Stakeholder prosperity assurance

When a mining project moves through various phases into operations, stakeholders know whether their lives improve as a result of these projects.

Stakeholder prosperity assurance is a new framework that envelopes thinking and disciplines that have gone into Social License and into ESG over time, while providing mechanisms that strengthen the fundamental goals of social license and ESG.

Context 

Social License to operate is the acceptance, trust, and approval a project receives from local communities and stakeholders. The concept goes well beyond legal permitting; it is aligned with legitimacy and support.  In the case of mining, earning social license equates to earning trust, so that aligned approaches and solutions can be implemented that stakeholders see as being beneficial.  Earning social license is often a prerequisite to permitting approvals that enable paths to operations.  Even as social license in theory needs to be re-earned on an ongoing basis in order to be maintained, focus is often more on the promises needed to earn social license and get projects going as opposed to the delivery of value relative to these promises.

Earning social license in a real way is part of ESG, a framework where consideration and governance of social and environmental stakeholders need to be considered in order to understand investment dynamics.  Investors come to understand that aligned stakeholders and effective governance lowers risks, which is why interest in ESG peaks, and companies being invested in come to see ESG-related disciplines as being sound operating practices for attracting investors.  The challenge with ESG is that the essence of the framework is often distilled into ratings and checklists, meaning that practices are more about ticking boxes on things that need to be done, less about doing things well in ways that create positive external value and impact.

Stakeholder prosperity assurance

Stakeholder Prosperity Assurance (SPA) is a new concept that builds on and goes beyond the disciplines of ESG and social license.  The focus of SPA is not on earning trust and alignment at the outset of projects, nor is it on whether specific good practices are being carried out over time, but on whether stakeholder prosperity itself actually improves.  Stakeholder prosperity in this context is measurable - it either means:

1. Improved financial outcomes for stakeholders - people make more money

2. Improved quality of lives for stakeholders - people have better lives, whether because infrastructure has been improved, pollution has been reduced, or any other reason

Measuring financial as well as quality of life improvements is central for ensuring that true stakeholder prosperity is being delivered. Put simply, how else do you know that strategies are being successfully translated into change unless you measure and monitor this change?

Stakeholder financial outcomes can be improved in a number of ways. At a basic level, local content and local employment directly increases income, and more broadly, local beneficiation through the deployment of processing facilities that increase local value-add support the development of economies. Capacity development that supports artisanal mining professionalization, as well as large-scale mining engagement plans, also opens doors for increased economic opportunities and financial value. Measuring financial gains is intuitively simple – GDP/capita improves in a mining region, or it doesn’t, a direct measure of prosperity.

Artisanal mining professionalization, as well as large mining project engagement efforts, also impact the quality of lives of miners and of neighboring communities.  It is equally important to measure these impacts, even as they are not necessarily financial.  A wide variety of targeted impacts fall into measures of quality of life, for instance:

1. Is the usage of mercury eliminated?  Recognizing that mercury is a neurotoxin, eliminating usage in mining in ways that align with Minamata Convention guidelines eliminates adverse health impacts on miners and on community members, while improving small-scale farming productivity in regions where mercury has affected water supply

2. Have new infrastructure, like roads, water, and power systems, been put into place that directly improve the regional economies and the quality of life of community members?

3. Have broader infrastructure, like schools, been put into place that support the delivery of sustainable development over time?

This handful of examples is meant to illustrate the broad scope of impacts on quality of life that are in play with mining.

Disciplines around SPA apply to any sector that has meaningful stakeholder risks and opportunities, recognizing that retained stakeholder trust and collaboration depends on felt impacts that improve their situations.  In the mining concept, SPA utilization makes sense in two interrelated contexts:

1. When mining projects are working with stakeholders to earn and to sustain social license, concrete information on stakeholder deliverables supports planning and execution.  SPA is operational in this context, something that supports engagement protocols that mines are involved in as they engage communities and broader stakeholders

2. There is a $1 trillion global sustainability bond market. Veridicor has defined a bespoke subset of these bonds that are geared to the stakeholder realities of mining, known as Stakeholder Prosperity Bonds. Scope of these bonds combine artisanal mining professionalization with targeted gains for large projects and the development of regional infrastructure like road, water, and power systems. SPA is a natural fit that supports these bonds. Theories of change determine specific stakeholder expectations of value, which are integrated into the architecture of bonds through a series of KPI’s. Measurement, analysis, and replanning of bond programs is essential for ensuring that promises codified in KPI’s are delivered, a process that is directly facilitated by SPA

In conclusion

Social License to Operate and ESG both speak to stakeholder alignment in different ways. License is about the development and sustainment of trust and alignment, whether communities and other stakeholders buy-into approaches that add mutual value that they believe will be executed in an authentic manner. ESG is about risks, the risks that are reduced when social and environmental stakeholder expectations are integrated into broader strategy. Both concepts are important, and both make complete sense, but the value that Stakeholder Prosperity Assurance brings centers around gaps in the application of both concepts. License tends to be statically considered, something that is needed upfront, and ESG often involves practices which validates checklists rather than the effectiveness of elements in these checklists. SPA validates effectiveness and it does so on an ongoing basis, through the measurement of prosperity. From a mining project perspective, SPA becomes an effective tool in this context, a methodology for validating that promises made during the process of engaging communities are translated into stakeholder value that is being successfully added. From a Stakeholder Prosperity Bond perspective, SPA provides a mechanism for integrating promises and deliverables through KPI’s that are reflected in bonds that create value along with positive impact in mining regions.

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