Print9.1.1 Social - Economic
First, we’ll illuminate through examples what we mean by social and economic, and then we’ll look at the intersection of the two, which forms the equitable region. Similarly, we’ll use examples to illustrate that which many would consider as equitable. Please note that these examples are not exhaustive, but rather are intended to give you a deeper understanding of each term.
The social dimension of sustainability would consider the following questions.
- Will (does) the project improve the infrastructure of the community, e.g. schools, hospitals, water supply, and highways?
- Will (does) the project contribute to the local economy, through tax revenue for example, in addition to creating jobs, and is this contribution in reasonable proportion to the value obtained by the company?
- Will (does) the project provide good-paying jobs within the local community?
- Will (does) the company provide training and education opportunities to improve the skill sets of workers?
- Will it be necessary to displace or move indigenous peoples as a prerequisite to mining activity?
- What will happen to the community or region when the project is completed? Will there be other industries to employ the workers from the former project?
The economic dimension would consider the following question:
- Is (will) the financial performance1 of the project (be) consistent with investor or company expectations?
This single question captures and represents the sum total of everything that affects the cost of bringing a mineral product to market. It also reflects market conditions, i.e. the price at which we can sell our product and the amount of product that we can sell. However, for this discussion, we will neglect market conditions and instead focus on the cost side of the equation. The mining and processing costs will be based on the many factors that we’ve studied in this course, e.g. ore grade, depth of the deposit, geotechnical characteristics of the orebody, the extent to which mechanization and automation can be applied, and so on. Of special interest here are any expenditures that would be made to address the social dimension of sustainability, such as strengthening the community through the improvement of infrastructure.
The intersection between the social and economic dimensions is aptly named equitable. Are the economic benefits that will accrue to society, and in particular the community, in reasonable proportion to the social costs of the project and to the economic benefits that the company will realize from the project? This is a difficult question to answer – how do you calculate this value? While every situation is likely to be somewhat different, there has to be genuine respect for the community and its institutions, as well as a desire by the company to improve the community within the realistic financial constraints of the project.
Unfortunately, it may become even more complicated. Whether or not a solution will be considered equitable can depend on the ethical framework under which the proposed solution is evaluated. Let’s take a non-mining example to illustrate this. Suppose that it is determined that a dam is needed at a certain location on a major river. The dam will provide flood control, sparing towns along the river from the devasting floods that occur every decade or so. The reservoir created by the dam will provide a more stable source of water for communities, and it will create some recreational opportunities as well. In total, thousands of people will benefit if this dam is built. Those are the “positives.” What about the “negatives”? There are a few dozen houses and farms that will become uninhabitable as the water accumulates behind the dam. In some cases, generations of the same families have lived in this area. The entity proposing the dam, which in this case is a government body rather than a private company, will pay the displaced landowners a substantial premium over full market value for their residences. Nonetheless, some landowners do not want to relocate and are opposing the construction of the dam. What to do...
Has an equitable solution been proposed? On the face of it, it would appear so. The landowners who will be displaced will receive sufficient money to relocate and are getting an additional sum of money for their inconvenience. Indeed, this and similar scenarios play out on a regular basis for infrastructure projects, and this is supported by the utilitarian school of ethical behavior. This school is about the greatest good for the greatest number of people. When viewed through the lens of the utilitarian ethic, the proposed project is ethical and this will strengthen the assessment that the action is equitable as well. Many industrial projects, including mineral projects, have long been evaluated under the utilitarian ethic.
In recent years, however, some have been applying another school of ethical thought known as deontology, which is concerned less with what is “good” and more with what is “right.” This is a school of thought concerned with social justice and the idea that basic human rights supersede what is good for society at large. When viewed through this lens, the dam project is unlikely to be deemed equitable, and as a consequence, there are likely to be protests, government appeals, and other actions to derail or delay the project. For mining projects, we have an obligation to address the parameters of the social and economic dimensions to achieve something that will be deemed equitable when viewed through the lens of the utilitarian ethic, and it is in our best interests to try to understand and address concerns when viewed with the deontological ethic. In essence, the evaluation of the utilitarian school is focused on rightness or wrongness of the consequences of actions, whereas the deontological school is focused on the rightness or wrongness of the actions.
1 Financial performance is assessed through metrics such as net present value (NPV) of the project, discounted cash flow internal rate of return (DCFIRR), payback period, and earnings before interest, taxes, depreciation, and amortization (EBITDA). This will take into account many of the locational, natural and geologic, and socio-political factors discussed in Lesson 4.1.