The report provides underlying causes, and ways to manage to solve the problem based on the dispute between Myanmar Holding Company and local community. It is prepared for the company CEO as the board of directors decided to review and analyses the current situation with recommendations for the problem solving. The necessary information is collected from local newspapers and report of state inquiry commission for that matter.
At present, the company has temporarily suspended its operation as local community protest become intense. The main issues raised during the protest are directly related to social cost, environmental cost and lack of transparency on the process from contract with the government to implementing. Therefore, in order to alleviate this dispute with local community and sustain the business, the company needs to take an account on social, environmental and economic impact in the area it operates. It is also important not to denude the natural capitals for the future generation.
To be a sustainable business and good corporate citizenship, the company needs to take a necessary action based on the recommendations. These are making an agenda for social sustainability, comprehensive strategy for environmental sustainability, and establishment of responsible corporate governance. The report also includes a proposed implementation plan with detailed action steps, responsible persons and a timeline.
As the local protest is still smoldering and it happens again at any time, the company should implement the recommendations effectively and quickly.
Copper Mine Dispute: Corporate Social Responsibility Consideration
Myanmar Holding Company is currently facing grievances of local inhabitants for their loss of crop lands and displacement because of copper mining. Following on the event, the company board of director chaired by CEO, decided to make a review and assessment on the current happening and find out possible solution to alleviate these events.
The purpose of the report is to explore underlying causes of the local people’s protest and ways to tackle current issues. It will also be discussed about how to develop a sustainable business on the long run.
Myanmar Holding copper mine near the Chindwin River in middle dry zone of Myanmar has been operating for nearly two years and it is open pit mining. The company is a joint venture between Myanmar and China investors.
In 2010, the company made contract with central government of Myanmar which was military regime. In 2011, the regime handed over to the democratically elected government. Although local community did not express their bewailing to the company at the beginning because of brutality of the previous government, they started to raise the issues of their suffering and disagreement in the reign of new government.
Because of implementing mining work, estimated 6,000 households have been displaced to other places and religious building including historic pagoda in this area are at risk for destruction. As a result, over the last 6 months ago, series of local protest happened and local government made crackdowns leaving injuries of the protesters especially Buddhist monks. Subsequently, it spread all over the country and many pockets of protest appeared across the nation. The company has been stopping its operation for nearly two months because of the widespread protest. Now the company is sitting on the grievances of local community and society at large. The state government forms an inquiry commission for this crisis.
3. Issues and problems
3.1 Social cost of local community
Being an existence of the company in the area, they lost their croplands and housing due to unlawful confiscation. Although the company gave compensation for their loss, it was not worthy compared to the existing land price. Then they also feel worried about health related consequences due to the dust and fume produced from the mining work. Moreover, local religious leaders and monks expressed their concern on loss of historic religious buildings in near-by areas.
3.2 Environmental cost
Water resources such as ponds and tube-wells near the mining area are believed to be polluted and many local people are gnawed by air pollution with fume emitted from nearby sulfuric acid plant.
Many believe that reduced crop production, scarcity of grazing lands and decrease in livestock animals’ reproduction are after effects of mining and sulfuric acid spraying.
3.3 Lack of transparency
Activists in these areas argue that there is no transparency on the process of contracting with the government, sharing the benefits between two parties and potential benefits for the local community.
4.1 Social responsibility of the company
When the company signed a memorandum of understanding with the government, it did not publicly mention about the contract and it had never discussed with local community for benefits and possible environmental impact. It did not inform local people about nature of work, how they would compensate and what they would return to the community. So, it is not transparent in the process of establishment of the project. Furthermore, there is no local community involvement and the company even neglects concerns of the people in the area it operates. It indicates that the company has weakness in assessment on social impact and cultural heritage before it operates. The bitterness of Local people leads to a spark to start a fire to hamper whole project.
A stakeholder is an individual or a group which either is harmed by, or benefits from, the corporation; or whose rights can be violated, or have to be respected, by the corporation (Crane & Matten, 2007, p. 57-8). According to the definition, stakeholders of the company are shareholders, suppliers, employees, local and state government, community based organizations, and other companies working in the mining field. They can make good or bad consequences of the company so that good relationship with them is pivotal.
A business should be ethical if it continues to exist and progress. Wells (2010) mentions that “there are two ethical principles in the stakeholder context: the firm has the obligation not to violate the right of others and firms are responsible for the effects of their actions on others”. However, the company could not fulfill both two ethical principles because local community lost their croplands, and houses due to the mine project. Then they have been neglected during the discussion phase with government for that project. Therefore, it should be reviewed at the ethical perspective whether the company’s action is ethical or not.
Utilitarian ethics are characterized by three general principles: an action judged by its contribution to all persons affected, its value is in the pleasure or happiness it produces, and it is possible to measure and compare the satisfactions produced by goods and services (Beauchamp & Bowie, 2004, p. 17-19). According to the right theory, individuals should be protected from abuse and neglect (Wells, 2010, p. 21).
The company action results in grievance of local people, and their increasing concern of environmental impact. It indicates that current business actions are not ethical for local community.
Another ethical question is “should stakeholders involve in decision making process of a business?”
There are three reasons why all the stakeholders should be considered in decision making process of the organization: it is morally and ethically correct way to behave, doing so actually also benefits the shareholders and it reflects what actually happens in an organization (Crowther and Aras, 2010).
In order to avoid unnecessary argument and be transparent, company should consider establishment of stakeholder partnership. First the company should discuss with local community and its employees about the area development including infrastructure, health and education. Second, all these stakeholders involve in the discussion and decision making for minimizing negative environmental impact of the project. However, it does not mean that they must participate in all the steps of activities including financial and human resource management. They are not decision makers but they are crucial for the company to be ethical and socially accountable. It is also necessary to establish a good relationship with local community and it leads to facilitation of future mining activities. Furthermore, employees known as internal stakeholders become morally superior with the evidence of higher productivity and lower staff attrition.
4.2 Environmental responsibility of the company
In the metal industry, production of Cu, Pb, and Zn causes the greatest degradation of the environment (Dudka and Adriano, 1995). Being an open-pit mining, its copper extraction technique includes taking out of copper ore by drilling and blasting with explosives, crushing of copper ore, roasting to convert sulfides to oxides, and various refining processes. From the process, it produces many by-products and these are waste rock, sulfur dioxide gases, and materials containing arsenic, lead and other chemicals (Wikipedia, 2013). Therefore, mining can largely affect both environment and ecosystem.
Because of copper mining, there will be deforestation by removing for mining purpose and depletion of non-renewable energy resources by using a lot of energy for the mining process. Moreover, dust and sulfur dioxides can reduce air quality and uncontrolled disposal of chemical containing waste materials can pollute all the water resources including underground and near-by rivers. These all have negative impact not only on environment but human health.
Myanmar environmental science expert group reports to the inquiry commission that underground water is not suitable for drinking purpose and it is below the international standard of underground water quality (Inquiry commission, 2013). For air quality, particulate/air mixture is higher than World Health Organization (WHO) standard but concentration of sulfur dioxide, Carbon dioxide and nitrogen in the air is within the range of WHO standard. Therefore, the report clearly says that there is negative effect on water and air quality (Inquiry commission, 2013).
The above information clearly shows that there are no environmental policy and environmental protection mechanism. The environmental management should include proper documentation, regular assessment of environmental impact and reporting mechanism (Wells, 2011).
4.3 Economic benefits to local community and the state
It is undeniable that state government has benefits by receiving commercial tax and income tax from the company. Company also has the profit from its copper production and trade. However, it needs to be reviewed whether there is any benefit for local community.
In the report of inquiry commission (2013), an economist suggests that the company should take in consideration of employment opportunities and enough compensation for the local community. He also comments that in the reviewing process of the project, the responsible persons of the company should consider not only economic factor but also political, social and environmental impact. The copper mining is a long term project and its economic viability largely depends on its operational cost as well as social and environmental investment. Therefore, effective planning and management are absolutely necessary.
4.4 Sustainable business
As the economist highlights in section 4.3, the company needs to behave in social and environmental responsible way. Nowadays, many corporate companies are increasingly adopting corporate social responsibility (CSR) in their practice. CSR embraces three dimensions: social, economic, and environmental (Wells, 2011). The government of United Kingdom defines CSR as follow: “The government sees corporate responsibility as the business contribution to our sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates – maximising the benefits and minimising the downsides (www.csr.gov.uk).
According to the definition, the company needs to incorporate CSR into its strategy for long term corporate benefits. Then next step is how to incorporate. There are three basic principles encompassing all CSR activities: sustainability, accountability and transparency (Crowther, D., & Aras, G. 2010). The business should take accountability for effects of the actions and it should report all the externalities to the stakeholders in transparent way. All the business activities should aim for sustainability. However, it does not mean economic sustainability only. It is also responsible for the development of social and environmental sustainability.
Sustainability development (cited in Wells, 2011, p. 7) is defined as seeking to meet the needs and aspirations of the present without compromising the ability to meet the future (WCED 1987, p.40). It is true that every citizen of the world should not use natural capital up for their benefits because their generations also have a right to consume it for their needs. Another point is that if all the natural resources are consumed, it will desperately threaten living of mankind. Therefore, every business should assume its responsibilities that go well beyond the scope of simple commercial relationship (Yasser, 2011). Based on the notion, many firms start to improve their performances on that matter.
The purpose of the report is to explore underlying causes of the current crisis and how to tackle the issues and discuss how to sustain the business.
It is clear that social and environmental costs are underlying causes for the current protest. The company needs to take responsibilities for the negative externalities. Therefore, the company should adopt CSR for its sustainability. To incorporate CSR into the company’s strategies, following recommendations are made:
a. Making an agenda for social sustainability
Social responsibility is defined as “a life enhancing condition within communities, and a process within communities that can achieve that condition” (McKenzie, 2004). Practicing social responsibility make the company get benefits: good reputation, improved dealing with community, less adversaries. So, it should consider make its agenda for improvement of communities at educational, health, labor cultural and human right aspects. In order to develop the agenda, it should discuss and negotiate with the community leaders.
b. Comprehensive strategy for environmental sustainability
Norman (2012) mentions that there are two main approaches to environmental sustainability, namely, waste minimization and pollution prevention. As defined sustainability by WCED (1987) in section 4.4, preservation of natural resources and maintaining ecosystem are important for the requirements of the present and the future generations. The company should develop a comprehensive strategy for environmental sustainability. In doing so, it should include assessment of the environmental impact and effective management for ecosystem preservation.
Life cycle assessment (LCA) is a method to assess environmental impacts of a product or service throughout the course of its lifecycle, from raw materials production, through manufacturing, product use, to disposal and all transportation in between (Michael, 2012). It can get not only the environmental benefits but also for financial benefits for the company. For instance, company can save money for corrective action of environmental damage, and by reducing operation cost through the improvement of supply chain system. LCA is a part of effective environmental management.
The company should also develop environmental management system (EMP). From the legal perspective, EMP is a corporate system for pollution prevention that informs management and employees at all levels of an organization how to approach their pollution prevention responsibilities and it establishes chain of communication with the organization so that prompt and effective responses can be made if anything does go wrong (Bates, 2006, pp.406). By adopting EMP, the company can regain its reputation among the stakeholders including local communities and the state government.
c. Establishment of a responsible corporate governance
It is imperative for the sustainability of the company. Corporate governance include the methods of corporate decision making, the ways in which stakeholders are included in the process, and their interest represented, and the transparent, ethical principles which are applied to all decision making (Wells, 2011, pp.56).
According to Kuhndt and Tuncer (2007), responsible corporate governance is framed by two pillars. The first pillar has four elements: stakeholder-empowered corporate governance, management and performance evaluation system such as ISO 14001 and social accountability standard 800, transparency enhancement and stakeholder verification through accountability audit (cited in Wells, 2011, pp.57). This approach can improve relationship with stakeholders and show the transparency.