Losing Your Social Licence

The global mining  sector is under crushing pressure to slash budgets for project development just to survive the current cycle of low metal prices. Yet, while some Canadian mining outfits operating domestically and abroad are touching the brakes on their corporate social responsibility programs, most realize completely stopping CSR programs to save money could be a death knell for current operations and future development when prices do bounce back.
Toronto environmental lawyer Adam Chamberlain hasn’t personally seen mining-sector clients or companies “pushing aside their CSR initiatives.” But, adds Chamberlain, National Leader of the Team North, Aboriginal Law and Climate Change Groups at Borden Ladner Gervais LLP, with profits down in the sector there’s been a disincentive to move CSR initiatives ahead at the pace they once did. “That has implications. Even if you still have every intention of doing all the great things you need to do to maintain your CSR commitments to the outside world, it’s going to look like you are doing less, even if you eventually do the same things you’ve always promised you’d do.”
So it’s important, says Chamberlain, that even when markets are down mining companies maintain relationships they’ve fostered in the communities where they operate now or plan to one day. The concept of social licence to operate (SLO) after all – that tricky and rapidly intensifying necessity to gain the trust and consent of local and indigenous communities to operate on their turf – is both hard to earn and easy to lose.
Smart, responsible companies know that, says Robin Junger, who co-chairs the Aboriginal and Environmental practice at McMillan LLP in Vancouver. A chief treaty negotiator and former Deputy Minister of Energy, Mines & Petroleum Resources as well as Energy and Clean Technology in the British Columbia government, Junger helped develop some of the province’s key environmental legislation. He’s helped major project developers in LNG and mining reach benefit and capacity funding agreements with Aboriginal groups.
From what he has observed so far, mining companies are “working very hard to keep a focus on CSR even though the financial challenges make it difficult at times. What I have seen is them having open and honest discussions with communities about how spending is down, their treasuries are down, but that they want to preserve a relationship.”
The notion of CSR and concept of social licence to operate in the extractive sectors, says Junger, are no longer flavours of the day. Put on an evolutionary scale, says Chamberlain, you could say that in the mining industry CSR practices are finally walking erect. “We are not knuckle dragging. … We have probably evolved as far as we need to. These are practices that are well understood and I think well used by many.”
Many, but not all. You get SLO through well planned and rigorously applied corporate social responsibility policies and initiatives. But recent global history is replete with examples of mining companies whose weak or non-existent CSR resulted in delayed, blocked or shut-down operations.
When they failed to engage the participation of local communities or people in their projects, mitigate environmental and social impacts in conjunction with them and deliver meaningful benefits such as training and jobs, things went badly sideways. With about 75 per cent of the world’s mineral exploration and development companies based in Canada, Canadian mining firms have had their share of SLO blunders.
In Guatemala, HudBay Minerals Inc. faces allegations in three separate civil suits that its security personnel were involved in the rape and murder of local Mayan Q’eqchi’ opposed to its Fenix mine operation, which it acquired in a 2008 merger and sold three years later. In a 2013 decision, the Ontario Superior Court of Justice struck an important precedent when, in denying HudBay motions that there was no jurisdiction for the complainants to sue in Ontario, it ruled the Q’eqchi’ suits could proceed. That ruling – meaning Canadian companies could be sued in Canada for human rights and environmental abuses alleged at operations they controlled or owned abroad – only amped up the importance of CSR for the Canadian extractive sector. (HudBay denies the claims and says, on its website, “It takes its role as a corporate citizen seriously and respects and protects human rights wherever HudBay operates.”)
Rightly or wrongly, they’re just one of a slew of Canadian mining firms facing international claims they fostered human rights or other abuses at their operations or were negligent in preventing them.

China – often shamed internationally for its extractive resource practices – has one of the worst reputations in the global mining industry when it comes to CSR. Driven by its “Going Out” strategy, China has encouraged its state-owned and private mining companies to exploit mineral opportunities in Africa, Latin America and other foreign regions at a voracious rate. Yet Chinese mining companies have been chased out of countries – and their mine managers occasionally murdered – for their callous treatment of local workers, not to mention for completely ignoring community concerns about pollution, health and safety and getting fair economic benefits from their resources.
“I think it can be pretty well proven,” says Steven Vaughan of Chinese and other foreign operators, including Canadians, “that most mine failures in the last 10 years have been failures because a mine company did not get a social licence to operate.”
The world has become a place where resource nationalization has become ever more prevalent. Countries are demanding more benefits to their economies and their citizens from the foreign companies extracting resources within their borders. A leading expert on mining law with Dorsey & Whitney LLP in Toronto who has worked in 65 countries over four decades as a lawyer, Vaughan ticks off examples of how mine companies have flubbed even basic CSR concepts since the term “social licence to operate” was first coined in 1997, by, as it turns out, a Canadian mining executive.
 “There have been a whole bunch of mine failures throughout the world caused by the inability of mines to relate well with the local communities,” he says. “That is, by not giving them jobs, not giving them training, not getting them involved in any way, shape or form. Not buying locally or using local companies. In a lot of countries they have been running foreign companies off title and told them to get the heck out of their country, because there was no benefit.”
In today’s activist atmosphere, where environmentalist and human rights NGOs will agitate and assist local communities to stand up to mining operations that don’t consult with them or ignore their concerns, even the Chinese, at last, have figured out that enlightened CSR practices are critical to their bottom line.
The China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC) recently published its Guidelines for Social Responsibility in Outbound Mining Investments. It calls on Chinese mining firms to implement CSR strategies “such as improving production efficiency, ethical and fair operations, labour conditions, providing safe working conditions, minimizing environmental pollution, avoiding contributing to armed groups or sourcing ‘conflict minerals.’” And, it adds, they should strive for “improvements in the lives of the local community.”
Looking at the guidelines spelling out how Chinese mine companies should comply with ethical business practices, strive for transparency and respect human rights and the environment, Vaughan concludes “in my humble opinion they are the highest CSR standards that any country in the world has.” Whether the Chinese will practise what the guidelines preach remains to be seen.
Meanwhile, the Canadian mining sector, while generally leagues ahead of the Chinese in terms of the evolution of CSR practices, still struggles with how it is supposed to achieve social licence to operate. David Bursey doesn’t particularly care for the term, first used 19 years ago by a former executive of now-defunct Canadian mining company Placer Dome. Bursey, Co-head of the Aboriginal Law Practice Group at Bennett Jones LLP in Vancouver, says the term is misused and misunderstood.
“You can use terms like public acceptance and public trust, or corporate social responsibility,” says Bursey. But for him the word “licence” in social licence to operate implies a kind of official permission to do something. And the reality is SLO is really an unwritten social contract with no legal status or specifications for companies seeking to develop such things as mines.
“One of the challenges of social licence, since it is by definition outside of the legal framework, is there is no mechanism to know when you have achieved social licence to operate,” says Bursey. Because a project can affect many people in different ways – environmentally, culturally, job-wise – it can be difficult to determine which elements in communities you need to achieve social licence with in order to proceed smoothly with a project, regardless of the go-aheads given by governments and regulatory authorities.
Yet, points out Bursey, the whole reason we have government regulatory bodies overseeing resource development is so decisions can be made on a scientific basis, illuminated by rational arguments on all concerned sides. “When you talk about social licence you are moving away from that process,” he says. “If opponents have a loud voice and don’t like the results you have achieved through an environmental assessment and then they can frustrate a project, then you are frustrating your ability to move in a rational and democratic way.”
One critical problem with the explosive use of social media by mining opponents is they are essentially free of accountability for their claims and views, says Bursey. As a result, for those in the mining sector, “credibility has to be earned every day.”
Credibility might be easier to earn, suggests Junger, if there wasn’t a lack of leadership by the federal and provincial governments in developing CSR standards resource companies could follow domestically and abroad in order to satisfy their obligations to achieve public trust. “What is ‘standard’?” asks Junger. “Companies are left to their own devices to sort this out. That’s a major challenge: the uncertainty, the unregulated nature of all this.” The absence of clarity around such issues as, for instance, what constitutes consent when negotiating with Aboriginal communities, or what companies need do in terms of benefits agreements when negotiating with impacted communities, “do have a negative impact on investment,” says Junger.
So do the Supreme Court rulings that, starting with the 2004 decision in Haida Nation v. British Columbia (Minister of Forests) – which established the Crown duty to consult and accommodate with First Nations, Métis and Inuit groups – have enhanced the rights of those groups to determine how resource companies operate on claimed or treaty lands. That duty requires that whenever a provincial, territorial or federal government is involved in a decision that could adversely impact Aboriginal or treaty rights, it must consult with impacted groups. Since then, notes Ann Bigué, a partner at Dentons Canada LLP in Montréal, subsequent rulings and interpretation by the courts have increased the need for mining and other resource companies to address the expectations of Aboriginal communities.
And, with those communities more vocal and better prepared with qualified advisors to defend their rights, Canadian mining companies, says Bigué, have become “very conscious of the fact they have to build good relationships with Aboriginal people to make sure they achieve a certain level of mutually beneficial relationships. Relationships where Aboriginal people are not left out, not ignored.”
Those communities, she says, “want to participate, to help define how things will happen.” And they want training, jobs, contracts for their business enterprises and entrepreneurs, as well as wanting to ensure the future health of their communities and the environment.
So regardless of whether you use the term social licence to operate – a community’s social permission for a company to conduct business on their turf – the corporate social responsibility initiatives required to obtain it are now as important a tool to modern mining and other extractive industries as the pickaxe was to the Gold Rush.
Without it, regardless of all the government permits and approvals tucked under their arms, mining companies will find it difficult, even impossible, to start digging holes.