Social Responsibility In Mining Industry
Is Corporate Social Responsibility Beneficial to Company Performance?
Introduction
While there are many investigations into the general relationship of corporate social responsibility (“CSR”) and company performance, relatively fewer have focused on a specific industry such as mining. Mining is an extractive industry with relatively low return on capital, questionable reputation and complicated stakeholder relationship (Humphreys, 2001; Kapelus, 2002). Taking these features into account, this essay is going to discuss whether CSR is beneficial to a mining company and how it should be implemented, with respect to two important factors of production: natural resources and labor. Despite the lack of an unambiguous general definition of CSR (Dahlsrud,
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For example, the Australian mining company Comalco Aluminium Limited has installed new technology of air emission management in several Tasmania and New Zealand smelters, which saved approximately 11 million AUD for the company and exerted significant positive influence on the local environment (Guerin, 2006). With shareholders’ interest and social interest well aligned, environmental CSR potentially creates a win-win situation for both the community and the company.
More specifically, environmentally-friendly CSR policies are an indispensable strategy to build reputation and reduce long run production cost for mining companies. Considering the complicated stakeholder relationship of the mining industry, an unsatisfactory reputation may be a potential threat to a company’s “social license to operate” (Slack, 2012), because customers may be unwilling to purchase from a socially irresponsible firm (Sen & Bhattacharya, 2001), investors to finance its projects and governments to provide policy support. With the constant problem of resource scarcity arising from the non-renewable property of minerals and the extractive nature of the business, a mining company’s profitability may be largely affected if mineral shortage drives the input price up, which implies that cost saving is also of vital importance and potentially
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Theoretically, it may boost a mining company’s performance through cost saving, reputation building and competitive advantage gaining. However, being morally and strategically appealing does not mean that CSR is unconditionally contributive. Since imprudent CSR schemes in spite of a company’s tough financial situation or neglecting stakeholders’ features tend to do more harm than good, it is recommended that companies should have sufficient knowledge of itself, its projects and its target stakeholders in order to achieve the harmony and reciprocity between company’s and community’s
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