Experts often call on mining companies to procure locally. This encourages regional entrepreneurs and helps to share the value that mining creates. Jeff Geipel, Founder and Managing Director of Mining Shared Value set upon a plan to use procurement as a development tool. In this interview with Making Mining Better, he discusses his ideas and what needs to change.
What is Mining Shared Value, and how did it start?
Engineers Without Borders (Canada) is an international development organisation. I had a background in global trade and commodities. That brought me to look at mining as a means for economic and social development. I pitched the idea of doing a programme focused on local procurement of goods and services to Engineers Without Borders, and they incubated this idea. I picked this area because nobody was talking about procurement as an extractive industry governance piece at the time.
Let’s talk about the social license to operate.
I started this initiative eight years ago. Since then, we’ve seen a drastic increase in community conflict, rising expectations, and governments wanting a bigger piece of the pie. EY just came with their third survey in a row showing that social license to operate is the number one risk facing the mining sector. Mining companies must now make an effort to procure and hire locally. They’ve got to make sure that their work benefits the community. They have a much larger role to play, and those expectations are only increasing.
Procurement as a tool for development?
I think the procurement of goods and services is the ultimate social license tool. You can make allies because local suppliers and business will want the mine to succeed. Many of the significant conflicts you see between mining and communities stem back to disgruntled suppliers or community members. Some may feel like they didn’t get a fair chance to participate in the value chain. Procurement is an effective way to help the mining industry with building partnerships within the community. That’s why we have a bit of a win-win relationship with mining companies.
Why do mining companies need a third party?
Lots of mining companies are doing their best. But a fresh set of eyes helps a lot. Building partnerships with local community stakeholders like the chamber of commerce and local government (if it has the capacity) is always useful. It opens up new opportunities. You’ve got to approach so many of the mining industry’s challenges in a multi-stakeholder model. For example, a mining company cannot provide finance for local business to buy a new machine. That’s generally the job of a financial institution. To be effective, you need an ‘all system approach’ and someone to bring it together.
ESG and procurement – what is the connection?
ESG focusses on preventing problematic practices with suppliers. For example, a framework that looks at the connection between procurement and corruption or bribery. So right now, if mining companies cannot demonstrate that they have systems in place to mitigate these risks like supplier problems, it is a considerable risk. One of the reasons we created the mining local procurement reporting mechanism with GIZ was to provide companies with a standard template to give this information.
For more information visit: http://miningsharedvalue.org/