Contents
2. Market System: Business Is Part of the Solution
Overview
This chapter argues that the world’s sustainability challenges cannot be addressed by one company, sector or country alone—nor will “going it alone” provide a company with a competitive advantage. Companies should adopt a systems approach to influence, engage and collaborate with diverse stakeholders across their broader market system, creating shared value for all.
Back to Basics: Creating Shared Value
In 2006, Michael E. Porter and Mark R. Kramer introduced the concept of “Shared Value’” – creating a meaningful benefit for society that also adds to the company bottom line.
At the time, corporate social responsibility (CSR) had emerged as a business priority in response to public outcry against companies for externalities ranging from forced labor in supply chains to global warming. This took companies by surprise – these were issues that they had not previously considered part of their business responsibilities. Unfortunately, the CSR efforts of many companies to uphold their reputations proved to be counterproductive for several reasons.
Firstly, because CSR approaches “pit business against society” based on the belief that companies must moderate their economic success to provide societal benefits. Secondly, they focus on tensions between business and society, rather than on their interdependence, creating a generic rationale that is neither tied to a company’s strategy and operations, nor specific to the places in which it operates. Instead, Porter and Kramer suggested that companies analyze their prospects for social responsibility using the same frameworks that guide core business decisions. By doing so, CSR could become much more than a cost, constraint, marketing tool or charitable deed – it could be a source of opportunity, innovation, and competitive advantage.12
By 2011, Porter and Kramer’s concept of shared value had significantly evolved beyond CSR, with clear distinctions between the two. They defined shared value as “corporate policies and practices that enhance the competitiveness of a company, while simultaneously advancing social and economic conditions in the communities in which it operates.”13
Source: “Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth,” Harvard Business Review, January-February 2011
The maturity of sustainability practices in the mining and metals industry today greatly varies—from companies with traditional business models that still largely focus on CSR to those with renewed business models aiming to create shared value. Companies on the leading end of this maturity curve continue to evolve in their approach to sustainability, as they strive to truly create shared value for all stakeholders.
Unlike CSR approaches that tend to be disconnected from business and strategy, the greatest opportunities for companies to create shared value are directly related to their business, and in the areas most important to the business. This way a company benefits economically and is able to sustain its commitment over the long term. This rationale is more likely to gain executive attention and company-wide buy-in to dedicate adequate resources and skills. It is also where the company’s scale and market presence equip it to have meaningful impact on a societal problem.
Source: Egon Zehnder analysis; Adapted from “Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth,” Harvard Business Review, January-February 2011
The concept of shared value recognizes that community harm or weakness creates internal costs for the company. Addressing these through innovation, business frameworks, and management approaches can increase a company’s productivity and expand its market. However, managers without a strategic understanding of shared value will invariably sideline these efforts. This can lead to far greater costs when the company is later found in violation of ESG obligations. It is essential to engage all levels of management in processes that identify and prioritize sustainability issues based on their salience to business operations.
“In the mining industry, safety, sustainability and ethical compliance and risk management are foundational – there is no room for complacency. At the same time, we must acknowledge that we are big footprint players, and in addition to effectively managing ESG risks, we have a role in creating shared value for host communities and countries. So, you’ve got to be doing both—value protection and value creation—and the two are not mutually exclusive, they are often reinforcing.”
Jane Nelson
Independent Director, Newmont and founding Director of the Corporate Responsibility Initiative, Harvard Kennedy School
To create shared value, it is equally important to recognize the powerful role of the broader systems within which companies operate. Management must understand the importance of outside-in perspectives. However, this may be easier said than done. Many organizations have developed an “us-versus-them" mindset that is ingrained as a cultural norm, resulting from years of command-and-control leadership and legacy business models. This mindset not only perpetuates workplace bias, but also responds defensively to any dialogue about sustainability issues. For many companies, this has become an organizational blind spot that must be addressed through culture change.
BHP CEO Mike Henry recognizes this: “People in BHP need to be demonstrating not just a willingness but a genuine ‘desire’ to hear the perspectives of others. Sometimes those others are from within the company, but our people must also engage with communities, NGOs, business partners and standard setters. Firstly, because we are mature enough to know that we aren’t always going to get it right; and even in the areas that we’ve thought deeply and logically about, there is always a different take. So, we need to listen to how others see things from their vantage point if we’re going to come up with solutions that create the greatest possible value for the greatest possible number of stakeholders.”
Creating shared value provides the business case for building resilient systems to deliver on stakeholder expectations while helping to address global sustainability challenges. This means embracing interdependencies between the company value chain, the supply chain it belongs to, and the market system it operates within. This chapter delves further into the multilevel approach companies must take to create shared value across these “systems within systems.”
Photo courtesy of Anglo American
The Value Chain Is a ‘System of Systems’
Many mining companies operate multinational asset portfolios across different host countries. These companies deal with a wide variety of economic, political, legal, social, cultural, and technological factors unique to each of their geographically dispersed assets.
Company assets are governed by the parent company structure, standardized systems and processes, common practices and organization culture. However, each asset exists within the operating environment of the host country – governed by its rules and regulations, and interdependent on the local communities, infrastructure, institutions and network of organizations in that country.
Value chain analysis of a mining company’s activities at the site or asset level can be a useful tool for local managers to systematically identify the material impacts of company operations in each location. Value chains exhibit the sequence of physically and technologically distinct value activities that must be performed for the creation of a product or service. Every value activity within the mining value chain operates as a sub-system, with specialized teams that focus on delivering specific outcomes. Each of these sub-systems interacts with surrounding communities and the broader operating environment, creating either positive or negative impacts. These impacts can be more subtle and dynamic than most managers realize, changing over time as sustainability and social standards evolve and science advances.
Continuously identifying, monitoring and managing impacts from value activities requires systems thinking – a holistic approach that focuses on the way a system’s constituent parts interrelate and how they work over a period of time and within the context of larger systems. This requires various departments to be involved from the outset, bringing together key stakeholders from each department to compile a list of material impacts, and distinguish between the ones that are common for the entire company and those that relate to one department. With this list, start to discuss how these impacts intersect both internally and with the external environment to leverage the interconnected nature of systems thinking improvements. This paves the way for the development of integrated solutions through joint efforts, leveraging powerful methodologies to solve complex problems, such as open innovation and design thinking. Moreover, beginning on the same page makes room for company-wide buy-in and leads to better adoption and implementation of integrated solutions.
Source: Egon Zehnder analysis (with references from: “Metals & Mining Industry Standard Version 2018-10,” The SASB Foundation; “Financial reporting in the mining industry (IFRS) 6th Edition,” PwC, 2012.)
“The mining industry has done a good job in identifying material issues directly relevant to their value chain and adapting these in response to evolving challenges and stakeholder expectations. Tailings management, for example, wasn’t really seen as a material challenge some years ago, but today it is high on the list of material issues. In addition to undertaking regular materiality analysis, more companies are also doing salience analysis to better understand their impact on people and not just the impact of ESG issues on the company. So, to me, it’s a case of identifying your most material and salient ESG issues, and then—in addition to saying, what must we do internally, what must we do at our operating sites and in our own value chains—also thinking about what should we do in partnership with others to address industry-wide or systemic challenges, and what are the mechanisms we need for working with others at that broader system level,” Nelson says.
She adds that, “The industry has demonstrated that it can work systemically and collectively when there’s a crisis. They have done it very effectively around COVID-19 and tailings management. In the latter case, for example, through the ICMM, the industry came together very quickly and worked with the United Nations Environment Programme and the Principles for Responsible Investment to develop The Global Industry Standard on Tailings Management within 18 months. When it comes to crisis management, I think that individual companies usually manage well and there are good examples of collaboration.”
However, Nelson points out, “when it’s about proactively strengthening systems or addressing complex, long-term systemic challenges, that’s where we need to spend more executive attention, resources and time. We are seeing that now with climate change, for example, where companies are having to drive change both within their own operations as well as collaborating more broadly along their value chains. They are having to collaborate on the technical, operational and business model aspects of mitigation and reducing carbon emissions, as well as on the adaptation issues that they and their communities are facing, such as changing livelihoods, water issues and using nature-based solutions, biodiversity and landholdings to do offsets. And, for all these different priorities to come together for any company making a net zero commitment, they’re realizing they will have to take a systems approach and work in partnership with others.”
Source: Egon Zehnder analysis (with references from: “Responsible Mining Map,” Initiative for Responsible Mining Assurance (IRMA) website accessed in August 2021; “The nine planetary boundaries,” Stockholm Resilience Centre website accessed in August 2021)
“We have an outsized impact on the communities and the local environments where we operate. We are wholly dependent upon the support of the countries and the communities where we operate. We rely on their goodwill for the resources we need to run our businesses. Companies that perform better on ESG – those who contribute to local development and minimize harm to the environment – are the ones that in the long-run will gain preferential access to resources.”
Mike Henry
CEO, BHP
Supply Chain or the ‘Value System’
The company value chain is embedded in a broader stream of activities that create a larger system called the supply chain. COVID-19 force majeures, blind spots in information flows through supply lines and lawsuits against end-consumers for complicity in unethically sourced mine supply have all underscored the importance of resilient, sustainable, legally compliant and ethical supply chains.
Dorward-King agrees. “The supply chain is key, and I think a lot of people take it for granted. For example, have mining companies done a risk assessment on what their vulnerabilities are going to be to climate change over the next number of years? The #1 risk is going to be interruptions to their supply chain—either impacting their ability to get inputs into their operations because roads have been washed out or the power is out; or may be ships can’t come in; or impacting their ability to ship product. The #1 risk will be from catastrophic weather events and changes in long-term weather patterns. It is critically important for companies to think through that and understand its implications for the supply chain,” she points out.
Meanwhile, consumers and investors are demanding greater transparency on human rights, labor conditions, biodiversity, waste, water and energy impacts in company supply chains, including visibility on these matters across first tier and lower-tier suppliers.
End-use companies, such as Apple and Tesla, are becoming more discerning about the provenance of raw material supply, entering long-term agreements directly with miners for clean and ethically sourced metals and minerals. Investors are also doubling down on companies to ensure full disclosure of human rights issues in both home and host countries, as required by the UN Guiding Principles on Business and Human Rights (UNGPs).
Through responsible sourcing, leading companies are not only fostering ethical supply chains, but also forming long-term supplier partnerships to jointly tackle complex challenges. Engaging with suppliers and buyers drives integration and builds trust, leading to improved capabilities and innovative solutions. A network instills confidence when it offers visibility – not only into input availability, pricing and lead times – but also on whether the values, standards and practices of your trading partners align with those of your company.
Interconnected value chains within a supply chain deal with many of the same cross-cutting sustainability challenges. We are seeing collaboration along the ferrous supply chain to help address climate change for example. BHP recently signed a memorandum of understanding (MOU) with Japan’s JFE Steel to jointly develop technologies and pathways for reducing GHG emissions from the steel making process.14 Similarly, Rio Tinto has entered MOUs with the world's largest steelmaker, China Baowu Steel Group15, and Korean steel maker POSCO16. Vale is the other major iron ore producer to have partnered with Japan’s Kobe Steel and Mitsui.17
Professor of Business & Public Policy at Oxford University Karthik Ramanna additionally sheds light on how mining companies can benefit from thinking vertically along the supply chain. This starts with how your company sees itself – for instance, identifying as an energy transition company rather than a commodity producer.
He explains, “There is no such thing as a truly B2B player. Everybody is eventually producing for either public consumption or for individual consumers. The real breakthrough companies are the ones that don’t think of themselves as sectorally bound. And the way to be breakthrough from a strategic perspective is to think of yourselves as more than just a mining company, and not just as a supplier to your immediate customer. It’s about having a sense of what the end-product is and where value can be created for the end-consumer along the entire supply chain. It’s that kind of vertical thinking that really helps companies not only gain a competitive advantage, but also address sustainability (and indeed any kind of strategic) gridlocks rather than flat horizontal thinking.”
Elysis illustrates how thinking vertically along the supply chain can result in truly innovative collaboration. Elysis is set to “revolutionize” the energy-intensive aluminum industry, having developed a way to make carbon-free aluminum. It is a JV that was formed in 2018 by Alcoa and Rio Tinto Aluminum with investments from Canada’s national and local governments, as well as multinational technology company and end-consumer, Apple.18
The supply chain carries many risks but also offers tremendous opportunities to make positive societal impact, particularly for industries that depend on the social license to operate. Local procurement enables companies to empower surrounding communities and contribute to the SDGs connected with people’s lives, livelihoods, and learning. Local procurement generates income and employment opportunities through the establishment of local businesses that supply mining operations.
Mining companies play a key role in building the capacity of their local supplier base by conducting trainings, facilitating finance, and helping with technical know-how. Building industrial capabilities in remote jurisdictions is beneficial for mining companies because the greater capacity that can be built, the cheaper it is for them to operate. It also enables the community to be less dependent on any one business by creating a more resilient, adaptable and robust layer of technology, skills and capabilities, which can be applied to other businesses, making that economy an attractive investment destination.
Source: Egon Zehnder analysis
“There is a clear view today that we need to partner with our suppliers and contractors for the long term by aligning our principles and sharing practices in line with a purpose that we all believe in. The fact is that there can be no change if you don’t change the supply chain because the supply chain is even bigger than you.”
Eduardo Bartolomeo
CEO, Vale
‘Market System’ as an Enabling Environment
The 2030 Agenda for the UN’s 17 SDGs requires collective action from public and private actors across geographies, sectors and disciplines. At the same time, governments have committed to “leave no one behind,” providing everyone the opportunity to participate in the formulation of the policies and programs that affect their lives.19
International donors and multilateral organizations play a key role at the global level of the sustainable development system. They support countries with their national implementation of the 2030 Agenda for Sustainable Development. This includes financial and technical assistance, as well as policy support on development issues, recognizing the strong, complex and crucial links between social, trade, financial, economic and environmental policies. They also bring about a more coordinated system by joining forces with various partners at global, regional and country levels.
Many international donors and multilateral organizations endorse an inclusive market system development approach for achieving sustainable impact at scale. This approach focuses on building the capacity and resilience of local systems, leveraging the incentives and resources of the private sector, and ensuring the beneficial inclusion of the underprivileged.
The United States Agency for International Development (USAID) defines a market system as “a dynamic space – incorporating resources, roles, relationships, rules and results – in which private and public actors collaborate, coordinate and compete for the production, distribution and consumption of goods and services. The behavior and performance of these actors are influenced by other actors’ decisions, and by rules, incentives and the physical environment. Market systems are composed of vertically and horizontally linked firms and the relationships embedded in these linkages; end markets, input and support service markets; and the environment in which they operate, which may include socio-cultural, geographic and political factors, infrastructure and institutions.”20
Market systems also include households and communities. Individuals belong to households, which are nested within communities that fall under sub-national and national governing systems. Ultimately, households and communities are the owners of resources – supplied to firms in the factor market – and the buyers of goods and services – demanded from firms in the product market. Therefore, understanding household and community systems, and how they interact with other systems, is essential to achieve development objectives.
Source: Egon Zehnder analysis; Adapted from various sources [Perspectives on Global Development 2019: Rethinking Development Strategies, OECD, November 2018; The Whole of Society Approach, Partners for Review (P4R), October 2018]
The market system approach provides a framework to “think locally and act systemically” for creating real change at scale. It seeks to understand systems of exchange and to guide practical interventions that can lead to positive social, economic and environmental outcomes. It is analysis-led (how and why systems function); interventions are facilitated (not controlled or led); and it requires adaptive management (ongoing feedback, measurement, and learning). Furthermore, it involves all the actors and factors that interact to shape the outcomes of an exchange.21
Leading companies are realizing that complex sustainability problems can only be addressed by resolving underlying constraints in the market system. Dealing with the root cause of market failures is the only way they can truly achieve ambitious shared value strategies.22 Understanding the market system and knowing its leverage points can help companies identify where to intervene such that a small shift in one thing produces big changes system wide. However, no one company can resolve systemic challenges alone.
Companies that take a market system approach can leverage this enabling environment to remove barriers and craft innovative solutions without having to bear all the costs. This is made possible by the participation of government, non-profits, different business sectors and others. However, participation by multiple actors can only emerge when there is genuine interest for engagement, space for collective work and the co-creation of knowledge.23 The SDGs provide common ground and a strategic framework for companies to encourage wider participation in collective action efforts.
The Climate Group’s global initiatives, such as SteelZero, EV100, RE100 and EP100, are good examples of the market system approach. Climate Group is a global not-for-profit that works with both governments and businesses to accelerate climate action. Climate Group Chair Joan MacNaughton shared with us how the organization works with different market actors to unlock the power of collective action.
Member companies of Climate Group’s EV100 initiative commit to switching their fleets to electric vehicles and installing charging infrastructure for employees and customers by 2030. According to MacNaughton, “One of the great things about EV100 is that we’ve made that connection with governments. This includes working with EV100 members in the U.S. to produce a position paper on how to drive key policies there. We were also instrumental in bringing forward the phase out of internal combustion engines from 2035 to 2030 in the UK. This was made possible by bringing together the business experience of what’s feasible, communicating that to government, and then government listening, because government needs the expertise of business to make well-informed decisions.”
MacNaughton explains that, “An individual company may feel that they don’t really have the resources to make a big push on something unless it was very directly about their own company interests and bottom-line. And that’s where the priority should be. But that’s not necessarily what is most sought after by government. Government wants to understand: are we going far enough, could we go a bit farther, is this actually the right way to do it? And so, our business programs synthesize those views and those areas of expertise in a way that can be very influential with government.”
Citing the RE100 initiative as another example, MacNaughton says, “It means you commit to procure 100 percent renewable electricity for your operations. When we started out some companies had difficulty finding sources of renewable power, but the intent was to send a signal to the market (and project developers) to create supply of renewable power. The annual demand from our RE100 members today is greater than the annual electricity usage of the UK. So, we're creating those demand signals, which I think are important.”
Launched in December 2020, Climate Group’s SteelZero initiative also seeks to create demand signals for zero carbon steel. MacNaughton shares that, “The concept is to have a feedback loop from companies with the purchasing power that goes back upstream into the steel industry.” Organizations that join SteelZero publicly commit to procure 100 percent “net zero” steel by 2050. With their collective purchasing power and influence, member companies seek to send a strong demand signal to shift global markets and policies towards responsible production and sourcing of steel. Although it is still early days for SteelZero, MacNaughton adds that “we are beginning to see signs of partnerships between miners and steelmakers to reduce emissions linked to the materials needed for the steel making process.”
Think Locally, Act Systemically, Deliver Strategically
A holistic approach to sustainable development implies the engagement of diverse actors across international, national, and local levels to shape policy and ignite collective action. Pathways to sustainable development require international cooperation, national policy formulation and implementation down to local levels. Below are some key considerations for companies to keep in mind as they think about their role at every level within sustainable development pathways24:
Local/Place-based
- Local companies and actors are best placed to understand the root cause of systemic challenges. They have the legitimacy, convening power and capacity to mobilize resources locally. They can also provide the sustained efforts needed to see these long-term strategies through.
- Relationships with surrounding communities, NGOs and government officials at this level are of paramount importance for companies to maintain their social license to operate. “People’s lives, livelihoods and learning. Those three categories are directly important to mining companies from both a risk management and a value creation perspective, and they align with many SDGs from an impact perspective. However, beyond the company’s own operations, there are also systems issues associated with these” Nelson says.
- Often, mining operations are in remote jurisdictions where local content development has significant relevance, particularly if this is the largest economic activity and major source for job creation, local procurement and infrastructure development. However, only focusing on local content development at the community level could mean opportunities to create shared value over the long term may be lost. Nelson feels that, “Nationally, beyond the immediate community in mining jurisdictions, I don’t see the mining sector collaborating enough with each other or other sectors. Companies need to be thinking about what they can do to move up the value chain nationally and mature from being project-focused, although that remains essential, to also taking a broader systems approach to job creation and sustainable development.”
National/Sub-national
- The SDGs provide a global framework for goals and targets that each country commits to implement nationally. At the national level, efforts to address systemic challenges typically focus on the policies, financing and institutional support needed to scale up interventions.
- Subnational (state or provincial) authorities play an intermediary role between national and local governments in the implementation of development initiatives. This is where a lot of the regulatory decision-making power lies and also a substantial proportion of the government’s procurement spend.
- However, if individual companies engage in influencing public and regulatory policy, this may be considered lobbying and anti-competitive. “Collaboration is a must to solve collective action problems, but in most cases this should happen vertically. When companies think about collaboration, they usually get nervous because they think of it as horizontal or sectoral collaboration, and they worry about antitrust issues. There are some pragmatic decisions on which companies could collaborate sectorally, particularly those that involve sector-specific taxes or regulation, but they must tread very carefully here. Otherwise, collaboration is probably better done cross-sectorally through a chamber of commerce,” Ramanna suggests.
- Cross-sector collaboration is key, as all national industries face similar systemic issues and constraints. National development strategies and sustainability efforts must be multisectoral to successfully respond to the multifaceted and cross-cutting challenges unique to that country. According to Dorward-King, “One of the harder questions is how to create public-private partnerships that can really make a difference in a country or a region. If you are talking about energy production and transmission, or people’s right to access water and have access to clean water – how do you help business and local government, national governments and even supra-international organizations participate in those kinds of partnerships that can make real large-scale difference? How do you get people to come to an agreement to share those resources? These are complex problems, but we ought to be able to tackle them, particularly in the mining industry, because where you have your assets, you’re going to be there for a long time. So, you have time to act, build trust, make agreements, make investments, recover the capital investment, and have good impact.”
Global/International
- The dynamics and relationships between various types of actors that comprise an industry’s global market system are highly complex. These connections can be viewed as a “chain of influence” that leads development efforts from intent to effect – from international donors and multilateral agencies, to intermediary NGOs and NPOs, to different layers of government, and the support local actors and companies receive in their local context.
- A global perspective is essential to understand the complex inter-linkages in the market system and potential barriers along the chain of influence. By doing so, companies can harness the global market system’s capability to meet local company needs and create more enabling spaces for partnerships and collaboration to develop sustainable solutions. Moreover, taking a global view is much more important today, given rising global inequalities and increased geopolitical risks.
- Additionally, a pressing concern for the mining industry is the lack of convergence toward a clear set of global sustainability standards. This is key for the industry’s competitiveness in the global market. For an industry that is viewed by many in poor light, there is a shared interest among mining companies to lift the standards of performance for the sector as whole. For this to happen, a set of global standards accepted by all the industry’s diverse stakeholder groups is essential.
- According to Henry, “One of the things that I’ve been speaking about publicly is the need for continued improvement in the way that markets function. For example, to meet the challenge of climate change, the world is going to need a lot more by way of mined commodities. And if the world’s need for those commodities is to be met in a timely, cost efficient fashion without unintended bad sustainability outcomes – i.e., too much water use or emissions generated, biodiversity impact and so on – then it is going to be important that good companies are the ones who meet that increased demand, and those companies need to be operating to higher standards. Right now, markets are operating somewhat inefficiently in this regard. There is insufficient alignment on what good performance looks like. Companies at the extreme bad end of the spectrum do get hit with higher capital costs and so on, but I don’t think there is an appropriate premium being reflected in the multiples of companies that operate to the very highest standards. Arguably there’s a bit of premium, but probably not significant enough to drive what the world truly needs, which is for supply of commodities to be met by the best companies in terms of ESG performance. The markets continue to muddle through and will get there in the end, but it will take quite a while. The world doesn’t have a long time to address climate change. So the quicker we can cut through market inefficiencies and build stronger alignment around common global standards – and the more performance against those standards gets better reflected in the cost of capital for different companies – the better it will be for the world.”
- However, without multi-stakeholder governance and participation in the development of globally accepted sustainability standards, the industry may remain relatively undervalued compared to other sectors. “I don’t necessarily believe that globally there is interest in environment, climate change and social inclusion with respect to standards set by the industry itself, through trade associations, for instance. I would rather propose to give this to a neutral party, preferably if: a) it was not regional but global, and b) it has to be an organization that truly understands the private sector,” advises Anne Kabagambe, former World Bank Executive Director and Barrick Gold Non-Executive Director.
The Trust Paradox
Creating shared value has increasingly become a business imperative in recent years. But at the core of creating shared value, lies society’s trust.
The legitimacy of business has been called into question based on the premise that companies have prospered at the expense of broader society. At the same time, business may provide solutions to many of the world’s sustainability challenges, given the expertise and scalable business models of the private sector.
“We face a challenge now when communities resistant to new industrial scale extraction ask, ‘can you show me the well-run industrial scale mine?’ Of course, this depends on how and who defines well-run or sustainable or responsible. From a community perspective, if we look at not only current employment but also value post life of mine, or clean drinking water, or water the community feels safe to use for livestock, or wells not drying, or blowing dust – there are few examples that could hold up to universal applause. And this will continue to feed the blockading of roads, fundamental conflicts and violence at the interface unless we step right into the heart of those issues. We need to be honest about the impacts that go with extracting mined materials that industrialized society uses every day, hold responsibility for improvement across the supply chain, and offer greater financial value to companies that better protect social and environmental issues,” says IRMA Executive Director Aimee Boulanger.
The 2020 Edelman Trust Barometer revealed global distrust in all four societal institutions – business, government, NGOs and media. A strong signal that institutions must embrace new ways to effectively build trust by “balancing competence with ethical behavior.” Respondents also identified collaboration as a big opportunity for institutions to advance society and build trust. However, partnership was the lowest scoring indicator for business, NGOs and government.25 Looking ahead, greater transparency will be essential for rebuilding trust with society.
“Many mining companies need to do better homework regarding their ESG or SDG related reporting. Many claim that they are doing fantastic work, and they do. But as often reported by auditors, investors, banks, assurance frameworks and NGOs, the quality of data is not always that great. For instance, the Responsible Mining Foundation (RMF) publishes a report every second year wherein they scrutinize 50 of the largest mining companies for their Responsible Mining Index. The RMF only filters through publicly available information, and they report that much of the data is selective or simply missing. Many companies are not happy with the feedback from assurance frameworks or the RMF, but the industry needs to realize the necessity to disclose. The mining industry has a major role to play in contributing to the realisation of the SDGs and a responsibility to show how they are mainstreaming the SDG goals into the way they do business. Finally, the business case for action on the SDGs nowadays is both strong and well-recognised. Those companies that effectively embed the SDGs into their core operations and strategies will ultimately strengthen both trust and their ability to meet the challenges of the future,” says Jörgen Sandström, Head of Energy, Materials, Infrastructure Program - Industrial Transformation, World Economic Forum.
Transparency is key to foster an organizational culture that is grounded in ethics. Ethics goes above and beyond compliance with legal requirements—it involves learning what is right and wrong, and then doing the right thing. This means transparent decisions and behavior guided by authenticity and compassion, taking into consideration the perspective of all stakeholders. Building trust with society is not only about making appropriate disclosures, but also being transparent about why business leaders make the decisions they make.
Photo courtesy of Anglo American
Footnotes
12. “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review, December 2006
13. “Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth,” Harvard Business Review, January-February 2011
14. “BHP partners with JFE to address decarbonisation in the steel industry,” BHP Press Release, 10 February 2021
15.“Rio Tinto advances climate partnership with China Baowu Steel with US$10 million investment,” Rio Tinto Press Release, 16 December 2020
16. “Rio Tinto and POSCO sign climate MOU,” Rio Tinto Press Release, 8 July 2021
17. “Vale informs on non-binding heads of agreement with Kobe Steel and Mitsui & Co.,” Vale Press Release, 13 July 2020
18. “With a Push From Apple, Rival Aluminum Makers Team Up Against CO2,” Bloomberg Businessweek, 21 April 2021
19. “Leaving no one behind,” United Nations Committee for Development Policy, 2018
20. Market Systems Resilience: A Framework For Measurement, United States Agency for International Development (USAID), December 2018
21. Value Chain Development for Decent Work (Third Edition), International Labour Organization, January 2021
22.“The Ecosystem of Shared Value,” Harvard Business Review, October 2016 Issue.
23. The Whole of Society Approach, Partners for Review (P4R), 2018
24. “Multiple Pathways to Sustainable Development roundtable”, UNEP, July 2015
25. “2020 Edelman Trust Barometer”, Edelman Data & Intelligence
