How mining companies can create shared value beyond compliance
Deloitte introduces value beyond compliance
In current market conditions and socioeconomic circumstances, mining companies need not only innovative business models to deal with cost, capital, efficiency, talent, technology and digitisation, but also new strategies to manage rising stakeholder demands, strategic risks related to their social licence to operate (SLO) and increased regulatory requirements linked to socioeconomic priorities.
Globally, society is increasingly disillusioned with business profit at the expense of society. Governments have tried to balance company profits and competitiveness with benefits to society by introducing policies and regulation. While this has led to an increase in corporate social responsibility spending, it has had a limited impact. High levels of unemployment, poverty and wealth inequality remain ubiquitous.
In many countries, the true socioeconomic contribution of mines is being questioned. External stakeholders, such as government and communities, believe that historically mining companies were the sole earners of wealth and that they continue to prosper at the expense of the broader society. Negative stakeholder sentiment persists and brings forth potential social volatility, which in turn affects a mining company’s SLO.
Still, mining companies have invested significant sums in local socioeconomic development as they seek to comply with increasingly comprehensive socioeconomic development scorecards set by national government.
In SA, for example, many mining companies face the challenge of dual compliance with the Mining Charter III of 2018 and the department of trade and industry’s broad-based black economic empowerment scorecard, which aims to drive priorities of socioeconomic development, industrialisation, transformation (which includes black ownership, employment equity, diversity and inclusion) and localisation. Governments view resource endowment as a vehicle for wealth creation, competitiveness and social progress, and the pressure and cost of compliance will remain.
How then does the mining CEO build greater social capital, deal with stakeholder perceptions and demands, achieve a greater socioeconomic impact, meet compliance requirements and ensure an SLO? A new paradigm is required and mining companies need to find new innovative strategies to ensure both their economic sustainability as well as their SLO.
New paradigm thinking and value beyond compliance
Deloitte believes mining companies have the opportunity to take the lead to bring the sector, government and society closer together and create shared value beyond the compliance agenda.
Value beyond compliance is about the fundamental synergy between economic performance and social progress and creating shared value.
There are various ways in which Deloitte's clients seek to generate shared value.
In some cases, it means collaborating with other mining companies to bring local government and communities on board and jointly plan and deliver on local socioeconomic cluster development.
In other cases, Deloitte works closely with its clients to develop and implement a range of shared-value strategies related to stakeholder engagement, enterprise and supplier development, diversity and inclusion, the regulatory environment and measuring impact.
Value beyond compliance strategy and implementation is underpinned by two important enablers.
- Analytics improve decisions related to core mining business and hold enormous potential to integrate and help companies track socioeconomic baseline data; stakeholder needs, disposition and desires; implementation progress and results of community development projects and initiatives; and to visually overlay this information on maps with geographic information systems data.
- Innovation is required to find new ways of engaging stakeholders, especially the youth; exploring economic succession to ensure a sustainable future for regions beyond the life of mines; reconsidering mining land use in the context of agricultural innovation; and using digitisation as a driver for greater social benefits and alternative economic opportunities.
In the new paradigm of value beyond compliance, it is important to collaborate with stakeholders, other mining companies and the government; explore innovation as a means to solving socioeconomic development issues; make new strategic choices; and measure the true socioeconomic impact from the perspective of citizens, governments and mining companies.
To read more on the six courses of action that mining companies can follow to achieve value beyond compliance, visit Deloitte's website.
This article was paid for by Deloitte.