Taking a targeted approach

Difficult to obtain and equally difficult to retain, winning the licence to operate requires a carefully-targeted stakeholder approach. The question is, which one to choose?

It has often been said that the mining industry is significantly different from other industries, in terms of its business operations as well as social and environmental impacts. A mining operation commonly generates a range of activities that directly affect communities such as land acquisition and compensation, human resettlement, noise from the operation of heavy equipment and detonation of explosives used to remove rocks and soil that cover the sought after minerals, acid leakage from rocks exposed to the atmosphere, disposal of waste material after the minerals have been extracted and a host of other issues that, if not handled properly, may have a negative impact on communities.

How to acquire the licence?

It is easy to say that the social licence to operate needs to be acquired, but then the simple question that arises is, how do we go about it? Obviously no company however large can or should address the concerns of every human being in its immediate surroundings, let alone beyond. This is where Stakeholder Theory comes to the rescue. This concept in the context of corporate management introduced by R. Edward Freeman in 1984 defines a stakeholder as a person or group or persons that affects or is affected by the achievement of an organisation’s objectives. In the meantime social scientists have come up with tools to determine who stakeholders are; I am not going to delve into this subject, but rather the next step after identifying stakeholders, which is engaging them in a meaningful way through two-way communications. Engaging stakeholders is a prerequisite toward obtaining the social licence to operate and this should be part of corporate policy as a whole. The illustration below shows how stakeholder management relates to communication strategy within the framework of overall management policy. While this holds true for corporations in general, for mining companies it is an absolute must if social licence is to be obtained and retained.

The fact that in many cases obtaining the social licence to operate is more challenging than applying for official licences is well-known by companies in the natural resources industries. At the Regional Stakeholder Consultation on the Post-2015 Development Agenda in Bali in December 2012 as part of the UN-sponsored discussions on the Millennium Development Goals, there was a highly illustrative presentation by a representative of the oil and gas giant, Shell. The Shell representative convincingly showed that 73 per cent of delays to capital projects relate to ‘non-technical’ risk – delays in permitting and community protests, whereby the latter accounts for the bigger share. Community protests are a clear indication of the absence of the social licence. Apart from internal company issues, difficulties in obtaining social licence are caused by the dynamic nature of the relationship between local communities and mining companies. Companies have always been held responsible by local communities for impacts associated with mining activities that are sometimes based on presumptions not facts. Compounding the problem is the propensity of mining companies to defend themselves by resorting to technical explanations that are understood only by mining engineers and geologists which aggravate the issue because this is regarded as a deliberate attempt to evade responsibility.
One of the key prerequisites to earn and maintain community acceptance is making sure the interests and expectation of relevant stakeholders are comprehensively understood and appropriately managed as part of ongoing stakeholder engagement. As I indicated earlier, stakeholder engagement exceeds traditional public relation activities as its overreaching premise lies in the need of two way communication.

It is often overlooked that earning the social licence does not occur in a vacuum but is closely associated with myriad dynamic aspects that shape the context for stakeholder engagement. Firstly, laws and regulations pertaining to the extractive industries are increasingly putting mining operations under scrutiny. Secondly, socio-political environment and economic dynamics are factors that affect society at large and sometimes have a direct bearing on mining operations, particularly in regions where the political framework is less stable. Thirdly, local cultures, national and international norms and values must be heeded by mining companies in order to operate in relative peace and in harmony with the social and political environment. The interplay of these various factors in which corporate communications take place is illustrated below.

Anticipating and managing issues

Social licence is also heavily influenced by the complexity and tension that emerge from local as well as industry-specific issues. Low employment, weak government service, local skills gap and poverty are some of the key issues that are commonly found in mining operations. All of these issues are intertwined and often escalate into cross-sectoral and cross-border issues that a mining company must anticipate and manage. The increasing sophistication of information technology brings both positive and negative consequences. What has just occurred in a small village could in the next few minutes go viral in social media networks all over the world. What seems to be a miniscule incident could lead to serious repercussions that may jeopardise business sustainability if not detected at an early stage, allowing the company to take precautionary steps and prepare for a crisis that may ensue. Mining companies that do not include issues management as part of their day-to-day business do so at their own peril.

“What seems to be a miniscule incident could lead to serious repercussions.”

The intricacies of these aspects frequently generate pressure to a company’s reputation. Business sustainability is inseparable from maintaining reputation and earning acceptance from stakeholders in the form of social licence. The essential components of reputation that a company must preserve and strive to improve are performance, behaviour and communication, as pointed out by experts in this field, John Doorley and Helio Fred Garcia in their book Reputation Management: The Key to Successful Public Relations and Corporate Communication (third edition, 2015). Excellent performance that is known only to those working in the company does not create reputation. On the other hand, bad performance will not lead to a good reputation, no matter how well one communicates. Performing and communicating well are essential, but equally important is the behaviour of the company’s executives that must reflect and be consistent with the other two factors to establish and nurture reputation. Again, these principles apply to companies in general, but mining companies are more susceptible to negative perceptions and must therefore be more sensitive to the many factors that may affect their reputation negatively.

A fundamental part in managing reputation is establishing and nurturing productive relationship and communication with key stakeholders. This is where stakeholder management comes into the equation. The concept of stakeholder management can be broadly understood as a systematic approach in understanding and incorporating stakeholder interests. Since reputation is the sum of performance, behaviour and communication, an effective management policy should include a stakeholder engagement process and a communication policy that provide a framework for an executable communication strategy.

Effective stakeholder engagement

Effective stakeholder engagement entails two important steps. First, it involves the process of identifying relevant stakeholders, essentially those that influence the sustainability of an operation. In a mining operation context, stakeholders vary from the local to national sphere. It is necessary to obtain comprehensive knowledge on who the key stakeholders are, especially those wielding the highest influence in preserving social licence. Therefore, it is crucial for a mining company to keep a list and continuously update its stakeholder database.

Secondly, the identification of most relevant stakeholders must be accompanied with adequate analysis of these stakeholders. Stakeholder analysis requires critical assessment and it goes beyond knowing who our key stakeholders are, but also recognises what their concerns and expectations are and in what way they influence our operation’s sustainability. There is an exhaustive list of analytical tools that may be applied in analysing stakeholders, the most common approach is by mapping their salience and capturing issues that attract their interest. Applying stakeholder salience requires measuring the mix of attributes of a stakeholder such as their power, legitimacy and urgency.

The outcome of stakeholder identification and analysis is then used as the basis to formulate an approach for stakeholder engagement. This means determining the engagement level and method tailored to the needs, capacity and expectations of relevant stakeholders. Knowing stakeholder profiles will assist mining companies in addressing issues that matters most to them. The knowledge of strategic issues brought up by each stakeholder group can shape the focus of the communication strategy and activities with key stakeholders. It further justifies why stakeholder engagement and corporate communication strategy should be aligned.

Steyn (2002) has provided a framework of thinking suggesting that since stakeholders and issues originate from an increasingly complex socio-political environment, corporate communication strategy should be designed as a both adaptive strategy and interpretative strategy. Adaptive strategy refers to adapting to trends, events and stakeholders in the environment while interpretive strategy emphasises relationships, symbolic actions and communication, as well as pointing out attitudinal and cognitive complexity among diverse stakeholders. Consequently, as many have realised, stakeholder engagement and corporate communication would always be a full-time effort and a never-ending process. That being said, the extent of how engagement and communication efforts should be performed will differ in the process of attaining the goal of securing social licence.

Machine gun approach versus sniper

A perfect analogy to describe and compare the effectiveness of stakeholder engagement at the praxis level is what we at Kiroyan Partners have dubbed the Sniper Approach as opposed to the Machine Gun Approach. A sniper approach denotes a company that engages its stakeholders in a systematic manner by means of a communication strategy that is suited to its objectives and needs. A sniper chooses his target carefully and operates efficiently and effectively, by using the smallest number of resources – bullets – as possible. By identifying stakeholders meticulously and engaging them on the basis of a carefully laid-out communication strategy, a company will use its resources effectively and efficiently, albeit in a non-lethal manner unlike a sniper in the real sense. On the other hand, the analogy to a machine gun refers to communication activities that are not guided by stakeholder analysis. Like the machine gun in real life, the user scatters resources around in the hope that at least a few of them will actually hit the target.

We argue that in securing social licence, the sniper approach is superior to the machine-gun approach because of the economy in the use of resources. At a time of low commodity prices as is the case since several years now, it is paramount that resources are put to work in the most effective and efficient manner. It requires competent and highly trained individuals who understand both the practical and theoretical aspects of stakeholder management and are well-versed in devising communication strategies that are tailored to a specific organisation’s needs and strategic objectives. To implement public relations work well, not only do we need experience and the capability to execute, it also requires solid grounding in theory that forms the basis for critical and analytical thinking in solving problems.

Noke Kiroyan

Noke Kiroyan is chief executive officer and chief consultant of PT Komunikasi Kinerja (Kiroyan Partners), a Jakarta-based public affairs consulting company he established in 2006. Among his other current positions, he is president commissioner of mining logistics firm PT Bis industries (subsidiary of Bis Industries Limited in Perth, Australia), chairman of the Paris-based International Chamber of Commerce for Indonesia, and commissioner (non-executive director) of gold-silver mining company Agincourt Resources, a subsidiary of EMR Capital in Melbourne, Australia.