The Triple Bottom Line: Key to Project Success

by P.M. James

March 2000

Perhaps some of you have heard me speak about Sustainable Development sometime during the past two years.  When I started speaking about this subject, I felt that I was on the leading edge of a major trend in our industry.  Now I feel a bit like a guy trying to outrun an avalanche.

Sustainable Development (SD) is not a particularly normal interest of a mining executive.  It would seem that I should be more interested in traditional business subjects like costs and profits and share price.  But in my way of thinking, I believe my interest in SD is logical.  If my company is unable to develop ore bodies because the local residents do not want miners for neighbors, there will be no costs, or profits, or even share prices to worry about.

Every day mining changes, rapidly becoming more of a global industry.  Modern mining has moved into practically every corner of the world.  However, we have not always put our best foot forward.  If you don't believe this is true, just think back to a couple of weeks ago when we were again seeing very disturbing video footage of dead fish in some of Europe's most famous rivers.  As we saw these images in North America, they were also seen around the world.  How would you like to try to get a permit for a tailings pond anywhere in the Danube Basin, or even in Wisconsin?  Our Nicolet project there has already been the target of an aggressive newspaper article based on the Romanian spill.

Back on the subject of change, recently a Canadian steel company started referring to itself as "sustainable" in its radio ads.  This is a company whose major operations are in North America, not in a developing part of the world.  Their point was the emphasis their company gives to community involvement, particularly the development of people.  In fact the company, Dofasco, is the top ranked steel company in the Dow Jones Sustainability Group Index.  Think about that for a moment.  There is a global stock market index that ranks companies on sustainability measurements and includes 200 leading companies with a total market capitalization of $4.3 trillion.  Moreover, this index is outperforming the Dow Jones Global Index and the S&P 500.  Maybe sustainability is something CEO's should think about.

  In announcing the start of this Index, Dow Jones said: "The concept of corporate sustainability has long been very attractive to investors because of its aim to increase long-term shareholder values.  Sustainability-driven companies achieve their business goals by integrating economic, environmental, and social growth opportunities into their business strategies.  These sustainability companies pursue these opportunities in a proactive, cost effective and responsible manner today, so they will outpace their competitors and be tomorrow's winners."  Wow! Triple bottom line and competitive advantage in one quote.

Last fall I was invited to speak and participate on a panel during the Peruvian Mining Engineers Convention in Arequipa.  Of course, my topic was SD. Two things made a lasting impression from my trip. 

First, by the time I spoke on the third day, there was nothing left to say.  At the opening session, the President of the Convention, the Chairman of the biggest Peruvian mining company, and the Minister of Energy and Mines all spoke on themes with clear ties to SD.  And then during the daily sessions, speaker after speaker at least touched on the same subjects.

The second impression I had while driving around the beautiful Spanish Colonial city was the high level of computer awareness.  I saw several cyber cafes where people go to connect to the Internet.  I also saw a computer class in progress in a storefront classroom late in the evening.  Seeing these examples of modern computer technology in the historic 16^th Century surroundings reinforces my view that computers and Internet access is, indeed, changing the world at a rate never before experienced.

Recently I was invited to join a board of an economic development organization in Peru made up of business and social interests.  The thing that caught my eye in their invitation was a reference to SD and its importance in the continued improvement of the standard of living in Peru. SD is a concept that resounds with many groups of people, from all walks of life, because it holds the promise of real, sustainable, positive change.

One other major change to the mining industry that came along in the last year is the consolidation of the aluminum and copper industries.  How this will affect SD is not clear but hopefully it will mean that the new, larger companies are more likely to support SD.

In past talks I have defined SD as attention to the triple bottom line of economic, environmental and social responsibility, the same factors Dow Jones used in their definition.  The triple bottom line is a big change for many in our industry, and it is natural to experience resistance to that change, particularly change this profound.  Perhaps discussing previous changes in the mining industry might help us understand the mechanisms involved and allow us to chart a way forward.

  When I began my career in mining in the United States, safety was the responsibility of the company and perhaps government at the state level.  There was no federal involvement in metal mining. After some disasters, public pressure resulted in the Mine Health and Safety Act, or MHSA, which backed up adherence to safety regulations with civil and criminal penalties.  Those of you involved in mining in the US at the time will remember the outcry.  Mining was being forced to be safe, and mining people resisted the change, not because they were against safety, but because they resented the government’s intrusion into our business. Finally, the forward-looking companies understood the necessity of the regulations, and we started to see Vice-Presidents of Safety, and incentive goals, and other outward signs that the companies expected adherence to the new rules. Finally, safety compliance started to improve and, although it can still be further improved, management, supervision and labor no longer resist.  As part of the process, we learned ways to measure safety performance, and we made our performance public, albeit reluctantly.

About the time safety regulation was finally being accepted, a new challenge reared its head, and that was environmental legislation like the clean air and clean water acts.  Again, there was a loud outcry and lots of resistance from the people in the industry, and again companies had to raise the level of attention to make it clear to employees that change was unavoidable.  As an industry, we are now doing a much better job of stewardship of our environment.  Of course, we can always improve, and will, but we have reached the point of considering the impact of our actions ahead of time.  Management, supervision and labor have learned to work in environmentally sound ways, and real progress has been made in improving our environment.  As part of the process, we have learned to measure our performance, we have established systems to assure compliance to the regulations, and we have started reporting our performance to our stakeholders.

Now we find ourselves at a similar point with the social side of mining.  No government has mandated social responsibility, but without it we cannot obtain permits or raise the money required to develop our projects.  Throughout history, miners have tried to remain low key and out of the spotlight.  Companies have contributed to the community and individual employees have volunteered to worthy causes, but rarely have companies thought about their social responsibility in a very comprehensive way.  Now we have to consider the effects of our actions more broadly, and we must work to establish sustainable programs and patterns in the communities.

Why? What has changed?  Why doesn't everyone just go back to the old way?

Years ago Joseph Heller wrote a novel that has become a modern classic, Catch 22, and a character in that book, Milo Minderbinder, epitomized the robber-baron entrepreneur.  His company's slogan was "what's good for M&M Enterprises is good for you."  I leave it to you to substitute any other company's name, but we all have seen the type.  "Who are you to question us? Obviously we know what is good for you!  We will take care of you. Trust us!" 

I believe the current emphasis on SD is driven by people all over the world who are starting to understand the real power of democracy.  They have begun to understand that they have the right to question, and even approve or disapprove development that is going to affect their families and communities.  No longer are we able to march in and tell the residents that we know what is good for them.  This has lead to the concept we refer to in Rio Algom as the need for a Social License, without which projects cannot succeed.

Obviously a Social License is not obtained from the courthouse. It is earned from the people of the community, the stakeholders of the project.  It is not written on paper, but you can see it in peoples’ faces when they talk about the development. It is about mutual respect, shared benefits, common trust.

Obviously, Social Licenses are easier to obtain in some situations than others, but do not be fooled.  It is critical to obtain that license everywhere we operate.  Whether the communities we affect are rich or poor, we must successfully address certain issues, cultures, and concerns if our projects and operations have any hope of long-term success.

So now, like the safety and environmental challenges we faced before, we need to learn to manage a new facet of our business.  To do that we have to elevate the level of attention given to the social side in our companies and our operations so that everyone understands that we are serious about meeting our social responsibilities.  We will have to explain to our stakeholders, our managers, our supervisors and our workers why these requirements are important, and, most importantly, we will have to learn how to measure our accomplishments.  Currently we have to use guidelines developed by others, such as the World Bank, until we are able to establish our own industry guidelines.

To establish those guidelines, we are going to have to seek out our stakeholders, listen and learn from them, and gain concurrence and trust without paternalism or patronage: not an easy task.

So, where do we go from here?  How do we become a sustainable industry?

First, we have to start to manage our businesses with attention to the triple bottom line.  Without performance measurement, we are unable to manage a process or a business.  We can measure the economic effects for both our companies and communities, and as I have indicated we are getting better at measuring the EH&S part, so we need to learn how to measure our social efforts.  But we cannot wait until we have the measuring stick; we must behave responsibly now.  Our Board of Directors, Management, all of our employees and all of our contractors need to know that this is important to the company, and their performance will be measured against our Social License,  the specific standards set for our activities in the particular community.

That means we must have a common approach for developing the Social License and it must be an approach that our employees and stakeholders buy into from the beginning.  Perhaps the best way to get that buy-in is to let them help design the approach.  A one-size-fits-all Social License probably would not work, but having a common approach for establishing community standards will give some commonality in the results.  Some factors such an approach would have to address would include local hiring, training, and procurement; community development; public consultation; relocation; compensation and codes of conduct.

Next we will have to train people in the company how to apply the common approach.  Remember that this is something new, and there will be a lot of natural resistance to implementation.  Systems will have to be established to give a framework to our efforts, manage the application of the approach, and assure compliance to the resulting Social License.  And management will have to manage the process.

It would be very easy if we could do all of this in a vacuum, with no time or monetary constraints, but this is the real world.  To be truly successful, we must involve outsiders, such as the citizens of the communities we affect, the NGO's that are involved (and wherever we go we find many more than we would suspect), the various levels of government, and social institutions such as church leadership.  There will be cultural differences and not everyone will agree on each subject, but it is crucial to have the input and understand the differences.  Sounds like the making of a partnership, doesn't it?  The Social License will not be successful without establishing such partnerships.

Above all, we must behave responsibly from the first day.  That usually means that the Exploration Department has an important role because they are the first representatives of the company that the communities meet.  To them, I would say remember what your mother said, "you only have one chance to make a good first impression."

And never miss an opportunity to meet with the community.

While I was preparing this speech, two pertinent events made the news.  First, Dofasco, the steel company I mentioned earlier, announced the best year they have had for over ten years.  That announcement was at the end of an article about the record profit-sharing payout their workforce had just received.

The second article was about an interview with an officer of the Australian company operating the gold mine in Romania that experienced the spill.  In the article the fellow indicated the blame for the spill should be attributed to heavy rain and snow and that the cyanide process was blameless.

You be the judge:  How would you want your company, or country, depicted?

Recently a young man in Chile solemnly explained to me what communities in his culture expected from companies like ours.  It was quite interesting because it was almost word for word what communities in Canada, the U.S., Kazakstan or Peru expect.  The list includes up-to-date information on the progress of the project, honest answers to questions, discussion of, and input into, development alternatives, true concern for the environment, sensitivity to the local culture, opportunities for their citizens to earn a better living, and a better life for their children and most of all, they expect to be treated with respect.

Isn't that what we all want?