How to assess if mining is “responsible”

2020-03-04 11:28

Whenever and wherever mining is discussed, the talk soon veers to responsible mining and the hope it holds for the economic, social and environmental well-being of Mongolia. However, most of us would fumble if asked to define what exactly responsible mining is. A presentation by B. Mendbayar, Head of the Internal Auditing and Monitoring Division at Erdenes Mongol and the man who worked out the assessment methodology for responsible mining in an IFC-sponsored programme, at a seminar of the Local Journalists’ Network 2019 training project, went into details of how to evaluate a company’s record in responsible mining. E. Od, who took notes, now presents what was said. 

Many terms are associated with responsible mining, such as reports, guidelines, standards and standard requirements. They all relate to developing a mine and exercising a licence holder’s mining rights. Responsible mining is primarily a management concept and includes risk management. A company working with responsibility will avoid risks and run more profitable, sustainable and eco-friendly operations. That following responsibility standards is actually economically profitable should be a major incentive for any company. 

Our assessment methodology for the responsible mining system is based on transparency.  We have kept our formulation brief, clear, simple, understandable, easy to use and possible to summarize. The Responsible Mining Standards (RMS) will be used to get people to work together. 

Internationally, RMS are followed to reach the following four basic goals: 
 

1.    CERTIFICATION

In Mongolia, we do not have any certification of the impact of mining operations. Internationally also, this has been introduced only recently. Investors, company owners, the government, non-government organizations and local citizens often evaluate mining activities differently. A study has found that citizens do not believe what the government, the civil society and the companies say. Therefore, there is need for assessment by a third party.      
 

2. FINANCIAL RISK

Mining projects are implemented through loans, selling shares, or private investment. Since the investor wants to earn a profit, he is willing to take risks and adopt what can be seen as dubious practices. 
   
3. VALUE OF THE COMPANY

In Mongolia, this is the responsibility primarily of the Mongolian National Mining Association (MNMA) and similar professional associations which charge membership fees from companies in return for, among other things, helping them improve their activities. They organise trainings, help their members exchange experiences, and plead with the authorities to resolve problems they might face. All this raises the worth of the company.   
 
4.    REWARD

Top mining companies are selected on the basis of many criteria. These include their record in regard to causing environment damage, adverse impact on human health, payment of appropriate salaries and wages to their employees, etc. RMS norms are used to make the assessment. For example, the National Chamber of Commerce and Industry checks the criterion regarding taxes paid, but of course the other criteria make sure a company is not rewarded for making a high profit by causing harm to human health and such. The MNMA regularly reviews the need to include new criteria for selecting the top entities. 
 
The 24 RMS norms used internationally include 1200 requirements that a company must meet. We wanted assessment to be made easier, and for that values of the 24 norms were transferred into the digital form, and the probability of high success was included. There are several risks in achieving this success and these have been sorted as advantageous, disadvantageous, important, medium important and low important.  

 

We aimed at stressing the principle that companies work better when they support one another. It is impossible to have responsible mining without mutual support, cooperation, and coordination. For a wheel to move fast, all cogs must be working in tandem.  
Responsibility is not only related to the environment and occupational safety. There are many other aspects that must not be missed. We have put 290 of them in 34 subsections of the five main sections in our assessment methodology. For example, there must be a proper feedback mechanism, to allow citizens to both receive information and provide feedbacks, and to ensure that the latter are registered. All feedback items received by the company are actually useful data. If a particular response comes from several sources, and not just one, the company should immediately investigate its own deficiencies and rectify them. Absence of feedback is also not helpful. Paying due respect to feedbacks and treating them with due consideration is simply good management practice. 

 

However, the situation in this regard is chaotic at state-owned companies. It is not clear which department at which office registers public response, and in most cases, the company does not get back to the citizens who offered the feedback. This is something more than just lack of responsibility; it is in a way denial of a citizen’s human rights and totally against responsible mining.  
Similarly, a responsible miner would never deny its workers the right to form a trade union. If an employee is not able to express his dissatisfaction at work and is not allowed to join a union, that will surely impair his productivity. Under our assessment methodology such corporate conduct would be easy to monitor. 

 

These days artificial intelligence is used to track a company’s progress in three major areas of its work: protection of human rights, eco-friendliness, and profitability. Widespread innovation leads to quick updates in methods. Now far less chemical than before is used in ore processing, and application of IT helps give a clearer idea of the workload of a mine employee, thus ensuring safety at the workplace. 
As for cooperation with the local community, the quality of education where children of the mine employees go to school must be the same as in the capital of the aimag where the mine is. Another issue with responsible mining is the extent to which a mine should bear the costs of medical treatment for local citizens who fall chronically ill because of the toxicity in the air that is an inevitable result of mining. These cases come under the category of Accumulated Impact of the Responsible Mining System. A responsible mine should make a careful study of such impact and then set up an interim risk fund to provide help to local citizens.  


The Responsible Mining Assessment Methodology has 5 sections, divided into 34 sub-sections and contains 290 provisions. The sections are:

1.    Corporate Governance and Transparency 
Transparent information on the terms and conditions of the investment agreement, the mechanism for paying taxes, preparing reports, dealing with feedback, and internal auditing mechanism. 

2.    Ensuring Human Rights and Labour Relations 
Basic human rights, right to make a speech, to join a union, equal opportunity, fair work, opportunity for being educated and developing oneself.

3.    Occupational Safety and Health 
Safety incidents, risk assessment, reporting, monitoring, how to plan and carry out prevention measures, measures to be taken in emergency situations, procedures, culture. 

4.    Environmental Protection 
Environmental impact assessment, water, air, waste, noise, greenhouse gas emission, biodiversity and corresponding protection, mine closure.

5.    Community Development and Public Involvement 
State, aimag and soum taxes and payments, sustainable workplaces, projects and programmes, infrastructure investments and future investments cooperation agreements, monetary and technical aids. 


The assessment methodology that we worked out would assess the actual internal performance of a company. It is not enough to see what rules, regulations and procedures are on the books, as the really important thing is to check the degree of compliance with them. By law, companies must have such rules and must also make budgetary provisions for their implementation. But are these properly and impartially monitored? Are any lessons learnt? Foreign invested companies do this “responsibly” but the performance of others leaves a lot to be desired. 
 

In 2018, Erdenes Mongol assessed Baganuur, its daughter company, in accordance with the methodology I am talking about. This year (2019), it is doing the same at Shivee Ovoo. Such exercises are useful. For example, following it, Baganuur issued its first ever report in compliance with the reporting standards for state-owned companies set by the Natural Resources Governance Institute (NRGI). Experts felt that with some improvement, this report, which can be seen at http: //www.baganuurmine.mn/?cat=65, could be a model for other companies. 
In joining the Voluntary Responsible Mining Code, Oyu Tolgoi, Energy Resources, SouthGobi Sands, Terra Energy, Aspire Mining, Baganuur, Erdenet and MNMA have signed an MoU that has 36 clauses. Our assessment methodology is a tool for citizens to independently monitor how any or all the seven companies are “responsibly” complying with provisions of the 36 clauses. The companies are of course obliged to issue an annual report on how they have worked in accordance with the clauses. 

 

Since Oyu Tolgoi LLC is required by International Finance Corporation (IFC) to implement financial risk standards, it works more responsibly than others. In 2018, the International Responsible Mining Fund issued Responsible Mining Index standards. These were used to evaluate 30 of the world’s top companies and 50 projects. Rio Tinto as a company and Oyu Tolgoi as a project were among them. Oyu Tolgoi’s performance was found to be “medium” and “low” for local employees and local purchases. Rio Tinto was placed 15th among the 30 top companies. So if we want to choose a company better than Rio Tinto, we need to attract the interest of any of the 14 top companies of the world. On the other hand, if Rio Tinto is to leave Mongolia, there is no guarantee that it would not be succeeded by a company that is not among the top 30.  I say this not to praise the company, but to indicate that it has a good record and can be a good example for others because of its responsible management practices. 
 

At the end of the day, any impartial assessment, which is what our methodology aims at, depends on hard data. Collecting accurate and reliable data is not easy in Mongolia. Companies upload their reports in PDF format, which cannot be used by researchers and specialists.  Excel would be better if the data are to be open for study and analysis, so that a proper assessment can be made of the extent and progress of responsible mining. 

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