Martin Scurrah

Conflict translates environmental and social risk into business costs

Significance In this report we investigate company–community conflict and its role in the regulation of sustainability performance in the extractive industries. We estimate the cost of conflict to companies and identify conflict as an important means through which environmental and social risks are translated into business costs and decision-making. The paper clarifies the relationship between the environmental and social risk experienced—and interpreted—by local communities, and the business risks experienced—and interpreted—by corporations. Findings reveal that, at least for the case of the extractive industries, these two types of risk can co-constitute each other. The central importance of corporate strategy and behavior for sustainability science is highlighted. Sustainability science has grown as a field of inquiry, but has said little about the role of large-scale private sector actors in socio-ecological systems change. However, the shaping of global trends and transitions depends greatly on the private sector and its development impact. Market-based and command-and-control policy instruments have, along with corporate citizenship, been the predominant means for bringing sustainable development priorities into private sector decision-making. This research identifies conflict as a further means through which environmental and social risks are translated into business costs and decision making. Through in-depth interviews with finance, legal, and sustainability professionals in the extractive industries, and empirical case analysis of 50 projects worldwide, this research reports on the financial value at stake when conflict erupts with local communities. Over the past decade, high commodity prices have fueled the expansion of mining and hydrocarbon extraction. These developments profoundly transform environments, communities, and economies, and frequently generate social conflict. Our analysis shows that mining and hydrocarbon companies fail to factor in the full scale of the costs of conflict. For example, as a result of conflict, a major, world-class mining project with capital expenditure of between US

Decentring poverty, reworking government: social movements and states in the government of poverty.

3 and US

Case Study: Jobs and Health in Peru

5 billion was reported to suffer roughly US

Conflict translates social and environmental risk into business costs

20 million per week of delayed production in net present value terms. Clear analysis of the costs of conflict provides sustainability professionals with a strengthened basis to influence corporate decision making, particularly when linked to corporate values. Perverse outcomes of overemphasizing a cost analysis are also discussed.

Challenges and Questions

Abstract The significance of social movements for pro-poor political and social change is widely acknowledged. Poverty reduction has assumed increasing significance within development debates, discourses and programmes – how do social movement leaders and activists respond? This paper explores this question through the mapping of social movement organisations in Peru and South Africa. We conclude that for movement activists ‘poverty’ is rarely a central concern. Instead, they represent their actions as challenging injustice, inequality and/or development models with which they disagree, and reject the simplifying and sectoral orientation of poverty reduction interventions. In todays engagement with the poverty-reducing state, their challenge is to secure resources and influence without becoming themselves subject to, or even the subjects of, the practices of government.

From the Cover: Conflict translates environmental and social risk into business costs

At the end of the 1990s, local groups in the city of La Oroya, Peru, struggled to draw attention to a problem that everybody was aware of but nobody had yet addressed: the high levels of pollution affecting its population living near a minerals smelter operation. The city of La Oroya had a long and complex relationship with the metallurgical facilities, a powerful local stakeholder, crucial to the region’s development. This was a difficult context for groups trying to address the consequences of decades of environmental neglect, as local authorities’ support leaned towards Doe Run Peru (DRP), a company reluctant to invest in modernizing its facilities and lowering pollution emissions. Although the presence of air pollution was evident, nobody had an idea how serious the problem really was. Local NGOs conducted a series of studies to assess the impact of pollution on the local population’s health. The results were shocking, showing that the population, and especially the children, had blood lead levels that far exceeded the maximum acceptable limits set by the World Health Organization. That was the beginning of an uphill battle to make the state and the company take action to protect people’s health. This case has become emblematic as it reversed the usual model of international advocacy: southern organizations providing information to campaign efforts in the North to influence decisions in the North.

Case Study: Garment Workers in Sri Lanka

Significance In this report we investigate company–community conflict and its role in the regulation of sustainability performance in the extractive industries. We estimate the cost of conflict to companies and identify conflict as an important means through which environmental and social risks are translated into business costs and decision-making. The paper clarifies the relationship between the environmental and social risk experienced—and interpreted—by local communities, and the business risks experienced—and interpreted—by corporations. Findings reveal that, at least for the case of the extractive industries, these two types of risk can co-constitute each other. The central importance of corporate strategy and behavior for sustainability science is highlighted. Sustainability science has grown as a field of inquiry, but has said little about the role of large-scale private sector actors in socio-ecological systems change. However, the shaping of global trends and transitions depends greatly on the private sector and its development impact. Market-based and command-and-control policy instruments have, along with corporate citizenship, been the predominant means for bringing sustainable development priorities into private sector decision-making. This research identifies conflict as a further means through which environmental and social risks are translated into business costs and decision making. Through in-depth interviews with finance, legal, and sustainability professionals in the extractive industries, and empirical case analysis of 50 projects worldwide, this research reports on the financial value at stake when conflict erupts with local communities. Over the past decade, high commodity prices have fueled the expansion of mining and hydrocarbon extraction. These developments profoundly transform environments, communities, and economies, and frequently generate social conflict. Our analysis shows that mining and hydrocarbon companies fail to factor in the full scale of the costs of conflict. For example, as a result of conflict, a major, world-class mining project with capital expenditure of between US

Oxfam and its Global Campaign on Trade

3 and US

Types and Tactics

5 billion was reported to suffer roughly US

Case Study: Trade and Agriculture in India

20 million per week of delayed production in net present value terms. Clear analysis of the costs of conflict provides sustainability professionals with a strengthened basis to influence corporate decision making, particularly when linked to corporate values. Perverse outcomes of overemphasizing a cost analysis are also discussed.