Corporate Social Responsibility in the Mining Industries

Natalia Yakovleva

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780754642688
• eBook ISBN: 9781351948371
• Topic: Business
• Subtopic: Business General
• Index: Business

Based on the concept of corporate social responsibility, this book analyses modern approaches adopted by mining companies that could minimise negative impacts of mining and enhance positive benefits to corporate stakeholders. Using a case study of two mining sectors (gold and diamond mining) the book evaluates policies and practices of mining companies within four key areas of corporate social responsibility: environmental protection, health and safety, employee relations and community development. Also included is an assessment of three models for community development that are developed within the mining industries: company-led approach, establishment of corporate foundation and tri-sector partnership. The study analyses management of corporate social responsibility issues with specific reference to mining in the Russian Federation and provides a comparison with global mining companies.

PART I

MINING AND THE ENVIRONMENT

Chapter 1

CSR in Mining: Origin and Concept

Origin and Concept of Corporate Social Responsibility

Companies have to meet a variety of responsibilities assigned to them by law, shareholders other stakeholders and the society at large in order to undertake their duties legitimately. Such responsibilities are categorized into four broad types (Carroll, 1979; Brummer, 1991; Peattie, 1992):

• economic responsibility requires a company to be productive and produce goods and services that are desirable by society;

• legal responsibility requires a company to follow set legal requirements to pursue its business;

• moral and ethical responsibility requires a company to follow the acknowledged ethical norms and values;

• social (sometimes referred to as philanthropic) responsibility requires a company to be proactively involved in practices that benefit the society beyond its economic, legal and ethical responsibilities.

According to the view that a firm is a purely economic institution (Friedman, 1970), the overriding economic goal of a firm is to maximize its return to investors via enhancing the value of the firm’s stock and increasing the dividends paid to each stockholder. However, corporate social responsibility (CSR) stems from the notion that companies relate to society and cause impacts that go beyond simple marketplace transactions and that companies serve a wider range of human values that cannot be captured by solely focusing on economic values (Walden and Schwartz, 1997; Buchholz, 1998; McWilliams and Siegel, 2001).

The concept of corporate social responsibility goes beyond the narrow economic, technical and legal requirements of the firm, beyond profitable production of goods and services and is increasingly being seen as helping to solve important social and environmental problems, especially those that the companies have helped to create. One important thesis that contributed towards the development of CSR concept is a view that firms can no longer be seen as purely as private institutions but as social institutions. Firms are expected to operate in full understanding of the general welfare of society and to share benefits from their economic activities with society. Therefore, firms retain their social role within the society by responding to society’s needs and giving society what it wants (Wood, 1991; Frederick et al, 1992; Walden and Schwartz, 1997; Balabanis et al, 1998; Buchholz, 1998).

The roots of CSR may be found as early as the beginning of 20^th century (see Table 1.1). Carroll (1999) calls Howard Bowen, who published a book Social Responsibilities of the Businessman in 1953, a father of corporate social responsibility. However, it was not until the 1960s that corporate social responsibility became a much more fully developed concept (Halal, 2001). The concept of corporate social responsibility is derived from several concepts and theories such as legitimacy theory, concepts of social contract and public responsibility, stakeholder theory, business ethics and corporate citizenship (Walden and Schwartz, 1997).

Table 1.1 Development of organization’s corporate social responsibility

Year	Type	Characteristics
1859–1910	Corporation is responsible to owners and managers only	A firm has primarily an economic responsibility to contribute to the society by making profit and produce goods and services, while labor is a commodity to be bought and sold.
1900–1950	Corporation is responsible to owners, managers and employees	A firm’s consideration of employees grows more than a mere factor of production as the firm has an obligation to provide a stimulating work environment and recognize employee rights as promulgated by employee unions.
1945–1965	Corporation is responsible to owner, manager, employee and other target environment	A firm must supply complete product information to consumers and not engage in deceptive practices. Firms must not be abusive in their pricing policies, and market unsafe products.
Since 1960	Corporation is responsible to owner, manager, employee and other target environment and public at large	A firm must not degrade the environment, must provide opportunities to minority groups, and actively work to promote social justice. A firm is a social institution as much as a legal and economic institution.

Source: Adapted from Kolk, ‘Economics of Environmental Management’ (2000).

Legitimacy theory According to theory of organizational legitimacy, a business is operating under a mandate from the society, which could be withdrawn if a business is seen not to be doing the thing the society expects of it (Woodward et al, 2001). Corporate social responsibility is seen as a contractual obligation a company has towards society. The notion of the social contract implies that a company operates in society via an implied social contract. It is society that has permitted a company to use natural and human resources and has given it the right to perform its productive functions to attain its power status (Donaldson, 1983; Balabanis et al 1998). However, society’s license for a company to operate is not permanent and organizational survival and company’s growth are based upon this type of social contract. Therefore, a company must constantly evolve and adapt to the changing needs and expectations of society (Walden and Schwartz, 1997) and must meet the test of legitimacy and seek society’s approval (Patten, 1991).

Legitimacy theory stresses the way company management reacts to community expectations and may include pollution prevention and remediation of the physical environment, assurance of health and safety of employees and consumers and those who reside in the communities where products are manufactured and wastes are dumped, as well as responsibility in relation to consequences of unemployment through technological innovation or plant closure (Patten, 1991). Legitimacy theory implies that given the growth in community awareness and concern, that companies will take measures to ensure their activities and performances are acceptable to society and meet society’s wider and growing expectations (Walden and Schwartz, 1997; Wilmshurst and Frost, 2000).

Public responsibility One of the driving principles of corporate social responsibility is a public responsibility, by which businesses are responsible for the outcomes relating to their primary and secondary areas of involvement with the society (Wood, 1991; Kolk, 2000). Businesses have often been forced to respond to various social issues that have been considered to be consequences of their activities (Buchholz, 1998). Bowen (1953) emphasizes that business behavior and methods of business operation must fall within the guidelines set by society. From this perspective, CSR is viewed as an obligation for a firm to follow policies and make decisions that would be desirable to objectives and values of the society at large (Bowen, 1953; Carroll, 1979).

Stakeholder theory Stakeholder theory is tightly linked with legitimacy theory. A company through its policies and operations can impact upon various stakeholder groups, including: consumers, suppliers, government, competitors, communities, employees and shareholders. The company may encounter demands from these stakeholders to devote resources to meet its responsibilities (Buchholz, 1998; McWilliams and Siegel, 2001). Henriques and Sadorsky (1999) classify corporate stakeholders into four groups: (a) organizational (including employees, customers, shareholders, suppliers); (b) community (local residents and special interest groups); (c) regulatory (municipalities, regional and central governments, regulatory system) and (d) media stakeholders. Stakeholder theory emphasizes the necessity for companies to consider the needs, interests and influence of those affected by their policies and operations. Stakeholder management involves taking the concerns of these various individuals and groups into account in a process of decision-making, so they can be satisfied to some extent, at least the most of them (Buchholz, 1998).

The central point of CSR is stakeholder management. As shown in Table 1.1 the range of stakeholders that companies target increased over the years. The interests of all corporate stakeholders need to be given consideration by the company, and if their concerns are disregarded they may damage or halt the company’s operations. Justification for the stakeholders’ involvement in corporate decision-making is that they are affected by the company’s operations. Stakeholders’ capabilities and power could be turned for or against the company. Therefore the company needs to respond to stakeholder demands (Frederick et al, 1992).

Ethics Business ethics theory, which is often referred to as ‘normative theory’ concerns holding managers and their companies responsible for implementing ethical principles in their organizations and using moral reasoning in their decisions, in the formulation of policies and strategies, and the general direction of their enterprises (Buchholz, 1998). In the CSR context, managers perform as moral actors and are obliged to exercise managerial discretion, which is available to them, in all domains of social responsibility towards socially responsible outcomes (Wood, 1991; Kolk, 2000). Ethics-driven view of CSR implies that corporate actions are not only made in the name of self-interest that is proposed by social and stakeholder obligations, but in favor of ethical values such as equality, liberty and fairness (Maignan and Ferrell, 2004).

Corporate citizenship The concept of CSR is closely linked to the wider concept of corporate citizenship. According to Carroll and Buchholtz (1999), a company becomes a good corporate citizen when it meets its fourth type of responsibility, a philanthropic responsibility, contributes resources to the community and improves quality of life. Corporate citizenship suggests a parallel between companies and individual citizens, and that companies are endowed with both rights and responsibility in the conducting of their business. Like individual citizens companies are expected to make voluntary contributions to help maintain the overall well being of the society that sustains them (Logan, 1998).

There is no universally accepted definition of CSR; various definitions are based on different business and social theories:

It refers to...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• List of Abbreviations
• Introduction
• PART I: MINING AND THE ENVIRONMENT
• PART II: CORPORATE SOCIAL RESPONSIBILITY STRATEGIES IN MINING
• Appendices
• Bibliography
• Index