CSR is more than a nicety for the global mining industry. It can be a source of competitive advantage and a requirement for maintenance of a "social license to operate". These business imperatives can transform an otherwise "voluntary" CSR standard into a business necessity. Forward thinking business leaders in the natural resource sector understand that doing business today means not only meeting the minimum legal and regulatory requirements, but also understanding the CSR expectations affecting their business strategies.
What Triggers the Duty to Consult?
Corporate Social Responsibility ("CSR") represents a strategic imperative for leading firms in the global mining sector. Whether a global mining company is seeking to meet environmental and social performance standards to obtain project financing - or meet stakeholder expectations to avoid reputation or regulatory risks - sustainable profitability can depend upon the maintenance of legitimacy and a social license to operate. Integration of legal advice into a CSR strategy can mark the difference between mere public relations and real competitive advantage.
CSR and Legal Risk Management
CSR expectations are highly intertwined with legal and regulatory obligations, particularly where voluntary self-commitments become the benchmark against which corporations are judged by their stakeholders. CSR is manifested in the integration of social, environmental and economic factors that determine corporate legitimacy into an organization's vision, mission, ethics, culture and governance systems. An effective CSR governance strategy must consider:
- Corporate governance and ethics
- Health, safety and security
- Environmental management
- Human rights
- Labour relations and human resources management
- Relations with local Aboriginal and non-Aboriginal communities,
- Anti-bribery and anti-corruption measures
- Supply chain management
- Corporate reporting
Effectively addressing the CSR concerns of corporate stakeholders necessitates accountability, transparency, the use of best practices and effective legal and regulatory risk management in these areas.
Due to the strategic implications for business organizations, a company's CSR programs are typically a concern for the highest levels of corporate management. Corporate boards may be legally responsible for monitoring compliance with corporate codes and policies. Social and environmental issues affecting CSR will often be part of this obligation. To meet these expectations and capitalize on opportunities, corporate boards and managers should consider the risks and opportunities that CSR issues present for the strategic goals and vision of the business and act accordingly.
Effective CSR Governance
Management systems and accountability oversight should be developed to ensure that the CSR vision and strategy of senior management is implemented throughout the organization. This may necessitate the establishment of a responsibility centre, which could include a CSR committee on a company's board of directors. Once the strategic vision and lines of accountability for CSR have been established, steps will need to be taken to implement the strategy at the operational level, including through the training of employees and the integration of CSR governance practices into contractual relationships. When initially developing a CSR strategy, this will require an assessment across the organization to identify risks as well as development of policies and procedures for CSR.
Transparency and Stakeholder Engagement
Building legitimacy with stakeholders is comprised of two key components: (a) ensuring corporate transparency; and (b) engagement with interested stakeholders. Transparency allows for disclosure of information that will allow stakeholders to make informed decisions. Engagement allows stakeholders to provide feedback to the business organization based on the information they have regarding the operations of the business.
Engagement with stakeholders allows corporate leaders to not only understand the legitimate expectations of stakeholders, but also assists companies to establish their performance benchmarks. Regular CSR reporting to stakeholders, coupled with ongoing stakeholder consultation, continues to inform the establishment and amendment of these performance benchmarks. In this way, there will be no CSR "finish line" - CSR commitments must be reviewed and revised with stakeholder input on an ongoing basis.
Measuring Impact & Auditing for Accountability
It will be important to track progress in the implementation of a CSR strategy. Tracking can include the monitoring of key performance indicators and qualitative feedback from stakeholders. Grievance mechanisms can be established to provide procedural avenues for gaining stakeholder feedback. These may be structured as part of contractual relationships with external stakeholders, or managed internally by the corporation itself. The feedback received from such processes should be continually reviewed and audited to determine whether the business is operating in a manner consistent with the corporate CSR strategy. Legal oversight of policy development is advisable, particularly since legal counsel will be essential to defend corporate practices in the event they are challenged in future.
The trend in financial disclosure requirements around the world has been towards greater disclosure of social and environmental matters. The definition of materiality has been expanding to account for the complex ways in which social and environmental practices can have a material bearing on a company's current and future operations. Global mining companies are increasingly expected to report in their publicly available statements all known trends, events or uncertainties that materially affect the company's performance. Such transparency creates reputation and legal risks that must be managed in the implementation of the CSR governance strategy.
Sustainable and Integrated Decision Making
Fundamentally, CSR is about the integration of social and environmental factors into the decision making and governance of a business organization. The integration of legal risk management with "beyond compliance" best practice approaches to CSR can allow global mining companies to anticipate change, stay ahead of regulatory risks, and drive competitive advantage from their CSR strategy.
While the adoption of a CSR strategy necessitates going beyond legal compliance, it cannot be sustained without it. Where global miners seek to adopt a CSR governance strategy, the objective should be to integrate CSR strategies with legal and regulatory risk management. With thought, planning and foresight, legal compliance imperatives will not act as an obstacle to the adoption of CSR governance strategies. Instead, the business objectives of stakeholder engagement, the adoption of best practices, and promotion of oversight, accountability and transparency, will be enhanced by effective and strategically minded legal advice, given by legal advisors conscious of the business imperative behind CSR.