Corporate foundations in the mining industry: the relationship between responsible investment and social investment

Abstract

This article explores the relationship between responsible investment (RI) initiatives in capital markets and lending institutions, and the performance of social investment as a specific form of corporate social responsibility (CSR) in the mining industry. It focuses on how the nature of institutional investment initiatives encourages certain organizational structures for CSR activities. The argument is developed by exploring an inherent conflict between the business case motivations for CSR as promoted by RI initiatives, and the legitimacy of CSR activities being based on their performance-fulfilling normative CSR values. Corporate foundations in the mining industry provide the empirical context for examination. These organizations distribute the benefits of mining operations through social investment. They are – interestingly – both connected to their sponsoring mining firms and yet self-governed. The organizational form of corporate foundations works as a strategic response to RI initiatives because the form allows social investment practices at a distance from the corporation to maintain its normative legitimacy and thus create the CSR desired by investors. Framed by an institutional economic geography lens, this organizational dynamic indicates that the inherent conflict in RI initiatives produces greater attention to the form of delivery of CSR than to its functions.

Keywords:

• form and function
• responsible investing
• social investment
• organizations
• corporate social responsibility

Acknowledgements

I thank Gordon L. Clark and Andrew Barry for their support throughout the Dphil this article was developed from. This paper draws on work from the Dphil and previous work published. I also thank the anonymous referees and the editorial team for their guidance in improving the piece. Any errors or opinions expressed herein are my own. This work was completed through support from the University of Oxford Clarendon Fund Scholarship.

Notes

This advocacy for better business is also addressed by a critical literature that views advancing business as the goal, even if at the expense of society (Rajak 2011). In Good Company, an anatomy of Corporate Social Responsibility. Stanford, California: Standford University Press.

Two examples of organizations that work across business sectors include Business for Social Responsibility (http://www.bsr.org), an organization of member firms as well as private sector CSR research, and the World Business Council for Sustainable Development, a CEO-led organization to foster sustainable development and responsible business practices (http://www.wbcsd.org/home.aspx).

Author's fieldwork experience from several interviews in both Namibia (March 2010) and Chile (June 2010).

Social license to operate (SLTO) refers to any collection of activities by communities or government that allows corporations to continue to operate and without which their business activities in the location are in peril. Loss of SLTO can occur through the formal revocation of mining rights or through informal protest strikes or violence from the community. For further discussion see Schumpeter (1987). Capitalism, Socialism, and Democracy. London, Unwin Paperbacks (Witt 2003). The Evolving Economy Cheltenham, Edward Elgar.

IFC performance standards: http://www1.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Sustainability/Sustainability+Framework/Sustainability+Framework+-+2012/Performance+Standards+and+Guidance+Notes+2012/.

Fieldwork notes from IAIA 2011, Puebla Mexico. World Bank and IFC led session on the process of updating the performance standards and explanation of the changes. Friday, 3 June 2011.

Interview with Aidan Davy, consultant with the ICMM, Thursday, 26 March 2009.

ICMM news 27 September 2010 (http://www.icmm.com/page/51640/newmont-recognized-in-dow-jones-sustainability-index).

An example of a critique of The World Bank lending and impacts of national development can be found at http://www.brettonwoodsproject.org/item.shtml?x=320869.

Further case studies of grant-making/administrative foundations (e.g. Asociación Los Andes de Cajamarca, Peru and the Greater Rustenburg Community Foundation, in South Africa) and implementation foundations (Fondo Minero Antamina, Peru and the Rössing Foundation, Namibia) can be found in the World Bank Source Book: Wall and Pelon (2011). The Experience with Foundations, Trusts and Funds. Extractive Industries for Development, The World Bank.

This is the northern Altiplano region near the Bolivian border. Many indigenous communities still live here and are increasingly affected by mining operations. FME has a second branch office here.