Category: Action Reports

14th May 2014. Multi­na­tion­al cor­po­ra­tions are infa­mous for push­ing native peo­ple off their land in order to open a new gold mine, extract oil, or oth­er­wise extract local resources. For decades, back­lash has been thought to be both lim­it­ed and inef­fec­tu­al, but new evi­dence sug­gests that protests from local peo­ple are effec­tive, extreme­ly cost­ly for the com­pa­nies, and often lead to sub­stan­tive changes to or total aban­don­ment of a project.

Researchers at the Cen­tre for Social Respon­si­bil­i­ty in Min­ing inter­viewed employ­ees at sev­er­al dozen major inter­na­tion­al cor­po­ra­tions who are involved with extrac­tive activ­i­ties, and found that com­pa­nies are increas­ing­ly hav­ing to deal with the social and envi­ron­men­tal impacts of their work, and that it’s hurt­ing them where it hurts most: their bot­tom lines.

The researchers, led by Daniel Franks, took a look at 50 planned major extrac­tive projects (oil drilling, new mine con­struc­tion, that sort of thing) and found that in ful­ly half of them, local peo­ple launched some sort of “project block­ade.” In 40 per­cent of the projects, some­one died as a result of a phys­i­cal protest, and 15 of the projects were sus­pend­ed or aban­doned alto­geth­er, accord­ing to Franks’ study, pub­lished in Pro­ceed­ings of the Nation­al Acad­e­my of Sci­ences.

“There is a pop­u­lar mis­con­cep­tion that local com­mu­ni­ties are pow­er­less in the face of large cor­po­ra­tions and gov­ern­ments,” Franks said in a state­ment. “Our find­ings show that com­mu­ni­ty mobi­liza­tion can be very effec­tive at rais­ing the costs to com­pa­nies.”

The num­ber of projects in the study sam­ple affect­ed by local action. Image: PNAS

The rea­son these projects, such as the Minas Con­ga gold mine in north­ern Peruand Lan­ji­garh baux­ite min­ing project in Oris­sa, India, were aban­doned wasn’t borne out of some sense of social respon­si­bil­i­ty to not pol­lute the envi­ron­ment or to not push peo­ple off their land. It was because the protests and result­ing gov­ern­ment back­lash was so great that it became finan­cial­ly unvi­able to move for­ward.

Delays, even ear­ly in a project, can be extreme­ly costly—at a major min­ing project, $20 mil­lion per week in lost rev­enues and lost invest­ment isn’t uncom­mon. Accord­ing to the study’s respon­dents, a nine-month delay at a Latin Amer­i­can mine cost a com­pa­ny $750 mil­lion; protests that shut down pow­er lines at anoth­er oper­a­tion cost $750,000 a day. Even before drilling or extrac­tion has start­ed, lost wages and start­up delays can cost $50,000 a day when pro­grams are forced to a stand­still after they’ve start­ed.

Per­haps not sur­pris­ing­ly, protests were most suc­cess­ful when they took place ear­ly on, dur­ing fea­si­bil­i­ty and con­struc­tion phas­es of a project.

“This [is] in part because the project is small­er in scale and there­fore eas­i­er to con­test, but also because at lat­er stages of the project cycle, cap­i­tal has been sunk into an area, changes become cost­ly to retro­fit, rev­enues begin to be gen­er­at­ed, and there are increased incen­tives for com­pa­nies and gov­ern­ments to ‘defend’ their projects,” Franks wrote.

Social media and inter­net access are allow­ing indige­nous and local groups to orga­nize more quick­ly, to learn from oth­ers who have had suc­cess­ful protests, and to con­nect with non­prof­its and human­i­tar­i­an groups that can help push their sto­ries out to the entire world.

“There’s been a big change in the men­tal­i­ty of indige­nous people—things like Face­book are allow­ing them to not be as naive,” Kel­ly Swing, a Boston Uni­ver­si­ty researcher who works in an area of the Ecuado­ri­an Ama­zon that is cur­rent­ly fight­ing back against pro­posed oil projects, told me. “They look at what has hap­pened in, say, Peru, and see that their cul­ture has gone to hell in a hand­bas­ket. All of a sud­den, gifts the com­pa­nies offer, like boats and edu­ca­tion and mod­ern med­i­cine aren’t the panacea they used to seem.”

Com­pa­nies, for their part, are learn­ing how to antic­i­pate these sorts of hangups, and some of those inter­viewed (all iden­ti­ties and spe­cif­ic respons­es were kept con­fi­den­tial) said that local back­lash can be pre­dict­ed and quan­ti­fied before it hap­pens.

“Sev­er­al inter­vie­wees were strong­ly of the view that the trig­gers for and under­ly­ing caus­es of com­pa­ny-com­mu­ni­ty con­flict, and its costs, are pre­dictable, and that approach­es, pro­ce­dures, and stan­dards are avail­able to com­pa­nies to avoid con­flict and devel­op con­struc­tive rela­tion­ships with com­mu­ni­ty actors,” Franks wrote.

At many com­pa­nies, Franks wrote, the high­er ups who approve major projects are com­plete­ly obliv­i­ous that their work might have some sort of social or envi­ron­men­tal impact. To com­bat this, com­pa­nies hire “trans­la­tors” who are able to iden­ti­fy poten­tial social prob­lems and put them in a lan­guage exec­u­tives can under­stand: mon­ey.

“Trans­la­tion requires indi­vid­u­als with­in orga­ni­za­tions who can work across func­tion­al, orga­ni­za­tion­al, and con­cep­tu­al bound­aries, and who can work in more than one ‘lan­guage’ and inter­pret how social and envi­ron­men­tal risk is trans­lat­ing into costs for busi­ness. The need for inter­nal ‘trans­la­tors’ sug­gests that cor­po­rate deci­sion-mak­ers do not cur­rent­ly have the nec­es­sary mod­els to inter­nal­ize exter­nal­i­ties and trans­late social risk inward,” Franks wrote.

Franks wrote that there’s some evi­dence that com­pa­nies real­ly do want to make sure local peo­ple are treat­ed correctly—that, as he found, con­cerns such as drink­ing water con­t­a­m­i­na­tion, envi­ron­men­tal destruc­tion, and pub­lic health risks, are not brushed aside. Then again, he not­ed that “some see stake­hold­er-relat­ed con­cerns as option­al ‘add-ons’ to broad­er reg­u­la­to­ry process­es for oper­at­ing projects.”

The chal­lenge for those “stake­hold­ers,” then, is mak­ing sure that, no mat­ter what, they make a project so dif­fi­cult to com­plete that those “add-ons” become so cost­ly that the project dies. It seems like, in an increas­ing num­ber of cas­es, that’s actu­al­ly hap­pen­ing.