· 7 min read
What is the purpose of a mining company?
It is easy to think about purpose at the most basic of levels. A mining company has a purpose of making money through the extraction of minerals. Although easy, this purpose is underwhelming, as it does not reflect the fact that mining companies are part of a broad ecosystem of business, social and environmental stakeholders.
Is it more holistic to think about the purpose of a mining company like this - making money through the extraction of minerals that are fundamental to global value chains? This feels closer, recognizing downstream customers and end users.
What about this - making money through the extraction of minerals that are fundamental to global value chains in ways that translate regional resource wealth into sustainable development? This sentence feels closer still, recognizing the local as well as the downstream fit of a business.
Paul Barnett, the leader of the Enlightened Enterprise Academy, talks about the characteristics of enlightened enterprises. Being clear about purpose is table stakes for being enlightened, given that it is about understanding the sustainable fit of a business in the broader ecosystem of business. Enlightened enterprises, as described by Paul, are organizations with a regenerative focus, recognizing that they are parts of broader dynamic systems, long-term potentially generational orientations, networked, integrated knowledge, wisdom and technology, with self-aware leaders who combine ethics and wisdom that goes beyond technical skills.
How do these concepts potentially apply to mining, an industry that is traditionally considered 'dirty' and occasionally harmful to people?
First, as context, the mining industry is changing rapidly. Pressured by soaring critical minerals demand, changing technology, political and geopolitical pressures, as well as expectations around community and ecological engagement, business models are being reconsidered so that the capital and top talent can be attracted that are essential for tomorrow's growth. As with all large industries, some companies are much more progressive than others, but it seems apparent that those companies that demonstrate a willingness to shift business models toward more progressive regenerative orientations will be tomorrow's winners.
What does this mean? And what does this look like?
The term regenerative seems like an oxymoron for an industry that is inherently about extraction, but the concept applies perfectly. As business models are reconsidered and as purposes of mining companies are refreshed, a key starting point is the fact that mines do not exist in isolation, they are simply elements of much larger business ecosystems.
The PESTLE model is a good starting point for thinking through diverse stakeholder groups that interact with a company. Political, economic, social, technological, legal and environmental relationships all need to be considered when defining a company's purpose and its supporting business model.
Mining activities are found in most countries to varying degrees. Formalized larger companies range in size from huge multi-nationals down to medium or small-scale companies that operate a single project. There are also artisanal miners, informal small scale operators that are found in close to 100 underdeveloped countries, often sharing land with the concessions that are owned and operated by larger companies. Mining tends to take place in relatively remote places, and comes with outsized social and environmental impacts relative to smaller communities found in the regions of mining projects.
Thinking about PESTLE categories and some of the dynamics faced by mining companies:
Political
Mining needs to manage a broad variety of political realities – responsible governance and advocacy
• Mining faces complex political and geopolitical considerations. At a high level, US-EU/UK-China-Russia rivalries around critical minerals dominance is ever-present. These minerals are facing significant supply shortfalls as the energy transition, AI and growing populations increases demand
• Along with geopolitical stresses, mining companies operate in countries and in sub-national jurisdictions with diverse legal frameworks and political challenges – navigating these in order to align diverse stakeholders is critical for conflict-free projects
Economic
Mining can support local growth and resilience
• Mining projects are often outsized compared to the economy of the region where they sit. Large projects rely on these economies while also potentially stimulating economic development.
• Companies need to consider infrastructure availability – power, water, connectivity.
• Equally, companies need to consider how they are contributing to local growth and development – collaboration around local content, local employment, local capacity development.
• Resources can be a curse or the start of virtuous growth cycles, depending on how effectively companies engage with local economies, targeting opportunities for mutual value
Social
Earning social license is table-stakes for conflict-free projects – impacts on people and on communities
• Mining projects often have outsized impacts on small relatively remove communities that they neighbor. Cultural differences between companies with head offices in faraway places and local communities are often significant, a basic challenge to communication and alignment. Earning social license starts with understanding who local stakeholders are, what these stakeholder groups care about – values, beliefs, needs, fears – actively listening and then respectfully engaging. Stakeholder dialogues need to consider a broad variety of topics, for instance water use, dust, local capacity development, infrastructure implications, corruption and beyond. Successfully earning social license involves agreements on solutions that make sense to stakeholders as well as to the company
• Artisanal miners often share land concessions with large mining projects, and are often precursors to large scale exploration. ASM is often a natural extension of nearby communities, making them an integral stakeholder. Engaging with ASM and supporting professionalization enhances joint productivity, lowering joint risks, and improving lives of miners and community members
• Mining company employees are a discrete stakeholder group as well. Topics that range from safety through to the dignity of work impact employee relations of course, but also cascade across community relations given that employees may be predominantly extensions of nearby communities
Technological
Sustainable innovation
• Mining is a conservative industry, one where business models have been largely unchanged for a very long time. It is worthwhile to think about technology holistically – not just as geology, engineering, equipment, AI and solutions related to data, but as organizational technology that enables resilient adaptation across different operating environments and business conditions. For instance, organizations that think about projects that straddle different scales, that partner explicitly with communities, that incorporate blended approaches to finance in capital outreach protocols are companies with increased flexibility to adapt to different realities over the course of time.
Legal
Ethical compliance and accountability
• Compliance is table-stakes for ethical business. A large mining company is faced with a variety of laws across jurisdictions, which it needs to understand and align with. Mining companies often have a choice – attempt to negotiate agreements where they are an exception, where rules don’t apply to them and where taxes are minimized, or on the other hand thinking about compliance as fundamental toward broader responsible mining practices.
Environmental
Stewardship and sustainability
Mining is extractive. Mining is dirty. Mining creates ecological harm. All of those things have been historical truisms. Ecological oversight – biodiversity protection, reforestation, contamination avoidance and carbon management – is a core element for earning social license given communities that neighbor mines, while also increasingly being an expectation that investors and end customers bring to the table. Environmental sustainability is no longer seen as ‘tree hugging’ in this context, it is smart business, aligning stakeholders and demonstrating responsible behavior.
To summarise, PESTLE helps in thinking through diverse stakeholder implications.
An enlightened enterprise needs to have a purpose that goes beyond extraction for profit. Recognizing community implications and downstream value chain realities, mining companies are well placed to consider where they fit in ecosystems and what fundamental value they deliver. This purpose needs to be fully integrated into the DNA of corporate culture, without which it is just a meaningless powerpoint chart.
As a company does this and as it considers the various stakeholder implications that PESTLE categorizes, it needs to think about how it delivers against its purpose with a long-term regenerative focus that recognizes that it is part of broader dynamic business ecosystems.
“In the world of mining, responsible mining standards and practices are a start on this work, where the values and disciplines inherent in community engagement, ecological oversight, collaboration with artisanal miners, ethical business practices and so on become core to corporate DNA.”
This article is also published on Enlightened Enterprise Magazine. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
