Thank you very much.
I understand that I've been invited before the subcommittee because of my research in mining, social conflict, and CSR. I'm very happy to have this opportunity to present my work to the subcommittee.
At the outset, I'd like to clarify that my qualitative work and knowledge is focused on the countries of Argentina, Chile, and to a lesser extent, Peru, and then my quantitative work has looked at the determinants of social conflict in general, not with regard to specific cases. I don't focus on human rights issues per se, but I am interested in both the causes of conflict and the remedies to it.
To begin, I'd like to talk about the determinants of conflict and what we know for sure about the behaviour of Canadian mining firms as a group. My research partners and I have done the first large-scale quantitative analysis of the determinants of social conflict in the Latin American mining sector based on a dataset we constructed with 640 mining properties located in five major countries of the region—Argentina, Brazil, Chile, Peru, and Mexico—which has been published in the leading international journal of development studies.
Within this universe, 21% of mining properties had known social conflicts associated with them—that's 133 firms with, and 507 without—and Canadian firms, defined by the location of their headquarters, owned 36% of those mines. Our main findings here support much of the case study literature that conflicts are associated with both livelihood concerns—perceived incompatibility between mining and existing agriculture activities—and distributional concerns. That's to say, concerns of populations about who gets what benefit from a mining investment.
These concerns are related to local socio-economic and socio-environmental conditions. As economic opportunities for people become more scarce in the presence of a mining project—meaning that agriculture options are harder, poverty is generalized, and state services are absent—the likelihood of social mobilization increases. Other things being equal, a community with fewer agricultural opportunities, lower incomes, and worse state services is more prone to conflict.
We also find a number of firm-level factors that are statistically significant. For example, the type of mine is important. Open-pit mines are much more likely to have conflict associated with them. The size of the firm is important. Interestingly we do not find, contrary to the literature, that juniors are associated with conflict. Instead we find that mid-cap sized mining firms are more likely to be associated with conflict. We also find that the mineral is not that important. Gold, contrary to expectations, was also not significantly associated with conflict.
I think the take-away here is that social conflict around mining is multi-causal, and that's even when mining advances with full respect for the law and without considering possible bad behaviour by companies and their representatives.
The distributional concerns I raised, which basically means concerns about who gets what from the investment, merit some extra attention because they are so often related to allegations of human rights violations.
It's worth noting that mining firms create a pole of economic rents—that's to say, wealth or possible benefit—in extremely poor contexts in developing countries. This basic fact means that some local people benefit while others do not, creating passionate interests in favour and against the project. In this context, human rights abuses can occur especially when those who would benefit, including state representatives, organize to defend those benefits from protesters.
I think when you look at many human rights reports, you'll find that many of the human rights abuses around mining are conducted by, as it were, people who are seeking to defend the benefits of a mine for themselves and not necessarily that abuses are instigated directly by companies in most cases.
A recent extension of this statistical work I mentioned, using the same data, focused on separating Canadian firms from the rest of the sample—in other words, separating them from foreign but non-Canadian firms and locally owned firms—which allowed us to see if Canadian firms as a group were more or less prone to be involved in social conflicts than mining firms from other countries.
First, we found that foreign firms as a group are more likely to be involved in social conflict with local communities than locally owned firms. When we split the foreign-owned firms into those that had Canadian headquarters and those that were headquartered in other foreign countries, we get some interesting results. The quantitative analysis showed that Canadian mining firms as a group are less likely to be involved in social conflicts than foreign non-Canadian firms. These results are extremely statistically robust and withstand a wide range of statistical robustness tests.
The marginal effect analysis on our modified sample, which slightly overrepresents the likelihood of a social conflict, shows us the probability of a mine being associated with conflict. I think these percentages are useful when we're thinking about human rights abuses and social conflict around mines. Locally owned firms have a 5% to 7% probability of being involved in a social conflict. Canadian firms have a 21% probability; foreign non-Canadian firms have a 27% to 28% probability.
I need to underline that these results are about Canadian firms as a group and neither confirm nor repudiate any particular allegation of human rights abuses. I do not regard these results as a defence for complacency with regard to efforts to improve the human rights and social conflict performance of Canadian firms. Nonetheless, they do suggest that Canadian mining firms as a group are doing something better than their foreign peers. In this context of the study of this kind of committee it is worth asking what that is.
CSR has often been cited as a possible corrective to poor social performance in lieu of home or host government regulation. That has been the approach of the Canadian government over the last decade or so. A lot of my qualitative work in the mining sector has been about how CSR codes work on the ground in practice and has been based on stakeholder interviews at the local level.
From this experience, I volunteer a few observations.
First, companies increasingly have a material interest in doing CSR better, to gain and maintain social licence but to more broadly manage the social risk, which has proven itself to be extremely costly to mining firms. CSR has professionalized throughout the industry over the last decade that I have been studying it. Second, adherence to international CSR codes is usually necessary but never sufficient to assure effectiveness. Codes need to be specific, measurable, with reporting and third party verification to be effective as a self-governance mechanism. Ultimately, effectiveness depends on having good people on the ground with the authority to take decisions important to the community and that can affect key aspects of the project. In reality there is often a governance gap between what is decided at the head office and what is implemented on the ground.
Best practice in CSR has two additional requirements: one, institutional mechanisms that allow broad-based participation and dialogue with the community that give the community effective voice; two, a broad-based distribution of substantial benefits to the community in development projects, supplier contracts, training opportunities, community infrastructure, and services, etc. In other words, CSR requires a legitimate process for participation and wide distribution of material benefits, which can change community perceptions about a mining project.
My final point is that CSR is not a panacea to the problem of human rights abuses or social conflict. It is above all a management tool that can, when used well, generate some degree of social licence or community consent, or at least keep protest from spiralling out of control. It reduces the likelihood that people will protest but it does not necessarily eliminate grievances or the drivers of conflict mentioned previously.
Thank you for your time and the opportunity to present my work to the subcommittee.