Corporate Social Responsibility and Natural Resource Conflict

Kylie McKenna

• Publisher: Routledge
• Year: 2015
• eBook ISBN: 9781317667384
• Edition: 1
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

This book examines the possibilities and limitations of corporate social responsibility in minimising the violent conflict often associated with natural resource exploitation. Through detailed and penetrating empirical analysis, the author skilfully asks why previous corporate social responsibility practices have not always achieved their aims.

This theme is explored though an analysis of two of the most complex and protracted conflicts linked to natural resources in the Asia Pacific region: Bougainville (Papua New Guinea) and West Papua (Indonesia). Drawing on first-hand accounts of corporate executives and communities affected by resource conflict, this book documents the translation of global corporate social responsibility into local peace. Covering topics as diverse as post-colonialism, law, revenue distribution, security, the environment and customary reconciliation, this ambitious text reveals how and why current corporate social responsibility initiatives may be unable to assist extractive companies avoid social conflict. The study concludes that this is attributable to the failure of extractive companies to respond to the social and environmental issues of most concern to local host communities. The idea is that extractive companies could actively contribute to peace building if they were to engage with the interdependencies between business activity and the root causes of conflict.

What sets this book apart is that it offers a holistic framework for extractive companies to engage with the complexity of resource conflict. 'Interdependent Engagement' is an integrated model of corporate social responsibility that encourages extractive companies to deal with the underlying causes of resource conflict, rather than applying solutions or critiques of their symptoms.

1 The challenge of corporate social responsibility and conflict

DOI: 10.4324/9781315768755-1

In every organisation or company, the management should be connected with us. It took so many years to understand that. Nobody understood that at the time ... but they do now.

(B18, landowner group chairman, interview with Kylie McKenna, Bougainville, 2010)

In April 2010 I travelled to Arawa, the old mining town of the Panguna mine in the Autonomous Region of Bougainville, Papua New Guinea (PNG). During my stay in Arawa I visited the house of an elderly landowner of land taken by the Panguna mine who had a long history of involvement in the Panguna Landowners Association (PLA). During the operating years of the mine, the PLA lobbied for a greater share of the wealth derived from the project for landowners, and compensation for the environmental damage it caused. I had only arranged to speak with this one landowner, but during our meeting about ten people from his family joined us. They sat across from the elderly man and me in silence, listening to every word he recounted of his experiences of the past, and his hopes for Bougainville's future. During our discussion, he spoke of the unfairness of the Australian Administration that supported a mining agreement that was not considered to represent the specific interests of the people of Bougainville. The landowner spoke of lobbying mine operator, Bougainville Copper Limited (BCL), and the PNG Government for more compensation, and the unwillingness of the corporate executives at the time to listen to the grievances of local people. He spoke of communication problems between landowners and BCL's Village Relations Department, of the murder and rape of women by migrants to Bougainville from other parts of PNG and the feeling of becoming a stranger on his own land.

The story I heard that day reflected upon an extremely painful past. But as images of the past were invoked, the elderly landowner also drew my attention to possible futures for the Panguna mine. He went on to talk about a belief that BCL has learned from the mistakes of the past, and his certainty that if Bougainvilleans truly want independence from PNG, the mine must be reopened.

In a deceptively simple way, this story encompasses many of the lessons learned during the course of this study. Drawing on the thoughts of over 90 stakeholders,¹ranging from multinational resource company executives (including corporate social responsibility [CSR] professionals, company directors and indigenous employees) to local landowners, this book explores the theme of how extractive companies might amend CSR practices to facilitate peaceful development. As the landowner alluded in his comments to the connection between local people and corporations, this study focuses on the interdependence that exists between large extractive companies and the societies in which they operate. The purpose is to investigate the productive possibilities that might emerge from engaging with this interdependence, rather than denial of it. The aim is to contribute to understandings of how large extractive companies can not only avoid the violent conflict that is so often associated with this industry, but can actually facilitate the peaceful extraction of natural resources.

Resource conflict

Conflict relating to natural resources is a defining feature of contemporary global armed conflict. Research conducted by the United Nations (UN) estimates that at least 40 per cent of intrastate conflicts, that is, conflicts that occur within the boundaries of a nation-state, have a link to natural resources (UNEP, 2009, p. 30). Numerous studies have sought to explain this dynamic. Termed the ‘resource curse’ or the ‘paradox of plenty’, scholars in this field argue that instead of contributing to peace and prosperity, an abundance of natural resources has a tendency to be associated with poor economic growth, poverty, corruption, state weakness, authoritarianism and repression, all of which increase the likelihood of armed conflict (Bannon & Collier, 2003; Collier & Hoeffler, 2005; Ross, 2001, 2003; Sachs & Warner, 2001).

A prominent explanation for the resource curse is that the presence of natural resources provides both an incentive for warring groups to compete and sell off the resource, as well as the financial means to purchase weapons (Collier & Hoeffler, 2005). Civil war is expensive and the tools of war have to be financed (Bannon & Collier, 2003, p. 3). Consequently, rebel movements can be characterised, in part, as business organisations. Without a source of finance, they ‘will wither away or be capable of only limited and low-level violence – more of an irritant than a serious threat to an established government’ (Bannon & Collier, 2003, pp. 3–4).

While there is general consensus in the literature that economic drivers can and do contribute to conflict, there is less agreement as to how influential they are relative to the social and environmental impacts that large-scale resource developments create, such as the influx of ‘economic migrants’ and disruptions to ‘traditional’ ways of life (Hook & Ganguly, 2000, p. 65). This has become known as the ‘greed vs. grievance’ debate, where the motivations of rebel movements are categorised as either ‘loot’ or ‘justice’ seeking (Ballentine & Nitzchke, 2003, p. 2). The data assembled for this book suggest that resource conflicts can be characterised by a combination of both these motivations. Some individuals are motivated by greed, while others simply want an end to the social and environmental disruptions caused by large extractive projects. For still others, possibly most, the motivations of both greed and grievance merge in ways that are difficult to disentangle.

Beyond notions of greed and grievance attention has also been drawn to the ways in which natural resource exploitation becomes linked in particular ways to identity and social change. Aspinall (2007, p. 950) argues that the separatist conflict in Aceh, Indonesia, was not determined by ‘any intrinsic qualities of natural resource extraction’. Rather, ‘the key factor was the presence of an appropriate identity based collective action frame’ (Aspinall, 2007, p. 950). The crux of Aspinall's argument is that ‘what determines rebellion is not the presence of a natural resource industry and its material effects, but rather how it is interpreted by local actors’ (2007, p. 953).

Similarly, Escobar (2006) argues that most conflicts over natural resources involve economic, ecological and cultural dimensions, each of which is transformed through resource exploitation:

it entails the transformation of local diverse economies, partly oriented to self-reproduction and subsistence, into a monetized, market-driven economy. It involves changes of complex ecosystems into modern forms of nature ... And it is changing place-based, local cultures into cultures that increasingly (have to) resemble dominant modern cultures, with their individualistic and productive ethos and market orientation.

(Escobar, 2006, p. 7)

These transformations have been documented empirically internationally, such as in Banks’ (2008, p. 23) argument that ‘what appear to be “resource” conflicts in Papua New Guinea are actually better conceived as conflicts around identity and social relationships’, as well as in Watts’ (2004) interest in the agency of extractive industries in reconfiguring relationships between territory, identity and rule in the Niger Delta.

Notwithstanding the connections between resource wealth and armed conflict, the natural resource curse should not be considered a fait accompli (Bannon & Collier, 2003, p. 11). For example, while diamonds can be linked to economic and social collapse in Sierra Leone, they were ‘critical to Botswana's success in becoming the fastest-growing economy in the world and a middle income county’ (Bannon & Collier, 2003, p. 11). Resources can result in social conflict and division but the case of Botswana also shows that they can be a basis on which to reduce poverty and promote development.

The responsibilities of extractive companies

Recognition of the potential for natural resources to ease poverty and contribute positively to economic and social development has led to the search for new frameworks on how to maximise the positive potential, while mitigating the risks. Examples include the Extractive Industries Transparency Initiative and the Voluntary Principles on Security and Human Rights, which target the elimination of corruption and human rights violations. More recent frameworks are wider reaching, aiming to capture ‘the ingredients successful countries have used’ (NRGI, 2010) to translate resource wealth into development. Much of the analysis to date, however, has been targeted at resource-abundant governments. As a result, existing recommendations largely focus on strategies that might redress or avoid the governance failures associated with resource wealth, such as economic overreliance on natural resources and revenue sharing regimes.

A notable example of a recent framework to guide responsible resource exploitation is the Natural Resource Charter (NRC). The NRC is a global initiative drafted by prominent economists including Michael Spence and Paul Collier. The NRC offers guidelines or ‘precepts’ to manage natural resources ‘in a way that generates economic growth, promotes the welfare of the population, and is environmentally sustainable’ (NRGI, 2010, p. 1). Ten of the twelve precepts outlined in the NRC are directed at the governments of resource producing states, while the remaining two target the home governments of extractive companies and extractive companies themselves. There is just one ‘precept’ for extractive companies, which is quite broad and lacks practical detail. It simply asks companies to ‘follow best practice in contracting, operations and payments’ (NRGI, 2010, p. 2).

There is also interest in the role that extractive companies could play in responding and potentially resolving recourse conflict in their areas of operation. This interest has been precipitated by three factors: (1) the expanded global reach of corporations and larger revenue base of some companies in comparison to the annual gross domestic product (GDP) of the developing states in which they operate; (2) the prominence and visibility associated with this wealth globally has been associated with increased expectations of social responsibility; and (3) the change in global approaches to conflict resolution which ‘has seen a move away from zero sum orientations’ towards an emphasis on ‘the critical need for negotiation and cooperation’ (Jamali & Mirshak, 2010, pp. 444–5). Extractive companies therefore, ‘are at once being called to task for exacerbating armed conflicts and being called upon to participate in their prevention and resolution’ (Berman, 2000, p. 28).

Corporate social responsibility

One avenue for the engagement of extractive companies in responding to resource conflict has been the expansion of the theorisation and practice of CSR to encompass conflict analysis and peace building.² ‘CSR’ has become recognisable shorthand for the onus on business to consider the consequences of business activity on the societies and environments in which they operate. Despite over 50 years of scholarship on CSR, there is no universally accepted definition (Dahlsrud, 2008). Moreover, various models of CSR have evolved over time, such as community relations and community development, adding further ambiguity to defining this field (Kemp, 2009, 2010).

Attempts to address the negative impacts of business on society are not a new phenomenon. Some analysts (Cheney et al., 2007, p. 4) trace the origin of such initiatives back to the late 1870s when...

Table of contents

• Cover Page
• Half-title Page
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Table Of Contents
• List of illustrations
• Acknowledgements
• Glossary and abbreviations
• 1 The challenge of corporate social responsibility and conflict
• 2 Conflict in Bougainville and West Papua
• 3 Historical injustice
• 4 State law and customary land ownership
• 5 Hierarchies of revenue and compensation
• 6 Preventive peace dialogue
• 7 Corporate security politics
• 8 Social impact assessments
• 9 Environmental damage
• 10 Local reconciliation
• 11 Interdependent Engagement
• Appendix 1: Numbers and types of people interviewed, Bougainville case
• Appendix 2: Numbers and types of people interviewed, West Papua case
• Appendix 3: Data collection phases and type
• Index