Mining rights vs social licence — why trust is the ultimate currency

Mining rights and social licence are two crucial aspects of a successful mining operation. While mining rights secure access to resources, social licence secures legitimacy, and trust is the ultimate currency in this relationship. Without trust, investments can falter, communities can become divided, reputations can be ruined, and livelihoods can be destroyed.

Many mining executives know how to obtain a mining right, but securing trust is a far more complex task. Despite the existence of stakeholder engagement plans, social performance standards, and expanding ESG disclosures, conflicts between mines and communities continue to escalate. The primary reason for these conflicts is the lack of trust in these relationships.

The concept of a "social licence to operate" was introduced by Jim Cooney in the late 1990s to describe the informal permission that companies require from the societies where they operate. However, this permission is not permanent or unconditional; it is earned through conduct and renewed through experience. The key to earning this social licence is building trust, which is a prerequisite for obtaining the social license to operate.

When trust is present, it reinforces the social licence, leading to reduced risks for the business, such as disrupted production, delayed capital, management distraction, damaged reputation, and, in extreme cases, human harm. Conversely, when trust weakens, these risks increase, and productivity and other outcomes may suffer due to diminished collaboration and cooperation between the company and its stakeholders.

The Marikana massacre of 16 August 2012 serves as a stark reminder of the importance of trust in mining relationships. This event highlighted that formal compliance alone cannot compensate for weak relationships, fragmented accountability, or the failure to recognize human dignity. Today, every listed mining company's annual report includes a section on stakeholder engagement to reassure shareholders about the effort put into engaging with these stakeholders to mitigate potential risks.

However, despite extensive policies, standards, and systems, conflicts between mines and their surrounding communities still arise.

The root cause of these conflicts is often the asymmetry of power between companies and communities, which makes building trust complex and challenging. To remedy this situation, mining companies should consider several issues. Firstly, they should determine which stakeholders they will engage with, ensuring that the engagement process is inclusive and representative of the entire community.

Secondly, they should involve stakeholders in setting the agenda for stakeholder meetings, ensuring that their input is valued and considered. Thirdly, companies should establish conflict management procedures that involve stakeholders in the process, rather than developing them in isolation. Fourthly, they should maintain regular engagement with stakeholders, rather than only engaging when problems arise.

Fifthly, companies should consult stakeholders adequately before making decisions that may impact them adversely. Lastly, they should ensure that the interests of all stakeholders are advanced, taking into account the diverse needs and expectations of different stakeholder groups. By addressing these issues, mining companies can foster a trusting relationship with their stakeholders, ultimately leading to a more sustainable and profitable mining operation.