As investors continue to demand more reporting around social impacts, Canada’s mining sector grapples with how to provide investors with more transparency on indigenous relationships.
Investors need more sight of how mining groups in Canada are working with the country’s 600 indigenous communities. Indigenous communities are an important source of labour to the industry with many mines and projects located on traditional lands, yet investors struggle to assess “the quality and sincerity” of mining groups’ relationships with indigenous groups.
According to a recent roundtable between the Mining Association of Canada (MAC), indigenous groups and institutional investors to discuss how the industry should engage with indigenous communities, investors typically engage directly with mining groups regarding their indigenous relationships but have limited tools or KPIs to assess governance around these often complex relationships.
For example, operating jurisdictions vary and there is a lack of common indicators guiding the relationship between mining companies and indigenous groups. Useful metrics should include the percentage of indigenous representation in the organization’s workforce across senior management; the number of indigenous suppliers and contractors and financial commitments to communities surrounding projects.
Nor do any of the main ESG frameworks like the Global Reporting Initiative, SASB or the Task Force for Climate-related Financial Disclosures (TFCD) have a particular focus on corporate indigenous relationships. In contrast, MAC’s ‘Towards Sustainable Mining (TSM) Indigenous and Community Relationships Protocol’ offers a framework for more transparency in assessing mining groups indigenous and community relationships.
Moreover, TSM offers the ability to benchmark between peers, independent assurance and strong indigenous involvement. It offers a scoring system that investors can use to quantify the quality of a company’s approach to building and maintaining strong relationships with its affected indigenous communities.
“Challenges remain for investors to evaluate the quality and depth of indigenous relations,” says the report. “Corporate disclosures that provide context around varying metrics on this topic will provide increasing value as investors grapple with how to evaluate and value these relationships over time.”
The roundtable also focused on research from the Corporate Social Responsibility Initiative (CSRI) that illustrates how strong partnerships between mining companies and indigenous communities help avoid costly breakdowns in relationships. The CSRI study found that the most frequent costs were those arising from lost productivity due to delays or shutdowns. With the growth in responsible investing and the integration of ESG issues into investment analysis, there is an increasing need for investors to understand and assess these potential risks.
Good relationships between investee companies and indigenous communities are even more important given tightening Canadian regulation. Regulation was strengthened in June 2021 when an act respecting the United Nations Declaration on the Rights of Indigenous Peoples received Royal Assent and came into force in Canada. It establishes accountability and minimum standards for indigenous people through 46 articles, covering issues such as injustices, equal rights, self-determination, and rights to traditional lands, while promoting mutual respect and partnerships.
This new legislation requires the federal government, in consultation and cooperation with indigenous people, to take all measures necessary to ensure the laws of Canada are consistent with UNDRIP and to develop an action plan to achieve UNDRIP’s objectives.
Partnering with indigenous communities often chimes with broader corporate environmental governance.
“Indigenous concerns relating to the environment are broad and include a wide spectrum of considerations which go beyond climate change, such as dust on the snow, the impact on wildlife and icebreaking activities to name a few,” said Matthew Pike, Aboriginal Affairs Superintendent at mining group Vale.
In fact, indigenous skills and knowledge can help mitigate climate change and environmental risks. Environmental concerns raised by indigenous communities are valid risks that a company should take into consideration in their project evaluation. Engaging with indigenous communities is not only the right thing to do, but it may also create value for an organisation, by providing access to local talent, local businesses and suppliers, maintaining a social license to operate in challenging jurisdictions, and building long-term partnerships.
Finally, the roundtable touched on how investors should look to mining groups’ senior executive team and board of directors to create the appropriate culture to execute a long-term strategy regarding indigenous relations.
That requires the inclusion of indigenous voices throughout a company’s operations, engaging and maintaining conversations around the use of indigenous lands, providing training and employment for local communities, fostering business relationships with local suppliers, and educating management and employees on the history of indigenous peoples.