting the Innu and Inuit people who
laid claim to the land (Innu Nation 1996; Cleghorn 1999; Hipwell et al. 2002). This
oversight on the part of Inco and Diamond Fields Resources (the exploration firm that
first discovered the deposit) started a long series of conflicts over the Voisey’s Bay
deposit that slowed down the development of the project significant. The ensuing battle
has often been compared to the famous conflicts between the Cree nations of northern
Quebec and Hydro Quebec (in relation to the James Bay hydro-electric developments)
(Cleghorn 1999).
The first sign of trouble arose in February 1995 when the Innu nation issued an
eviction notice to the Diamond Fields Resources exploratory drilling team, stating that
the firm had not consulted the land’s rightful owners prior to their drilling and hence they
were acting illegally. Because the Innu/Inuit land claim for the area had not been
officially settled at the time, the Innu were found to have no legal right to issue an
eviction and a highly publicized 12 day standoff between Innu protestors, who were
blocking the exploration activities, and police ensued (Innu Nation 1996; MiningWatch
Canada 1999). Because the land claim was unsettled, the Innu had no legal claim to the
land and ultimately the Innu were forced to abandon the protest, allowing exploratory
drilling to continue. In January 1997 the governments of Canada,
Newfoundland/Labrador, the Innu nation, and the Inuit Association of Labrador signed a
memorandum of understanding whereby they agreed to participate in a joint
environmental impact assessment and permitting process, thereby ensuring that the Innu
and Inuit would have a legal means to participate in the Voisey’s Bay planning process. 41 The Voisey’s Bay Nickel Company was created by the original mineral rights holder, Diamond Field Resources, in order to market and sell the mineral rights.
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Despite the government’s recognition of Innu and Inuit interests, in 1997 Inco attempted
to build an airstrip and road to support exploratory and preparation drilling in the
Voisey’s Bay area without consulting the aboriginal communities; activity which the
Innu and Inuit vowed to adamantly oppose until the conclusion of the environmental
assessment process and the signing of an enforceable impact benefit agreement (Innu
Nation 1996; Hipwell et al. 2002; Ali 2003; Gibson 2006). Conflict over this issue, and
Inco’s insistence that it had the right to build exploration infrastructure, caused the
Innu/Inuit to undertake another protest in August 1997; this was supported by legal action
seeking an injunction to prevent the building of the airstrip and roadway. In September
1997 the Innu/Inuit won their case (on appeal) and exploration activities were severely
delayed as a result; this was the first of many delays that would plague the development
of the Voisey’s Bay mine. By March 1999 Inco’s environmental impact assessment had
been reviewed and accepted, however, it was recommended that the project only be
authorized if certain measures were taken to ensure that the life span of the project was
sufficient to create lasting economic benefits, that land claim negotiations in the area be
settled prior to construction, and that impact benefit agreements and co-management
agreements be signed between the Innu/Inuit and Inco (Gibson 2006).
Arguments related to each of these points delayed the project from 1999 to 2002.
First, in August 1999 the federal and provincial governments stated that it would not be
possible for the land claim agreements to be settled prior to the Voisey development; this
lead to Innu/Inuit efforts to stall the approval of the project and another legal case by the
Innu/Inuit which attempted (unsuccessful) to force the government to sign a
comprehensive land claim agreement42 prior to the Voisey development. Also, between
1999 and 2001 negotiations between Inco and the government of
Newfoundland/Labrador reached an impasse over the issue of building ore smelters in
Newfoundland. While Inco argued that smelting ore in Newfoundland was uneconomical,
the provincial government was adamant that the project would not be approved unless
secondary processing was conducted within the province, something which the province 42 As discussed in earlier sections, Labrador and British Columbia are the two largest areas in Canada that are not covered by comprehensive land claim agreements.
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believed would ensure that Voisey’s Bay would have a positive long term economic and
social impact for the people of Newfoundland. The conflict between the government and
the Innu/Inuit over the land claim, and the conflict between Inco and the province over
smelting, caused a two year delay between 1999 and 2001 when very little progress was
made in the negotiation process (Hipwell et al. 2002; Gibson 2006). In 2002 negotiations
resumed and an impact benefit agreement43 was finally signed between the Innu/Inuit and
Inco. During that year Inco also capitulated on the province’s demands, agreeing to smelt
the ore at a high tech smelting facility that would be built at Argentina, Newfoundland.
The company agreed to this only after the federal government offered to contribute $150
million to the construction of the plant. Finally, the company also agreed to slow the
speed of production at the mine so that the mine would be open for a minimum of 30
years (rather than 15 years); this was undertaken to ensure a longer time period for social,
community, and economic development, increasing the likelihood of long term social and
economic benefits (Hipwell et al. 2002; Ali 2003; Gibson 2006). Once the necessary
agreements were signed, construction of the Voisey’s Bay mine and smelting facilities
began in 2003 and 2004. In the end, the final environmental impact assessment and
impact benefit agreements were considered to be highly progressive (Gibson 2006).
It took nearly nine years from Inco’s announcement of its intention to build the
mine for construction to actually begin. Even for a mining development this is unusually
long and a series of delays, including the two year impasse in negotiations from 1999 to
2001, severely delayed the development process, costing Inco considerably. Delays in
mining are considered very costly, in part, because financing used to purchase mineral
rights and for construction accrues interest whether or not the mine is operating. This
reality, and the many legal and negotiation fees that resulted from conflicts with the
Innu/Inuit and the provincial government, are likely to have cost Inco considerably.
Though firm numbers in this case are not available, Inco was forced to ‘write down’ a $2
billion debt in relation to the $4.3 billion spent to procure the mineral rights for Voisey’s
Bay, and it is likely that the interest accrued during the delays was considerable (Gibson 43 The impact benefit agreement stipulated a share of profits for the Innu/Inuit, guaranteed employment and training, environmental regulations, and co-management arrangements.
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2006). Many have criticized Inco for not consulting the Innu/Inuit earlier and for making
obvious attempts to accelerate development and skirt the environmental impact process
(recall their failed attempt to build an airstrip and roads prior to EIA approval). Innu
representatives have maintained that Inco’s decision to undertake exploration activities
without the consent of local people represented a major breach of trust, setting the stage
for the conflicts that followed. They argue that, had a comprehensive land claim been
settled prior to Voisey’s discovery, a variety of Inco’s and Diamond Fields Resources
actions would have been considered illegal and they would not have been allowed to
proceed as they did. From the beginning the Innu/Inuit maintained that Inco should treat
the aboriginal groups as the legal landowners, given that they have communities less than
40 km from the mine site and that they were actively engaged in comprehensive land
claim negotiations (Innu Nation 1996; Cleghorn 1999; MiningWatch Canada 1999;
Hipwell et al. 2002). In any case, it is clear that the negotiation impasse was only
resolved when the company agreed to certain environmental and social provisions
designed to ensure that environmental impacts were minimized and that social benefits
were maximized (for example the establishment of smelting in Newfoundland). Other
cases where large scale mining developments were proposed on aboriginal lands have
encountered far fewer conflicts with aboriginal people, when those people were
incorporated into the decision making and planning process in a constructive way from
the beginning44 (Hipwell et al. 2002).
It is clear that in the Voisey’s Bay case, better management of social issues from
the beginning of the planning process would have expedited Inco’s procurement of the
necessary social and legal licenses to operate. The experience at Voisey’s Bay is famous
in the Canadian mining industry and has acted as a wake-up call for companies
attempting to ‘railroad’ past environmental, social, and community considerations. Thus,
a mining company’s ability to obtain their ‘license to operate’ is heavily influenced by
their performance in these areas, and hence, the need to obtain necessary permissions and
licensing acts as a driver of CSR adoption.
44 See the discussion of the Ekati diamond mine (Case Study 11) .
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6.5 Investor Pressure, ESG Factor Integration, and Mining
Because mining primarily consists of high risk projects involving large capital
investments, the availability of investment capital is a major issue for mining companies.
Due to the large capital requirement of mining projects, ‘high quality’ financing is
necessary for the viability of mining developments, and the costs associated with loan
repayments, interest, and equity costs can have a considerable impact on the profitability
of mining (Mackenzie 1983). Even as early as the 1980s it became clear that “…against
this background, such factors as mineral prices, labor and environmental costs, and
productivity are seen to be central to the development of viable new projects” and that
these factors would impact mining companies’ ability to obtain financing (Powis 1983;
Yudelman 1983, 10). In an indirect way the Canadian mining industry was dealing with
ESG factors when attempting to attract investment long before these factors were
formally integrated into investment planning. In the late 1980s the availability of
investment for the Canadian mining industry started to change as a result of shifts in
domestic public opinion. Again, when referring back to Gordon Peeling’s 1998 speech
where he discussed the industry’s reasons for undertaking the WMI (Case Study 1), we
see that attracting investment was a major driver of CSR adoption:
“…many Canadians had negative attitudes toward mining. In particular, most said
they did not trust the industry or its leaders. Mining was described as a dirty,
dangerous industry which does not care for the environment. We also polled
decision leaders in government and the news media and found even stronger
negative stereotypes. Government policies began to move in an adverse direction.
The result was predictable. Mining investment in Canada fell dramatically”
(Peeling 1998).
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Due to a deteriorating relationship between Canadian mining firms, the
government, and the public, by 1992 “the Canadian business climate was marked by an
atmosphere of public distrust, policy uncertainty and unpredictability”. This began to
negatively impact the industry as mining is highly capital intensive and requires large
amounts of investment funding when establishing new projects. In the 1990s the
Canadian mining industry, led by the MAC, attempted to rebuild their public reputation
in order to secure a more conducive policy environment and increase the prospect of
future investment. As Peeling (1998) describes, this was a major driver of corporate
responsibility initiatives:
“The first objective was to build trust with Canadians, and the chosen field of
action was environmental. The second was to build alliances, and the method was
to seek accommodation with other interest groups. The third was to build
momentum for policy change. The method was political mobilization at the grass
roots…When we undertook to improve the investment situation in Canada we
understood that the environment would be the focus. Environment is the issue for
mining. The economic viability of mining is very sensitive to land access
restrictions and to unnecessary environmental costs imposed by governments,
including the cost of delay”.
While these efforts predated the emergence of the Socially Responsible Investng
(SRI) movement, it is clear that the Canadian mining industry was taking early steps to
integrate investors’ ESG concern into their business practices, in part, to affect policy
changes and attract future investment. Environment was the main focus of this but social
factors were also a considerable part of the industry’s initiative “accommodation with
other interest groups” involved the formulation of partnerships with aboriginal groups,
environmental groups, labor unions, and other citizens groups with a stake in mining and
its social impacts (Peeling 1998). The industry undertook these objectives through the
WMI and other initiatives, which are discussed in more detail later. To date the industry’s
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CSR reform efforts have been very successful and ESG ratings of the mining industry
have become considerably better (Barnett 2007). In addition, government policy has
shifted to become more mining friendly and investment has rebounded strongly (Peeling
1998).
In recent years the emphasis on ESG factor integration (and hence CSR
performance) has grown within the financial community. This has had a major impact on
the mining industry and the extractive industries in general. As Kruger (2007) writes, for
example,
“There is increasing pressure on mining companies over the world to mine
sustainably - not least from the world's top mining banks which rank highly on the
Dow Jones Sustainability World Index…institutions belonging to the World
Index, such as the Royal Bank of Canada and Royal Bank of Scotland, require
their clients to comply with World Bank standards, which involve both
responsible action towards the natural environment and the community…banks
such as Nedbank, which ranked 25th on the global sustainability index, did not
want to risk their good sustainability reputations by granting loans to companies
with bad environmental or people and community practices…the majority of the
world's top mining banks belonged to the sustainability index which implied that
companies violating World Bank sustainability standards would have to settle for
less than competitive finance”.
Within Canada ESG factor integration has become increasingly important for
mining financers, an important development given that Canada generates 30-60% of
worldwide mining finance annually (CPP 2007). The policies of the Canadian Pension
Plan (CPP) illustrate this point. The CPP is one of Canada’s largest institutional investors
and one of the largest single equity holders in the world. Currently they manage $120
billion in equity assets, an amount which is expected to reach $250 billion within 10
years. This money is managed at arms length from the Canadian government in order to
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finance Canada’s retirement pension plan in the long term and currently the CPP owns an
average of 2% of the shares issued by Canadian public companies (including mining
firms) and is a significant holder of mining equity worldwide The CPP manages these
assets according to the obligations of fiduciary duty (a concept already discussed),
attempting to minimize risks while maximizing payoffs (Barnett 2007; CPP 2007). Due
to the perceived link between fiduciary duty and ESG performance, the CPP is now a
major advocate of ESG factor integration within Canada and they exercise active
ownership (voting their proxies) and actively engage corporations on ESG/CSR issues,
especially with regards to corporate transparency and accountability. Because the
extractive industries represent one of the CPP’s core focus areas, their efforts have
impacted Canadian mining companies substantially. They were, for example, one of
several shareholder groups pressuring Ivanhoe mining to exit Burma; an issue which is
discussed subsequently (Barnett 2007; CPP 2007).
Case Study 7: Ivanhoe Mining in Myanmar
The Canadian mining industry has directly experienced pressure related to ESG
factor integration and the demands of investors who are integrating these factors into
their portfolio management practices. A clear case of this involves Ivanhoe mining and its
operations in Myanmar (Burma). In 1992 Ivanhoe Mining (headquartered in Vancouver)
entered into a joint venture to develop a large scale copper mining operation in Myanmar
at the Monywa project site. Ivanhoe established the Myanmar Ivanhoe Copper Company
Limited (MICCL) in cooperation with Myanmar’s state owned mining company Mining
Enterprise 1, with each company owning a 50% share in the venture. Five years later, in
1997, the Canadian government responded to international criticism of the Myanmar
regime and its human rights abuses, imposing economic sanctions against the government
of Myanmar and calling for the removal of Canadian interests. Ivanhoe was exempt from
the sanctions as its venture was established prior to their imposition (Ivanhoe Mines
2007). Nevertheless, international pressure against the mining company grew rapidly and
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the joint venture was portrayed as ‘working with the dictatorship’ and hence ‘condoning
and supporting humans rights abuses.’ This led to international activism against Ivanhoe
including a highly publicized series of shareholder proposals originating from Ivanhoe’s
investors and equity holders (the CPP, which held between $17 and $32 million worth of
Ivanhoe stock during the controversy, was one of them) (CPPIB 2008). These proposals
systematically challenged Ivanhoe’s management staff on the Monywa mine issue,
calling for eventual divestment, a variety of human rights and environmental revisions,
and detailed reporting of their operations. As an offshoot of this, Ivanhoe’s investors have
also moved towards greater scrutiny of the company’s primary operations in Mongolia
and other international sites (Amnesty International 2007). Despite a strong
environmental and employee record, and local economic benefits, Ivanhoe announced in
2006 that it would sell its share in the Monywa project and hence divest itself from
operations in Myanmar. This involved selling their 50% stake in the venture to a third
party trust managed by Rio Tinto, with the intention of resale at a reasonable price.
Incidentally, Rio Tinto provided significant reinvestment into Ivanhoe following the
divestment and it has been suggested that a condition of Rio Tinto’s ‘buy in’ into Ivanhoe
was that Ivanhoe divest from Myanmar (this cannot be proved conclusively). In total,
Ivanhoe had raised approximately $100M US for investment in the Monywa project. The
company has not disclosed how much of this was lost as a result of early divestment but
they have stated that their investment ‘was not recovered.’ Yet, it was clear that Ivanhoe
chose to sell in 2006 in order to recover as much of their investors’ money as possible
before the situation deteriorated further and possibly to fulfill the demands of a major
investor, Rio Tinto. While investor intervention on this ESG issue was not the only
reason for divestment, it played a major role in Ivanhoe’s decision. Investors and activists
pressured the company to make this move both to recover their assets and to increase the
likelihood of long term human rights reforms in that region, given that the mine was
providing the Myanmar government with a significant percentage of its income (Amnesty
International 2007; Ivanhoe Mines 2007). This incident is now famous within the mining
community and has acted as a major wake-up call for mining companies operating in
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areas with questionable human rights records (Barnett 2007). In addition to the examples
examined, investor pressure has also been a major driver of the mining industry’s climate
change disclosure initiatives (discussed later).
It is clear from the Ivanhoe example and the discussion that preceded it that the
Canadian mining industry has already had significant experience, both directly and
indirectly, with ESG factor integration in financial decision making and that this has
acted as a major driver of CSR adoption. It is likely that in the years to come investors
will play an ever greater role in motivating responsible business activities.
6.6 Transparency and Accountability in Mining
In the last decade, and especially in the last five years, there has been significant
pressure on mining companies to become more transparent and accountable (in the
managerial sense) with respect to their environmental and social performance. Financiers,
and to a lesser extent NGOs, have been pushing hard for corporate transparency and
managerial accountability in relation to corporate responsibility issues. This has resulted,
in part, from other types of governance scandals (ex. Enron), from highly publicized and
expensive CSR disasters, and from the mounting financial risks poised by
environmental/social issues. Due to the high risk and high impact nature of the industry,
mining has received a great deal of attention from financiers in this regard. In part, this
results from a history of poor reporting and disclosure in relation to CSR performance
and related risks. In a recent report published by the Yale School of Forestry, for
example, Repetto (2004) found that Canadian and American mining companies have a
long history of withholding information related to environmental and social risks from
investors, often illegally, and in many cases this has caused ‘unexpected’ losses to
investors who were poorly informed about the potential for financially damaging
environmental/social disasters events to occur45.
45 Events discussed in the report include the denial of operating permits on environmental grounds, the emergence of large scale liabilities and lawsuits, and large scale disasters with high cleanup costs.
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Case Study 8: Royal Oak Mining Bankruptcy Case
Repetto (2004, 9) describes one such case where a Canadian mining company
withheld information regarding CSR related risks:
“Royal Oak Mining Ltd. declared bankruptcy in April 1999, citing low gold
prices, although Royal Oak’s third quarter 1998 report listed assets totaling
$840.3 million and liabilities totaling $645.8 million. The latter excluded the cost
of dealing with 240,000 tons of highly toxic arsenic trioxide buried in
underground mining vaults in its Giant Mine in Yellowknife in the Northwest
Territories that were leaching arsenic into ground and surface waters. Recent
engineering estimates of the costs of closure and remediation are approximately
$200 million, against which the government held a $0.4 million performance
bond for water quality reclamation. The Giant Mine went into production in 1948
using a roasting operation to extract gold from its arsenopyrite ore, producing
arsenic trioxide dust as a waste product. The arsenic trioxide dust that was
collected was blown underground into mined out and some specially constructed
chambers for storage 20 to 75 meters below the surface. After 50 years of mining
operations, approximately 240,000 tons of arsenic trioxide dust had accumulated
underground. Approximately 10-13 tons were added every day over the last few
decades. Royal Oak Mines acquired ownership in 1990 and operated the mine
from then until April 1999, when it went into bankruptcy. At low gold prices,
Giant Mine became a break-even operation. Royal Oak Mines went into
receivership in April 1999 with no provisions to deal with the arsenic trioxide
problem, which was left to the federal government. Extracting it would be
difficult to accomplish without endangering workers’ health, since arsenic
trioxide can be lethal if inhaled or absorbed through the skin and extraction would
leave open the question of suitable long-term surface storage. At present, after ten
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years of engineering studies, the government is supporting a plan to freeze the
arsenic underground and let the arctic permafrost hold it in place, at a discounted
present cost of about $100 million. Under this scenario, the pumps would have to
keep running until the arsenic has leached out of backfilled chambers and vaults,
which would add an additional $100 million in discounted present costs to the
bill. Royal Oak never recognized a liability for reclamation of the stored arsenic
trioxide nor did it discuss the problem in its financial reports… (yet) according to
language in its 1997 and 1998 annual financial filing: “. . . the Company believes
that it has made adequate financial provisions for the costs associated with mine
closures and reclamation, and is of the opinion that any changes to environmental
laws and regulations in the future should not have a material effect on the
Company.” In other words, in its public disclosures, investors would find no
reference to or estimate of the very large financial liability that the stored arsenic
trioxide represented, a liability that had been valued at over $120 million in 1993
and subsequently has been estimated in the $200 million range. Were these
estimates disclosed, the true state of Royal Oak’s balance sheet would have been
clear well before its declaration of bankruptcy in April 1999.”
Incidents such as the Royal Oak Mining - Giant Mine case described by Repetto
(2004) have caused financiers to demand increased disclosure, reporting, and
transparency of CSR related risks and performance. This has become increasingly
important in recent years as environmental costs have increased; currently
decommissioning, management, and remediation account for an average of 7% of mining
operating revenues (Deloitte 2007).
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6.7 Reporting and Disclosure in Mining
The demands of activists and financiers have motivated increased transparency in
the Canadian mining industry, and this has been achieved through reporting and
disclosure initiatives. For example, Magness (2006) has studied the relationship between
investor demands and corporate disclosure in gold mining firms following the 1995
tailings disaster at Cambior’s Omai gold mine, in Guyana. The tailings failure in this
operation is one of the largest tailings leaks that a Canadian company has been involved
in, with three million cubic meters of wastewater contaminated with cyanide and copper
flooding local river systems and agricultural irrigation. Following this disaster there was
a major activist backlash and financiers began actively seeking information related to
tailings management. Magness (2006) found that these demands led to a marked increase
in tailings management disclosure, especially by large firms and firms that were seeking
external financing. Significantly, the backlash that resulted from this disaster was a major
factor in motivating the MAC’s efforts to establish improved standards for tailings
management (discussed in later sections). This illustrates how demands for transparency
can impact CSR disclosure and performance. The following brief case study provides
further evidence supporting this point. Currently a variety of reporting and disclosure
initiatives are in place in the Canadian mining industry46.
Case Study 9: The CDP and GHG Disclosure
The largest single effort aimed at standardizing and encouraging CSR related
disclosure is the Carbon Disclosure Project (CDP). The CDP’s purpose is to encourage
and standardize the disclosure of corporate climate change related performance,
particularly GHG emissions levels, so that the impact of climate change regulation and
risks can be fully incorporated into investment and business decision making. The CDP
46 Some of these initiatives are discussed in later sections.
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“…informs investors and corporations of the importance of climate change risks and
opportunities. Voluntary disclosure on greenhouse gas emissions management through
the CDP is a valuable complement to statutory, financial, and other voluntary reporting
mechanisms. The CDP is one of the most comprehensive and relevant resources for
company-specific climate risk information available to investors” (Conference Board of
Canada 2007). This agreement has already been ratified by 315 of the world’s largest
institutional investors, including most of the world’s main mining banks, representing
$41 trillion in assets.
The demands made by investors through the CDP, and the high GHG impact of
mining, have motivated extensive climate change related reporting and disclosure activity
from the Canadian mining industry. Under the Towards Sustainable Mining (TSM)
framework (discussed in detail in later sections) Canadian mining companies committed
to developing recognized, standardized, and accurate energy use and GHG emissions
measurement, reporting, and disclosure procedures that would meet worldwide standards.
Currently every major mining company in Canada is either fully participating in GHG
disclosure or building their measurement capacity to do so in the near future (CIM 2005).
The TSM reporting and disclosure requirements have been accompanied by, not
surprisingly, a rapid increase in the industry’s efforts to cut energy use and reduce GHG
emissions through innovative energy use reduction plans (see the discussion of energy
use in section 9.13). The industry’s climate change reporting and disclosure efforts were
formally recognized in 2001 when the MAC (as the industry’s representative) and five
member companies were collectively awarded the Voluntary Challenge Registry (VCR)
gold metal for voluntary reductions and reporting initiatives. The MAC was only the third
industry association to win this prestigious award47 (Paszkowsi 2001). The MAC’s
climate change disclosure efforts have occurred despite the industry’s highly critical
stance regarding the Kyoto protocol (discussed in section 9.2). Even in the absence of a
national GHG strategy, the mining industry has undertaken significant climate change
47 VCR was established in 1997 as a non-profit partnership between industry and governments across Canada. Its main objective is to encourage and evaluate voluntary GHG emissions reductions (Paszkowsi 2001).
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management. It is likely that investors’ and governments’ demand for climate change
reporting and disclosure has not only motivated the industry’s disclosure and reporting
initiatives, but its GHG emissions reduction campaigns as well, given that the industry’s
performance in this regard is now well publicized and that this information is available to
activists, investors, and policy makers. Thus, transparency, reporting, and disclosure
motivate CSR adoption and improved environmental/social performance.
6.8 Verification, Labeling, and Reporting Standards in Mining
In the previous section, the mining industry’s climate change reporting and
measurement initiatives were discussed, illustrating the impact that demands for
disclosure can have on environmental/social performance. In a world where corporate
performance is increasingly scrutinized, any industry interested in serious CSR
management finds it necessary to measure, verify, and report their environmental/social
progress. The mining industry’s major verification effort it discussed in the following
section.
Case Study 10: TSM External Verification
Verification of corporate performance, and the claims made through related
disclosure, has become an important aspect of corporate CSR strategy, given the
scepticism with which many regard corporate environmental/social efforts. Under the
Towards Sustainable Mining framework mining companies have committed to external
verification of their CSR performance in the areas of tailings management, energy use,
greenhouse gas emissions, external outreach programs, in regards to their interaction with
aboriginal peoples, and biodiversity48. Following the verification plan laid out in the
TSM, which was formally initiated in 200649, the MAC’s member companies will follow
48 The industry is still developing its biodiversity and aboriginal people indicators. 49 Although the verification program was formally initiated in 2006, the largest companies in the MAC began external verification several years earlier (MAC 2005).
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a rotating verification schedule, with 1/3 undergoing external verification each year, so
that each company is verified once every three years. This complements the self
assessment that members generate annually. Results of this process are organized by
company and by individual facility or mine and are tracked to compare performance in
the short and long term. The results of this process are published annual in the TSM
report and by individual companies in their annual reports. Very few industries have
standardized verification of this calibre and the MAC (and its members) are the only
national level mining association with standardized externally verification in place (MAC
2005; MAC 2007b). Verification of this type motivates high levels of performance
because it ensures that environmental/social claims are not exaggerated or merely ‘green-
washing’, because it quantifies performance, and because it makes performance
information publicly available.
6.9 Reputation Management in Mining
Although reputation management is an important issue for mining, it is difficult to
point to any particular case study as an example of reputation management. This arises
from the fact that few activities are undertaken explicitly to improve a company’s
reputation, and improved reputation is usually one of several benefits resulting from any
given corporate responsibility management activity. Thus, while no case study is
presented for this driver, many of the other case studies discussed in this document
represent examples where CSR activities have enhanced the reputation of mining
companies. Recall, for example, the comments of Gordon Peeling (1998), CEO and
President of the MAC, “To repair the investment climate in Canada, our first task was to
build trust and restore the credibility of the mining industry with respect to the
environment. We could not attack other elements of the investment climate until our
environmental reputation was dealt with”. Mr. Peeling made these comments when
discussing the industry’s reasons for undertaking the WMI process. Later, in 2006 when
discussing the MAC’s relationship with Nature Canada, Peeling (2006) also stated “You
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may be thinking that it’s a bit pat for an industry leader to say that the environmental
movement is good for industry. Is this just an attempt at greenwash? Do I really mean it?
Let me put it this way: To do less and prevaricate would do serious damage to the
credibility and reputation of the industry. That reputation is something we put a very high
value on”. Thus, while no case study is presented explicitly for this driver, it should be
understood that improved reputation is a benefit which results from high levels of
environmental/social performance and that reputation is hence a driver of CSR
management.
6.10 Branding, Marketing, and Ethical Consumerism in Mining
Because mining is primarily a supply chain industry, with most mining products
being sold to manufacturers, processors, and other industrial sectors instead of end
consumers, ethical consumerism and marketing is not as big an issue for mining as it is
for other industries50. However, precious metals and gemstones have received attention
from ethical consumers, activists, and retailers, and there has been increased interest in
the last decade in the social and environmental impacts of producing these highly valued
products for the consumer market (primarily for jewellery). These concerns have
motivated attempts to ‘ethically brand’ precious metals and gems from certain regions
and market them to ethical consumers. Ethical consumerism concerns surrounding gold,
platinum, and especially diamonds have had the greatest impact on the activities of the
Canadian mining industry. Public pressure for ‘clean’ gold and ‘conflict free’ diamonds
has intensified since the 1990s, culminating in 2006 when eight of the world’s largest
jewellery retailers signed a pledge to move away from selling gold and diamonds that are
not produced in an environmentally and socially responsible fashion. This commitment,
which was spearheaded by the NGO led ‘No Dirty Gold’ campaign, stipulates specific
environmental, human rights, and social requirements that mining companies must meet
if they wish to sell their products to the signatories; an important development given that 50 This is beginning to change as the demands of ethical consumers are starting to penetrate the supply chain in some industries (Davis 2005; Co-operative Bank 2007).
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80% of the world’s gold production is used to make jewellery (Greenbiz.com 2006). The
jewellery retail industry has been eager to find ways to address the ethical issues
associated with the mining of precious metals and gemstones (especially diamonds) in
order to preserve the marketability of their products, as David (2005) explains, “…gem
diamonds have no intrinsic value: their huge price is dictated instead by their image. If
associations with war and mutilation were allowed to tarnish that image, then diamonds
risk becoming as unacceptable as fur coats.”
Case Study 11: The Ekati Diamond Mine, Certification, and Aboriginal
Involvement
Although economically viable diamonds were only discovered in Canada in the
early 1990s51, Canada is expected to produce between 12% and 16% of the world’s
diamonds (by value) by 2010, making Canada the world’s third largest diamond producer
(MAC 2003c). Canada’s diamond output has grown rapidly following the opening of
North America’s first diamond mine in 1998, the BHP Billiton operated Ekati diamond
mine, located 300 km northeast of Yellowknife, Northwest Territories (NWT). Since that
time two other diamond mines have opened in Canada, both in the NWT; the Diavik
diamond mine, jointly owned by Rio Tinto and Diavik diamond mines inc., was opened
in 2003, and the De Beers owned Snap Lake diamond project, which opened at the end of
2007 (MAC 2003c; CAD.com 2008). The owners of the three Canadian diamond
producing mines, and companies interested in developing the other 12-15 economically
viable sites that have been discovered in Canada, have worked hard to portray Canadian
diamonds as superior to their international competitors in terms of their social and
environmental sustainability. To this end, Canadian diamond producers, in conjunction
with the federal government, have begun issuing ‘CanadaMark’ certificates of
authenticity that accompany Canadian diamonds. This is done so that Canadian diamonds
51 The first commercially viable diamond deposit discovered in Canada was found by the prospectors Chuck Fipke and Dr. Stu Blusson who discovered the Ekati deposit in 1991 after years of research (Dearden & Mitchell 2005).
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can be distinguished from diamonds produced in conflict prone areas; a clear example of
‘ethical branding’ in the mining industry (CAD.com 2008). In addition, Canadian
diamond producers have been quick to obtain Kimberley Process certification, an
international certification scheme designed, primarily, to distinguish conflict diamonds
from non-conflict diamonds, though the certification process has recently been extended
to include other social and human rights concerns including the treatment of aboriginal
peoples52 (MAC 2003c; Kimberely Process 2008). The Canadian mining industry views
these certifications as critical components of their diamond marketing strategy and they
believe that certified diamonds will be worth more than diamonds produced in conflict
prone areas (MAC 2003c; BHP Billiton 2008). Thus, the industry has found it essential to
maintain the legitimacy of their certification, branding, and ethical marketing claims by
practicing strong CSR management.
In many ways, the Ekati diamond mine exemplifies the Canadian mining
industry’s ‘new approach’ to mining development and the Ekati mine was among the first
to implement key approaches to community consultation and sustainability. Immediately
following the discovery of the Ekati deposit in 1991 BHP Billiton moved towards
establishing the diamond mine, which would eventually become the fourth most valuable
diamond mine in the world, a project that would ultimately cost $1.2 billion to
implement. Immediately it was recognized that the Ekati mine would generate
considerable economic value, and it is estimated that over its lifespan the mine will
contribute $2.8 billion in taxes to the federal government and $828 million in taxes to the
government of the NWT, while adding in excess of $6 billion to Canada’s GDP. Given
their desire to market Canadian diamonds as environmentally and socially responsible, it
is not surprising that BHP Billiton made considerable efforts to ensure high levels of CSR
performance during the establishment of the Ekati diamond mine, setting the standard
high for the Diavik and Snap Lake projects that followed it (Dearden & Mitchell 2005,
472-480; Yakovleva 2005). BHP Billiton aspired to cause ‘zero net harm to communities
52 The three diamond mines built in Canada thus far were built within aboriginal lands, so proper consultation of aboriginal communities was essential for Kimberely Process certification.
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and the environment’ during the development and operation of the mine and to this end
they have undertaken considerable responsible business initiatives.
On the environmental side, the company has funded extensive wildlife studies in
order to assess the effects of the mine on sensitive species, including the Bathurst
Caribou herd and the region’s grizzly bear population. In order to minimize impacts on
these species, the company has decided not to construct any permanent long distance road
infrastructure, instead relying on temporary ice roads and restricting heavy shipping to
the winter. In addition, the company utilizes physical separation (grinding and crushing
of rock) rather than chemical separation to remove diamonds from the ore, thereby
substantially reducing their effect on local water quality. Once the diamonds are removed
from the ore, tailings are either placed within the mine pits or the Long Lake tailings
pond, both of which will be flooded gradually after they are filled so that they can be
converted to permafrost and covered over with natural vegetation in order to form
wetland communities. Keeping with the zero impact objective, even the dams used to
contain the tailings are non-permanent, and all tailings are contained within ‘ice dams’
made from frozen sediment. These dams are designed to hold the tailings in place and
prevent water leakage until the tailing water is rendered safe according to federal
guidelines, after which the ice dams will gradually disintegrate, allowing normal water-
flow to resume. Furthermore, during decommissioning the artificial dam that was
constructed in order to remove lake water that covered the diamond deposit will be
breached and deconstructed in order to fully restore natural water flows. Lastly, because
the company needed to drain two lakes to access the diamonds, they have constructed an
artificial breeding channel between two other adjacent lakes that is designed to enhance
the local fish population to replace fish displaced by the draining. In order to support
these environment management plans, the company also conducts regular environmental
monitoring and funds local environmental research projects. These environmental
management initiatives are considered quite extensive and it is clear that the company has
invested considerably to minimize environmental impacts (CEAA 1996; Dearden &
Mitchell 2005, 472-480).
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BHP has also made commitments to ensure high levels of social performance.
During the design and development of the mine considerable effort was made to consult
local aboriginal and non-aboriginal communities using a highly progressive consultation
framework. This involved measures to connect communities with mine designers and
engineers, programs to connect aboriginal people in the NWT with other aboriginal
people affected by mining (including flying aboriginal representatives from the NWT to
BHP operations in New Mexico where 76% of the workers are aboriginal), and the
creation of a traditional ecological knowledge (TEK)53 research project. The TEK project
was intended to preserve the TEK of local aboriginal groups, while also making it
available to the mine’s environmental management team. Because there were conflicting
and unsettled comprehensive land claim agreements being negotiated between the
government and the aboriginal groups at the time of the mine’s development, BHP opted
to circumvent the land claim framework and the government, instead signing impact
benefit agreements with local aboriginal groups directly (This included the Inuit, Metis,
and Dene). These settlements are considered quite progressive and were signed prior to
the formal recognition of the aboriginal groups’ rights to the land. In addition, BHP
voluntarily signed a social-economic benefit agreement with the government of NWT
whereby they agreed to preferentially award employment and support contracts to
aboriginal people, aboriginal businesses, and other residents of the NWT. In addition,
they made a variety of commitments to train residents of the NWT to work for the
company, to provide community support programs, and to support northern research
projects (Government of NWT 1996; Dearden & Mitchell 2005, 472-480). To date the
company has kept their promises and 60% of their workforce consists of NWT residents,
while in excess of $100 million has been paid annually to aboriginal owned companies
contracted to support the construction and operation of the mine (MAC 2003c).
Importantly, the environmental and social performance of the Ekati mine is monitored
and reported upon extensively, with internal and external auditing conducted regularly
(MAC 2003c). 53 TEK is the title used to describe the traditional and local ecological knowledge held by aboriginal people who have lived in an area for many generations.
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As part of the Ekati IBA the company responded to the desires of the aboriginal
community, who petitioned for funding and support for aboriginal led social impact
monitoring studies. As Cleghorn (1999)54 describes, the Dene community has been able
to use this funding to independently monitor the social impacts of the Ekati diamond
mine:
“Lutsel K'e Dene First Nation have actively pursued monitoring and research at
the community level to ensure that the impacts on their community of
industrialization do not go unchecked. Early in the study it was identified that the
monitoring had to be grounded in the priorities of the community. The study grew
partly out of the momentum that built up during the environmental assessment
process for the mine, as to what appropriate monitoring mechanisms for the mine
would be. Naturally, the community priorities and those of the mining company
and government do not always match. Although this could have been a
considerable obstacle in the monitoring, it has not been. Instead, the community is
proceeding with the monitoring that it has determined is the most important, while
the company is doing the same. In some areas, such as water quality for example,
both parties agreed that monitoring would be necessary. In some ways, the
differences in monitoring are essentially differences of scale; the difference
between monitoring phytoplankton instead of monitoring healing practices for
example. Over three years, the community has undertaken three major studies,
namely, The Community-Based Monitoring Project (1996), Traditional
Knowledge Study on Community Health (1997), and Community-Based
Monitoring Cycle Three (1998).
The goal of the first study, the Community Based Monitoring Project, was to
design a tool that would increase the capacity of Lutsel K'e Dene First Nation and
other northern communities to address both the positive and negative effects of
mineral development. The project consisted of three phases:
54 Some sections omitted in interest of length.
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1. gathering ideas and Chipewyan terminology for concepts like monitoring,
indicators, and community health.
2. development of themes and indicators of community health
3. a four-step process of monitoring was designed to include;
* gathering information
* summarizing information and communication
* evaluation of information with a committee
* reporting.
The Traditional Knowledge Study on Community Health involved documenting
traditional knowledge about community health or the Dene way of life (Dene
ch'anie) as it was defined in the first study. Information from this study was used
in designing the monitoring. Following this study, the model for Community
based Monitoring was implemented. Since 1997, Lutsel K'e researchers have been
collecting information on specific indicators, and comparing them with the results
of the 1997 study.
One of the results of these studies was the identification of employment problems.
Employment at the site has fluctuated over its short life. In 1997, 22 people from
Lutsel K'e were reported as employed in the mining sector, while six months later
only three people were still working there. Low wages, no overtime, little room
for advancement, no native food, and concern about environmental hazards were
given as reasons for this flux in employment.
The Local Employment officer listed the following obstacles facing Lutsel K'e
Dene Band members pursuing jobs at the mine:
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* lack of job readiness
* inadequate training and development programs
* drug and alcohol problems
* lack of local resource people able to assist in business development
* limited capacity for investment in business development
* lack of infrastructure to support business development.
Traditional food consumption has been monitored for two years.”
It is clear from the extensive environmental and social initiatives undertaken
during the development of the Ekati diamond mine, and the branding/marketing strategy
articulated by BHP and the MAC, that ethical consumerism, ethical branding, and
marketing are significant drivers of CSR adoption in the Canadian diamond mining
industry, though other drivers also come into play. Thus, although ethical consumerism,
marketing, and branding are less important drivers of corporate responsibility initiatives
for many mining products, the experience of the diamond mining industry shows that
these drivers do affect mining companies.
The Ekati case study is also important because it provides an example where the
industry was able to address the need for aboriginal peoples to participate in monitoring
programs by ensuring that the local community is empowered to identify and monitor the
negative social effects of the mine. While aboriginal led monitoring does not occur in all
mining developments, it is becoming increasingly common for mining companies to
provide funds and support for this type of aboriginal participation (Cleghorn 1999;
Hipwell et al. 2002). More generally, the Ekati diamond mine provides a model for the
industry with respect to aboriginal consultation, participation, and compensation.
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6.11 NGOs and the Mining Industry
The Canadian mining industry has had a mixed relationship with the large number
of NGOs that become entangled with the operation of mining firms domestically and
internationally. A corporations’ relationship with NGOs can act both as a positive and
negative driver of CSR adoption. This is discussed in the following two sections by
examining the Canadian mining industry’s relationship with two prominent Canadian
NGOs, MiningWatch and Nature Canada.
The mining industry has been a popular subject of NGO activism, both
domestically and internationally, since the 1960s. This results from the industry’s
potentially high environmental and social impact, its history of poor performance in these
areas, the highly visible and concentrated nature of mining developments, the
concentration of capital within the industry (the mining industry internationally is
dominated by a small number of very large multi-national companies), and the secrecy of
mining company operations (Yakovleva 2005). As Ali (2003, 37) explains, “Mining
companies, in particular, because of their operations in remote undeveloped areas and
their relative secrecy of operations, are regarded with much suspicion by those who
oppose corporate power”. Typically environmental, human rights, anti-development, anti-
globalization, labor, poverty, and aboriginal rights NGOs are involved in protests and
activist campaigns concerning mining companies and mining developments. As Peeling
(2001) explains, “We see multiple citizens’ groups concerned with social and
environmental issues, acting as watchdogs, monitoring corporate activities and
demanding accountability – and the mining industry is one of the most closely
scrutinized.”
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Case Study 12: MiningWatch Canada and the Pascua Lama Gold Mine
MiningWatch is one such NGO based in Ottawa, Canada and it is among the
leading critics of the Canadian mining industry, especially in regards to the industry’s
domestic operations. MiningWatch “…addresses the urgent need for a coordinated public
interest response to the threats to public health, water and air quality, fish and wildlife
habitat and community interests posed by irresponsible mineral policies and practices in
Canada and around the world” (MiningWatch 2008). The organization’s stated objectives
are to55:
• Ensure that mineral development practices are consistent with the goals of
sustainable communities and ecological health;
• Strengthen technical and strategic skills within communities and organizations
faced with impacts of mineral development;
• Impose appropriate terms and conditions on mining and in some cases prevent the
development of projects that would adversely affect areas of ecological, economic
and cultural significance; and
• Advocate policies to improve the efficiency and reduce the risks of mineral
development.
Major reports recently issued by the NGO include:
• “Looking Beneath the Surface: The Real Costs of Mining” a report which claims that
the mining industry creates a net drain on the Canadian economy and is heavily
subsidized by the Canadian government56 (MiningWatch 2002).
55 Quoted directly from the MiningWatch website (MiningWatch 2008). 56 Recall that in the introductory sections the case was made that the Canadian mining industry is a major contributor to the Canadian economy. The government provides very few subsidies to the Canadian mining industry.
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• “There Are No Clean Diamonds: What You Need to Know About Canadian
Diamonds” a report which claims that Canadian diamond mining has a huge
environmental impact and that it is done at the expense of aboriginal communities
which did not consent to the mining process (MiningWatch 2006).57
• “Policy Statement on Uranium Mining” an anti-uranium mining document wherein
the NGO states that “…MiningWatch Canada takes the position that there should be a
total moratorium on uranium exploration and new uranium mines across Canada. The
conditions that would alter this position are stringent and unlikely to be met by the
industry any time soon, if ever.”
These are a few examples of the reports and studies that MiningWatch continues
to produce, and despite the dubious claims made within these documents (as discussed in
the footnotes), the NGO has had a major impact on the mining industry’s reputation and
some of its development projects (Foster 2007). The Barrick gold mining Pascua-Lama
mining development, high in the mountains on the border of Chile and Argentina,
provides an excellent example58 of the interaction between this NGO (as well as other
NGOs) and the Canadian mining industry.
The Pascua-Lama gold mine development has been the subject of an international
activist campaign spearheaded by MiningWatch and its alliance of environmental,
aboriginal rights, and human rights NGOs. These activists have mobilized within Canada,
Chile, and Argentina with the intention of preventing the construction of the mine, based
on the premise that the mining operation will destroy the region’s mountain-top glaciers,
hence depriving local people of freshwater, that its operation will result in the
exploitation of local people, and that the mine will cause significant cyanide, sulfuric
acid, and mercury pollution (Estrada 2005; McAller & McElhinney 2005; Estrada 2006).
57 Recall that in the development of the Ekati mine (case study 11), that aboriginal communities were extensively consulted during the development of the mine and that all possible measures have been taken to minimize environmental impacts. 58 Although this case study takes place outside of Canada, it involves a confrontation between a Canadian mining company (Barrick Gold) and a Canadian NGO (MiningWatch). Thus, this researcher felt it was an appropriate example for the purposes of this thesis.
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To support these claims MiningWatch has produced an extensive document criticizing
the development which they have distributed widely (MiningWatch 2008). Their
publications and lobbying (particularly in Canada) have been fairly influential and they
have succeeded in delaying the development of the mine, although it appears unlikely
that they will stop it entirely (McAller & McElhinney 2005). The main points of
contention articulated by the NGO, including the claim that the mine would destroy
glaciers, have delayed the licensing and approval process for the mining development,
costing Barrick time and money. This has occurred despite the fact that MiningWatch has
bent the truth considerably in a variety of press releases, statements, and documents
issued on their website, circulated with a petition against the mine, and presented to
policy makers in Canada, Argentina, and Chile. For example, MiningWatch (2008) has
repeatedly claimed that the mining development will destroy the mountain-top glaciers
and hence a major portion of the region’s freshwater supply. In reality, only three of the
fifty glaciers are located near the mining site and the impact on these glaciers will be
quite small. According to Barrick’s environmental impact statement, the worst case
scenario involves the accidental destruction of the glaciers, which the company has not
planned. Nevertheless, if the glaciers were somehow accidentally destroyed, the Huasco
Valley would loose a mere 0.3% of its fresh water supply (Barrick Gold 2008). Barrick
has been sufficiently concerned by the MiningWatch campaign that they issued a public
statement to clarify some of the issues surrounding the Pascua-Lama mine wherein they
highlighted the fact that their mining development will employ 1,660 people for
approximately 20 years (5,500 people during the mine’s construction), that it will involve
a capital investment of $2.3 billion, much of which will be spent in Chile and Argentina,
and that they will contract more than 600 Chilean and Argentinean supply companies. All
of this in a region which has 18% unemployment and some of the highest poverty rates in
Chile and Argentina. In addition, Barrick has generated two extensive publicly available
bi-national environmental impact assessments, both of which were approved after a
thorough review by the governments of Argentina and Chile. Lastly, the company has
also made a variety of voluntary environmental and social commitments.
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Despite its efforts, Barrick has been sufficiently impacted by the MiningWatch
campaign that the company felt it necessary to highlight seven of MiningWatch’s most
‘misleading assertions and facts’ and reply to them publicly (Barrick 2008). Barrick’s
side of the argument was recently supported by letters sent to MiningWatch from
Chilean, Argentinean, and Ecuadorian community leaders who take issue with the NGO’s
attempts to use deception in order to prevent development in the impoverished region
(Foster 2007). Investigations undertaken by the documentary filmmakers McAller &
McElhinney (2005) also suggest that support for the project is widespread among local
people.
The Pascua-Lama case illustrates the ability of NGOs to obstruct the activity of
mining companies, even when they do so under false pretenses. While Barrick Gold
Company has succeeded in establishing the Pascua-Lama development, this project was
delayed by the Canadian NGO’s campaign. However, extensive community consultation
and environmental impact statements, as well as a variety of social and environmental
guarantees, paved the way for the project’s approval, and it is likely that these measures
minimized the impact of the activists’ campaign (McAller & McElhinney 2005; Barrick
2008). Thus, NGO activism can be seen as a driver of CSR adoption in mining, given that
high levels of environmental/social performance simultaneously reduce the chances of
NGO attacks and provide a defense should such attacks occur.
6.12 Business-NGO Partnerships in Mining
In contrast to the relationship between the mining industry and NGOs like
MiningWatch, cases exist where the mining industry has formed mutually beneficial
relationships with NGO groups. One such case involves a partnership between the
Mining Association of Canada (as the industry’s representative) and Nature Canada, a
large environmental NGO with over 40,000 supporters and 100 affiliated naturalist
organizations.
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Case Study 13: The Northern Bathurst Island National Park
Nature Canada and the MAC have worked together closely for more than fifteen
years, becoming acquainted with one another when Nature Canada (then the Canadian
Nature Federation) was invited to participate in the Whitehorse Mining Initiative, where
the organization acted as a central player in the accord’s development (the WMI is
discussed in more detail in later sections) (Peeling 2006). Since that time, the two
organizations have worked together closely on the federal government Species at Risk
Working Group (SARWG), a civil society and industry group assembled to provide input
into the creation and maintenance of the federal Species at Risk Act. In addition, Nature
Canada has collaborated with the MAC and many of its member companies (ex. BHP
Billiton) on a variety of mining sustainability initiatives and the NGO is regularly
consulted when the MAC deals with mining related environmental issues (Peeling 2006).
Lastly, the two organizations have also worked together to resolve conflicts between
mining activities and conservation objectives.
In the late 1990s when a new park was proposed for Northern Bathurst Island
(Tuktusiuqvialuk National Park), as part of the federal government’s plan to establish at
least one national park in each of Canada’s 39 natural regions, a conflict between the
interests of mining and conservation developed. During mandatory MERA testing for
mineral potential within the proposed park boundaries, it was found that there was a very
high potential for oil, gas, and mineral mining in the eastern part of the park.
Unfortunately, this area also represented essential habitat for the critically endangered
Peary Caribou- a species which has declined from a population of 40,000 in the 1960s to
less than 200 individuals (other threatened wildlife species were also present). This
conflict of interest created a deadlock between Environment Canada and Natural
Resources Canada (among other government officials), causing the park boundary
negotiation process to stall. Drawing upon the relationship that they had developed while
working together on SARWG and during the WMI, Nature Canada approached the MAC
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hoping to negotiate a compromise with the mining companies who had claims in the area,
specifically Noranda and Cominco (now Falconbridge-Noranda and Teck Cominco
respectively). Following this the MAC and Nature Canada were able to negotiate a
private agreement whereby an area on the eastern side of the island would be excluded
from the park boundary, as long as the mining companies agreed to support a moratorium
on mining, oil, and gas exploration and development (see Figure 4 below). The
agreement stated that this moratorium would stand until the Peary Caribou were either no
longer endangered, or extinct. Should either happen, the mining industry would be free to
develop the area. This solution was presented to the government negotiators and
accepted, allowing the process to progress to the next stage, wherein the government
must negotiate an agreement to form the park with local aboriginal people (in this case
the Inuit) (Spence & Gratton 2002; Gelfand & Gratton 2006). Clearly this compromise
fulfilled the objectives of Nature Canada, the MAC, and its member companies.
The collaborative relationship between the MAC, its member companies, and
Nature Canada is ongoing, providing benefits to each of these organizations. From Nature
Canada’s perspective, benefits include a strong alliance with a major industry, a
relationship which has already made an impact on their conservation objectives.
Conversely, Nature Canada provides many benefits for the MAC. Gordon Peeling (2006),
CEO and President of the MAC, described the partnership in a speech made at a
fundraising luncheon for Nature Canada supporters, “It is not an exaggeration to say that
Nature Canada has had, over the past decade, a profound, positive influence on
MAC…You may be thinking that it’s a bit pat for an industry leader to say that the
environmental movement is good for industry. Is this just an attempt at greenwash? Do I
really mean it? Let me put it this way: To do less and prevaricate would do serious
damage to the credibility and reputation of the industry. That reputation is something we
put a very high value on. Companies that ignore the environmental movement do so at
their peril. I don’t think they will be in business very long…” NGO-industry partnerships
such as the one described can only be maintained if they are mutually beneficial and if
they exist without compromising the reputation and integrity of their members. This
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means that the industry involved must demonstrate that it is socially and environmentally
responsible and continue to improve its performance; otherwise the collaboration will
damage the reputation of the NGO. It is clear from this case study that NGO-industry
partnerships exist in the Canadian mining industry and that such partnerships are valued
by industry members, thus, the potential to form such partnerships functions as a driver of
CSR adoption.
Figure 4: Proposed Northern Bathurst Island Park Boundaries (Spence & Gratton 2002)
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6.13 Eco-Efficiency and Industrial Ecology in Mining
As mentioned in the literature review, the discussion of eco-efficiency in mining
is subsumed by the industrial ecology framework. In this section two examples of eco-
efficiency/industrial ecology initiatives in the Canadian mining industry are discussed in
order to demonstrate that behavior of this type is integral to the mining industry, that it is
undertaken profitably, and that it is beneficial environmentally. For these reasons eco-
efficiency and industrial ecology initiatives can be understood as CSR initiatives, given
that some of the benefits derived from this kind of activity are indirect; that is, these
activities are undertaken not only to cut energy and material costs but also to accrue
benefits such as improved reputation, investor confidence, and marketability.
Case Study 14: Inco Energy Efficiency Campaigns
The first example of eco-efficiency involves Inco59, a major nickel and copper
producer. Inco has been a Canadian energy efficiency champion for over 25 years.
Continuously cutting energy costs and improving output efficiency has been a major part
of Inco’s international competitiveness strategy, given that energy costs range from 15-
30% of production costs depending on the product and that the company is under
significant pressure to reduce greenhouse gas emissions (MAC 2003b; Vale-Inco 2003).
Continuously improving energy efficiency is part of Inco’s long term business strategy
and between 1990 and 2001 the company managed to improve their output of copper and
nickel per unit energy consumed by 16% (MAC 2003b). Since 2000 Inco has continued
to reduce energy use and increase efficiency, and they have been successful enough that
they have reduced their GHG emissions by 13% since 2000 while simultaneously saving
$60 million per year in energy costs (Natural Resources Canada 2008b). This clearly
59 Inco was purchased by a Brazilian consortium and is now Vale-Inco, however, its headquarters remain in Toronto and it retains significant operations throughout Canada.
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illustrates the potential for eco-efficiency to be undertaken profitably within the Canadian
mining industry while improving environmental performance.
Interestingly, Inco’s success with energy use reduction began in the 1980s with
their ‘Turn it Off Turn it Down’ campaign; an initiative that originally had little support
from management but allowed employees to present ideas related to energy conservation.
Because energy use reductions, at the time, were advocated not only to reduce costs but
also to improve local air quality and reduce acid rain, which affected the nearby
communities that workers lived in, employees showed a high degree of interest in the
project. The response of Inco’s employees was overwhelming and a variety of innovative
employee based approaches to energy use reduction have saved Inco millions, while
convincing the company’s management of the long term potential of eco-efficiency
programs. This program was re-invigorated in 2001 and re-branded under the new name
‘Powerplay--Take Charge of Energy’ and has since been a major success, again due to
employee interest, this time centered on concerns regarding climate change. The success
of this program is illustrated by the success of the program’s pilot project, which was
implemented at Copper Cliff, Ontario over a three month period. The initial goal of the
pilot project was to provide $2.7 million worth of annual energy savings during the pilot
period, but due to widespread employee input, participation, and innovative ideas this
goal was far surpassed, reaching $9.7 million worth of savings for this pilot plant
(Louiseize 2002). Since that time Inco has implemented the program company-wide and
Inco’s new parent company, Vale Resources (Brazilian), has taken Inco’s energy
efficiency expertise and implemented similar programs among its other holdings. In
addition, Inco has explored other means of increasing eco-efficiency through employee
based initiatives, such as recycling (Vale-Inco 2003). It is clear from this example that the
early success of Inco’s energy conservation programs, resulting from high employee
interest and participation, has motivated continued eco-efficiency efforts within Inco and
its parent company. Thus, this example clearly illustrates both how the potential
monetary benefits of eco-efficiency can drive improved environmental performance and
how employees can be a major factor in motivating and improving performance.
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Unfortunately, there has been relatively little application of industrial ecology
(IE) research tools within Canada. This is evidenced by the sparse availability of
industrial ecology studies in the mining sector, despite the fact that preliminary
investigations indicate that the Canadian mining industry is rich with examples of IE type
linkages. This is evidenced by the activities of two of Canada’s largest mining
companies; Falconbridge and Noranda.
Case Study 15: Industrial Ecology – Falconbridge-Noranda Recycling
Both Falconbridge and Noranda are major copper, nickel, zinc, and aluminum
producers managing a diverse set of Canadian and international sites. While the primary
business of these companies is mining they also control significant smelting and
processing facilities, and quite surprisingly, they have extensive recycling and
reprocessing capacity. This is evidenced by the fact that after Falconbridge’s acquisition
of Noranda in 2005, Falconbridge-Noranda became the world’s largest recycler of
electronic waste60 and one of the world’s largest recyclers of batteries and copper. This is
an interesting fact, especially given that Falconbridge and Noranda had independently
entered the recycling sector prior to their merger and both firms have been developing
their recycling capabilities since the early 1970s (Falconbridge-Noranda 2002;
Falconbridge 2006). This aspect of the companies’ activities has grown substantially and
prior to the merger announcement in 2001 recycling accounted for 29% of Noranda’s
annual revenues at a gross value of $328 million dollars (Falconbridge-Noranada 2002).
Currently Falconbridge-Noranda process over 100 million pounds of electronic waste
annually (Falconbridge 2006).
The growth of Falconbridge-Noranda’s recycling capacity has emerged as a result
of several processes that would be particularly interesting to industrial ecologists:
60 Falconbridge was recently acquired by the Swiss mining firm Xstrata and so both firms are now subsidiaries of that parent company.
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• Shortage of Smelting Inputs: Declining mine outputs in the 1970s and 1980s left
Falconbridge and Noranda smelters operating below optimum capacity. In order
to operate at full capacity these firms sought recyclable material. By 2001
recycled material accounted for 15% of Noranda’s smelter inputs (Falconbridge-
Noranda 2002).
• Smelting Facilities: It became clear early on that smelting facilities built
originally for primary processing could be retrofitted for recycling at relatively
low cost. Smelting facilities are now designed with eventual use for recycling in
mind (Hatch Engineering 2007; Falconbridge 2008).
• Loop Closing Networks: Falconbridge has made extensive efforts to form
recycling partnerships with companies who purchase their primary metals. These
partnerships involve the creation of waste disposal agreements whereby
Falconbridge takes a partner’s electronic and other recyclable wastes, reprocesses
them, and then sells the recycled metal products back to that partner so that it may
be added back into their production cycle (Falconbridge 2006).
Falconbridge-Noranda continues to expand their recycling operations and increase
the complexity of their IE activities. This is evidenced by the recent opening of the Horne
Smelter Recycling Plant which was developed by retrofitting the smelter that had
originally serviced the Horne mine located in Rouyn-Noranda, Québec. This particular
facility boasts a specially designed reactor that captures SO2 emissions as a byproduct of
the copper recycling process and converts them into valuable sulfuric acid, which is later
resold for a variety of industrial purposes (Hatch Engineering 2007). This facility is now
the largest and most technically advanced of its kind in North America and it is capable
of processes complex feeds of recyclable material, processing up to 800,000 tones of
copper and precious metal bearing material annually, yielding approximately 180,000
tones of anode copper and 600,000 tones of sulfuric acid (Falconbridge 2008).
The examples presented here have not, to this author’s knowledge, been
addressed by the IE literature. An industrial ecologist will recognize that the recycling,
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waste reduction, and pollution control linkages that these companies have formed
represent very large scale examples of IE activity within Canada and yet very little detail
is known regarding the process by which these linkages formed, how they have affected
other industries and businesses, and how such linkages can be formed in other industries.
These activities are heavily integrated into the main business strategy of these firms and
their experience with this type of activity, and its profitability, motivates CSR adoption
throughout the industry in the form of eco-efficiency and industrial ecology initiatives.
This is evidenced by Teck-Cominco’s recent foray into e-waste recycling in western
Canada, a program which the company began in 2003, emulating the initiatives of
Falconbridge-Noranda (MAC 2005).
It is clear from the Inco energy efficiency and Falconbridge-Noranda recycling
examples that eco-efficiency and industrial ecology type behavior is a major part of
mining company strategy and that these activities can be quite profitable. The experience
of these firms, and the increased competitiveness that has resulted, motivates corporate
responsibility management activity of this type within them and throughout the industry.
As discussed previously, while this author does not make an attempt to evaluate
the validity of the Porter Hypothesis as a driver of CSR in mining, it is interesting to note
that the industry’s experience with SO2 emissions provides some superficial evidence
supporting Porter’s argument61. It is interesting to note that in Noranda’s 1983 annual
report they mention that efforts to capture SO2 emissions would result in a net loss to the
company and that such activity would be undertaken only to reduce acid rain and meet
government regulations. At the time, the company was attempting to develop a profitable
proprietary SO2 capture process at the Horne smelter, an effort which eventually
succeeded (as described previously) (Brooks 1986). This could be taken as evidence
supporting the Porter Hypothesis, given that efforts to develop profitable SO2 capture
technology was stimulated by acid rain regulation.
61 Porter argued that environment regulation can encourage firm level and economy wide innovation that leads to better economic performance (Porter 1991; Porter & Van der Linde 1995; Porter & Kramer 2006).
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6.14 Corporate Employees in Mining
As discussed in Case Study 14 (in the previous section), Inco has pioneered eco-
efficiency within the Canadian nickel and copper business, finding ways to significantly
reduce energy use and hence greenhouse gas emissions over the last twenty five years.
Continuously improving energy efficiency is part of Inco’s long term business strategy
and between 1990 and 2001 the company managed to improve their output of copper and
nickel per unit energy consumed by 16% (MAC 2003b). Since 2000 Inco has continued
to reduce energy use and increase efficiency, and they have been successful enough that
they have reduced their GHG emissions by 13% since 2000 while simultaneously saving
$60 million per year in energy costs (Natural Resources Canada 2008b). All of this (as
discussed) has largely been the result of employee based corporate responsibility
initiatives, demonstrating the impact that corporate employees can have on CSR adoption
and implementation.
6.15 Strategic CSR in Mining (Drivers in Mining Conclusion)
As mentioned earlier, some studies suggest that environmental management
accounts for an average of 7% of mining operating costs, while the management of social
issues (such as compensation of aboriginal peoples) is also likely to have a major
financial impact on mining companies (Deloitte 2007). Given the substantial investment
in environmental/social management by mining companies, it is not surprising that their
industry is among the first in Canada to adopt widespread strategic CSR approaches. As
described in the case studies presented throughout this thesis, the mining industry’s
activities go far beyond philanthropy and the less integrated corporate responsibility
strategies that are typical of many industries. The Canadian mining industry’s active
management of environmental issues that are pertinent to their core operations (for
example biodiversity, tailings management, GHG management, etc.) and their
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management of social issues that are directly related to mining activities (aboriginal land
rights issues) have been discussed by examining several case studies. It is evident from
the examples presented that a variety of company specific (ex. the Ekati mine) and
industry wide (ex. GHG management) strategic CSR initiatives are in place. With respect
to the environment, a serious change in attitude has occurred throughout the 1990s, as
Hefferman (1997) describes, “Whether companies are merely responding to the new
regulatory climate or whether the logic of preserving a healthy environment has really
sunk in, attitudes have changed. Instead of wasting time, energy, and money fighting
constructive regulation, the industry is making environmental protection a priority.” This
is confirmed by Yakovleva (2005) who describes the international mining industry’s
transition from a reactive approach to environmental and social issues (1970s and 1980s)
to a proactive approach (1980s and 1990s), to what can be described as a ‘strategic’
approach (mid 1990s to present).
It has been shown that the mining industry’s management of corporate
responsibility issues is complex, stretching beyond regulatory compliance and the
management of a few high profile problems to include a variety of environment and
social issues. It has been argued that this was undertaken in an effort to actively manage
how CSR concerns impact mining companies so that the industry can have greater
control over such key issues as their reputation, license to operate, the regulatory climate
in which they function, etc. It is clear from the discussion thus far that the Canadian
mining industry is actively engaged in strategic CSR management; linking their
environmental and social initiatives to the core of their business operations and
profitability.
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Part II: Linking CSR and Improved Environmental and Social Performance:
In the literature review sections the concept of corporate responsibility was
discussed and two fundamental issues were identified in the field’s literature:
1 – Can active CSR management improve corporate profitability?
2 – Does industry led CSR result in real improvements in environmental and
social performance?
The first question has been addressed in the preceding discussion by identifying
the drivers which link environmental/social performance and profitability; and it has been
argued that these drivers motivate CSR adoption in the corporate world. Examples from
the Canadian mining industry have been discussed in order to illustrate the existence of
drivers that link corporate profitability to environmental/social performance in a high
impact sector. This brings us to the second question: Given that the corporate world is
seriously interested in responsible business (for the reasons discussed) can this approach
result in significant improvements in environmental and social performance? In the
following sections this question is addressed by examining the industry level projects
undertaken by the Canadian mining industry. These initiatives are explained and their
impact is investigated either by examining published performance data, or site/company
specific case studies. As in other sections, the main focus of this discussion is
environmental performance and aboriginal-industry relations, as an example of social
performance.
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7.0 The Whitehorse Mining Initiative: Setting the Stage
In this thesis the Whitehorse Mining Initiative (WMI) was selected as the major
CSR breaking point for the mining industry, an agreement which was originally pursued
in 1992 and signed in 1994 (Peeling 2006). Recall that in earlier sections ‘past’
environmental and social performance was defined as pre-WMI performance. In this
section the WMI is discussed and presented as the foundation of the industry’s modern
corporate responsibility initiatives.
The Mining Association of Canada envisioned the WMI process after a period of
steep decline from the early 1980s to the early 1990s (WMI 1994a; McAllister &
Alexander 1997). While a general recession was partially responsible for the situation, it
was also evident that CSR factors not only played a role in this respect, but were also
acting as a barrier to the industry’s economic recovery, as discussed in the following
quote (McAllister & Alexander 1997). Peeling (1998, 1-2) summarizes the context which
led to the development of the WMI in the following terms:
“First, there was rapid increase in the creation of parks and other protected areas,
substantially reducing the land available for exploitation. Second, in allocating
these lands, governments made arbitrary decisions, the most notorious example
being the Windy Craggy deposit. Third, after more than 20 years of negotiation,
Aboriginal claims are still not settled, leading to uncertainty in mineral tenure.
Fourth, there has been a rapid increase in environmental regulation, increasing
companies' costs and leading to project delays. In summary, by 1992 the
Canadian business climate was marked by an atmosphere of public distrust, policy
uncertainty, over regulation, and unpredictability.”
In other words, the industry was facing significant domestic difficulties at a time
when it was attempting to stage a financial recovery and to retain its international
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importance62. The circumstances surrounding the Windy Craggy deposit illustrate the
difficulties that the mining industry was facing and the need for the industry to reform its
environmental/social performance and its relationship to key stakeholders.
Case Study 16: The Windy Craggy Deposit
In the late 1980s and early 1990s Geddes Resources proposed a major mining
development in northern British Columbia (190 km. southwest of Whitehorse). The
company planned to develop the Windy Craggy sulphide deposit, which had recently
been shown to contain major mineral resources, the primary product of which would be
copper and gold. After investigating the area it became clear that the deposit was far more
extensive than previously thought and it was estimated to have a commercial value of
between $8 and 15 billion at the time (Webster 1998). The discovery of a copper deposit
of this size was seen as a major boon for the mining industry, given the precarious
financial state of the industry at the time and the need for new copper mines to feed
domestic smelters63. There was also significant scientific reason to believe that other
large deposits existed in the area, and if this was the case, the industry hoped to develop a
major new mining region (Webster 1998).
Unfortunately for the industry, the Windy Craggy deposit lay within an area that
was considered by environmental groups to be one of the most important undisturbed
habitats in the world, and a highly public conflict over the resource development ensued.
On one side, the industry argued that the mineral potential in the region was massive and
that its exploitation could contribute significantly to economic development with minimal
environmental impacts (Webster 1998). Environmentalists, even moderate ones,
mobilized a highly public resistance to the development, stating that the area was
virtually untouched, that it was surrounded by major and important national parks both in
62 Since World War II the United States, Canada, Australia, and Russia have dominated world mining. Beginning in the 1990s, increased competition from developing nations, particularly Brazil, China, India, South Africa, and Congo, became more significant (McAllister & Alexander 1997). 63 At the time several major domestic copper mines were closing and new domestic copper supplies were needed to feed the smelting industry (McAllister & Alexander 1997).
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Canada and the United States, and that it had one of the world’s highest concentrations of
top predators including grizzly bears and eagles. Geddes Resources continued their
development plans and submitted their environmental impact assessments, which were
rejected on the grounds that the company could not adequately guarantee its ability to
control the acid rock drainage problem. The company countered by resubmitting the EIA
applications with stringent environmental management controls. The original EIA
process, which was supposed to last three months, ended up taking several years as a
result of conflicting demands placed upon the company by three separate review
processes originating from British Columbia, Canadian and American (federal) reviews
(the latter case being required in light of the proximity of the project to the US (Alaska)
border).
When it appeared that the mine’s environmental management provisions would
finally be accepted and that it would be approved, the federal and provincial
governments, in conjunction with the US federal government, announced that the area
would be subsumed as part of a five million hectare UNESCO world heritage site, the
largest in North America. The decision to designate the area as a world heritage site came
as a shock to Geddes Resources and the entire mining industry, given that virtually no
public consultation or announcement was made during the world heritage site’s
development. As a result, the industry accused the government of using the EIA process
to delay the development (for years) at the cost of Geddes Resources who had spent more
than $50 million on the exploration and EIA process, while government planners
conducted backroom negotiations to develop a conservation area without public or
industry input (McAllister & Alexander 1997; Webster 1998). As part of the heritage site
creation the mineral claims of twenty mining companies were nullified by the provincial
government without compensation, and only Royal Oak Mines (who had a controlling
share in Geddes Resources) were offered compensation following the decision. Recall
that Royal Oak Mines went bankrupt in 1999 (as discussed in Case Study 8), partially as
a result of the Windy Craggy decision.
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As Webster (1998) describes “What happened to Windy Craggy is indicative of a
trend against the mining and investment industries in North America – a trend that is
producing some unpleasant consequences.” The industry echoed this sentiment and
mining officials have maintained that the decision was arbitrary, undemocratic, unlawful,
and highly biased (Peeling 1998). Whether or not designating the area as a world heritage
site was the right decision, the Windy Craggy incident illustrated very vividly to the
mining industry that the environmental impact assessment process was highly inefficient
and prone to bias, that government and public sentiment were hostile to the industry, that
the government could not be trusted to guarantee their mineral claims, and that investors
would see Canadian mineral development as uncertain and risky (McAllister &
Alexander 1997; Peeling 1998; Webster 1998). The size of the Windy Craggy deposit,
and the manner by which future development was denied in the entire region, illustrated
very clearly to the mining industry where the public, the policy community, and the
government stood with respect to mining interests. McAllister & Alexander (1997) argue
that the incident provided the direct stimulus that motivated the WMI and afterwards the
industry knew that change was needed if they were to remain prosperous. It is no
coincidence that the WMI was initiated shortly after the Windy Craggy decision.
7.1 The Whitehorse Mining Initiative: Envisioning the Future
As mentioned, the MAC led the WMI process, which began in 1992 with the
presentation of the Whitehorse charter, a document which attempted to lay out a plan for
addressing the structural problems facing the industry. The Whitehorse charter, which
was presented at the 1992 annual mining minister’s conference, stipulated a plan for
creating a national mining strategy that incorporated the interests of a diverse set of
stakeholders. The federal government responded to the WMI idea positively and pledged
their support for the project (Christensen 1993). Following a generally positive reception
from industry representatives and the government, the MAC invited participants from a
diverse set of stakeholders groups to the first WMI meeting in Toronto in 1993. In total,
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the WMI process included 150 stakeholder representatives and the entire process cost
approximately $1.3 million; paid for by the federal government and the MAC (Peeling
1998).
From the outset the mining industry wanted to incorporate all of the major
stakeholders who interact with the Canadian mining industry in a consensus based
process that was aimed at creating a national strategy for integrated resource planning
and sustainable mining, though the final outcome of the process was not foreseen at the
outset (Peeling 1998). According to Tony Andrews, president of the Prospectors and
Developers Association of Canada at the time, “The ultimate goal (of the WMI) is to
come out with a mining industry that has a direction to be both environmentally and
socially responsible as well as profitable” (in Christensen 1993). Fundamentally, the
industry wanted to repair its relationship with the government, society, and community
stakeholders in order to address the regulatory and institutional problems facing the
industry, to repair the investment climate, and to improve the industry’s public image
(Peeling 1998). To this end, representatives from moderate environmental groups,
aboriginal organizations, labor organizations, mining community organizations,
government, and the industry itself were invited to attend the WMI meeting and
participate in the creation of the accord. These six groups represented the ‘key
stakeholders’ invited to participate in the WMI process (Peeling 1998). The inclusion of
this diverse set of stakeholders, and the industry’s willingness to consider new ways of
approaching mining development, was seen as a radical step from a traditionally
conservative industry (McAllister & Alexander 1997).
The first step in the process was to appoint a leadership council which consisted
of senior members from each group. The leadership council would ultimately vote on a
final accord. Prior to the creation of the accord the WMI assembly divided into four
working groups, each of which would discuss issues pertinent to their topic and create a
final report for the leadership council that outlined the issues discussed and
recommendations for addressing them. The working groups dealt with taxation and
finance, labor and community/workplace conditions, environmental issues, and land
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access; it is the products of the final two groups that are of primary focus for this paper.
Each had 20-30 members from relevant stakeholder groups (Peeling 1998). Following the
first general meeting they met several times in 1993, during which stakeholders were
asked to present the concerns that they had with respect to how mining was being done in
Canada and offer suggestions for fixing the situation. The MAC representatives reiterated
the economic importance of mining and argued for a better taxation and regulatory
regime, for the resolution of land access issues, for clean up of unclear and overlapping
public policy, reforms to the environmental impact assessment process, certainty in
mining tenure, and a reduction in mining related liability (McAllister & Alexander 1997).
Aboriginal people wanted control over resources within their lands, input into decision
making, notification prior to exploration, incorporation of aboriginal input into the
planning and management of mines, jobs and training as part of IBAs, and better dialogue
with industry. Environmental organizations wanted the mining industry to continue to
improve its environmental performance, to incorporate mine closure as part of the
planning process, to have the industry’s support in efforts to complete Canada’s national
park system, and to address environmental problems associated with mining (such as acid
rock drainage) as a fundamental part of planning and management (WMI 1994a; 1994b;
1994c). During the process the land access discussions experienced the greatest
difficulty; this is not surprising given that environmentalists want as much land as
possible to be protected while the industry wanted as much as possible to be available for
mining. Nevertheless, all four working groups were able to communicate their views and
compromise, and final consensus was reached on most issues. Once the communications
and negotiations process finished, the participants generated final reports that represent
balanced appraisals of the negotiation process, and the mining industry as a whole, with
conflicting viewpoints presented where consensus could not be reached (WMI 1994a;
1994b; 1994c).
Once the working groups had submitted their final reports, the leadership council
reviewed the results and drafted the consensus based WMI accord, which outlined the
principles and goals which the mining industry would attempt to abide by in order to
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ensure the goodwill and cooperation of the stakeholders in future mining endeavors. The
final accord also consisted of a vision statement which began with the declaration “Our
vision is of a socially, economically and environmentally sustainable, and prosperous
mining industry, underpinned by political and community consensus. Mining is an
important contributor to Canada's well being, both nationally and regionally. The
Whitehorse Mining Initiative is based on a shared desire to ensure that mining continues
to make an important contribution, within the context of sustainable development” (WMI
1994a). The full vision statement can be seen in Appendix 1. Once the vision statement,
goals, and principles were agreed upon, a large WMI general meeting was held in 1994
and attended by representatives from the provincial and federal governments; at this
meeting the final accord was signed. The final WMI principles and goals of pertinence to
this discussion are as follows64:
Principle (Policy Framework)
• A policy framework which recognizes the need to attract capital in the face of
international competition, while meeting the environmental and social objectives
of Canadians, will optimize industry's economic contribution.
Goal
• To work for a mix of policies at the federal, provincial and territorial levels which
both recognize Canada's status as an open economy and satisfy the objectives of
Canadians for progress in the economic, social and environmental spheres. To
establish a regulatory regime that is both effective and efficient in maintaining
prescribed standards of activities and operations, and in reducing the cost of
complying with regulatory requirements.
64 The principles and goals presented here were taken directly from WMI (1994a). Some of the principles and goals in that document have been omitted.
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Principle (Investment)
• The mineral industry requires readily accessible investment capital on a globally
competitive basis.
Goal
• To ensure that the Canadian mineral industry has ready access to capital for
exploration and development in Canada. To make securities regulations and
policies more responsive to the needs of the mining sector, especially the junior
sector, while protecting interests of investors. To identify and address any policies
and regulations that may impede capital formation and investment. To overcome
existing obstacles in accessing debt capital by addressing the current regulatory
and policy uncertainty with respect to the environmental liability of lenders. To
enhance access to debt capital by decreasing the current policy and regulatory
uncertainty with respect to mineral tenure.
Principle (Regulatory Duplication)
• Elimination of unnecessary regulatory duplication and overlap, with appropriate
checks and balances, will aid the effective protection of the environment and
achieve greater efficiency in regulating the mining industry.
Goal
• To continue to establish cooperation agreements among jurisdictions for the
development, administration, and enforcement of environmental standards to
improve the efficiency and effectiveness of the regulatory system and to reduce
unnecessary industry regulatory compliance costs. To streamline the permitting
and compliance processes to minimize the time and costs to meet the
requirements of the various regulatory regimes. To develop processes such that
each new mining project is subject to a single timely environmental assessment by
an appropriate single lead agency, which results in only one set of
recommendations that meet the requirements of all jurisdictions.
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Principle (Environmental Responsibility)
• Environmentally responsible mining exploration, development, operations and
public policies are predicated on maintaining a healthy environment and, on
closure, returning mine sites and affected areas to viable, and, wherever,
practicable, self-sustaining, ecosystems that are compatible with a healthy
environment and with human activities.
Goal
• To ensure minimal environmental impact during mining exploration,
development, operations, and closure by voluntary and regulatory means,
including the use of appropriate environmental effects monitoring. To ensure that
comprehensive reclamation plans that return all mine sites to viable, and,
wherever practicable, self-sustaining, ecosystems are developed, and are
adequately financed, implemented, and monitored in all jurisdictions. To ensure
that the responsible governments maintain a balanced regulatory framework for
mine reclamation that is stable over time, harmonized across jurisdictions, and
based on standards that meet the needs of a sustainable society. And that changes
to the framework be made through a measured, consultative, and predictable
process with appropriate phase-in periods. To develop techniques through
interdisciplinary research that minimize or prevent adverse environmental
impacts, and that return disturbed sites to viable, and, wherever practicable, self
sustaining, ecosystems. To provide a regime for mine reclamation financial
assurances at current and future mines which ensures adequate funds for full
reclamation and a means of financial assurance that is reasonable, flexible and
responsible. To establish, in each jurisdiction, an acceptable means of identifying
responsible parties to undertake reclamation of old mine sites that pose a health,
safety, or environmental problem. To establish, in each jurisdiction, funding
means for reclaiming old mine sites where responsibility cannot be assigned.
Reclamation should begin with those sites posing the greatest risk. To encourage
the exploration of old mine sites which, if successful, may lead to potential
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environmental clean up opportunities through redevelopment. To ensure the
development of site-specific reclamation standards, which, wherever practicable,
work toward the establishment of the original ecosystem, but which, when
justified by specific circumstances, take into account the possible need for on-
going management and the possibility of other desirable uses.
Principle (Environmental Assessment)
• Environmental assessment is an essential tool for identifying potential
environmental impacts of proposed projects, determining their acceptability, and
evaluating potential mitigation and remediation measures, thus enabling economic
activity to proceed while safeguarding the health of the environment.
Goal
• To ensure that project-specific environmental assessments are effective, efficient,
and well defined, and are conducted in the broader context of:
o an integrated land use planning process
o government policies and programs
To ensure that the terms of reference and scope of environmental assessments are
ecologically relevant and are decided upon early in the process. To have
environmental assessment processes which are formally structured, credible,
balanced, and fair. To ensure that government policies and programs adequately
incorporate environmental considerations. To ensure that monitoring programs
are efficient and effective, and provide adequate feedback to stakeholders.
Principle (Science in Environmental Decision Making)
• For sound environmental decisions to be made during the life cycle of a mine:
o all stakeholders need access to high quality, relevant, and unbiased
information grounded in sound science; but,
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o complete scientific certainty is not a prerequisite to appropriate action to
protect the environment where risk of serious adverse impacts to the
ecosystem is evident.
Goal
• To broaden and improve the information base on the environmental effects of
mining, and to ensure that all information is accurate, unbiased, and developed in
a manner consistent with professional standards and scientific methods. To
promote meaningful participation by Aboriginal peoples and the use of traditional
and local knowledge. To ensure that decisions which could lead to serious adverse
impacts on ecosystems are made cautiously, are made on the best available
information, and address the limitations of science. To promote research on the
environmental impact of mining, and on minimizing those impacts.
Principle (Land Use and Land Access)
• Access to land for exploration and development is a fundamental requirement for
the mining industry.
Goal
• To make land-use and land-access policy and decision-making processes
accessible to all stakeholders whose interests are affected. To ensure that
decision-making processes consider the requirements of the mining industry and
other stakeholders for land access and use. To develop collaborative mechanisms,
outside permitting processes, through which stakeholders can address and resolve
contentious issues on an on-going basis, both in the context of specific projects
and for broader policy matters. To ensure that land-use and land-access decisions
are timely and result in as much certainty and clarity as possible for all
stakeholders.
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Principle (Protected Areas)
• Protected area networks are essential contributors to environmental health,
biological diversity, and ecological processes, as well as being a fundamental part
of the sustainable balance of society, economy, and environment.
Goal
• To create and set aside from industrial development by the year 2000 those
protected areas required to achieve representation of Canada's land based natural
regions. To use, after establishing where they do not already exist, clear
scientifically based criteria for determining both the number of regions and the
amount of a region that needs to be protected in order to achieve
representativeness. To ensure that the selection of protected areas is undertaken
consistently across all jurisdictions, including an identification of candidate
protected areas by government based upon scientific criteria followed by
consultation with the mining industry and all other stakeholders and final
selection taking into account appropriate, economic, environmental and social
information. To have government policies clearly state that, subject to complying
with all applicable legislation and regulatory requirements, mining is an
acceptable and permitted activity in non-protected areas. To provide that mining
may be an acceptable and permitted activity in conservation-related areas not
required to achieve representativeness so long as such development is compatible
with the objective of such an area and is congruent/consistent with relevant
legislation and management policies. To ensure that Aboriginal peoples are
involved in the selection and management of protected areas, benefit from
economic opportunities related to development and operation of protected areas
and have access to protected areas consistent with management plans for
traditional economies and ceremonial, cultural, subsistence, and social practices.
To coordinate the selection of protected areas across jurisdictions so as to achieve
representation without unnecessary duplication.
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Principle (Certainty in Mining Tenure)
• Certainty with respect to mineral tenure and in acquiring the right to mine as
described in legislation is critical to mineral investment.
Goal
• To ensure certainty with respect to mineral tenure and the process for acquiring
the right to mine as described in legislation. To ensure that all governments have
and communicate clear policies on mineral tenure, revocation and compensation.
To ensure that, for companies in compliance with regulatory requirements,
revocation of mineral tenure is used only in extraordinary circumstances and that
appropriate compensation occurs in a fair and timely manner.
Principle (Community Benefits)
• The economic benefits for workers and communities from mining exploration,
development, and operations are maximized when these activities are planned
carefully, taking into account both direct and indirect impacts.
Goal
• To produce the maximum practicable socio-economic benefits of mining for
communities. To minimize the consequences of mine closure on workers and
communities by fully integrating plans for the life cycle of mining operations into
the economic development plans of mining dependent communities. To reduce
any negative social, economic, and labor relations consequences of long distance
commuting to mining operations, and to address fly over effects of long distance
commuting.
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Principle (Aboriginal Lands and Resources)
• Aboriginal peoples have rights protected under the Constitution Act, 1982, which
include, among others, rights to lands and resources.
Goal
• With a view to providing a more certain climate for mineral exploration and
development, to ensure that:
o Aboriginal land claims are settled expeditiously, efficiently, and fairly;
o The structure for negotiations is well-defined and clearly understood;
o The negotiation process is supported by adequate resources;
o Third-party rights relating to land and resources are recognized and
referenced in land-claim agreements.
To develop and maintain enhanced communications between the mining industry
and other stakeholders, and Aboriginal groups concerning the status of
negotiations, and, in the post-settlement period, an explanation of the rights, and
obligations established under any land claim and related agreements. To have
timely, consistent, dependable, and simple rules and processes for resource
development in claims-settlement areas, and in post-settlement mechanisms,
where such development is desired by an Aboriginal community. To establish in
claim settlements simple and effective regulatory regimes governing land use and
environmental management. To develop interim business agreements and/or
participation agreements between the mining industry and affected Aboriginal
communities.
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Principle (Aboriginal Involvement in the Mining Industry)
• Aboriginal peoples are entitled to opportunities to participate fully in mineral
development at all stages of mining and associated industries and at all
employment levels.
Goal
• To remove the barriers - real and artificial - to education, workplace, and business
opportunities that often prevent Aboriginal peoples from maximizing benefits
from the mining industry. To allow increased participation of Aboriginal peoples
in all parts of the mining industry, including direct employment and related
economic or business opportunities. To allow the mining industry, Aboriginal
peoples, and other interested stakeholders to develop formalized partner
relationships in which there is a better awareness of respective issues, needs, and
concerns, and a higher level of mutual understanding. To support policies,
legislation, and agreements that encourage growth in business relationships
between the mining industry and Aboriginal communities. To ensure regular and
open consultations between exploration companies and mine developers, and
Aboriginal communities, and to ensure that the Aboriginal communities are
involved in decision making processes that concern exploration, infrastructure
development, mine development, and reclamation. To remove any impediments in
the Indian Act and the Indian Mining Regulations, in provincial and territorial
legislation, in federal-provincial agreements, or under development policies, to
full participation of Aboriginal peoples in economic opportunities in mining and
related businesses.
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Principle (Open decision making processes)
• Decisions are improved when reached through open, transparent, timely, and well
defined processes with meaningful and responsible participation by stakeholders.
Goal
• To expand the opportunity for meaningful and responsible participation by
governments, the mining industry, employees and their representatives,
Aboriginal peoples, the environmental community, and local communities in
decision making processes that affect the public interest. To ensure that
stakeholders have access to necessary information and, within clearly established
criteria, resources that enable them to participate. To enhance public trust in
decision making processes by ensuring that stakeholder viewpoints are fairly
heard and considered.
7.2 The Whitehorse Mining Initiative: Immediate Impact
The WMI served as a major learning experience for the mining industry and other
stakeholder groups. When they initiated the process, the MAC had no idea how far the
WMI would go and whether or not consensus could be reached on a variety of
controversial issues. Nevertheless, the WMI went a long way towards reconciliation with
old adversaries, it resulted in significant knowledge sharing, and it helped a diverse group
of policy communities to develop a trusting and working relationship with one another.
The mining industry believes that this result, in and of itself, made the process
worthwhile (McAllister & Alexander 1997; Peeling 2006). As Peeling (1998) describes,
“The WMI has led to continuing contacts among those who participated in the
consultations and a much higher degree of dialogue, understanding, and communication
among them. This illustrates that in the long run, the process of trying to reach agreement
is as important as any tangible product. Through dialogue, the WMI has allowed us to
gain knowledgeable partners in Canadian society, if not outright ‘allies’. The MAC now
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has a comfortable working relationship with labor and environmental groups. While we
disagree in some matters, the relationship is free of mutual suspicion.”
In the years since the WMI it has become clear that the initiative has had an
immediate and dramatic impact on the structural problems facing the industry and
provincial/federal governments have rapidly improved land access, the EIA process, the
regulatory environment, the taxation structure, and the mining investment climate in
Canada. As a result, investment in the industry has rebounded, for several years more
mines have been opening in Canada than closing, and the industry is currently quite
prosperous. While the industry’s good fortune is also partly the result of high resource
prices, there is no doubt that the changes made by governments since the WMI have had
a substantial impact. Many of these changes were initiated almost immediately after the
signing of the accord (McAllister & Alexander 1997; Peeling 1998; Peeling 2006). Thus,
from the industry’s perspective, the WMI has been a huge success.
While it is evident that the WMI has been highly successful for industry,
determining whether or not the WMI, and the initiatives that followed it, have been
successful from the perspective of other stakeholders requires further examination. In the
following section the industry’s efforts to reach their WMI goals are discussed by
examining the industry’s post-WMI performance initiatives.
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8.0 CSR Performance: Post WMI Aboriginal – Industry Relations
It has been argued that the mining industry has a very poor history with regards to
its treatment of aboriginal peoples affected by mining. In the past, widespread social
disruption, environmental damage, poverty, and other social problems have resulted from
irresponsible and inconsiderate mineral development within aboriginal lands. The
industry’s relationship with aboriginal peoples has been their most pressing social
concern in the last few decades and considerable attention has been paid to this issue.
Mining issues have also been very important to aboriginal communities, given that 1200
aboriginal communities are located within 200 km of mineral and metals activities, and
36% of aboriginal communities are located less than 50 km from one of the primary
mines developed in Canada (AFN 2001). Since the 1970s, and especially since the late
1980s, there has been a major improvement in the legal framework surrounding
aboriginal land claims and many aboriginal people now live within settled comprehensive
land claim agreements (Labrador and BC are the largest exceptions). The recognition of
aboriginal land rights has meant that aboriginal people now have considerable power over
resource development, and Impact Benefit Agreements (IBAs) are now signed for
virtually all new mine developments that occur within aboriginal lands (Keeping 1998).
Typically these agreements include cash payments, mechanisms for including aboriginal
input into planning, and some form of employment guarantee (Hipwell et al. 2002). The
fact that aboriginal land rights are now legally recognized (in most places) and that IBA
negotiations have become standard in mining developments has meant that the
relationship between aboriginal peoples and mining companies has improved markedly.
However, as evidenced by the ‘principles’ discussed in the previous section,
significant problems still existed at the time of the WMI. This results from the fact that,
while land claim settlements mean that industry must sign impact benefit agreements,
many aspects of the industry’s interaction with aboriginal people are not legislated. The
mining industry is not, for example, legally obligated to consult aboriginal people when
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they are conducting exploration activities on aboriginal lands and they are not required by
law to employ aboriginal people, provide training, or contract aboriginal businesses
(Hipwell et al. 2002). Recall that in the Voisey’s Bay case (Case Study 6), one of the
main causes of conflict between Inco and the Innu was the company’s insistence that it
had the right to conduct exploration activities without aboriginal consent or
compensation. Voisey’s Bay is one recent example where industry could have pursued
better consultation with aboriginal peoples during the exploration phase.
In the WMI the mining industry agreed to several goals regarding their interaction
with aboriginal peoples. In brief, these include: (WMI 1994a)
• To have timely, consistent, dependable, and simple rules and processes for
resource development
• To establish in claim settlements simple and effective regulatory regimes
governing land use and environmental management.
• To remove the barriers to education, workplace, and business opportunities
• To increase participation of Aboriginal peoples in all parts of the mining industry
• To ensure open consultations between exploration companies, mine developers,
and Aboriginal communities
• To ensure that the Aboriginal communities are involved in decision making
processes
The mining industry’s success at achieving these goals is discussed in the
following sections.
8.1 Post WMI Aboriginal – Mining Industry Relations: Significant Progress
Improving CSR performance is an ongoing process for any company or
organization and no definitive ‘endpoint’ is likely to be reached in most cases. In the case
of the Canadian mining industry, it is fair to say that there has been significant
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improvements in their performance with regards to aboriginal peoples since the WMI,
however, many issues still exist (Sloan & Hill 1995; Cleghorn 1999 Hipwell et al. 2002).
This is illustrated by the following discussion and the experience surrounding the
development of the Ekati mine, the Raglan project, and the Musselwhite mine (discussed
shortly).
First, as mentioned, nearly all new mining developments in aboriginal lands occur
after some form of IBA has been signed; this in and of itself represents a huge
improvement in industry-aboriginal relations. However, not all IBAs are equal and they
can differ significantly with each mining development (MAC 1998B). In some areas
there has been evident improvement in industry-aboriginal relations, for example, wage
disparities between aboriginal and non-aboriginal workers have been much improved.
The mining industry is not only the largest employer of aboriginal people in Canada, it is
also the highest paying with the average employed aboriginal person receiving $1,013.13
per week employed- this is comparable to non-aboriginal workers (MAC 1998Bb). In
addition, many companies are now actively engaged in aboriginal training, proactive
aboriginal hiring, and community development programs (MAC 1998B; Yakovleva
2005). Lastly, all major mining companies now have corporate aboriginal relations
policies, and these “Policies relating to Aboriginal peoples typically describe the
company's commitment to consult and involve local Aboriginal peoples in all phases of
mineral development. They recognize the value of traditional knowledge and respect for
traditional lifestyles; they acknowledge the need for cross-cultural training; and identify
opportunities for training, employment and business arrangements” (MAC 1998B). The
development of corporate aboriginal relations policies is an important one, given that in
the past most companies did not pay any special attention to the needs of aboriginal
peoples (Hipwell et al. 2002). While these measures indicate that the mining industry
continues to reiterate its commitment to improving the social aspects of its performance,
the following case studies provide a more comprehensive view of the industry’s post
WMI performance and the industry’s ‘new’ approach to mining. In addition to the Raglan
and Musselwhite cases presented in the following sections, see the earlier discussion of
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the significant provisions for aboriginal consultation and compensation that were
undertaken during the development of the Ekati Diamond mine (Case Study 11).
Case Study 17: The Raglan Mine
Like the Ekati diamond mine (Case Study 11), the Raglan mine is a success story
that provides a model for aboriginal-industry relations in future mining developments.
The Raglan project was initiated by Falconbridge in 1995, who wished to develop a
nickel, copper, and cobalt mine in the Ungava Peninsula region of extreme northern
Quebec, 60 km. west of the Inuit community of Kangiqsujuaq. The mine lay within an
area that the Inuit were claiming as part of ongoing land settlement negotiations, which
had not been settled at the time. Prior to development Falconbridge voluntarily signed a
major project agreement with the Inuit owned Makivik Corporation65 that addressed the
main Inuit concerns (Keeping 1998; MAC 1998B; Hipwell et al. 2002). These included a
commitment to: (Keeping 1998; MAC 1998B)
• Maximize training and employment opportunities: academic upgrading,
languages, safety, common core mining skills, operations and maintenance, etc.
• Establish Inuit entrepreneurial business relationships: agreements for Inuit open
pit mining; trucking of concentrates and hauling of fuel and supplies
• Monitoring and addressing local environmental issues: extensive environmental
baseline and impact studies; design criteria that will include minimum liquid
effluent, acid mine rock containment and progressive reclamation.
• Commit to finding employment opportunities for aboriginal peoples in other
Falconbridge projects after the termination of the Raglan project.
• Require non-aboriginal local suppliers to hire aboriginal peoples.
65 Makivik Corporation is responsible for the political, social, and economic development of the Nunavik territory of the Inuit (Cleghorn 1999).
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• Make annual payments to the Inuit community for 18 years and to provide 4.5%
profit sharing
• Establish a committee and an arbitration process that will facilitate
communication between the company and the community and allow for dispute
resolution.
Each of these provisions was outlined more specifically in the Raglan agreement.
The final provision resulted in the creation of the Raglan committee, which consists of
three members from the company and three Inuit members responsible for reporting back
to their communities. Overall the Raglan committee has been successful at implementing
the IBA and monitoring mine operation and so far there has been no need for court action
by either Falconbridge or the Inuit. As Cleghorn (1999) describes “There is a genuine
willingness to work through issues and come to solutions that will work. Formal
education is becoming much more of a priority for Inuit people which will benefit Inuit
institutions as much as it will benefit the mine. People seem generally happy to have jobs
at the site and are proud of working there.” In addition, Inuit have been involved
extensively in environmental monitoring programs. Falconbridge has also worked hard to
inform local people about the project, employing a variety of venues such as radio talk
shows, site visits with community leaders, community meetings, and local talks. These
efforts and early consultation have helped develop a trusting relationship between
Falconbridge and the Inuit (Cleghorn 1999; Hipwell et al. 2002)
However, the Raglan case has not been without problems. While employment
numbers have been high- with 20% of the mine’s workforce Inuit, ultimately the
committee and IBA dictates a 30% Inuit employment level and efforts have been made to
rectify this situation. Also, Inuit employment has caused some problems for family life in
the community, given that the mine operates on a 4 weeks on, 2 weeks off schedule.
During the four weeks at work a parent with children must leave their family for the
entire period, leaving the other parent alone. Also, substance abuse is common during the
two weeks of time off. These issues have been addressed by modifying the working
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schedule for Inuit employees (MAC 2004). Accusations of discrimination at the work site
have been made and the Inuit have been concerned that they are not being promoted as
quickly as non-Inuit workers. Management is addressing this issue through inter-cultural
courses for all employees, better monitoring of Inuit promotions, and language courses
(given that language skills are acting as a barrier for many Inuit). However, the company
acknowledges that substance abuse, limited education, and high rates of turnover of Inuit
employees make it difficult for Inuit to be promoted at the same rate as non-Inuit
employees (Keeping 1998; Cleghorn 1999; Hipwell et al. 2002; MAC 2004).
The Raglan case illustrates very clearly the successes and problems associated
with the Canadian mining industry’s aboriginal CSR efforts. On the positive side,
significant efforts have been made to incorporate aboriginal people into the mine’s
development, operation, and monitoring programs. In addition, the company has made
significant efforts to employ and train aboriginal workers, to promote economic
development, and to provide community compensation. However, other social problems
remain, and issues of substance abuse, aboriginal employee advancement, discrimination,
and the impacts of economic development on the community remain persistent concerns.
Case Study 18: The Musselwhite Mine
The Musselwhite mine is a gold mine located in northwestern Ontario within
traditional aboriginal lands. In 1996 construction of the mine began as a joint venture
between Placer Dome and Kinross Gold. However, negotiations with aboriginal peoples
were undertaken as early as 1989, long before the mine was developed, and an agreement
was signed in 1992. This was one of the first comprehensive IBAs signed between a
mining company and aboriginal peoples, and it was intended to address long standing
conflicts between the aboriginal people and the mining companies in the region (Hipwell
et al. 2002). The Musselwhite mine had a similar IBA structure as the Raglan mine. As
NRC (2006) describes:
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“The Musselwhite Agreement addressed these important topics: Preservation of
the environment and heritage of the mine area; Local employment and business
development opportunities; and ensuring that communities received economic and
other benefits from the mine. The agreement contained sections relating to:
financing of community projects; a preferred hiring policy for members of the
signatory First Nations; and a maximum production capacity to ensure the benefit
of the mine extended over a substantial period of time…The Musselwhite
Agreement was vital in establishing the terms for the development of the mine.
Essentially, it represented that the local First Nations communities were giving
the JVs a ‘social license to operate’ …Achieving First Nation employment as
specified in the agreement was problematic…Most people agree that the mutual
respect between both parties was essential to resolving disputes.”
The Musselwhite agreement includes the following provisions: (MAC 1998b)
• Environmental issues: funding for expertise related to environmental assessment,
planning, etc.; early notification for aboriginal communities; ban on the use of
certain chemicals; aboriginal involvement in decision-making;
• Cultural and heritage issues: funding for mapping of locations of religious,
cultural and subsistence resource importance; accords on how these sites will be
treated; stipulations for reclamation.
• Jobs and job opportunities: goal of 25% of total workforce ( to date: 101 of the
291 jobs are held by Aboriginal workers); provision of training assistance (on the
job and pre-employment)
• Business and other economic opportunities: establishment of various aboriginal
owned businesses supporting the mine including road construction, air
transportation, freight, laundry, and catering services.
• Social issues: alcohol and drug free camp (instant dismissal for those found
violating this rule); voluntary employee assistance programs; donations to social
and youth development; Aboriginal liaison officers; scholarships, etc.
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• Administrative arrangements: funding for various administrative needs such as
quarterly meetings of parties, use of translators, coordinating and workings
committees, dispute resolution mechanism
As with the Raglan case, the Musselwhite agreement has been highly successful
at resolving conflict without legal action and in maintaining trust and a good working
relationship between the community and the company. They have, for example,
successful discussed issues related to a 350% increase in operational output that will
result in the mine closing earlier than expected. This success has resulted, in part, from
early consultation regarding the development and ongoing dialogue throughout the
mine’s operation (MAC 2004).
As the WMI recognizes, improving performance is an ongoing process for any
company or organization and no definitive ‘endpoint’ is likely to be reached in most
cases. In the case of the Canadian mining industry, it is fair to say that there has been
significant improvements in their performance with regards to aboriginal peoples since
the WMI, however, many issues still exist (Sloan & Hill 1995; Cleghorn 1999; Hipwell et
al. 2002). The Raglan and the Musselwhite mines represent some of the earliest IBAs
signed between mining companies and aboriginal peoples and the successes and
challenges of these mines illustrate the industry’s early attempts to implement the social
principles outlined in the WMI. More recent cases such as Ekati (discussed), the Diavik
diamond mine, and Voisey’s Bay (in some ways) illustrate how the type of IBAs
pioneered at Raglan and Musselwhite have become the rule rather than the exception in
modern Canadian mining and most new mining operations in aboriginal lands are
undertaken in a similar manner (Sloan & Hill 1995; Cleghorn 1999; Hipwell et al. 2002;
Fontaine 2007). Thus, it is fair to say that the mining industry’s corporate responsibility
efforts have resulted in substantial improvement in their aboriginal relations. It is clear
then, that profit driven CSR initiatives can result in significant improvements in social
performance.
Although it is safe to say that the mining industry has made substantial progress in
improving their relationship with aboriginal communities since the early 1990s,
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significant problems still exist in this area. In the interests of a balanced evaluation of this
subject, some of the issues that continue to challenge the mining industry are discussed in
the following section.
8.2 Post WMI Aboriginal – Mining Industry Relations: Continuing Challenges
The mining industry is still aware that there are areas where they could continue
to improve their performance in relation to aboriginal peoples. In recent national
consultation roundtables held with mining industry representatives and aboriginal
peoples, several persistent issues were identified: (MAC 1998b; MAC 2004)
• Many aboriginal peoples do not receive an adequate K-12 education and
aboriginal peoples are still less educated and less trained than other Canadians.
This limits their ability to capitalize on mining employment and business
opportunities. Industry and aboriginal peoples have argued that a better career
oriented education system is needed in aboriginal communities; one that includes
participation from industry and aboriginal oversight.
• Many mining companies are not adequately consulting aboriginal people during
the exploration stage of mining development. Aboriginal people feel they are
often only consulted after the mines are essentially planned and that their input is
often added on as an amendment to an existing plan. Experts such as Hipwell et
al. (2002) identify ‘late’ consultation as one of the problems that the industry has
been least effective at addressing since the WMI. Aboriginal people maintain that
consultation needs to happen at the very beginning of the development cycle
(Fontaine 2007).
• Land claims in many regions remain unsettled and this creates problems for
mining companies and aboriginal communities alike.
• There needs to be a greater emphasis on industry-aboriginal joint ventures so that
aboriginal economic development can be encouraged.
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• Many aboriginal communities still lack basic knowledge about mining and
information needs to be provided to these communities well before they are
approached about development. The MAC, in partnership with the federal
government, has created an information kit to help educate aboriginal
communities about mining developments, the process of development, and the
potential effects of mining (NRC 2006).
• Culture and lifestyle are affected by mining and company policies (for example
aboriginal working shifts) must be changed to accommodate aboriginal peoples.
Other cultural issues, such as the availability of traditional foods on the worksite,
also need to be addressed.
Critics, such as Hipwell et al. (2002) would add other points to this list including:
• Lack of financial and human resources, in some cases, make it difficult for
aboriginal communities to meaningfully participate in the planning process.
• Cultural conflicts remain difficult to resolve. As Hipwell et al. (2002) argue
“Mining executives often struggle with the difficulties of understanding,
accepting, and incorporating aboriginal perspectives into their business
management systems. Furthermore, there is an implicit assumption that the
process for consultation and engagement of aboriginal peoples can originate from
the mining industry and/or from government.”
Many of these problems, for example education and land claims, are primarily the
responsibility of the government and aboriginal people recognize that shortfalls in some
areas are not the industry’s fault, especially where the industry has tried to ‘fill the gap’,
for example through aboriginal training agreements. Aboriginal representatives have
asked that mining companies continue to work towards addressing these problems and
that they support aboriginal people as they lobby for changes to government policies
(Fontaine 2007). As a representative of Canada’s aboriginal community, Phil Fontaine
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(2007), stated when making a speech at the MAC’s 2007 Lobby Day on Parliament Hill,
“We ask you to work with us to push governments to fulfill those responsibilities. Doing
so will help to ensure that we share equally in the riches generated from our lands and
resources.” In their lobbying activities the industry has maintained consistently that the
government needs to increase their investment in aboriginal areas, particularly their
investment in education and infrastructure (MAC 1998b; MAC 2004; Fontaine 2007).
It is clear that while the mining industry’s profit driven corporate responsibility
initiatives have resulted in significant improvement in their social performance, there are
still some problems which remain persistent.
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9.0 CSR Performance: Post WMI Environmental Performance
The Towards Sustainable Mining (TSM) framework was developed by the MAC
and its member organizations as a voluntary agreement that was meant (primarily) to
outline the major environmental issues facing the industry and set out an agenda for
dealing with those issues. The TSM is the descendent of the WMI and was built upon the
MAC’s environmental work that followed the WMI accord (Peeling 2001). As Peeling
(2001) explains, “Three years ago, the MAC Board underwent a strategic review,
concluding that the industry’s reputation was deteriorating and its social license – by this
I mean the consent and support of those with an interest in what we do – was eroding.
There was a belief that we had dropped the ball handed to us by the WMI by failing to
follow-up on its environmental recommendations in a concerted manner. Most important,
the industry believed that the only way we could improve this situation was to improve
our performance.” The TSM was created by members of the MAC, mining company
representatives, and with the help of the ‘external advisory panel’ which consisted of
outside interests groups, many of whom participated in the WMI. The advisory panel
continues to advise the MAC’s TSM committee twice per year. In 2004 the framework
was formally launched and adhering to the framework is now compulsory for all MAC
member companies. See Appendix 2 for the full TSM guiding principles.
While the MAC and its members have made considerable environmental progress
since the WMI, with a variety of accords, reports, and initiatives designed to deal with a
range of environmental issues, the TSM represents the industry’s first attempt to create a
comprehensive industry wide environmental framework; this is what Peeling (2001)
means by a ‘concerted effort’. The TSM attempts to articulate a comprehensive
sustainability agenda that encompasses the diverse set of ‘issues based’ approaches that
the industry had previously employed. Following this approach, the TSM establishes
performance criteria for a number of environmental issues, it commits companies to
monitor, disclose, and verify their CSR performance (as discussed in section Case Study
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10) and it attempts to outline minimum environmental standards for Canadian mining. A
key point made in the TSM guiding principles is the realization that there is no ‘end
point’ in terms of environmental performance and under the framework the industry
commits itself to ‘continual annual progress’ (Peeling 2001). The major subjects covered
by the TSM framework include tailings management, energy management (including
GHG emissions), pollution management (aka air and water ‘releases’ management), crisis
management, external engagement, consultation with aboriginal peoples, acting as a
‘good neighbor’, biodiversity, mine closure, and mining site reclamation (MAC 2004b;
MAC 2005b; MAC 2006). The TSM’s contribution to the industry’s performance in each
subject area is discussed in the following sections. It is important to note that, through the
use of reporting, external verification, and due to the requirement that members adhere to
the agreement, the TSM attempts to make CSR performance improvements mandatory
for member companies.
Throughout the following sections reference is made to the TSM’s performance
indicators. While the details of these indicators are not discussed in this document, the
MAC’s simplified explanation of what is required for a company to reach a given
performance level is displayed in Appendix 3. A simplified chart displaying the tailings
management criteria (as an example) can also be found in Appendix 3.
9.1 Transparency and Related Issues
Because demands for transparency, reporting, disclosure, and other related issues
are essential drivers of CSR adoption in mining, it is not surprising that the mining
industry now discloses a wide variety of performance information through corporate
sustainability, social, and environmental reports, through annual reporting on a variety of
issues, by making the terms of agreements with aboriginal peoples public, and through
third party verification. Pressure for disclosure comes not only from governments and
NGOs, but from financiers as well, who are actively engaged in pressuring corporations
to measure and disclose CSR related risks. These pressures have led to high levels of
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transparency and disclosure by mining companies on corporate responsibility related
issues. Under the TSM framework major mining companies have committed not only to
measure, report, and disclose information pertaining to important corporate responsibility
issues (such as climate change and aboriginal relations) but also to have their
performance externally verified every three years (as discussed in Case Study 10). Thus,
it is clear from the discussion in earlier sections that the mining industry has substantially
improved its transparency, accountability, reporting, disclosure, and verification in the
years since the WMI. See Appendix 3 for the TSM’s General Explanation of
Performance Levels, a brief rubric which explains (generally) what is required for a
company to reach a given performance level for each indicator.
9.2 Mine Closure, Reclamation and Abandoned Mining Sites
Approximately 10,000 toxic and dangerous mining sites exist in Canada
representing a significant legacy of mining industry environmental neglect. In the past
most mines and mining facilities were simply abandoned or decommissioned in the most
basic way. Fortunately, throughout Canada mining companies are now required to
stipulate their closure and reclamation plans as part of the EIA approval process prior to
the construction of a new mine. Even when not required to do so explicitly66, virtually all
modern mines are shutdown through a planned closure and remediation process. With
modern mines, the closure and reclamation plans have usually been made before the
facility is even constructed and it is usually the case that the mining company is required
to make periodic payments to the government in order to create a reclamation fund which
can be used to finance reclamation work. Reclamation funds range in size from a few
million dollars for small mines to more than $100 million dollars for large projects. As
part of the decommissioning and reclamation of modern mines, it is typically the case
that (Teck Corona Operating Corporation 2007; Natural Resources Canada 2008c):
66 For example, mines or refineries that began operation prior to the 1980s are often ‘grandfathered’ into the environmental regulatory system and such facilities may not be legally obligated to undergo remediation.
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• All buildings, equipment, and garbage are removed
• Infrastructure (ex. roadways) are sometimes removed
• Toxic tailings and other hazardous material is adequately sequestered in the long
term
• Topographical risks (ex. landslides) are alleviated and topography is sometimes
restored
• Hydrological barriers are removed (where possible)
• Underground access is secured
• Land is re-vegetated
• Environmental monitoring continues for a decade or more
Where reclamation and decommissioning are undertaken adequately, it is often
the case that there are few overt signs that mining ever occurred on the remediated site.
This is consistent with the commitment by the federal/provincial governments and the
mining industry that mining is to be a ‘temporary’ land use activity (WMI 1994c; Natural
Resources Canada 2008c). The following brief case study illustrates how modern mine
closure and reclamation is conducted.
Case Study 19: Newmont Gold: Golden Giant Mine Closure
Newmont Gold’s Golden Giant Mine has operated near Marathon, Ontario, on the
north shore of Lake Superior, since 1985. Prior to the commencement of
decommissioning in 2003, the mine employed ~330 people and operated with a ‘five star’
environmental rating according to Newmont’s internal evaluation criteria (MAC 2004b).
Final closure planning began in 2003 and by 2007 the mine was no longer producing
material. Remediation work is expected to conclude by 2010. In order to minimize post-
closure environmental impacts the following activities will be undertaken (Newmont
Gold 2003):
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• All treated water discharge into Lim Lake (White River watershed) will be
stopped by the end of 2008
• All underground openings will be secured by capping with steel reinforced
cement. The mine will not be accessible without heavy equipment
• Hazardous materials in tailings will be concentrated, registered, and removed
from the site for long term disposal at hazardous waste facilities
• All buildings will be salvaged or dismantled
• All surface rock piles will be used to backfill underground chambers or placed in
the rock quarry. The perimeter of the quarry will be secured and the quarry will be
allowed to fill with water
• Surface and groundwater contained within the complex and its tailings ponds are
gradually being released into Cedar Creek and all water will be tested to ensure
that it meets provincial water quality guidelines. Water currently meets provincial
guidelines and is expected to improve within ten years of the mine closure.
• $4 million in financial assurance has been posted and is being held by the Ontario
government, to be returned following the completion of remediation.
• At the end of decommissioning (following drainage) the tailings pond, processing
plant, and mining site will be disassembled completely
• The site will be re-vegetated with natural grasses
The decommissioning and reclamation of the Golden Giant Mine is not
exceptional and most modern mines receive similar treatment at the end of their lifecycle.
Thus, it is evident that in the area of mine closure and reclamation the mining industry
has vastly improved compared to its pre-WMI and historic performance.
However, the legacy of abandoned mining sites continues to be a major issue for
the mining industry and many activists and communities focus on the mining industry’s
historic failures, even though the abandonment of mining sites was often done legally. As
mentioned earlier, the exact number, nature, and toxicity of abandoned mining sites is
unknown and no comprehensive national inventory exists. The mining industry has
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continued to work with the government to establish a national abandoned mining
inventory by providing information and technical assistance through the National
Orphaned/Abandoned Mines Initiative (NOAMI). NOAMI was first launched in 2002
and has worked towards developing a national abandoned mining sites inventory, a report
on land rehabilitation funding options, a guide for community led rehabilitation, and an
avenue for technological transfer. The group is also analyzing the legal and regulatory
dimensions of abandoned mines with the intention of developing a best practices guide
for each level of government that will help guide reclamation activities. The mining
industry has participated in each of these activities and is thus attempting to help
governments and communities that are dealing with abandoned mining sites. However,
while there have been some pioneering efforts to reclaim abandoned mining lands67, the
industry and government maintain that it is likely that only the most dangerous
abandoned sites will ever receive the funding necessary for reclamation and that the
majority of abandoned sites will never be attended to (MAC 2004b; Meech et al. 2006).
9.3 Biodiversity Impact Management
Mining can cause local damage to biodiversity and place pressure on wildlife
through habitat destruction, noise creation, pollution, and the building of roads. The
changes caused by mining can seriously impact wildlife populations and biodiversity,
particularly in aquatic ecosystems where acid mine drainage, sedimentation, and heavy
metal leakage has the greatest impact (Dearden & Mitchell 2005; Yakovleva 2005).
Until recently most mining companies did not consider biodiversity to be an issue
of central importance to their operations, in part, because mining regulations focused on
67 One such case involves the Brittania beach mine in BC, a copper mine operated for over 100 years and abandoned in 1977 when Anaconda mining went bankrupt. Prior to reclamation the mine represented ‘the worst acid-rock drainage metal pollution’ problem in North America with an average of 800 kg. of zinc, copper, iron, aluminum, and manganese leaching into surround waters daily. Due to the extreme nature of the case, and the potential for high property values in the area, a partnership was formed between the government, remnants of Anaconda mining, and real estate developers to remediate the site. The plan was highly successful and the area has been significantly cleaned up and converted into a thriving community (Meech et al. 2006).
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issues such as pollution, acid rock drainage, safety, tailings management, and air quality
issues. Also, it was assumed that the impact of mining on biodiversity was relatively
small compared to other industrial land uses such as agriculture, fisheries, forestry, and
more recently tar sands development. Issues concerning the ‘broader landscape’ and the
indirect impacts of mining, for example the impact which roads can have on natural
habitats, were not the focus of early CSR efforts undertaken by the industry and
government regulators, except where endangered species were present. Recently,
however, the range of issues considered by mining companies and by the government
during the EIA process has widened and biodiversity is now a central concern in mining
planning (CNF & MAC 2003; MAC 2005b). In order to better understand the impact of
mining on biodiversity in Canada the mining industry has undertaken several important
joint studies with the Canadian Nature Federation (CNF) (now known as Nature Canada)
and various governments. The most important of these was the 2002 document Scoping
of Ecological Impacts of Mining on Canada’s National Parks; a study which has helped
the mining industry understand how mining can impact biodiversity both directly and
indirectly (CNF & MAC 2002). In that study it was found that, “…Almost half of
Canada’s national parks indicated that mining has occurred in the past or is currently
occurring in or around their park boundaries. Approximately 90% of the mines identified
during the interview process are located outside park boundaries, however many of these
(~39%) are located within 10 km of the park boundaries.” These mines were found to
adversely effect national parks (to varying degrees) primarily through the creation of road
networks that make previously remote areas accessible, by creating barriers to the
movement of wildlife (including roads), by changing local hydrology, and through the
pollution of aquatic ecosystems. Where acid rock drainage, heavy metals, sedimentation,
or other forms of water pollution are severe, local extinction of aquatic life can result far
downstream, including in national parks and other conservation areas (CNF & MAC
2002).
In the years following the WMI the mining industry has attempted to respond to
concerns regarding their impact on biodiversity in a variety of ways. At a company and
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project level most mining companies have developed some form of biodiversity policy
and manage the issue wherever the need is overt, for example, when an endangered
species or sensitive habitat is present near the mining site. However, broader biodiversity
concerns are not systematically addressed by many companies (CNF & MAC 2002;
MAC 2005b). To deal with this issue, the MAC formed an executive task force on
biodiversity which has been tasked with developing a comprehensive industry wide
policy as an amendment to the TSM framework. In 2005 the MAC announced its
intention to develop an indicator of biodiversity performance that will be integrated into
the other TSM indicators that they regularly measure, report, and verify. In addition, the
MAC is developing corporate guidelines for biodiversity that will address issues such as
reclamation and remediation, species at risk, the regional footprint of mining activities,
native species displacement, monocultures, and support for outside biodiversity programs
(MAC 2005b). As a prelude to a comprehensive biodiversity policy, in 2007 the industry
amended the TSM by adding the following section to the framework (MAC 2007c):
The conservation of biodiversity is a commitment in MAC’s Towards Sustainable
Mining (TSM) Guiding Principles. MAC members recognize that access to land
and a company’s social license depend upon responsible social, environmental
and economic practices and that there is a strong business case for supporting
biodiversity conservation. MAC members believe that mining, conducted in
consultation with communities of interest, can co-exist with biodiversity
conservation. MAC members accept that a corporate commitment to biodiversity
conservation is essential and have agreed to the following commitments:
1. MAC members will positively contribute to the conservation of biodiversity
through all stages of the mining life cycle.
2. MAC members will work with key communities of interest to develop and
implement responsible policies and practices to:
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a. integrate the importance of biodiversity conservation, including respect for
critical habitat, into mining and land-use planning and management strategies,
including considering the option of not proceeding with a project.
b. assess and monitor the state of biodiversity throughout the project cycle.
c. avoid, minimize, mitigate and/or compensate for significant adverse
biodiversity effects.
d. enhance, through research, information sharing and/or partnerships, the
industry’s understanding of and contribution to biodiversity conservation, science
and traditional knowledge.
e. establish, finance and implement comprehensive reclamation plans that,
wherever practicable, return mine sites to viable and diverse ecosystems that will
serve the needs of post-mining use, recognizing that mining can permanently alter
landscapes and that other desirable land uses may be considered in reclamation
plans when justified by site-specific circumstances.
3. MAC members are committed to transparency and public reporting on issues
related to mining and biodiversity conservation.
4. MAC members, recognizing that protected areas can contribute to biodiversity
conservation, will comply with the requirements of legally-designated protected
areas and are committed to working with key communities of interest to develop
transparent, inclusive, informed and equitable decision-making processes for the
establishment of protected areas.
5. MAC member companies undertake not to explore or develop mines in World
Heritage sites. All possible steps will be taken to ensure that pre-existing
operations in World
Heritage sites as well as existing and future operations adjacent to World Heritage
sites are compatible and co-exist with biodiversity goals.
6. MAC and its members will demonstrate leadership by informing others of this
Mining and Biodiversity framework and encouraging its adoption.
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While this statement does not represent a comprehensive biodiversity policy, it
does indicate the industry’s attention to the issue. It is expected that a more concrete
policy will develop upon the completion of the industry’s TSM biodiversity indicator.
Ultimately, the industry hopes to incorporate a comprehensive biodiversity strategy into
all aspects of mine development, including infrastructure planning (MAC 2005b).
In addition to the MAC’s recent efforts to develop a comprehensive biodiversity
policy and indicator for the industry, there has been a concerted effort by the MAC and
its member companies to establish better communication with conservation groups and
conservation area managers. This process began with the WMI but was also furthered
through the creation of the Scoping of Ecological Impacts of Mining on Canada’s
National Parks report which involved consultations with park managers throughout
Canada. Through the creation of that report, and the consultations that it entailed, the
industry has been able to identify the most important areas where they impact
biodiversity and they have attempted to put mining companies in contact with parks
managers (CNF & MAC 2002; CNF & MAC 2003). These efforts have been fairly
successful so far and several examples exist where communication between mining
companies and parks has allowed the industry to lower its impact on biodiversity (CNF &
MAC 2003). Dialogue with conservation groups has allowed the industry to support
biodiversity conservation where it would previously have been indifferent or opposed to
it. Many projects have illustrated the industry’s early success in this regard, for instance
the Northern Bathurst Island National Park example (Case Study 13), where the MAC
and CNF successfully collaborated to overcome difficulties in the park’s planning.
Lastly, it should be noted that the industry’s active management of other environmental
issues is extremely complementary to their goal of reducing biodiversity impacts, for
example, their commitment to mining site reclamation, lowering GHG emissions,
controlling water and air pollution, preventing acid rock drainage, and preventing tailings
spills are all initiatives that will reduce their impact on biodiversity and wildlife
substantially.
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While the mining industry is explicitly addressing biodiversity concerns
somewhat later than other environmental issues, it is clear that since the WMI the MAC
has worked towards the creation of an industry wide biodiversity policy, towards the
creation of biodiversity reporting indicators, towards a better understanding of their
impacts on biodiversity, and towards better communication with conservation groups and
parks managers. These efforts have set the ground work for addressing the industry’s
biodiversity impacts explicitly, and examples such as the Northern Bathurst Island
National Park and others discussed in this document illustrate that progress has already
been made in this area. As mentioned, it is important to note that other efforts at
improving their environmental impact are likely to positively impact biodiversity. Thus,
it is clear that the industry has made substantial progress in dealing with biodiversity
issues.
9.4 Energy Use and Greenhouse Gas Emissions
The mining industry has a natural incentive to work towards reducing energy
consumption, given that energy costs account for 15-30% of mining operating costs
(MAC 2003). For this reason, mining companies and the industry in general are
continuously attempting to lower energy use to increase their competitiveness, this was
illustrated earlier by the Inco Energy Efficiency example (Case Study 14). As
Paszkowski (2000) explains, “Mining is a highly competitive, global industry - one of the
ways we become more competitive is by driving down energy costs by becoming more
energy efficient”. Recently the industry has undertaken major benchmarking exercises
through the generation of two energy efficiency reports that address the energy
consumption of both underground bulk mines (CIPEC 2005a) and open pit mines (CIPEC
2005b). Both reports found that while mining operations in Canada have been increasing
their energy efficiency for as long as they have tracked this issue, and that some
companies and sectors have dramatically increased efficiency in the last thirty years,
Canadian mining companies still have higher energy costs per unit produced than many
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of their competitors in other nations. There are various reasons for the high energy costs
of Canadian mining; Canadian mines are often remote and equipment/products must
travel great distances, Canadian energy prices are higher than in some competing nations,
mining in winter requires greater energy use, rock may be harder and more difficult to
mine/separate than that of competing nations, etc. These reports also indicated that
energy efficiency and energy use can vary widely between facilities and companies
within Canada, which suggests that gains in efficiency have not been universal and there
exist many opportunities for increased energy efficiency within the industry (CIPEC
2005a; CIPEC 2005b).
As discussed previously in Case Study 19, the mining industry’s approach to the
climate change issue has been progressive68 and they have simultaneously set voluntary
reductions targets and actively engaged in voluntary reporting of their GHG emissions
and energy use. As discussed in that section, the industry has been effective at lowering
GHG emissions during the 1990s. The industry has continued to reduce emissions since
1999, on track with their voluntary emissions goals (MAC 2003b). Since the mid 1990s
the Canadian mining industry has been one of very few industrial sectors in Canada that
has seen continuous reductions in its GHG emissions (Peeling 2001).
Despite these aggregate improvements, the MAC has identified energy use and
particularly GHG emissions management as the area where they have had the most
difficulty under the TSM framework. As the MAC (2006) explains in the 2006 TSM
progress report “Energy use and GHG emissions management remains the weakest
overall performance area on an aggregate basis. This year’s performance was roughly
equivalent to last year’s, though a comparison of 2005 and 2006 reporters indicates a
small improvement in GHG emissions management and GHG reporting. One reporter,
BHP Billiton Diamonds, obtained Level 3 or better for all six indicators in this area—an
achievement that will likely be of interest to other facilities.” The following chart
68 This author characterizes the mining industry’s approach to climate change as progressive because, although they have resisted the Kyoto protocol, they do so with sound arguments and as many environmentalists will agree, the Kyoto protocol is highly flawed and ineffective. The industry’s other climate change related efforts (as discussed) show that their criticism of Kyoto arises from a nuanced stance on the issue and they are not merely climate change ‘deniers’.
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illustrates the energy and GHG emissions results of the latest TSM reporting period.
Level 1 represents the lowest level of performance and Level 5 the highest, given that the
MAC’s goal is to have all facilities and companies operating at Level 3 or higher, the
results presented in the following charts are considered poor:
Figure 5 : TSM 2006 Energy Use and Greenhouse Gas Emissions Management Assessments (Taken directly from MAC 2006, 5)69
69 Level 1 is the lowest level of performance and Level 5 is the highest. See Appendix 4 for the MAC’s general explanation of the five ranking levels. Ultimately, the MAC’s goal is to have all mining facilities in Canada reach level 3 or higher.
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Figure 6: TSM 2004 Energy Intensity and GHG Emissions Intensity Performance (Taken directly from MAC 2004b, 6)
It is clear from these two figures and the preceding discussion that while the
industry as a whole has a fairly good track record when it comes to improving its energy
use efficiency and lowering GHG emissions, the management systems employed by most
member companies are relatively weak at dealing with these issues. In addition, a large
number of facilities are performing poorly with regards to their energy intensity and
GHG emissions intensity in the most recent reporting periods. The fact that the industry
has been reducing GHG emissions steadily since the mid 1990s and increasing energy
efficiency while most facilities are performing badly according to the TSM guidelines
indicates that progress thus far has been limited to a few facilities and companies, while
the majority continue to operate at Level 1 or 2. In other words, if measured as a single
unit the mining industry as a whole has decreased GHG emissions and increased energy
efficiency, but most of the progress thus far has been the result of improvements in a
minority of the MAC’s reporting facilities and companies. Thus, it is not surprising that
while the mining industry has moved towards reducing GHG emissions faster than almost
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any other large domestic emitter, the industry remains one of the largest emitters of GHG
emission and one of the largest energy users in the nation (MAC 2003b; CIM 2005). Like
most GHG intensive industries in Canada, the mining industry’s GHG reductions are far
from what will likely be required of them in coming years.
9.5 Acid Rain and Toxic Pollution
Although the mining industry is now the largest emitter of SO2 in Canada70, it has
been steadily reducing its SO2 emissions since the late 1980s as shown in the following
chart:
Figure 7 : Mining Industry Sulfur Dioxide Emissions From 1988 to 2005 (Taken directly from MAC 2006, 13)
If oil sands operations are excluded from this chart (as they are from the rest of
this thesis) then the industry’s sulfur dioxide performance is even better than indicated. In
either case, it is clear that the Canadian mining industry has substantially reduced these
emissions over the long term. In addition, a major retrofit of Vale-Inco’s Sudbury
smelting facilities is expected to reduce national emissions further by 2008 (MAC 2006).
70 National efforts to reduce acid rain causing emissions have significantly reduced the acid rain problem in Canada. As early as the late 1970s and early 1980s mining companies were actively managing their emissions of acid rain causing gases (Brooks 1986).
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While the mining industry has significantly improved its ability to prevent SO2 emissions
from mining, tailings, and smelting activities, the significant legacy of abandoned mining
sites, and their huge tailings heaps, continue to emit large (though naturally declining)
quantities of this gas (MAC 2004b).
The mining industry has also made substantial progress in reducing other forms of
air and water pollution (other than GHG emissions). The industry’s annual release of
major pollutants has gone done substantially since they began comprehensive
measurement in 199271. As shown in the following two charts, the mining industry has
substantially reduced the amount of pollution that it generates for the eight pollutants of
greatest concern72:
Figure 8: Mining Industry Major Pollutant Reductions from 1992 to 2005 (Taken directly from MAC 2006, 12)
71 Hilson & Murck (2001) found that while large mining companies in the gold mining industry in North America employ state of the art pollution control technology, smaller ‘junior’ companies only employ technology that is required by regulations. Whether or not this trend holds true for mining as a whole is unclear. 72 The numbers presented in these figures represent reductions in total pollutants released in both air and water. The industry does not publish data that distinguishes between toxic pollutants released in the air and water.
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Figure 9: Mining Industry Major Pollutant Reductions from 1992 to 2005 (Taken directly from MAC 2006, 12)
In addition to reducing pollution, the industry has also supported and actively
participated in pollution research through the Metals in the Human Environment
Research Network (MAC 2004b). New federal Metal Mining Effluent Regulations, which
have been added to the federal Fisheries Act, have set strict limits for cyanide, arsenic,
copper, lead, zinc, nickel, and radium-226 for metals mines which release effluent into
fisheries areas (about 100 metal mines in Canada). These mines are now obligated to
control their emissions of these substances, to ensure that none of their effluent is acutely
lethal to fish, and to ensure that total suspended solids in effluent water are low enough to
allow fish populations to remain productive. Compliance is ensured through mandatory
ecological measurement and reporting (MAC 2004c).
It is clear that the Canadian mining industry has substantially reduced their
contribution to the acid rain problem (by reducing SO2 emissions) and that they have also
succeeded in dramatically reducing their releases of toxic pollutants since the early
1990s.
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9.6 Acid Mine Drainage
Acid mine drainage (AMD) is one of the most serious environmental problems
associated with Canadian mining. When AMD occurs it can acidify aquatic ecosystem,
contribute to the leaching of heavy metals, and cause other forms of pollution. AMD is
one of the major causes of the other environmental problems discussed in this thesis,
impacting pollution levels, biodiversity, productivity, general environmental quality, and
human health. In addition to other aspects of tailings management (discussed in the
following section), controlling AMD is a major issue in tailings management.
As recently as the mid 1980s the AMD problem was poorly understood and few
technological options existed to manage the issue. It is not surprising then that the first
step in combating the AMD problem was the establishment of a national AMD research
program. This program, which has been jointly funded and undertaken by the MAC,
NRC Canada, and Environment Canada, has gone through three major iterations since its
establishment in 1989. Since its inception the MEND (Mining Environmental Neutral
Drainage) program has cost approximately $17.5 million, a significant portion of which
has been paid for by the MAC. The MEND program has also worked closely with similar
research programs in Europe, Australia, and the United States with the intention of
making AMD technology available internationally (MAC 2004b; MAC 2006, 12).
The MEND program has resulted in major breakthroughs in the understanding of
the AMD process and the development of AMD management technology. Many new
AMD technologies have been tested in Canada in the last fifteen years as a result of the
MEND program, including the highly successful high-density AMD sludge water
treatment plant first implemented by Teck Cominco at its Kimberely mine, BC (Peeling
2001).
New technology pioneered by the MAC and the federal government through the
MEND program includes the following: (MAC 2004d)
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• The development of covers for reactive tailings in permafrost regions
• Development of disposal options for lime sludge
• Identification of metal leaching processes and methods to control the problem
• The development of underground paste backfilling
• The development of dry covers designed to prevent water leakage into waste rock
and tailings
• The generation of a variety of regional pilot projects and case studies
The MEND program has enabled the mining industry to make a great deal of
progress in reducing the AMD problem and in combating its worst side effects (such as
heavy metal pollution). It is estimated that as a result of the MEND program the mining
industry has been successful in removing approximately $400 million worth of AMD
related liability; this is a substantial chunk of the estimated $2 to $5 billion in liability
associated with the AMD problem (Sanchez 1998; Natural Resources Canada 2008d). In
addition, the worst effects of AMD are now largely controllable through careful mine
planning, water treatment, and tailings management (Natural Resources Canada 2008d).
A large amount of the ‘unaddressed’ liability related to AMD comes from older mines
that were not designed with strong AMD controls or from abandoned mining sites which
continue to generate the chemical reactions leading to AMD.
It is clear that through the MEND program the mining industry has made
substantial progress in addressing the AMD problem. While this problem has not been
‘solved’ the industry is now better equipped to actively manage the AMD issue and new
mines are substantially better in this respect.
9.7 Tailings Management
Tailings management remains a major issue for mining firms and where tailings
are mismanaged a variety of environmental problems can result. In extreme cases, such
as the Aurul Mine Tailings Spill incident (Case Study 3) large scale tailings disasters can
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occur as a result of mismanagement. In modern mining operations the problem is dealt
with by using tailings to backfill underground mines, by re-filling and re-vegetating over
open pit mines, or by constructing tailings ‘ponds’ which consist of large depressions that
are filled with tailings materials and surrounded by artificial walls designed to contain the
tailings and runoff. These ponds are now actively managed and various technologies are
employed to contain toxic leachate within the pond (MAC 1998; MAC 2003).
Controlling effluent from tailings ponds is one of the main ways in which mining
companies have been able to reduce their acid rock drainage and heavy metal pollution
problem (MAC 1998; MAC 2003).
Because tailings spills and the mismanagement of runoff simultaneously represent
the risk of environmental damage and financial loss the Canadian mining industry has
been quick to learn from cases like the Aurul mine spill and has attempted to institute
strong management practices. The MAC (1998, 3) summarizes the approach that is has
taken to improving tailings management since the WMI as follows:
“Tailings facilities provide a window on the mining industry. They tell a story to
the public about how the industry manages its activities. They also pose a risk that
must be managed for the long term. The mining industry has the technology to
safely design, build, operate and decommission tailings facilities. This technology
must be consistently applied for the safe and environmentally responsible
management of tailings. One way to do this is to establish a comprehensive
tailings management system, one that individual companies may adapt and
implement under often widely ranging conditions. Through this approach, the
industry can develop effective self-regulation, demonstrate due diligence,
complement government regulations, and protect the environment and the public.
Perhaps more importantly, this will also help individual companies to integrate
environmental and safety considerations in a consistent way with continuous
improvement in their tailings operations. Since tailings facilities are site-specific
and complex, involving unique environmental settings and physical
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characteristics, their effective management depends on applying both managerial
and technical expertise. No set of generic recommendations can be fully
applicable to every operation…”
As described above, the industry has primarily focused on improving tailings
management since the WMI as the technology itself is already at sufficient levels to
ensure safety and prevent environmental impacts. According to the industry’s TSM
tailings indicator, they have done well in improving tailings management thus far and, as
shown in the following chart, MAC tailings management is approaching the ultimate goal
of having all facilities operating at Level 3 or higher:
Figure 10: TSM 2006 Tailings Management Performance (Taken directly from MAC 2006)
The tailings management results shown here represent improvement over the
2005 results and since launching the TSM the tailings management indicators have been
steadily improving. In each year the best indicators have been for assigned accountability
and annual tailings management reviews (by responsible executives and engineers), both
of which are considered essential practices for safe tailings management (MAC 2005;
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MAC 2006). For a simplified explanation of what is required for a company to reach a
given performance level, see Appendix 3. A simplified chart displaying the tailings
management criteria (as an example) is also displayed in Appendix 3. The MAC
evaluates member facilities in the area of tailings management in five main performance
areas: the tailings management policy and statement of commitments, the physical
tailings management system, the assignment of responsibility for tailings management to
senior officials (accountability), annual senior management review of management
practices, and the facility’s adherence to the MAC’s (2000) Operation, Maintenance and
Surveillance Manual for Tailings and Water Management Facilities (MAC 2005b). This
guidebook and the MAC’s (1998) A Guide to the Management of Tailings Facilities were
developed following the WMI as a means of establishing safe tailings management
guidelines that could set the standard for the industry. Through these documents the
MAC has established an important technical and managerial reference for its member
companies. The generation of these documents followed the formation of an executive
task force designed to promote the safe and environmentally responsible management of
tailings (MAC 1998; Gardiner & Gladwin 2004).
Through the creation of an executive task force aimed at improving tailings
management, the generation of major technical and managerial tailings management
reference documents, and the establishment of the TSM performance criteria, the MAC
has been successful in improving the industry’s tailings management since the WMI.
This is evidenced by the absence of significant domestic tailings spills since the early
1990s and the overall positive trend in TSM tailings performance (Gardiner & Gladwin).
In addition, the industry’s success at reducing heavy metal and acid rock pollution are
also a testament to the success of their tailings management initiatives, given that tailings
are a major source of these pollutants.
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9.8 Industrial Ecology and Recycling
Although they have been relatively sparsely studied, this author has made the
argument that industrial ecology activity and eco-efficiency are widespread in the
Canadian mining industry (see Case Study 15) and recycling can be an integral part of the
business of mining companies. In many cases this represents ‘loop closing’ behavior,
given that these companies are recycling products that contain metals that were originally
created as part of their primary resource extraction activities. Recent studies from
Australia indicate that widespread industrial ecology type interactions are also present in
that nation’s domestic mining industry (Van Beers et al. 2007).
Despite the fact that federal Export and Import for Hazardous Wastes Regulations
have historically been a barrier for the recycling of some metal bearing products, the
mining industry is easily one of the largest recycling sectors in Canada (MAC 2004b). As
shown below in Figure 11, Table 1 & 2 the Canadian mining industry recycles substantial
quantities of post-consumer products such as batteries, scrap aluminum, copper, lead,
metal, steel, zinc, and electronic wastes within their own facilities. In addition, they
utilize a substantial quantity of what can be considered ‘by-products’ including secondary
cooper feed, refinery slimes, residues, foundry sands, etc. Lastly, as shown in Figure 11,
Table 3, a large percentage of mining facilities have recycling programs in place for
products that the industry cannot recycle itself but instead sends to other waste processing
facilities, such as chemicals, paper, and wood products. In most cases where the industry
is engaged in recycling and by-products utilization they are able to make a profit and the
use of such products can be a significant source of competitive advantage73 (MAC
2004b). As shown in Figure 12, it is not only Falconbridge and Noranda which are
actively engaged in recycling and by-products utilization as a major part of their business,
other major metal mining firms such as Teck Cominco, Barrick Gold, and Inco are also
engaged in this activity on a large scale. 73 Again, see the Falconbridge-Noranda discussion (Case Study 15) for more detail on how firm profitability is influenced by recycling activities.
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Given that recycling rates in the industry have been steadily rising since the late
1980s, it is safe to say that the industry’s recycling and by-products utilization activities
contribute to their efforts to reduce their environmental impact and improve their
performance (MAC 2004b). Large scale recycling, when conducted profitably and with a
solid business rational, can save energy, reduce pollution, and prevent the generation of
hazardous and non-hazardous wastes.
Figure 11: 2003 Intake and Outflow of Recycled Materials (Taken directly from MAC 2004b, 11)
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Figure 12: Quantities of Recycled Materials Utilized by Company in 2003 (Taken directly from MAC 2004b)
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9.9 Post WMI Environmental Performance: Conclusion
In the preceding sections the mining industry’s post-WMI environmental
performance has been examined by focusing on an issue specific analysis. The major
post-WMI push for the mining industry, in the environmental realm, has been the TSM
framework. Generally speaking, the Canadian mining industry has substantially improved
its environmental performance since the early 1990s. As discussed, the industry performs
very well in terms of transparency, reporting, disclosure, and third party verification of
environmental performance; a fact which makes them relatively easy to evaluate. In areas
such as biodiversity, acid rain causing emissions, toxic pollution, tailings management,
recycling, eco-efficiency, energy efficiency, and in their promotion of industrial ecology
type interactions the mining industry has been very successful at improving their
environmental performance. In some cases, such as heavy metal pollution, the
improvements have been dramatic. It is clear that the mining industry has made
substantial progress with these environmental issues.
In other areas the mining industry’s post-WMI environmental performance has
been mixed. While the industry has made substantial progress in addressing acid mine
drainage and reducing greenhouse gas emissions, problems persist in these areas.
Greenhouse gas emissions are of particular concern and the mining industry faces a major
challenge in coming years as pressure to reduce their impact on climate change is likely
to increase. In addition, while the mining industry has dramatically improved its planning
for the closure and remediation of new and currently operating mining sites, the
hazardous, costly, and highly polluting legacy of abandoned and orphaned mines remains
a persistent problem for the industry and all Canadians. It is unlikely that the majority of
abandoned mining sites will ever be remediated, instead, they will be left to gradually
degrade and (hopefully) their toxicity will decline naturally (Mining Watch Canada
2001).
While few environmental issues can ever truly be ‘solved’, it appears that the
mining industry has made substantial progress in improving its environmental
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performance since the WMI. Even in the problem areas, such as GHG emissions,
progress has been made. The ability of the mining industry to substantially improve its
environmental performance as a result of their profit motivated corporate responsibility
activities supports the argument that profit driven CSR can have a substantial social and
environmental impact.
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Reflective Conclusion
In this thesis the Corporate Social Responsibility (CSR) movement is examined
with the intention of answering two questions of central importance to this developing
field:
1) Can active CSR management improve corporate profitability?
2) Can profit driven CSR substantially improve corporate environmental and social
performance?
Following a review of other relevant topics, including industrial ecology,
aboriginal peoples and resource management, and a profile of the Canadian mining
industry, these questions were addressed through a mixture of literature review and case
studies drawing from the Canadian mining industry. As a background, the Canadian
mining industry’s past CSR performance was examined, with emphasis on their
interactions with aboriginal and the environment; these two areas were the focus of the
analysis throughout this document.
The first question was addressed through a literature review of each driver which
was further illustrated by case studies from the Canadian mining industry. The major
drivers identified through this analysis included, in order of appearance:
• Legal Dimensions and Legislative Compliance (Regulations)
• Avoiding Regulations and Influencing Policy
• Liability and Risk Management
• Obtaining a ‘License to Operate’ and the social license
• Investor Pressure, Environmental, Social, and Governance (ESG) Factor
Integration in Investment Decision Making, and Investor Activism
• Demands for Transparency, Accountability, Reporting, Disclosure, and
Verification of CSR Performance
• Industry Standards and Consumer Labelling
• Reputation Management
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• Branding, Marketing, and Ethical Consumerism
• NGO Activism
• Business-NGO partnerships
• Eco-efficiency and Industrial Ecology (potential benefits of)
• Innovation and the Porter Hypothesis
• Employee Pressure and Participation
• Strategic CSR
It is argued that in combination, these drivers affect both a company’s
environmental/social performance and its profitability. Many of these drivers, however,
are still emerging and it is clear that they have developed more rapidly for large
companies and companies in high impact sectors (such as mining).
The second question, Can profit driven CSR substantially improve corporate
environmental and social performance? is the more difficult to answer and will likely
prove to be the more controversial as the corporate responsibility movement continues to
expand. In this thesis this question was addressed by examining the mining industry’s
modern environmental and aboriginal relations initiatives and by contrasting them to the
industry’s historic performance on these issues. As with the previous section, the analysis
was undertaken through the use of a literature review, and by highlighting relevant case
studies. As discussed the major CSR departure point was the 1994 Whitehorse Mining
Initiative (WMI), and this was chosen as the line between ‘past’ and ‘present’
performance. This is because the WMI represented a major turning point in the history of
the Canadian mining industry and can be seen as the event that revolutionized their
approach to responsible business issues. The process by which the WMI was created, and
the accord itself, was summarized to give context to the analysis that followed. Following
an examination of the WMI, the mining industry’s post-WMI relationship with aboriginal
peoples was examined. The argument was made that the mining industry’s relationship
with aboriginal peoples has substantially improved since the WMI. However, in the
interests of fair analysis, it was also argued that significant unresolved issues exist in this
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area, some of which are the fault of the mining industry and some of which are due to
larger social issues.
The environmental analysis yielded similar results. After discussing the mining
industry’s major environmental initiative, the Towards Sustainable Mining (TSM)
framework, it was argued through an issue-based analysis that the industry’s
environmental performance in the areas of transparency, reporting, disclosure, and third
party verification is commendable. The case was made that the mining industry’s can also
boast much success in areas such as biodiversity impact management, acid rain causing
emissions, toxic pollution, tailings management, recycling, eco-efficiency, energy
efficiency, and in their promotion of industrial ecology type interactions. However, in
areas such as acid mine drainage and greenhouse gas emissions, problems persist. In
addition, while the mining industry has dramatically improved their planning for the
closure and remediation of new and currently operating mining sites, the hazardous,
costly, and highly polluting legacy of abandoned and orphaned mines remains a
persistent problem for mining companies and Canadians.
It was argued that following the WMI the mining sector substantially improved
their environmental performance and their treatment of, and relations with, aboriginal
peoples. In both cases, however, significant problems persist despite ongoing corporate
responsibility efforts on the part of mining executives. Thus, the answer to the second
question appears to be that profit driven CSR initiatives can substantially increase social
and environmental performance. However, corporate responsibility issues are complex,
persistent, constantly evolving, and difficult to resolve, and so it is not surprising that
some problems remain unresolved and will require ongoing effort. Nevertheless, the
evidence presented in this thesis indicates that in less than twenty years profit driven
responsible business initiatives have resulted in substantial improvement in the
environmental and social performance of a major industry. It is fair to say that the
Canadian mining industry has undergone a major transformation since the WMI and that
this has had a very positive impact both on the industry, the environment, and Canadian
society. Lastly, because mining is a major high impact industry that has managed to link
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CSR and profitability positively, this author believes that the conclusions of this thesis
provide valuable insights for other Canadian heavy industries, particularly oil and gas; an
industry which deals with many of the same issues as mining.
To summarize, the evidence presented in this thesis indicates that the CSR
movement constitutes far more than ‘green-washing’ and elaborate public relations
campaigns. In the case of Canadian mining, it is argued that improved profitability and
social/environmental performance are linked. These conclusions support the argument
that, as the corporate responsibility movement continues to evolve and expand, it will
have a substantial impact on improving the environmental and social performance of
corporations.
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Future Considerations
There are many topics related to this thesis which could be of future interest for
those who study CSR and the Canadian mining industry. An issue of considerable debate
in the corporate responsibility literature is whether or not the drivers of corporate
responsibility equally affect large, medium, and small firms. This analysis has not
examined mining companies according to size, though most of the case studies discussed
deal with large multi-national mining firms that are members of the MAC. It would be an
interesting area for future study to compare the role of drivers and the
environmental/social performance of the large ‘senior’ mining firms against their smaller
‘junior’ counterparts. In addition, it would be interesting to examine other areas of CSR
performance in the Canadian mining industry, including their performance with respect to
gender issues, community development, and labor relations, in order to better understand
how corporate responsibility plays out in these areas. It would be interesting to contrast
the industry’s performance in these areas to their performance in the more high profile
realms discussed in this thesis.
It is this author’s opinion that the most significant and interesting prospect for
future research would involve an analysis of how the CSR performance of multi-national
mining companies differs in the developing and developed world. This analysis has
focused primarily on the performance of mining companies within Canada but nearly all
of the mining companies referred to in this document have some form of operations in
developing nations. Activists claim that mining companies are guilty of human rights
abuses, environmental destruction, and other offences when they operate in developing
nations. Recall, for example, the MiningWatch Canada Pascua Lama Gold Mine incident
(case study 12). In this case it was argued that the activists claims were unfounded (and
dishonest), but this does not mean that the CSR performance of mining companies in the
developed and developing world is equal. Further analysis of this issue would contribute
to the literature and provide insights into the geographic scope of CSR drivers.
196
Lastly, it would also be interesting to conduct a similar analysis in the Canadian
oil and gas, oil sands, and radioactive mining industries. These industries have been
excluded from this analysis because they are either rapidly emerging or drastically
different than minerals and metals mining. However, many similarities between these
industry’s exist (in some cases the same companies are involved) and it would be
interesting to compare these sectors.
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Appendix 1: WMI Accord Vision Statement
(from WMI 1994a) WHITEHORSE MINING INITIATIVE
VISION STATEMENT ________________________________________________________________________
______
Our vision is of a socially, economically and environmentally sustainable, and
prosperous
mining industry, underpinned by political and community consensus.
Mining is an important contributor to Canada's well being, both nationally and regionally.
The Whitehorse Mining Initiative is based on a shared desire to ensure that mining
continues to make an important contribution, within the context of sustainable
development.
This vision is more simply stated than achieved. We recognize that the natural
environment, the economy, and Canada's many cultures and ways of life are complex and
fragile, and that each is critical to societal survival. Furthermore, no aspect of social,
economic, and environmental sustainability can be pursued in isolation, or be the subject
of an exclusive focus, without detrimentally affecting other aspects.
We also recognize that this vision will serve us well in responding to the uncertainties of
the future. The context within which we seek to achieve our vision is dynamic. Social,
economic, and environmental systems are constantly changing. Therefore, it is essential
in realizing this vision that we enhance our ability to recognize, anticipate, and respond to
change, while striving to achieve a level of predictability that will allow us to pursue
environmental, social and economic goals.
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The realization of this vision is not, and cannot, be the responsibility of any one group.
None of the stakeholders can achieve its objectives without the cooperation and support
of the others. We are all aware of the need to speak plainly about the issues that face us,
to think creatively about possible responses to them, and to work cooperatively to ensure
that they are addressed effectively.
The Principles and Goals that we have adopted represent a major and historic first step
toward revitalizing mining in Canada. They point to changes that can restore the
industry's ability to attract investment for exploration and development and, at the same
time, ensure that the goals of Aboriginal peoples, the environmental community, labor,
and governments will be met.
The process by which we reached consensus also establishes a framework for creative
cooperation, which is most important in this area of dynamic change. It is a framework
that can help us anticipate, react, and adapt to changes quickly and effectively by
allowing us to capitalize on the goodwill and the ability we have developed to work
together, by enabling us to draw on the collective expertise of all stakeholders, and by
encouraging us to resolve differences in a constructive spirit.
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Appendix 2: TSM Guiding Principles (from MAC 2004b)
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Appendix 3: General Explanation of TSM Performance Levels
(from MAC 2006) Level 1 - No systems in place; activities tend to be reactive; procedures may exist but are not integrated into policies and management systems. Level 2 - Procedures exist but are not fully consistent or documented; systems/processes are planned and being developed. Level 3 - Systems/processes are developed and implemented. Level 4 - Integration into management decisions and business functions. Level 5 - Excellence and leadership.
This represents the broad definition of each performance level. In the TSM framework a much more detailed explanation of what is required at each performance level is presented for each indicator. A simplified version of the tailings management performance criteria is displayed below to illustrate the general structure of the TSM performance indicators.
Simplified TSM Tailings Management Performance Evaluation Rubric and Performance Level Definition (from MAC 2005b)
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