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INSIGHTS: Creating value beyond compliance: towards a new paradigm of Social Integration

By 24th August 2023No Comments

According to an EY survey, out of 150 global mining companies 44% cited Social License to Operate (SLO) as the number one risk to their business in 2020. In fact, SLO was considered the top business risk for miners in 2019, 2020, and 2021 around the world. In 2022 and 2023 the top risk shifted to Environmental, Social and Government (ESG) issues.

However, obtaining and maintaining a Social License to Operate can be considered a key for getting the “S” right in ESG performance. SLO, in essence, refers to ensuring the acceptance of communities with respect to a planned mine development and avoiding community related conflicts. These conflicts constitute a high risk for miners around the world due to the potential to stall project development and interrupt production. One could argue that an SLO (or a lack thereof) is actually far more powerful than a government or regulator when it comes to the consequences it can have for mining companies and to their reputation, their standing with investors and consumers and the impact on financial returns.

Mining companies to date have responded with a broad range of activities to manage and improve compliance, community relations and the risks emanating from poor acceptance by communities and the larger public. Today, virtually every major mining company releases a detailed sustainability report. Yet, unstable relationships and disputes between miners and communities are not declining and proper engagement with local communities and indigenous landowners does still not seem to be common in the mining industry.

Doing mining the right way then has to include getting community relations right. However, the obvious question is: why are engagement activities failing to close the trust gap between the mining companies, communities and society and how to make those relationships work in a broader scale?

Limitations of current community engagement practices
Even though mining companies are well aware of the need to engage communities early and earnestly, creating successful long-term relationships with communities and stakeholders is, in actuality, easier declared than accomplished. Successful relationships are based on trust and mutuality and building them is a process that cannot be rushed or simply checked off a list. It takes time, financial and personnel resources, commitment, foresight and courage, as well as skilful communication and willingness to listen and learn. Unfortunately, to date these skills necessary to put responsible mining into practice are rarely taught or trained within educational mining institutions and programs. In fact, even outside mining, these skills are rarely taught in tandem with their direct business programmes.

In addition, with mining companies often being the sole or main employer and an important tax-payer in a given region, this situation may make some mining companies feel less incentivized to engage the surrounding communities and their management teams may not be accustomed or required to deal with initiatives “outside the fence”.

Also, mining is a long-term, capital-intensive business and management seeks to reduce risks as much as practically possible, showing some level of aversion to innovative engagement practices to avoid what might be considered an additional level of uncertainty. Consequently, much of the relationship building with stakeholders and communities has focused on more traditional activities, including philanthropic engagement and community investment relevant from the company’s point of view. However, these activities are rarely connected to the core business of the mining company and, more often than not, could contribute to cost savings. More importantly, however, they are based on a transactional relationship with the local communities.

It is, at its core, precisely this transactional nature of activity towards communities, where something is given or provided to the community in exchange for accepting the mine development, that has left communities dissatisfied and at least partly explains the still present discontent with mining projects. The lack of true participation and failure to meet the actual needs and demands of communities have left mining companies unable to reduce their exposure to SLO risks.

However, in many cases, it is not for lack of trying. As Dean Slocum, Founder and President of social and environmental risk management consultancy, Acorn International, aptly put it in a recent interview with The Intelligent Miner: “It’s rare that we find a mining company that doesn’t understand what meaningful engagement means … but it’s common that we run into mining companies who struggle with making that happen.”

It is, at its core, precisely this transactional nature of activities towards communities, where something is given or provided to the community in exchange for accepting the mine development, that has left communities dissatisfied and explains, at least in part, the still present discontent with mining projects.

Drivers for change
Yet, there are several factors that consistently put additional pressure on the mining sector to get community engagement right and rethink the value they create for the communities they operate in or that are affected by the operations.

On the one hand, there is an increasing scrutiny from investors, especially large institutional investors ascribing to the Equator Principles or the International Finance Corporation’s (IFC) performance standards, which results in meaningful engagement and creating social value becoming critically important and increasingly considered good international projects.

On the other hand, today’s interconnected of society, where news can travel the planet in an instant, has led to a rising awareness in the communities about environmental, social and governance issues and what they can demand from mining companies. It has also increased awareness among, and instant scrutiny of, the larger public and social media can pose immense reputational risks in case of malpractice.

This increased stakeholder pressure and the rise of structured ESG investing means that finding new ways to be responsible and engaging earnestly and differently with host communities has actually become a key to long-term competitiveness for mining companies.

Emergence of new approaches
In response, different approaches have emerged that aim at creating trust and partnership across the sector.

One way of moving to a more equitable partnership is for communities to become equity partners in projects. This has been an emerging trend in Canada and the U.S., where indigenous communities expect generational benefits from developments on their land.

Another approach is to seek out points of intersection between the concerns and needs of host communities and the goals and requirements of companies and identify an entrepreneurial and mutually beneficial way to tackle common goals and shared needs to create value.

Organisations that are able to bring these approaches to life and succeed in building trusted and equitable relationships with their host communities will likely generate new opportunities faster while lowering their development and operating costs with fewer disruptions.

Appian has already reaped the benefits of paving new paths in community relations and has been publicly recognized for its approach to community engagement, going beyond traditional approaches towards a new and unique paradigm developed within Appian: Social Integration.

The Appian approach: Social Integration
“As long as you need to ask for a social license (to operate), it means you are lagging behind and you are a foreigner to the environment you are in, it means you are not integrated into nor part of the socioeconomic system or landscape you operate in” says Silvio Lima, Appian’s Head of Corporate Affairs, ESG and Community Engagement, “which is why within Appian we have stopped talking about social license but rather speak of Social Integration”.

The strategy of Social Integration is closely linked to and aligned with Appian’s overall business strategy. Adequate integration with the local territories directly contributes to a stable operational environment, supports the overall business strategy and enables Appian [to do what] while building a legacy of excellence and sustainable opportunities for local development.

Being integrated with the local socioeconomic environment means becoming an integral part of the territory the mine is located in, just like any other member of the community and any other stakeholder. It means the mining operation gets woven into the fabric of the area and the aim is to create a sense of belonging, on the part of the mining company as well as of the communities.

The focus of Social Integration thus is to move past transactional relationships and to build trustful relationships that can be leveraged to find mutually agreed and sustainable options. Decisions naturally involve some sort of compromise and these are mutually agreed alternatives and reached in partnership and based on mutual respect. This means that learnings are shared openly, while there is an openness to finding improvements together, seeking alternatives, debating and engaging with one another based on an understanding that all parties belong to and care about the wellbeing of the communities and the sustainable development of the territory.

“When it comes to community relations, it is about what is important to the people living there, not what is important for the company or what the company thinks is important to the communities,” Silvio Lima points out emphasizing the shift in mindset that needs to take place.

When it comes to community relations, it is about what is important to the people living there, not what is important for the company or what the company thinks is important to the communities.

Silvio LimaHead of Corporate Affairs, ESG, and Community Engagement

In order to identify opportunities that are in alignment with the overall business strategy as well as with the strategic objectives of Social Integration, Appian has developed a structured approach for identifying suitable projects that create value for all parties involved. The first step is a dynamic diagnostic or mapping of local demands as well as capabilities, capacities and opportunities for local development. This is done through continuous stakeholder dialogue, while potential initiatives are evaluated and classified against a management matrix. This matrix allows one to classify initiatives based on their potential for value creation as well as their implementation effort (complexity, cost, duration). Promising areas for sustainable value creation that Appian has identified include education, local capacity building, income generation, environmental conservation, local procurement and volunteering.

Being well aware that it takes a lot of commitment, effort, time, patience, consistency and mainly the right skills to achieve Social Integration and build a lasting and trustful relationship with local communities, Appian has seen it pay off, for the business as well as for the communities. “Usually, there is no easy way.” Silvio Lima knows, “getting Social Integration and the building of trustful partnerships right is not necessarily easy, it means we have to dare to be present with each other, listen to one another and stay engaged even if there is no quick fix or easy solution”. However, the results of getting it right speak for themselves.

The following case studies of Appian’s operations illustrate how Appian has been working towards Social Integration with local communities around the Atlantic Nickel and Mineração Vale Verde (MVV) operations in South America.

Social Integration in action: Appian case studies

STEM bike in action
Children on the STEM bike that teaches them on -the-spot problem solving 

STEM (MVV and Atlantic Nickel)
STEM educational programs play a vital role in supporting the development of poor regions that lack access to quality formal education. For Appian, the introduction of Science, Technology, Engineering, and Mathematics (STEM) initiatives in the territories where operations are located can empower individuals with the necessary skills and knowledge to thrive in a rapidly changing world.

STEM programs provide hands-on learning experiences, fostering critical thinking, problem-solving, and creativity. These programs not only bridge educational gaps but also cultivate a mindset of innovation and entrepreneurship. By equipping students in poor regions with STEM education, Appian contributes to empower them to tackle local challenges, such as farming productivity, environmental sustainability and infrastructure development. Furthermore, STEM education opens pathways to higher education and higher income career opportunities, offering a sustainable route out of poverty.

By investing in STEM educational programs, Appian can contribute to uplift communities, break the cycle of poverty, and contribute to the overall progress and prosperity of these underserved regions. “By investing in training teachers on STEM education, we aim at enhancing its impact creating a resilient and thriving community that embraces social upward mobility through technology””, says Nelson Silva, Appian’s Senior Advisor for Safety and Social Performance.

In partnership with Educando, an NGO specialized and committed to transforming the education of Latin American youth, Appian developed a STEM program along with 10 schools: 5 around MVV and 5 around Atlantic Nickel. More than 150 teachers, 15 school managers and 2,000 students have been positively impacted by the program in their regions.

Women entrepreneurs in front of their store in Arapiraca
Women entrepreneurs in front of their store in Arapiraca

Women Entrepreneurship Program (MVV)
Given the local demand for alternative income opportunities, particularly for vulnerable minorities, such as women in the area around the MVV operations, Appian set up a program in 2020 aimed at developing economic opportunities near the Serrote mine. These women are usually working in rural agricultural farms but rarely gain opportunities for independent income generation.

The Appian team started to conduct a participatory rural diagnosis in order to identify potential opportunities, needs and challenges through a series of workshops held in each of the neighbouring communities. Based on the outcomes of these workshops, together with the Brazilian National Service of Industrial Training (SENAI), 10 professional training courses were organized for the production and commercialization of products such as cakes, pies, sweets and snacks that could be sold to the mining operation and beyond, thus enabling the increase of family income and the development of new business opportunities for local women.

Close to 20 female entrepreneurs benefited from this program to date, providing life-changing opportunities for some of them who, for example, were able to escape situations of domestic violence and abuse. Recently, some of the female entrepreneurs that participated in the program have also opened a permanent store in the city of Arapiraca. Beyond being regular suppliers to the mine, they have thus been able to build a larger and sustainable business serving the community at large. This is a prime example of sustainable economic development that benefits all parties in the region and which can multiply opportunities or even create spin-off effects.

For Appian, this is an invaluable achievement first and foremost because the results were jointly achieved together with the communities. Secondly, these initiatives have generated a sense of purpose not just for the women entrepreneurs but also for the Appian employees. Enhancing employee engagement is a dimension that cannot be underestimated as everyone feels proud to be part of an entity that can foster such life changing initiatives.

Cocoa Project (Atlantic Nickel)
At Atlantic Nickel, where there are approximately 1,700ha of conservation areas, Appian has developed an agroforestry program to strengthen the existing culture in the region for cultivation and processing of cocoa. The program, which supports traditional family farming practices, is focused on sustainable development, income generation and biodiversity conservation and is thus fully compatible with the conservation efforts of Atlantic Nickel in the area.

A local farmer showing off the fruits of his labor
A local farmer showing off the fruits of his labor

As part of this program, Atlantic Nickel provides training and an in-kind loan to the farmers that can use the land free of charge to grow cocoa plants. For the families that partake in the project, the revenues generated from this land constitute their main source of their income. While the average per capita income in the region is approximately US$2,500 per year, the average income per participant of the program is 44% higher, constituting a substantial improvement when compared to average employment conditions in the area.

The program is currently being expanded towards providing capacity for farmers to process the cocoa to produce chocolate and further enhance their income and build capacities that can be applied sustainably beyond mining, directly contributing to sustainable long-term economic development in the region and which can foster the development of local supply chains.

Knowledge Industry Program (MVV)
In the strategic area of education, this project aims to improve the quality index of basic municipal education by promoting a digital and technological environment. In a tripartite partnership between MVV, SENAI and the Craíbas Municipality, the core objective is to foster the involvement of schools in the thinking towards finding solutions for local challenges and promoting a digital and technological environment within those schools.

Official opening of the education program
Official opening of the education program

This first training program, which has just been launched, will impact more than 400 students, 28 teachers and 9 management staff, providing training related to administrative functions, school management and non-traditional disciplines, such as coding, entrepreneurship and sustainability using a hands-on methodology.

In an area where illiteracy rates average 21% and reach 41% for some age brackets, a material investment in education brings a sense of perspective and opens new doors to long-term development of the region. At the same time, improving local education means investing in increasing the potential future local pool to hire from, which of course benefits Appian. Hiring locally not only means less turnover but locals have a close connection with the region and can act more naturally as ambassadors for the company in the communities. Furthermore, higher levels of education generally translate into lower levels of violence and better chances for economic development and thus contributes to social stability in the region, which, again, benefits all parties in the territory.

Social Integration is not a matter of semantics, but of attitude.

Conclusion: mine development as a co-creative process
One of the challenges with moving towards a new paradigm of partnerships and Social Integration is that there is no “one case fits all” approach because meaningful engagement and opportunities for value creation will have to look different for every operation.

While certain approaches, concepts, skills or practices are replicable or can be integrated elsewhere, each program will have to be essentially unique in order to address the variables of each context and location in the most suitable way. This is because relationship building and identifying meaningful opportunities for value generation is a co-creative process that cannot be easily replicated. Applying a “one size fits all” approach will likely lead disconnection, which is mutually exclusive with the goals of Social Integration.

To successfully position mining as a catalyst for the sustainable development of resource-rich regions, mining companies thus need to be prepared to genuinely embrace reconsidering the position they have in the socioeconomic ecosystem and the role they play, not just as providers of raw materials but as creators of societal capital and social value.

It means mining companies need to create a new vision and purpose for doing business by identifying what they can contribute to society and the sustainable development of the communities they operate in. This vision and purpose are not only increasingly demanded by communities, investors and regulators, it is also expected by young talent the industry is trying hard to attract. Addressing the talent gap requires alignment with those of the next generation of talent that tends to weigh purpose in their career choices.

This shift, as Appian has seen first-hand, is one that can become a differentiator for success. Social Integration is not a matter of semantics, but of attitude.

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