Driving Business and Social Benefits Through Inclusive Community Investment

July 10, 2015
  • Alison Colwell

    Former Associate Director, BSR

Many companies in the mining and energy industries are facing tough economic conditions but still wish to maintain their social license to operate and their community relationships. For these companies, community investment tools that create value for both the business and communities are more important than ever. They drive efficiency, focus reduced budgets, reduce social risk, and maintain important commitments. To start, companies can follow two principles for community investment, which will help build holistic programs. 

Principle 1: Be Inclusive

Community investment is based on the idea of inclusion: By improving the well-being of individuals and communities, we can build an inclusive economy, in which everyone participates in, benefits from, and contributes to global and local economies. To achieve this, companies should design effective investments that strengthen peoples’ skills and support their full participation in employment and social life. This capacity-building approach offers multifaceted benefits.

Companies should invest in projects that support economic independence, building capacity within communities. Approaches include fostering entrepreneurship and small business development and identifying existing local efforts to support. For example, the DreamBuilder Program, a partnership between Freeport-McMoRan and Thunderbird School of Global Management, provides an e-learning platform to enhance women’s small-business skills. And at the Ahafo Mine in Ghana, Newmont and the Ghana National Vocational and Training Institute offered several community training programs. These included training for local people on work-readiness and trade-skills related to the project; for local businesses on contract bidding, book-keeping and budgeting; and for farmers on technical, marketing, and financial skills.

Companies must also build their own capacity to listen to communities and build partnerships. For example, Rio Tinto’s Stakeholder Engagement Academy helps employees learn competencies, including the strategic role of stakeholder engagement, understanding stakeholders, building relationships, and negotiating sustainable agreements.

Inclusive projects are more sustainable, as they have community support, and, ideally, partners and co-financing. Eventually, inclusive projects should become self-sustaining, or at least provide an “exit strategy” for the company to hand over the financing and management to local partners. Working in partnership should reduce dependencies on the company and prevent investing in infrastructure investments that are left unused. Projects that do not plan for ongoing management often result in schools without teachers and books and clinics without nurses, equipment, or medicine.

Principle 2: Be Strategic

Before companies begin to create community investment programs, they must take a critical step: managing their impacts, respecting human rights, and listening to the voices of rights holders. To avoid accusations of “buying” support, companies should first manage and mitigate negative impacts and maximize opportunities for positive impacts from core business activities, such as hiring and sourcing locally. Mining companies invest significantly in infrastructure, roads, ports, rail, energy, and water, among others, and companies have the opportunity to invest in shared infrastructure that meets the needs of the company’s operations, while also providing added value for the communities. Companies can and should include communities’ voices in decisions about the location and design of business operations, products and services, suppliers, hiring practices, marketing, distribution, and so forth.

Then, companies can build voluntary community investment projects, which should be strategic and aligned with both core business priorities as well as those of the communities. A common mistake is making decisions in isolation, without addressing both internal business functions and external stakeholders. To avoid this mistake, companies should conduct baseline assessments, as well as community assets and needs assessments, and map where the company’s strategic business priorities overlap with the communities priorities. BSR worked with Shell to identify a range of external stakeholders associated with their projects and conducted interviews on topics related to economic development, environmental impact, and community dynamics. BSR’s recommendations for community relations and investment focused on how to maximize benefits for both Shell’s projects and the surrounding communities.

Companies should take a portfolio approach to their community investments, rather than selecting and implementing each project in isolation. For instance, if a company invests in entrepreneurial training, it may consider adding a microfinance project to support those new entrepreneurs. Given limited resources, companies cannot support every project and should look at their community investment portfolio holistically to understand linkages and increase overall impact. By understanding cumulative impacts and regional priorities, and by being transparent about strategic focus areas and project needs, companies can more effectively collaborate with others investing in economic, social, and cultural development; enhance impact; and reduce the risk of corruption.

Community investments should be managed as any other business unit—employing a strategic plan, measurable key performance indicators, budget, and cross-functional oversight, and hiring significant and qualified staff, including local staff that understand the issues, culture, political dynamics, and decision-making processes of their communities.

For more on our approach to inclusive and sustainable communities, review our community/social investment project selection tool.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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