August 2017

Moving from a social licence to operate to a social licence to close

  • By Sabrina Genter, Principal Consultant, Environmental Resources Management and Toby Whincup, Managing Partner – Mining Sector, Environmental Resources Management

Although many mining companies are familiar with the concept of a social licence to operate, a more holistic view looks at how the impacts of mine closure will affect stakeholders

Social licence to operate refers to the ongoing acceptance and approval of a project, company or industry by its stakeholders. It is widely recognised that stakeholder concerns can and have resulted in increased operating costs, schedule delays, reputational damage and, in extreme instances, mine shutdowns. Last year at the Mining Innovation Summit in Canada, Mark Cutifani, Chief Executive Officer for Anglo American, indicated that over $25 billion worth of projects globally are stalled due to community opposition.

Social licence to operate is not a new concept for the minerals industry. There are numerous examples of where projects have successfully obtained and maintained their social licence to operate. To date, much of the focus has been on establishing a social licence to operate in the early stages of a project, and maintaining it during operations. However, what is emerging is the need to obtain and maintain a ‘social licence to close’. This article explores the concept of social licence to close, and the implications for the mine closure planning process.

A social licence to operate

Social licence to operate is underpinned by trust – building and maintaining trust between a project, company or industry and its stakeholders is required. Moffat and Zhang (2014) found that there were four factors that influenced trust in the mining sector:

  1. procedural fairness
  2. contact quality
  3. impacts on infrastructure
  4. (to a lesser extent) contact quantity.

Procedural fairness refers to whether stakeholders feel that they have had a voice in the decision-making process. This can include decisions made by the mining operator, as well as by government agencies (such as regulatory approvals). In other words, when stakeholders feel that their voice is heard and when a company or industry acts on their concern and manages the impacts experienced by stakeholders, their trust in the company or industry is enhanced.

A social licence to operate can be lost – it is not permanent. This means that constant effort is required to maintain a licence throughout an operation, including through the closure process. This includes ongoing engagement with stakeholders, and management and monitoring of potential social impacts.

There are two important aspects of this that need to be recognised by the mining sector. Firstly, the reputational impact experienced by a company often extends beyond a single asset or geography. Stakeholders are increasingly using tools such as social media to raise the profile of their concerns, which helps to extend impacts across assets and geographies. Secondly, the actions of a single company can, and often do, have implications for the sector as a whole.

Social impacts of mine closure

Closure can bring about a range of changes, particularly for nearby communities and councils in which the mines operate. These changes include: a reduction in employment and business opportunities; a reduction in taxes, rates and other revenue streams (eg social investment); changes in population size and composition in communities; potential contamination or other environmental impacts; changes in property values and housing availability in communities; and changes in sense of place, identity of communities and social cohesion. These impacts are likely to be experienced in communities that are located close to mines, as well as the home communities of fly in, fly out (FIFO) and drive in, drive out (DIDO) workers. The ability to achieve a social licence to close requires operators to identify and manage these potential social impacts early in the life-of-mine and manage them proactively.

Although many of the impacts are likely to be negative, there may also be positive outcomes. This includes a reduction in noise and air emissions, which are often associated with mining operations.

There may also be opportunities to repurpose mine infrastructure or rehabilitated land to support economic diversification. There is an increasing body of literature focusing on the opportunities to repurpose infrastructure. However, liability (eg residual contamination) and land tenure issues (eg incompatible zoning) often exist, and need to be addressed in order for these opportunities to come to fruition.

Rehabilitation and repurposing of land also needs to be balanced with the future potential of resources that for one reason or other may not currently be economical. There may be instances when a site may be revisited and mineral extraction recommenced as a result of price fluctuations or the introduction of new extraction methods.

The social impacts experienced by communities are often more acute in instances where a community is economically dependent on a mine and where opportunities for economic diversification are limited. This includes regional and remote mining operations in Australia, where communities have grown or, in some instances, been established on the back of a mine. The remote nature of these communities often limits the economic diversification opportunities.

Cumulative impacts

As more mines in Australia reach closure, the industry will need to look at not just the impacts of a single mine, but the cumulative impacts resulting from the closure of multiple mines. This will likely produce community as well as regional-level impacts, particularly in locations where multiple mines are reaching closure.

The minerals industry does not exist in isolation. In terms of cumulative impacts, changes in other industries (transition of oil and gas projects from construction to operation or climate impacts in the agriculture sector) may compound the impacts associated with closure.

It is also important to note that impacts may not be limited to nearby communities. Mines, particularly smaller operations, that are dependent on shared mine infrastructure may also experience changes or impacts. These too need to be considered.

Regulatory framework in Australia

For the past five years, there have been a number of changes to enhance the management of the closure process. Many of the recent changes have focused on managing potential long-term environmental impacts (such as contamination), land rehabilitation and provisioning for closure (and potential abandonment).

At this time at the state level, there are limitations in the frameworks with regard to the social implications of closure, although the need for engagement has been included in the guidance documents on closure issued by state regulators. For example, in Western Australia stakeholder engagement is identified as a key aspect of mine closure in the Department of Mines and Petroleum’s guidance on the topic.

At a federal level, although the terms of reference for the Senate review into rehabilitation of mining and resources projects as it relates to Commonwealth responsibilities (report to be issued in August) references social and economic considerations, these appear to be focused more on rehabilitation practices, rather than the broader implications of mine closure.

Although the management of potential social impacts is not a regulatory requirement in most instances, social impacts are often of interest to government agencies. Of particular interest is the potential loss of jobs and business opportunities.

Many companies have corporate guidelines that require the identification and management of social impacts, engagement with stakeholders, and investment in communities (eg through social investment programs). Again, much of the focus has been on the feasibility, construction and early stages of operation, which is often when community concern and opposition is at its peak. However, stakeholder issues can emerge at any stage of a project. For this reason, ongoing engagement and social impact monitoring is required throughout the life of an operation.

Industry organisations, such as the International Council for Mining and Metals, have also established guidance to support companies in this regard. Industry bodies play an important role by helping improve practice across an industry. This is important as the actions of one operation or company can have implications across an industry – as stakeholders often see an operation or company as part and parcel of the broader minerals industry.

Conclusion

The concept of social licence to close needs to form a part the closure planning process in order to minimise potential risks to the operation. These risks include potential delays or increased closure costs, potential long-term damage to reputation and impacts to communities. Social closure planning should:

  • Reflect legal and institutional requirements.
  • Reflect stakeholder input and ideally consensus. This requires extensive engagement well in advance of closure. The outputs should not only support closure, but future planning for those impacted by closure.
  • Identify baseline conditions and forecast impacts, risks and opportunities.
  • Set out implementation arrangements (eg roles and responsibilities, work plan and schedule, budget, monitoring and evaluation programs).

When done well, planning for closure serves as a foundation for sustained socio-economic well-being and beneficial reuse of project assets. Without effective planning, communities find themselves unable to adapt and mines remain burdened by undue expectations and stakeholder grievances.   

Reference

Moffat K and Zhang A, 2014. The paths to social licence to operate: An integrative model explaining community acceptance of mining, Resources Policy, 39:61-70.

Feature image: Neale Cousland/Shutterstock.com.

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