Dirty Gold..?Published by MAC on 2004-08-05
Whose Rules?: Forget the feel-good homilies. There's no win-win-win when activists, Canada's second- largest gold company and an indigenous people battle to define social responsibility
Peter Shawn Taylor, National Post (Canada)
August 5, 2004 National Edition
MARCH 24, 1996. On Marinduque Island in the central archipelago of the Philippines, a poorly constructed cement plug in a storage pit at the Marcopper mine fails. Over the next four days, a plume of liquid mining waste that has been stored in the pit cascades out a two-kilometre long tunnel into the Boac River. A flood of three million tonnes of slurry wipes out river crossings, brings local commercial fishing to a halt and inundates agricultural land. It is a massive environmental disaster. And for the company at the centre of it all, Placer Dome Inc., today Canada's second-largest gold mining company, it is soon to become a financial and public relations disaster as well.
A United Nations environmental team arrived to assess the damage and reported, "It is evident that environmental management was not a high priority at Marcopper." A Philippine congressional inquiry as well as a U.S. Geological Survey study further shone a spotlight on Placer's role in the spill. By the time Placer divested itself of its 40% share of the mine, it had spent US$75 million on the cleanup and had earned a black mark from environmental groups around the world. "Of course it damaged our reputation," said John Willson, Placer's CEO at the time.
Determined to rebuild his firm's reputation, Willson pushed Placer Dome to embrace the then-burgeoning concept of corporate social responsibility (CSR). Two years after Marcopper filled the Boac River with sludge, Placer bragged of becoming the first major mining company in the world to publish a sustainability policy. It signed on as a founding member of the International Council on Mining & Metals (ICMM), which has sworn off exploration in UNESCO-designated World Heritage sites, and it partnered with the World Health Organization in the World Alliance for Community Health, which is recognized as having greatly reduced the incidence of filariasis -- a parasitic disease that can lead to elephantiasis -- in developing countries.
In 1999, Placer launched a program for laid-off workers at its South Deep mine in South Africa who were suffering from HIV/AIDS, which earned the firm a World Bank Development Marketplace award in 2002 -- the first time a private-sector corporation had ever been nominated or won the award. Known as the Care Project, it provides patients and their families with palliative-care training, monthly medical supplements and counselling. Significantly, Placer's entire $3-million effort (the Canadian International Development Agency also put in $2 million) was aimed at people who would never again work for the company.
So it seems appropriate that when you step off the elevator on the 16th floor of Placer's Vancouver head office, the first thing you see is a framed print of the company's corporate sustainability charter. The obligatory wall-mounted shiny rock collection is farther down the hall, behind the receptionist. When asked why Placer would pursue a reputation as a miner with a sense of responsibility, Jay Taylor, CEO since 1999, responds with perfect boilerplate: "Why CSR? Quite simply, it is the right thing to do."
Social responsibility has cast a large shadow on the corporate world since Placer Dome got on board. Look no further than the fair trade coffee display at your local Starbucks or the corporate responsibility audits conducted annually by companies like Gap Inc., and you'll see that corporations now exist under a broad new set of expectations. Business leaders must worry about employment diversity, human rights, health care and global warming, as well as earnings before interest, taxes and amortization. Where once it was only shareholders who needed to be looked after, now the rest of the population demands benefits from a company's existence. "Business operates with a licence from society, and it needs to serve a public purpose," says Robert Dunn, CEO of Business for Social Responsibility, a San Francisco-based organization dedicated to spreading the gospel of CSR -- of which Placer Dome is a member. "Business has an obligation to consider the well-being of the greater society. Self-interest is the enemy of the common good."
Given these trends and Placer's recent track record, one might think the miner stands at the forefront of CSR. Yet numerous environmental non-governmental organizations (NGOs) don't share the company's enthusiasm for its own record. "Placer is one of the companies that we really worry about," says Catherine Coumans, research coordinator at MiningWatch Canada, as she runs down a list of Placer's "problem mines" from the 18 sites it currently operates around the world. She dismisses the South African award as an attempt by Placer at something akin to "greenwashing" -- the practice of cultivating a few laudable projects to provide cover for a global program of raping and pillaging. At Marinduque, she claims Placer still has a massive unfulfilled obligation to clean up Calancan Bay, the body contaminated by the mine. Last year, she arranged for a representative from the island to speak at Placer's annual general meeting in Toronto, where he also conveyed the concerns of angry natives from Indonesia and the state of Nevada (who were unable to attend due to concerns about SARS). "People all over the world have concerns with this company," she says. "There is a huge discrepancy between what they say and what they do."
As if to put an edge on Coumans' complaints, earlier this year two U.S. activist groups -- Earthworks and Oxfam America -- unveiled a new consumer education campaign aimed at the gold mining industry called No Dirty Gold. Under it, Placer Dome earns specific condemnation for its environmental policies and its treatment of native Americans. "The point of the campaign is to raise questions and give consumers choice," says Earthworks president and CEO, Stephen D'Esposito, from Washington, D.C. "We want customers in jewelry stores to start asking, 'Which mine did this ring come from?' and 'Who are the responsible miners?' "
D'Esposito is keen to emulate similar consumer-based pressure campaigns that saw customers deliberately avoid diamonds from war-torn countries and wood from clear-cutting logging operations or old-growth areas. Both have been stunning successes -- to the extent that diamonds now come with certificates of origin, and lumber is frequently stamped with its method of harvest. Both measures have required fundamental changes to their respective industries. There is every reason to believe that mustering consumer outrage will remake the precious metals business by imposing new standards on the mining industry as well.
Consumer pressure campaigns have become the key driver in creating a new set of global standards and strictures in other sectors too. The Gap, for instance, earlier this year accepted controversial International Labor Organization standards for all its factories after years of protests from anti-sweatshop groups. Banker Citigroup Inc. agreed not to finance any projects that would threaten "critical natural habitats" after a campaign by the Rainforest Action Network, which included celebrities cutting up their Citi credit cards. What academics call a firm's "reputational capital" is now under the control of activist groups with a variety of agendas.
Thus the argument that Placer Dome is a socially irresponsible miner because it is cited in the No Dirty Gold campaign carries considerable weight. But if the point of CSR is to make the world a better place, it is worth asking: In whose best interests is this battle being waged? For a company like Placer, it's a many-sided question. But a single mine brings the issues into focus. A mine that is an environmental blight to North Americans, an economic saviour to its local community and a cash machine for shareholders, in a place where, prior to 1939, the local people had never been seen by the outside world, yet today find themselves main characters in the global debate over corporate social responsibility.
Papua New Guinea is one of the poorest and most remote nations on Earth, situated in the South Pacific just off the northeastern coast of Australia. And in the most remote part of this remote land live the Ipili people of the Porgera valley. Prior to the Second World War, they lived an isolated, prehistoric existence. Disputes were settled at the business end of a stone axe, and a man's wealth was measured by the size of his pig herd.
Placer Dome first came to Porgera in the 1970s, drawn by the area's rich history of gold panning. In 1990, after lengthy negotiations with the Ipili, the Porgera mine poured its first gold bar. At its peak of production in 1992, it ranked as one of the richest gold mines in the world, constituting more than a quarter of Papua New Guinea's entire export base. Today, it is still one of Placer's most lucrative mines, earning US $42 million in 2003 and accounting for 16% of the nation's foreign earnings.
Anyone who has spent time in Porgera marvels at the Ipili's negotiating skills and pluck. University of Chicago anthropologist Alex Golub, who spent several years there, recounts the negotiations between the Ipili and Placer: "They told Placer: 'We want a high school, we want a hospital, we want long-term economic development, we want a road, we want an airstrip, and we want a town to be built. If you agree to this, you will have your mine. If you open a mine without our permission, we will kill you.'" They got their deal.
It seems clear that Placer operates with the consent of the local community. Both the company and the local residents understand that life will get extremely difficult for the miners if the natives ever become restless, for whatever reason. In 2001, political displeasure south of Porgera saw the power pylons leading to the mine toppled and production at the mine cut off for several months.
To win peace, the mine has insinuated itself into Porgera's public life in numerous and varied ways. Through agreements with the local community and the national and provincial governments, Placer has spent US $48 million building roads, schools, sports clubs and the like since 1990. Recently, when the local high school was being starved of staff and supplies by the provincial government, Placer funnelled an extra $100,000 into the operation and brought in a tutor. "There are obvious advantages to us supporting the community. Our efforts in Porgera are a strategic advantage, and we can't accept that community services will suffer," says Brad Gordon, Placer's mine manager at Porgera.
Following complaints that the local Enga province was not benefiting sufficiently from the national taxes it was paying, Placer held back a portion of its own taxes for use on provincial priorities. Given the provincial government's dubious track record for efficiency, Placer itself spends this money on new infrastructure programs identified as priorities by the elected governments.
The local landowners association, which represents the various clans that held tribal title to the land where the mine is located, shares a 5% equity stake in the mine with the two levels of government. They also receive regular compensation cheques for the use of the land. When the mine was being constructed, Placer built new homes for every displaced resident, with free electricity and the first electrical appliances the Ipili had ever owned.
In response to demands from local politicians that Porgera generate more local economic benefits, the mine scaled back its fly-in/fly-out labour policy and agreed to build a local townsite, called Paiam, which is now nearing completion. This town forms the centrepiece of the firm's plans for leaving behind a viable economy when the mine closes in 10 years or so.
In a similar fashion to its AIDS program in South Africa, Placer funds community health patrols that visit isolated villages along the Porgera river system and to communities that have no contact with the mine whatsoever. All told, Placer has returned US$863 million to Papua New Guinea and the local community through taxes, royalties, compensation payments, provision of social services and development activities since 1990.
"Placer realizes that it needs to keep the local population relatively satisfied and to address issues so they won't have strikes and protests on their hands. This allows them to get on with mining the gold, which is why they are there," observes Philip Gibbs. A Catholic missionary, Gibbs was parish priest in Porgera on-and-off between 1973 and 1983 and still makes frequent visits. "A lot of the promises of the provincial government have not borne fruit, and I think the local people have come to expect Placer to do these things -- fill in for the government," he says. Benedict Imbun, an Engan by birth, and a professor of management at the University of Western Sydney in Australia who has studied Porgera extensively, agrees: "Because of the dire straits of the government and the economy, Placer tends to be seen by the people as another type of government." Unquestionably, the mine's presence in Porgera has ushered in modern medicine, higher living standards and economic opportunity. "Without the mine, it would be back to a subsistence existence for the area," says Imbun frankly.
If CSR is supposed to require corporations to accept broader responsibilities in the community and act more like governments, then Porgera sounds like a feather in Placer Dome's cap. But CEO Taylor has a tough time bragging about the Porgera mine, or using it to burnish his firm's reputation. In fact, if the No Dirty Gold campaign is supposed to muster consumer pressure to shut down mines that groups like Earthworks and MiningWatch consider to be irresponsible, then Porgera -- and the Porgerans -- would be the first to feel the pinch. Despite all Placer's efforts in cultivating local support for its efforts in Porgera, the mine figures prominently in the No Dirty Gold literature as a problem.
Porgera lies on the confluence of two major geological fault lines. This, plus the 3.5 metres in annual rainfall the area receives per year means that, in Placer's view, the mining waste the company generates at Porgera cannot be held in a tailings dam, as is the normal procedure, for such a dam would inevitably burst or erode. Instead Placer pumps the mining waste into the local river system, a technique known as riverine tailings disposal. And according to MiningWatch's Coumans, this is flat-out socially irresponsible.
"This form of waste disposal would be illegal in Canada. Other companies have made commitments to never use riverine disposal but Placer absolutely refuses to do it," Coumans states. "That is a serious concern." Since riverine tailings disposal allows the mining waste to mix with the local environment through the water system, Coumans argues that a miner concerned with CSR should never countenance such a system. She points out that the nearby Ok Tedi mine, formerly operated by Australian miner BHP Billiton Ltd., was responsible for the contamination of the Fly River (although it should be noted that the Porgera system shows no such effects). In fact, new proposals from the World Bank could make riverine tailings disposal off-limits for financing from the institution (BHP recently renounced the practice), and could also prevent international banks from making loans for such projects.
The fact that the Porgera mine was fully approved by the Papua New Guinea government does not cut Placer any slack among environmental NGOs. Marta Miranda, a senior associate at the World Resources Institute in Washington, D.C., joins Coumans and D'Esposito in arguing that CSR requires Placer to impose upon itself global standards that exceed the demands of Papua New Guinea's elected government. "We are not talking about legalities here," says Miranda. "I don't see how you can define yourself as a progressive company unless you are aspiring to something greater than that."
Despite the heat generated by the No Dirty Gold campaign and Placer's many critics, Taylor makes no apologies for Porgera or its environmental practices. After a study by an Australian government research agency, Porgera now has a public committee that oversees environmental testing and remediation of the river system. "I am not the least bit defensive about it; it had a very thorough review process. But some people say, 'Hell no, they shouldn't be allowed to do that.' Some people don't want mine development, period."
While Taylor, who will step down as CEO next month, is keen to point out that his company does a lot of good for the Porgera area, he defines his commitment to CSR in practical terms -- Placer's efforts are designed to keep the mine open, the labour supply willing and able to work, and the surrounding area quiet. "I can't do what I am doing right now unless I can reward our shareholders," he says. "[CSR] is the typical business challenge of what is the cost and what is the benefit?" He deliberately avoids making sweeping commitments that activists demand because it could tie his hands in the future.
But those demands may yet rule. Given the success of the blood diamonds and wood-sourcing campaigns, plus the new World Bank lending proposals, there is every reason to suspect that No Dirty Gold will lead to greater pressure on miners and more changes to the regulatory world. Future Porgera-style developments could soon be made off-limits by the NGOs that appear to drive the social responsibility movement.
David Wheeler, the Erivan K. Haub Chair in Business and Sustainability at York University's Schulich School of Business in Toronto, is an advocate of firms adopting CSR as a strategic tool to distinguish themselves from their rivals and increase their profitability. "We have to come up with models of CSR that make business sense," he says. At the same time, he admits that much of the CSR agenda is out of corporations' hands. Last year, a survey by the World Economic Forum found that, on matters of CSR, respondents placed a much higher level of trust in NGO representatives than in corporate spokespeople. NGO reps were third on the list, after academics and doctors. Corporate reps were second-last, just ahead of athletes and entertainers. "Even though Placer is doing the right things, they still get it," he observes. But why?
When Placer Dome's World Bank award for its South Deep mine was favourably written up in the Toronto Star, Coumans fired off an angry letter to the editor claiming the article was "a stunning example of media manipulation by Placer Dome." She argued that Placer's award-winning program had actually been poached from South African competitor AngloGold Ashanti. It seems a rather serious charge -- that Placer won an award that should have gone to someone else. Alan Fine, public affairs manager of AngloGold in Johannesburg, confirms that his firm had a program that was similar, though not identical, to Placer's at South Deep. But even so, he says, who cares? "I'm not looking to say AngloGold did any of this first," declares Fine. "It is not really an issue for us. The fact of the matter is that Placer Dome is one of the most enlightened mining companies operating in South Africa, alongside us."
The charge that Placer stole the South Deep program is revealing of something deeper. But not of the company. Coumans has styled herself as Placer's avenging angel since well before the Marcopper spill. In 1988, she arrived at Botilao, a village on Marinduque Island, to work on her PhD in religious anthropology. As a Canadian, she began to be asked by locals if she'd take their concerns about the mine to Placer's management. She says she was outraged by what she saw as the mine managers' arrogance. After the spill, she abandoned her work on liberation theology and began pushing NGOs to challenge Placer's environmental practices.
Since then, Placer has never been far from her critical eye. She has frequently disrupted the firm's annual general meetings with troupes of natives from various locales around the world. Asked to name one positive thing Placer has done, Coumans is silent for a long time, before mentioning an old mine in B.C. whose closing, while not environmentally sound, was done "more responsibly" than others. While nearly everyone with a connection to Porgera will attest to Placer's genuine efforts to better the local community -- even if it is driven by the profit motive -- Coumans never gives an inch. The company even merits its own category on MiningWatch Canada's "issues" webpage: metal mine effluent, asbestos, abandoned mines, Placer Dome. It is the only company so listed.
What seems clear is that while NGO activists such as Coumans have become the adjudicators of corporate reputations under CSR, they can hardly be considered dispassionate judges.
"Activists tend to blur the issues," says Assheton Carter, director of energy and mining for Conservation International in Washington, D.C., a think tank set up to promote global biodiversity. Carter is an environmen- talist, but also a practical voice from the NGO community. "The activist argument is that mining is fundamentally unsustainable because it involves digging stuff out of the ground that won't be replaced. But in my view most mines want to get along with their local community, because it can cost them an awful lot of money if they cockup. And they know that local activists can be used as a resource by international activists." This explains why Taylor is so keen to keep everyone in Porgera satisfied to everyone's mutual benefit. "Placer is a good example of a firm thinking about these issues for a long time," says Carter, referring to Porgera. And yet the company still attracts protesters like outhouses attract flies.
Paul Mitchell is another observer who straddles the poles of industry and NGOs, and who finds the CSR debate frustrating. Currently, he is secretary-general of the ICMM, which is developing international mining standards. Previously, Mitchell was CEO of the aid agency CARE Australia and a key player in international development efforts. "A lot of NGOs have become so dependent on advocacy for their profile and income that it is difficult for them to engage in a constructive way," he says. As a result, NGOs and miners are constantly in conflict when there should be ample room for common ground on economic as well as environmental issues. Mitchell recalls that when the ICMM announced its plan to forego exploration in World Heritage sites, many environmental groups were scornful of what they saw as an insignificant gesture, while mining firms were aghast that the group had given so much away. "One of the problems with CSR is that there is no one definition," he says. "Rather, there are several incompatible definitions."
While everyone may agree that CSR is the most important new business issue of the day, no one is quite sure how to define it or who to trust to make decisions in its name. Firms such as Placer Dome are eager to do good where it will provide a positive return for their shareholders. This, they claim, is social responsibility. Activists wish to impose a new regime of standards on the corporate world in order to hobble business interests and promote an environmental agenda. This is also called social responsibility. Clearly, activists currently have the whip hand. But does this situation really serve the common good? More to the point for Porgerans, should CSR be defined in such a way that NGOs from the industrialized West are able to dictate Third World development?
Not according to Meg Taylor. Taylor, no relation to Placer's CEO, is perhaps Papua New Guinea's most famous person and she commands a unique voice in the story of Porgera. Her father was Jim Taylor, an Australian explorer who led the first white patrol to set foot in Porgera in 1939. Her mother was a Papuan from the Wahgi valley south of Porgera.
Meg Taylor understands well the implications of Porgera from both a local and international perspective. She served as Papua New Guinea's ambassador to the United States from 1989 to 1995. In 1996, she returned to her homeland to become the first chairperson of a community advisory committee in Porgera that was set up in response to an Australian government report that called for greater environmental monitoring of the riverine tailings system. Currently she is a vice-president at the World Bank's International Finance Corp. and the official ombudsman for communities upset with World Bank-funded development projects. It is hard to ignore her views on Papua New Guinea, and she, like the rest of the Papuan highlanders, is not shy in making her point. According to her, the NGO/CSR view of Porgera amounts to something akin to environmental colonialism.
"People in this part of the world live very comfortably, if you ask me," she says from her Washington, D.C. office. "And they are entitled to their opinions. But what of the people in my country? The NGOs argue that if it must be riverine disposal, then you shouldn't have a mine at all. Well isn't that terrific," she snaps.
"There is this assumption that the Papuan government and the local communities cannot make decisions for themselves, that we need the people of the First World to always speak for us," she says. "Sure it would be preferable to have a tailings dam so the impact on the rivers would be minimal, but that is not going to happen. These are tough decisions that the people have to make for themselves. And the villagers would say to me, 'This is our one chance. Let's make the most of it.'"
Is Placer Dome a socially responsible miner? Let's try an easier question: Are Porgerans better off with Placer Dome or without?
They knew full well the deal they were making in 1990 -- trading a river for a chance to enter the modern world with its medicine, education and economic opportunities. Both Placer and the Ipili have profited greatly from the deal they made. And surely creating such mutually beneficial relationships is the goal of any realistic and sustainable definition of corporate social responsibility, whatever the developed world has to say. "Placer has totally gone beyond what is expected of a mining company," says Meg Taylor. "The people of my country expected them to be good corporate citizens, and they rose to the occasion."
FIGHT OR TAKE FLIGHT
Some companies resist CSR's growing momentum. Others ride it to advantage
When Tiffany & Co. buys full-page ads in national newspapers, it's usually to trumpet something like its three-drop diamond earrings or a 12-strand gold-chain heart necklace. Yet this March, the jewelry retailer bought a full spread in The Washington Post not to tell the world about its latest bauble, but rather to publish a letter from Tiffany CEO Michael Kowalski to the chief of the U.S. Forest Service -- a letter that argued against a silver mine in northern Montana.
Why was Kowalski throwing his firm's reputation behind a campaign to stop a new mine? Because he recognizes the value of Tiffany being positioned as a leader on corporate social responsibility (CSR) in the jewelry industry. It's the same reason bankers at Citigroup now refuse loans to any project that poses a threat to a rainforest. Or why diamond producers certify their output to confirm its country of origin and methods of production. Thanks to the rising power and influence of the CSR movement, the market demands it.
Diamonds and forest products are two industries, in particular, where consumer-oriented campaigns intended to promote socially responsible corporate practices have had a major impact. With diamonds, the driving force is a certification scheme known as the Kimberley Process. Its intent is to remove from trade all rough diamonds from countries where their production and sale have helped to fuel armed conflict. Similar pressure has been brought to bear by activists and non-governmental organizations (NGOs) on forest companies that log in rain forests, cut old-growth timber or engage in clear-cutting. Retailers such as Home Depot Inc. and Staples Inc. have been the subject of consumer actions in an attempt to change their wood- and paper-sourcing practices, while NGOs like the Forest Stewardship Council now establish and enforce "standards" for socially responsible forestry.