What makes a good CSR strategy?

Successful CSR strategies produce benefits to both society and to business and they do so in such a way that the relationship between society and business is improved. We can map benefits in broad terms to a simple two-by-two matrix. [1] When a company engages in philanthropy for which no strong business case can be made, the benefits may be high for society but low for business. When a company’s approach to CSR is one of propaganda, they pay more attention to the marketing message than to the substantive impact of the activities, and the benefits are generally quite low for society. Although the benefits of this may be high for the business initially, empty propaganda can expose it to potentially costly reputational risk. Some companies pursue CSR activities based on the personal “pet” interests of senior leaders; these seldom bring substantial benefits to either society or business. A strategy based on partnering with society to find solutions to challenges that both society and business care about, however, has a high potential for shared value creation.

The CSR benefits matrix

Step 1: Define how the business should benefit

When analyzing the case of Pueblo Viejo Dominicana Corporation (PVDC), I identified three primary benefits to the business that a good CRS strategy should lead to:

1. Risk mitigation: core business functions are supported or protected – in this case the construction of the PVDC mine and its future gold production.

2. Local community development: the communities will be left better off as a result of the business operations. This is listed as a benefit to business because I felt there was sufficient evidence that this is a genuine high-level objective of corporate leadership.

3. Enhanced corporate reputation: the reputation of the company as a good corporate citizen will be strengthened. This is critical since future contracts, financing, and the ability to operate without resistance are at least partially dependent on their local and international reputation.

Step 2: Define how society should benefit

Regarding benefits to society in this case, by in large I was thinking about benefits to the local communities in the area directly affected by the mine operations, although certainly one could make a case for a good CRS strategy producing benefits to a broader segment of society, including beyond the Dominican borders. But, since most of the risks of the mining operation are being born by local communities, I would expect most of the benefits of a good CRS strategy to target the same. While conducting field research in preparation for the case study, I spent several days interviewing representatives from communities near the mine, and I got a pretty good sense of what benefits mattered most to them. Based on this field evidence, the relationship between the communities and PVDC will largely be defined by the degree to which three aspirations are realized:

1. Economic and social development: Community members consistently expressed expectations that the mining operation would bring economic and social development to their communities. The key driver of this expectation is the stipulation in the Special Lease Agreement that 5% of the total payments received by the central government from the mining operation must be distributed back to the various communities in the vicinity of the project. There are high expectations that this money will be invested in their communities to generate both economic growth and social service improvement. But, of course, the distribution of these benefits is also critical. It is not enough that a few people in the mine area benefit, the communities must deem the distribution of benefits to be fair if the corporate-community relationship is to benefit.

2. Environmental health: Previous mining at Pueblo Viejo led to severe acid rock drainage, impacting several streams near the mine site. Although PVDC is already taking steps to clean up the environmental damage done at the mine site while operated by the Dominican government, community members continued to express some concern about the long-term environmental impact on the productivity of their soil and on the health of their children. But how do you convince people who have already had a negative experience with irresponsible mining in their communities that this time it will be different? They will not be satisfied by mere promises to address future negative environmental impacts unless PVDC is able to signal early on its embrace of long-term and broad accountability for a range of negative side affects.

3. Fair and dignified treatment: Another theme that was repeated in many interviews was the quality of the personal interactions with representatives from PVDC. Members of the community, including its leaders,  told several stories of times when they felt respected, listened to, and “known” and several stories of times when they felt the contrary. It would be a mistake to underestimate the secondary effects that good or bad personal relationships between community members of representatives of the mine can have on corporate-community relations. When people feel they have been treated poorly by a person from the business, they often project that experience onto the whole business. This then affects their level of trust in the business – something that PVDC cannot afford to lose, since the key to their operating without resistance from the communities is the widespread belief that this time it will be different, that PVDC will really leave the communities better off, where Falconbridge (another local mine not currently in operation) and Pueblo Viejo under Dominican operation are seen to have failed.

The aspirations expressed by these communities echo those expressed by dozens of communities around the world that were interviewed by the authors of the recently published book, “Getting it Right: Making Corporate-Community Relations Work.” [2] After nearly a decade of extensive field research in over a dozen countries, done in collaboration with a score of corporations, primarily in the international mining and petroleum industries, including Barrick Gold Corp. (BGC) and Placer Dome (the previous owners of Pueblo Viejo), the authors of “Getting it Right” concluded that communities define successful company-community relations to the degree that their economic prospects and social services improve, the company takes responsibility for any negative impacts, and the company approach demonstrates fairness and respect.

Step 3: Translate shared aspirations into principles

So, the aspirations of both the corporation and the community were articulated and substantiated. The next step was translating these aspirations into a set of clear principles by which to critically assess the CSR strategy being pursued by Barrick and its partners in PVDC. Since, in theory, all three of the business aspirations could be fulfilled by ensuring the realization of the aspirations of the local communities, I directly linked the principles that would define a successful CRS strategy to their aspirations. “Getting it Right” provided a very useful principles framework, which I used.

Connecting CRS principles to shared aspirations

Step 4: Define good practice and assess

Once the broad principles are clear, a series of good practices can be defined that follow from these principles and from the specific context of the case your analyzing. I used a number of good practices defined in “Getting it Right” and came up with a few of my own as well. Here is a list of good practices that were relevant for this case and against which I assessed the goodness of the CRS strategy of PVDC in both theory and practice. The first five related to the first community aspiration, 6-8 relate to the second, and 9-14 to the third. To be clear, the list of good practices should be case specific; this is not a set menu against which all CRS strategies should be assessed. That would not be appropriate.

1. engage with many people
2. generate widely shared and widely enjoyed benefits
3. agree that the communities own their development process, not the company
4. leverage resources and share costs
5. reward reasonable and thoughtful interaction, not violence
6. listen to local communities’ concerns regarding side effects
7. discuss a long-term vision with communities
8. help communities to develop their own impact preparedness plan
9. provide support to existing organizations and strengthen local capacity
10. present a human face to communities and interact with them
11. ask, discuss, and listen – engage openly with communities in decisions that affect their lives
12. ensure that information is easily accessible to all types and groups of people
13. be responsive to community inquiries, questions, and letters
14. act, and be seen to act, on requests that go beyond the corporate interest

[2] Zandvliet, L. and M.B. Anderson. (2009). Getting it Right: Making Corporate-Community Relations Work. Sheffield: Greenleaf Publishing Limited. The book will be referred to simply as “Getting it Right” from this point forward in the report