The social licence to operate has been a central concept in the mining industry lexicon for the past two decades.
Jim Cooney, former director of international and public affairs for Canadian mining company Placer Dome, is commonly credited with introducing the term, at a World Bank conference in 1997 that explored the outlook for the sector.
It was a time when the mining industry was facing heightened public scrutiny and significant reputational challenges, following a series of environmental incidents and conflicts with local communities. There was a growing perception that mining was an industry incompatible with the emerging concept of sustainable development. The reputation of the sector as a whole was being tarnished by past, and contemporary, examples of poor practice – posing a serious threat to the sector’s ability to sustain profits, access new assets, and maintain investor and employee confidence.
It was against this backdrop that the focus on social licence to operate became elevated in the practice of the industry’s top performers. Around this time too, leading players in the sector – with Rio Tinto instrumental among them – came together to form the International Council on Mining and Metals and advance their commitment to sustainable development.
The canary in the coal mine
So what do we mean by our social license to operate? How do we gain it, and how do we maintain it?
In essence, social licence to operate is the unwritten contract between a company and the communities in which it operates. The social licence is granted by the community, and encapsulates their general approval and acceptance that a company can begin and continue operating in an area.
It is usually site-specific, because the needs of each community and their local environment, and the potential impact each project could have on these, vary from place to place. In the same way, it is never to be taken for granted, and can change over time with shifts in political, economic and stakeholder circumstances.
Although legal entitlement to pursue a mining project will come from the host government, this is intrinsically linked to the social licence. Sovereign support is increasingly difficult to maintain without the broad, proactive support of host citizens. Companies must demonstrate that it is in everybody’s best interest for them to develop resources and maintain operations, and then – collectively with their stakeholders – convince governments to issue and maintain the legal licence.
In this way, social licence to operate can be seen as the canary in the coal mine, pointing to potential loss of approval to operate, even where the law permits it.
Our social licence helps us manage business risk, at all points in the cycle. Although there is a clear business case for focusing on our social licence, at Rio Tinto we take our ethical responsibility to protect our people and our neighbours equally seriously. Not just because it is good business, but because it is the right thing to do.
"Our social licence helps us manage business risk, at all points in the cycle."
Our approach to securing our social licence centres on building strong and lasting community relationships. Managing these relationships well is as necessary to our business success as the good management of our mines, refineries, smelters and ports.
In no sense are community relations an add-on, marginal to our exploration, mining and processing activities. Communities and social performance work is an integral part of the way we operate, every day.
We strive to build relationships that demonstrate mutual respect, active partnership and long-term commitment. This means recognising and respecting the cultures, lifestyles and heritage of our neighbours, so that we can maximise the benefits and reduce any negative impacts of our operations. Although we recognise we can’t always meet everybody’s concerns and expectations, we aim to operate with broad-based community support.
Since our mines are often in remote corners of the world – built where the best mineral orebodies exist – our local communities are often the same towns where many of our employees live. As core members of our communities, open and honest internal communication with our people is therefore critical, to make sure we maintain their support. Productive workforces are motivated by accomplishing societal purposes, so it is important that our people see and understand the contribution their work makes to sustainable development.
Our approach is founded on our communities and social performance framework – which has transparent communication and engagement at its heart.
This framework is based on three main areas of work: building knowledge; engaging with our stakeholders; and developing mutually beneficial programmes.
In the first phase, we carry out baseline communities assessments, so that we can understand the key social and economic factors that a community faces. We gather data on the local people, understand the impact we would have, and identify potential risks and opportunities.
Equipped with this knowledge, we build relationships and partnerships with our diverse stakeholders, who include communities, governments, NGOs, academics and other corporates – making sure the needs of the various parties are mutually understood and accepted.
We then develop communities programmes that reflect both the baseline assessment and engagement phases, and which encourage stakeholders to be self-sufficient, not dependent on our presence. These may cover education, health or livelihood initiatives, and provide local employment, small business and contractor opportunities.
Rio Tinto’s Communities and Social Performance Framework
Working for mutual benefit
Our work on the ground varies according to the local context, but some themes commonly apply – like local procurement, cultural heritage, gender, human rights and community agreement-making.
During the past 20 years, we have negotiated agreements with land-connected host communities to gain access for exploration and to develop mining operations. These agreements allow us to manage the shared risks, responsibilities and benefits, while also offering security to plan our future operations. The following case studies illustrate these agreements:
The Pilbara, Australia
In the Pilbara region of Western Australia, which is home to most of our iron ore operations, we have formed agreements with several Traditional Owner groups. These agreements provide recognition of Native Title rights and interests of the Traditional Owner groups, while securing the ongoing operations and expansion of our iron ore business. They also provide monetary and non-monetary intergenerational benefits for local communities and Traditional Owner groups. One of these agreements is with the Ngarluma people, and last October we awarded the sub-lease of our Karratha sheep and cattle station to their governing Native Title body – Ngarluma Aboriginal Corporation – after their successful tender. The Aboriginal peoples’ knowledge of water resources and the best grazing areas, and their deep understanding of the land sets the station up for success. It is one of the ways we are working in partnership to promote further economic participation by Aboriginal people.
"The Aboriginal peoples’ knowledge of water resources and the best grazing areas, and their deep understanding of the land, sets the station up for success.”
At our Diavik Diamond Mine in Canada’s Northwest Territories, we have also formed participation agreements with five Aboriginal groups, and Aboriginal people comprised a quarter of the mine’s workforce at the end of 2015. Diavik also works with these Aboriginal communities to incorporate their traditional knowledge in its environmental studies, including in monitoring the health and palatability of fish in the lake near the mine, and caribou and grizzly bear populations. These Aboriginal groups depend on the natural environment and its wildlife for their subsistence and symbolic livelihood, and their understanding of the land is of great importance.
April Pigalak and Travis Liske from a community local to the Diavik Diamond Mine in Canada contribute their traditional knowledge in addressing fish palatability, as part of a water monitoring programme.
Women in communities often bear more of the burden of change brought about by mining and other developments, so gender considerations are also an important factor in our communities work. This may include ensuring local women are trained to take on roles that they may not previously have had the opportunity to do, such as the driver training programme at our Bunder diamond project in rural India, which equipped a number of women to become part of our team of professional drivers.
Oyu Tolgoi, Mongolia
With an expected multi-generational productive life, the Oyu Tolgoi copper-gold mine in southern Mongolia has the potential to contribute significantly to the nation’s development and prosperity. As the manager and joint owner of Oyu Tolgoi, Rio Tinto is focused on ensuring the project brings lasting benefits to the country and is sustainable over time. This means forging strong partnerships with communities that are built on trust, developing the local talent to drive and support future growth, and stewarding the country’s environmental resources – such as water – with care. By making these investments in communities, education and the environment, the Oyu Tolgoi operation can have a positive impact that stretches across both the local and national levels. In April 2015, Oyu Tolgoi established precisely the type of partnership agreement that will help to spread and consolidate the benefits of this large-scale project. The signing of a Cooperation Agreement with Oyu Tolgoi’s partner communities, Umnugobi aimag (province) and the Khanbogd soum (county) as well as Manlai, Bayan-Ovoo and Dalanzadgad soums was the first of its kind in Mongolia and took four years to finalise. Its ultimate goal is to build a stronger relationship between Oyu Tolgoi and the community and promote sustainable socioeconomic development for current and future generations including the promotion of employment and training, water and pasture land management, environmental and cultural heritage protection and monitoring, health and safety, and local business developmentEach year, Oyu Tolgoi will contribute US$5 million to a Development Support Fund. The fund is administered by a separate legal entity with a board consisting of representatives from the local communities and Oyu Tolgoi, and is destined for community programmes and projects within Umnugobi aimag that meet defined criteria. The board decides how to spend the funds to deliver the best outcomes for the region. The first tranche of investment has been made to develop two kindergartens for local children.
Australia’s remote Western Cape York Peninsula is home to Rio Tinto’s Weipa bauxite mine. Through the Western Cape Regional Partnership Agreement (RPA), Rio Tinto is working with Western Cape Indigenous stakeholders and Australia’s state and federal governments to overcome barriers to Indigenous employment, grow the region’s economy, and increase Indigenous participation in a broad range of industries beyond the mining sector. The RPA’s initiatives include workshops that help adults improve their skills in areas such as driving, literacy and numeracy – areas which are known barriers to Indigenous people gaining employment – as well as forums to support the development of local Indigenous businesses.
We are also looking for ways to help broaden the regional economy and encourage growth of local businesses through our Weipa supplier development and procurement strategy. This includes building relationships with Indigenous businesses in the region, and educating locals on our procurement process and criteria.
These are just a few of the examples of how we engage with our local communities to obtain and uphold our social licence to operate – and thereby keep our operations delivering value for all our stakeholders. Each year we report on stories like these across our communications channels, and in our sustainable development report – riotinto.com/sd2015. Whether at the top or at the bottom of the commodity cycle, these efforts are at the core of our business and define the way we work.