Human rights are as old as civilisation itself. First enshrined in law over 3700 years ago, they’re at the very heart of social expectations and responsibilities. Yet today the issue of human rights is evolving faster than ever before, especially now that social media has the power to thrust corporations overnight into the public limelight. Although mining companies are increasingly accountable for meeting international standards – not only directly within their operations but also in relation to supply chains – examples of serious violations are still being reported. In addition, human rights reporting is now mandatory for UK London Stock Exchange (LSE) listed companies, but very few have yet reported on the human rights risks that they face. James McNally, a technical director with Wardell Armstrong International and an authority on environmental and social corporate responsibility, looks at the critical role that effective human rights management and due diligence has to play in successful mining projects.
Whether it’s the development of a new mine in Central Africa or fracking in the English Home Counties, the scope for complex and sensitive human rights issues to arise is very real. They’re a key aspect of sustainable development. Any new large scale project is bound to have human rights implications, and the way they’re assessed and addressed is of growing importance. But without a clear view of the principal risks or issues, there’s no way that companies can judge the adequacy or effectiveness of their response, or be fully confident that they’re truly on the right track.
This requirement is nothing new. In ancient Mesopotamia, around 1754 BC, the Babylonian Code of Hammurabi laid down 282 laws – on tablets of stone. They included some that dealt with the responsibility of businesses for the effects of their products and processes on customers, fellow citizens and the community. With the laws arranged in orderly groups, everyone who read the code would know what was required of them. Suggesting that both the accused and accuser should be able to provide evidence, it was copied by succeeding generations as a model of legal and judicial reasoning. Could this be the earliest version of the International Finance Corporation (IFC) performance standard 2 on labour and working conditions?
But let’s fast forward to today. Are things now as they should be? Far from it. According to Maplecroft’s Human Rights Risk Atlas, the number of countries deemed to be an “extreme risk” for human rights abuses has increased by 70% since 2008. The highest risk countries now include (in this order) Syria, Sudan, DR Congo, Pakistan, Somalia, Afghanistan, Iraq, Myanmar and Yemen. Key emerging economies to drop into this unwelcome category include Nigeria in 10th place, India in 18th, the Philippines in 27th and Indonesia in 30th. Middle East and African countries account for the majority of the 70% increase. Key factors include the repression of freedom of speech, ethnic and sectarian conflicts, the lack of worker protection, and competition for land and water between local populations and industrial business users. An interesting feature from this table is that although China remains in the extreme risk category, it has shown one of biggest improvements in working conditions – unlike other key supply chain countries such as Bangladesh, Cambodia and Vietnam.
Examples of poor human rights practices are seen all too commonly. Extracting resources can contaminate land, water and air – affecting the health and livelihoods of communities and workforces. Local people are often excluded from economic benefits. Corporations sometimes operate without providing key information to communities. Governments sometimes fail to provide the legal means for people to hold companies accountable. There are also documented cases of funding flowing to armed groups operating in areas where minerals are mined.
Human Rights Violations can occur very quickly from seemingly unintended sources if companies do not manage their extensive operations with great care. Whilst working in one African country, Wardell Armstrong International became aware of a mining operation where the company had employed a security firm using ex-military personnel. Because they were operating under their own separate management system, the controls, policies and procedures of this security firm were completely out of step with those of the mining company. The guards were armed, there were reported instances of the bribing of local police, and some very serious assaults had taken place on people from the local communities. In short, the situation was highly unstable with potential reputational damage and business contingency impacts to the mining company.
So in the face of poor human rights management, what does best practice look like? What should be the response of enlightened mining companies in developing a pro-active, effective approach to understanding, managing and mitigating human rights issues?
The key point is that human rights due diligence should never be seen as merely another layer of corporate administration. At its best, it can play a critical role in making sure that mining companies fulfil their social responsibilities while also creating value for shareholders and for the communities and societies in which they operate.
It follows therefore that human rights issues should be incorporated fully into existing processes and due diligence practices – from Environmental, Social, Impact Assessments (ESIAs) and political risk assessments to investment decisions, contracting and procurement, and the management systems covering environmental, social, security, and health and safety areas.
The potential benefits are many. Companies that follow a responsible approach to human rights should find it easier to meet financial performance standards and secure finance. The risk of damage to reputational impact (a critical risk for any high profile listed company) should be far less. They should enjoy improved relations with their stakeholders, and more easily maintain their social licence to operate. They should avoid strikes, blockages, legal claims and fines. They should gain both operational efficiency and competitive advantage.
Yet if early indications are anything to go by, UK LSE listed companies have some way to go before they can be seen to be truly embracing the new mandatory human rights reporting requirements that took effect on 1 October 2013. According to published statistics, 27 of the FTSE 100 companies have so far released annual reports which should comply. Of these, 24 included a statement about their commitment and awareness of human rights. Eighteen outlined management responsibilities. But incredibly only six gave an overview of the key human rights risks that their company faced, including signposts to policies and processes. On average they covered the topic in fewer than 200 words.
If mining companies needed any more encouragement to make sure that their human rights strategies are as coherent and real as they need to be, there are plenty of other legal reference points. In terms of domestic UK law – in addition to the UK Companies Act – there are the Human Rights Act, the Bribery and Corruption Act, and the UK Action Plan on business and human rights. Internationally, there are the IFC performance standards on labour and working conditions, community health, safety and security, land acquisition, involuntary resettlement and economic displacement of indigenous peoples, cultural heritage, and project-related human rights impacts including forced labour, child labour, and life-threatening occupational health and safety situations. Then there are the Organisation for Economic Co-operation and Development (OECD) common approaches, the European Union (EU) Dodd Frank Act with its reference to conflict minerals, and the UN guiding principles that cover the state duty to protect, the corporate responsibility to respect, and the need for greater access by victims to effective remedy. Various assurance standards and codes of practice from organisations such as Bettercoal, London Bullion Market Association (LBMA), Responsible Jewellery Council (RJC) also embrace human rights considerations. The list goes on…
Political interest in the UK also seems high. A recent House of Commons seminar, hosted by Wardell Armstrong in conjunction with the All-Party Parliamentary Group for the Extractive Industry (APPG EI), saw a committee room packed with representatives wanting to listen to speakers discussing lessons learnt and solutions needed to integrate human rights considerations throughout the mine life cycle. This particular seminar had the largest turn-out ever recorded for an APPG EI meeting.
The Business, Innovation and Skills (BIS) Select Committee has recently acknowledged that the mining sector would benefit from greater transparency and accountability. To improve the performance and accountability of mining firms, a Social Responsibility Index (SRI) is currently being explored to be developed in the UK. This would build on existing schemes such as the FTSE4GOOD or represent a new index. Such initiatives incorporating a SRI index are already implemented in other regions such as at the Johannesburg Stock Exchange. The UK should lead the world in corporate transparency and social responsibility. A rigorous index would help achieve this goal, assist responsible investors and provide an incentive for all extractive companies to conduct themselves in a socially and environmentally responsible way.
The good news, then, is that the understanding of human rights is clearly evolving and steadily becoming integrated into mainstream business, legal and political considerations.
Governments bear the primary responsibility for making sure that companies under their jurisdiction respect human rights. But companies also have a clear duty to uphold these rights in their operations. This is a duty that’s certainly recognised across the industry as one that’s growing in importance. The social licence to operate is an area assessed by EY as one of the top four risks to mining companies over the last seven years, and is now currently positioned third overall.
Moving from good practice guidance to good practice on the ground may not be easy, and one size definitely does not fit all. But with the right level of commitment and having the right expertise on your side, especially when directed by a human rights champion, companies can finally get away from the feeling of constantly putting out fires, and instead tackle their root causes with a well thought through approach to human rights.