Supplementary written evidence from London Mining Network (EIS 47)
Supplementary comments received from London Mining Network (LMN) following on from the Commons Select Committee on Business, Innovation and Skills hearing on Tuesday 4 March 2014
Questions asked by the Committee on 4 March
The Committee asked LMN to provide (1) suggestions about how mining companies might be required to report on their human rights and environmental impacts in a manner which enables comparisons to be made between companies and (2) how tax revenues from mining might be apportioned justly between national and regional governments.
LMN, as a network, has not worked on issues of taxation. We therefore refer the Committee to the work of colleagues at Christian Aid. This submission will deal with reporting and make some further comments to add to those made by LMN Co-ordinator Richard Solly at the hearing on 4 March.
1) Reporting
In March 2011, the Financial Reporting Review Panel issued a statement about the report and accounts of Rio Tinto plc (see https://www.frc.org.uk/News-and-Events/FRC-Press/Press/2011/March/Statement-by-the-Financial-Reporting-Review-Panel.aspx). This gave examples of the kind of information that the FRRP accepted should be included in company reports if they are to comply with the Companies Act of 2006. Specifically, the FRRP noted:
“Additional information included in the Rio Tinto Annual Report following discussions with the Panel comprises details of the potential health risks posed by exposure to workers and communities surrounding uranium mines; details of the sensitivities the group faces in dealing with local communities, such as the La Granja copper development in Peru and the Eagle project in Michigan in the United States; an example of the potential for the group’s projects to impact on biodiversity, with information relating to biodiversity projects associated with the group’s activities in Madagascar; additional details of the group’s non-managed Grasberg mine in Indonesia and the nature of the environmental, social and reputational issues relating to that mine.”
LMN's 2012 report on the need for stricter regulation of UK-listed mining companies (http://londonminingnetwork.org/docs/lmn-the-case-for-stricter-oversight.pdf) recommended, among other things:
“UK-listed mining mining companies should be legally required to note in their corporate reports all findings of non-compliance with IFC and OECD standards, and of UK and non-UK regulation concerning biodiversity and environmental protection, as well as convictions in UK and non-UK courts.” (Recommendation number 2 on page 6 of the report)
Colleagues at Christian Aid have drawn our attention to the document A Primer for Environmental and Social Disclosure published by the Toronto Stock Exchange and Chartered Professional Accountants Canada at http://www.cica.ca/focus-on-practice-areas/sustainability/cica-publications-and-activities/item78049.pdf, which contains useful suggestions and comparisons between stock exchanges.
In addition, LMN believes it should be possible for companies to note in their annual reports, for each mine in which they are involved (including, as appropriate, those which have been closed but which continue to produce acid mine drainage) such items as:
The data on the above issues should be readily accessible to companies as part of their business, and its presentation should not be onerous to companies who operate in a responsible manner. There are other matters which ought to be taken into account but which, as LMN noted in the hearing on 4 March, are less easy to quantify. What is the psychological impact on displaced people of the loss of their homes, lands and livelihoods, even if they are provided with alternative dwellings of a reasonable standard and alternative livelihoods? Not only rural Indigenous Peoples, but farming communities in general, characteristically feel a close emotional and spiritual link to the land on which they and their ancestors have depended. Experience of groups within LMN is that land-based people often express a deep attachment to the places that they have lost, even if a relocation has been organized as well as it could be organized. Some have even told us that people have 'died of broken hearts' as a result of relocation. How can such happiness and sadness be quantified? Yet they are among the most significant impacts of mining operations on land-based people around the mines.
Finally, it is important to reiterate and to emphasize LMN's view that fuller reporting and transparency does not, will not and cannot in itself be sufficient to address the multiple negative impacts of mining operations on surrounding communities by London-listed mining companies. It is not sufficient for a company simply to report on the environmental and social damage it has caused. It must make good that damage and avoid causing such damage in the future. It is clear that companies must apply due diligence in the avoidance of harm, according to the UN Guiding Principles on Business and Human Rights. However, what is needed, in addition to stricter regulation and enforcement by the governments of the countries in which the mines are situated, is stricter regulation of UK-listed mining companies by the UK government, with proper enforcement of that regulation.
2) Further comments
Committee Chairman Adrian Bailey MP invited contributors to the 4 March hearing to send in supplementary material to the answers given and points made at the hearing. The following notes restate some of the points made in the LMN Co-ordinator's remarks on 4 March for the sake of clarity and add further points.
Governance: why are companies in the extractives sector under such scrutiny? Why are so many NGOs working on this matter?
It is important to bear in mind that the great majority of mining around the world is opencast or open pit mining rather than deep mining. It creates relatively few jobs in comparison to deep mining and does much greater damage to the environment. It has been expanding rapidly in recent years. Such mining is uniquely destructive, involving removal of vegetation, destruction of rural livelihoods, toxic waste dumps, tailings dams, acid mine drainage and other forms of pollution. It is increasingly often on Indigenous Peoples' land, often against their stated wishes, involving violation of their cultural values and sacred sites. In developing countries it often involves militarization of areas, attendant human rights abuses, demonization of mining opponents, including their detention or even assassination.
Many groups, at least in LMN, have started work on mining issues at the direct request of communities with whom they have been working in various parts of the world. Those of us in LMN care for the well-being of real people whom we have actually met – for the dignity and livelihoods of small-scale farmers who want to carry on farming, or Indigenous Peoples who want to prevent the desecration of places which are sacred to them. Having met such people and heard their concerns, we cannot just forget about them.
We believe other organizations have increasingly taken up mining issues because they have seen the level of concern at community level, the number of violations of fundamental human rights and the amount of environmental destruction wrought by the mining industry across the world.
There is also a sense of moral responsibility as people living in Britain for what companies based or listed here are doing, and concern for the reputation of this country.
Engagement between companies/communities/NGOs/governments: is it good or not?
Different people mean different things by engagement. If engagement is taken to mean simply 'communication', it could be taken to mean anything from doing behind-closed-doors deals with companies to active blockading of company operations to make clear a community's opposition to them.
Within LMN, different groups take different attitudes to engagement, as do the communities with whom groups work. Some communities will meet with governments but not meet with companies. Some groups will meet with companies at public events such as company AGMs but not in private. Others are happy to have discussions with companies as long as representatives of mining-affected communities are present; others will meet with companies at the request - or with the permission of the communities with whom they are working, even without a representative of those communities being physically present. Some will meet on their own initiative with companies or government, but ensure that they keep in mind on whose behalf they are working.
As a network, we think it is important that the views of mining-affected communities should always be respected. The danger of meeting in private with companies or government without sufficient communication with affected communities is that misunderstandings and misrepresentations can occur. At worst, a working relationship can be established between NGOs and companies or government which goes off in its own direction and potentially betrays the views and interests of the communities on whose behalf the NGO is supposed to be working. Co-operation between companies and NGOs on projects intended to mitigate some aspect of a mine's operations can have the unfortunate side-effect of legitimizing the presence of a mining company in an area when it is in fact opposed by local communities.
Regarding engagement between companies and communities, we have experience where companies can subvert communities through not telling the whole truth, by offering threats or bribes. Even well-intentioned corporate philanthropy can subvert important community decision-making processes.
If a community makes its rejection of a proposed mining project clear by demonstrations and refusal to meet a company, that resounding NO has to be respected.
How are policy makers reacting to companies in the sector in the UK? How does regulation of extractives companies feed through to the reputation of the UK? What regulations can be put in place that make sure that companies do good, but that also help the economy of the UK?
Regulatory bodies have been saying their hands are tied and can only apply the rules they are given. They exercise a 'light touch'. LMN's efforts to find a government body which believes it has the responsibility to hold companies to account for their human rights and environmental impacts have proven fruitless. LMN wrote to the Financial Reporting Council in February 2013, but received no reply. In April 2013, LMN wrote to the Financial Conduct Authority. The FCA replied, explaining that with regard to the conduct of companies listed on the London Stock Exchange, it could only use the powers it had been given by Parliament, and implied that if LMN believed that its powers were insufficient, we should contact the Government. With regard to companies trading on the Alternative Investment Market, the FCA recommended contacting the London Stock Exchange, which is responsible for the regulation of that market. After some delay, LMN wrote to the London Stock Exchange in December 2013. The LSE replied that it could only enforce the rules of the Alternative Investment Market, ensuring that the market is orderly and that investors have sufficient information.
The FCA seems interested in tighter regulation only on matters of corporate governance which may impact investors' financial interests. But companies need to be held to account also over human rights and environmental issues. If investors are unconvinced by the moral argument, they may consider the possible impacts on their financial interests as well: if local people are opposed to a mining project, they can hold up the progress of the project, and these delays cost money[i].
By instituting the Bribery Act, the UK Government has already accepted that UK companies need to be held to account here for abuses overseas. The Act has yet to prove its worth, but it is a beginning. We need something similar on human rights abuse and environmental destruction. LMN's 2012 report recommended that UK companies should be expected to keep the provisions of international agreements to which the UK is a signatory.
A conflict is sometimes posited between respect for human rights and the environment on the one hand, and development on the other. The Vienna Declaration and Programme of Action, adopted by consensus at the World Conference on Human Rights on 25 June 1993 in Vienna, Austria, created the office of the United Nations High Commissioner for Human Rights. It talked about development as a right. But Part I, paragraph 10, states: “While development facilitates the enjoyment of all human rights, the lack of development may not be invoked to justify the abridgement of internationally recognized human rights.”
In its review of the UK in August 2011, the UN Committee on the Elimination of Racial Discrimination said in paragraph 29 of its Concluding Observations:
“The Committee is concerned at reports of adverse effects of operations by transnational corporations registered in the State party but conducted outside the territory of the State party that affect the rights of indigenous peoples to land, health, environment and an adequate standard of living. The Committee further regrets the introduction of a legislative bill in the State party which, if passed, will restrict the rights of foreign claimants seeking redress in the State party’s courts against such transnational corporations (articles 2, 5 and 6).
“Recalling its General Recommendation 23 (1997) on the rights of Indigenous Peoples, the Committee encourages the State party to take appropriate legislative and administrative measures to ensure that acts of transnational corporations registered in the State party comply with the provisions of the Convention. In this regard, the Committee recommends that the State party should ensure that no obstacles are introduced in the law that prevent the holding of such transnational corporations accountable in the State party’s courts when such violations are committed outside the State party. The Committee reminds the State party to sensitize corporations registered in its territory of their social responsibilities in the places where they operate.”
With regard specifically to listing rules, LMN noted in its 2012 report that the Hong Kong Stock Exchange's rules were better than those of the London Stock Exchange. Section 18 of those rules (pages 386-404) refer to minerals companies, and the most relevant points are the following:
18.05 In addition to the information set out in Appendix 1A, a Mineral Company must include in its listing document:
(6) if relevant and material to the Mineral Company’s business operations, information on the following:
(a) project risks arising from environmental, social, and health and safety issues;
(b) any non-governmental organisation impact on sustainability of mineral and/or exploration projects;
(c) compliance with host country laws, regulations and permits, and payments made to host country governments in respect of tax, royalties and other significant payments on a country by country basis;
(d) sufficient funding plans for remediation, rehabilitation and, closure and removal of facilities in a sustainable manner;
(e) environmental liabilities of its projects or properties;
(f) its historical experience of dealing with host country laws and practices, including management of differences between national and local practice;
(g) its historical experience of dealing with concerns of local governments and communities on the sites of its mines, exploration properties, and relevant management arrangements; and
(h) any claims that may exist over the land on which exploration or mining activity is being carried out, including any ancestral or native claims.
Of course, strict listing rules themselves are not sufficient to ensure good corporate behaviour once a company has listed; there needs to be regulation holding companies to account for their human rights, social and environmental impacts after they have listed.
London Mining Network
Finfuture
London N4 2DA
[i] S. Herz, A. La Vina and J. Sohn, Development without Conflict: The Business Case for Community Consent, World Resources Institute, 2007