Social Licence to Operate in LATAM´s mining sector
Is Social Licence a licence?
The term Social Licence to Operate (SLO) was coined in the mid-1990´s by the mining industry and the World Bank. The meaning of SLO has expanded over the years, requiring consideration of relevant environmental and social issues alongside identifying how all stakeholders can collaborate for mutual benefit. Although SLO includes the word ‘licence’, it cannot be obtained through an official document and instead requires the local community’s acceptance of the project itself. In order to achieve this, there must be a set of best practices and engagement between mining operators, local communities, governments and other relevant stakeholders.1
SLO in LATAM – risks and conflicts
Latin America’s abundant and varied mineral resources attract a large portion of the global mining investment. According to ECLAC (United Nations Economic Commission for Latin American and the Caribbean), Chile is the world´s largest copper producer; Mexico the largest silver producer; and Peru is ranked second for copper, silver and zinc, and sixth for gold. Latin America is also home to 61 per cent of the world´s reserves of lithium.
However, these numbers are not always received positively. In fact, ECLAC reports that Latin America has registered the greatest number of socioenvironmental conflicts related to mining in the world.2
These conflicts often reflect a company’s failure to obtain SLO in local communities where their project is based. There are several factors that jeopardise the likelihood of achieving a SLO. Infringing on Indigenous rights appears to be a key motivator of social conflict across the major Latin American jurisdictions. This is followed by labour rights, corruption, civil unrest and violations by security forces, as well as water quality and availability. Resulting social conflict in response to mining in Latin American countries can translate into disruptive protests, claims before domestic tribunals and popular referendums resulting in rejections of mining projects.3
Source: Verisk Maplecroft; Human rights posing ‘high risk’ to miners’ social licence to operate in Latin America. Human Rights Outlook, 2019
Social License to Operate as a business risk
According to EY´s report on the Top 10 business risks and opportunities for 20204 in the mining and metals industry, the license to operate remains in the No. 1 slot, with 44 per cent of survey respondents putting it at the top of their risk list.
Source: EY; Top 10 Business Risks and Opportunities 2020. Paul Mitchell, EY Global Mining & Metals Leader, September 2019
The risk of SLO conflicts has been boosted recently by the extended period of elections and government changes, which have brought uncertainty to the political environment and created volatility in commodity markets.
In addition to this, the mining sector is facing greater scrutiny from consumers who demand a more transparent and ethical supply chain as well as a lower carbon footprint. Moreover, the growing phenomenon of shareholder activists are also driving many miners – particularly those with coal assets – to reshape their portfolios by either reconfiguring existing operations or executing divestments.
LATAM – a hotspot for social conflict in mining
Brazil, Chile, Mexico and Peru make up 85 per cent of regional minerals and metals exports. According to ECLAC, where there is a mine almost invariably there is also a social conflict. ‘The lack of support of local communities for mining projects is a fact and it has become one of the main issues that mining companies have to deal with in the LATAM region,’ said César Padilla, General Coordinator of OCMAL, the Mining Conflict Overseer in LATAM. 5
Active Australian expertise in SLO in LATAM
There are several examples of Australian best practices in SLO being deployed in LATAM. For instance, environmental consultants, Cardno Entrix and Cardno Latin America, have been working in the region for more than 20 years providing social and environmental services in several mining, hydrocarbon, and infrastructure- and energy-development projects. Cardno´s approach to SLO is the development of shared values.
Another great example is Australia’s Voconiq, the world´s leading evidence-based community-engagement provider of advisory services. The company delivered a series of workshops to Mexico´s key community engagement decision makers in the States of Zacatecas and Sonora in late 2019.
The University of Queensland’s Sustainable Minerals Institute (SMI) has also had several engagements with the Peruvian mining industry, academia and Mining Ministry. Projects have included supporting the development of centres of excellence in mining to improve social engagement and the broader impact of mining operations for communities. The SMI has also worked to provide research for miners willing to incorporate best practices and to promote the Australian sustainable-mining models.
The Queensland SMI is also active in other LATAM markets. For instance, last year it signed a cooperation agreement with the Sustainable Mining Centre of the Mining Cluster of Zacatecas in Mexico. The agreement will provide a framework for SMI to work with the mining centre on key issues that impact the local mining industry, including SLO, operational health and safety, and the environment.
Mining operators in LATAM are starting to change their views on community engagement. Practices are evolving from mere transactional handouts and commitments to ongoing positive and proactive engagement with communities, including greater investment in developing best practice community engagement and long-term strategies.
In many instances social conflict in the mining sector is related to environmental issues. Consequently, companies in LATAM are also increasingly focusing on improving environmental practices in order to obtain social licence to operate. Australia has a very good reputation among LATAM miners as a leading global provider of sustainable mining equipment, technology and services. Therefore a window of opportunity is opening for suitable Australian METS in the LATAM mining sector.
Opportunities for Australian companies
The development of new projects, together with a stronger government focus on social and environmental issues, provide Australian companies with a range of opportunities in the SLO and sustainable mining space:
Environmental and sustainability:
- Water management
- Environmental protection services
- Cyanide management
- Tailings management
- Mine closure and remediation
- Operational health and safety
- Airborne contaminants management
- Hazardous materials management
- Risk management
- Community and stakeholder mapping
- Socioeconomic baseline studies
- Social impact assessments
- Whole-of-mine lifecycle community engagement and development planning
- Complaint and grievance management
- Engaging with Indigenous communities
- Monitoring and evaluation
- Education and training
Evidently, there remains scope for Australian mining operators to engage in LATAM. Australia’s expertise in sustainable mining – particularly community engagement and achieving SLO – delivers strong value to the region and the likelihood of commercial success.