A new approach to the "triple bottom line"
28 January 2015
Has the social license to mine, environmental compliance, and compensation and accommodation of employees following occupational injuries and diseases become the new "triple bottom line"?
At the recent International Bar Association conference held in Dar es Salaam on Mining in Africa: Opportunities and Legal Challenges the message could not have been clearer – the exploration and mining world is changing, with the strongest possible emphasis on the so called "social license to mine", which takes into account the full spectrum of potential impacts of exploration and mining activities particularly in relation to host communities.
In this article we explore the notion that the typical or common "triple bottom line" used in determining the feasibility of a prospective project or activity should be broadened to include a general consideration of three aspects: the "social license to mine", substantive compliance with applicable environmental laws, and consideration of the unfortunate consequences that sometimes flow from the activity or operation in relation to injuries and diseases.
It seems that each of these aspects is gaining in prominence for a variety of reasons, including regulatory and stakeholder activism and enforcement.
Before exploring each of these aspects in further detail, it is appropriate to consider the multiplicity of challenges facing the South African exploration and mining industry. It is only within the context of these challenges that the notion of the new "triple bottom line" can be effectively explored.
The primary challenges faced by the South African exploration and mining industry
For convenience, the difficulties being faced by the South African exploration and mining industry can be summarised in eight key challenges:
1 The global financial crisis and the impact that this has had on global demand.
2 Regulatory and legislative uncertainty.
3 Infrastructure (ports, rails, water, roads and electricity).
4 Labour uncertainty.
5 Health and safety.
6 Environmental compliance requirements.
7 Illegal mining operations.
8 Community activism.
Collectively, these challenges have created a need for exploration and mining companies to review their approach to legal compliance, and to move beyond substantial legal compliance to the situation where there is sustainable development of the communities in which mines operate.
The need for a social license
While a social license cannot be equated to corporate social responsibility (CSR), CSR is a term with which many people are more familiar, and it is useful to have regard to the concept of CSR within the context of the social license.
A colleague, Scot Anderson, of the Hogan Lovells Denver office also presented a paper at the International Bar Association conference in Dar es Salaam. In his paper he made reference to a useful definition of CSR by Kevin O'Callaghan (Corporate Social Responsibility: A framework for understanding the legal structure), namely "the economic, legal, social, ethical, and discretionary expectations that society has regarding the activities of private sector corporations". Scot Anderson identified that there are two concepts captured by Kevin O'Callaghan's definition. He states "first, CSR embodies more than mere compliance with legal and regulatory compliance. Rather, CSR includes ethical and social considerations. Further, legal compliance is mandatory, but CSR is in large part discretionary. Second, CSR rests on societal expectations. Those expectations are objective. In implementing a CSR program, then, a company makes a conscious decision to exercise discretionary functions in a manner that aligns it with societal expectations".
Along with CSR, the concept of a social license has gained prominence in the mining, natural resources and energy sector, as the sector, either voluntary or, as a result of legislation, recognises the various communities effected by their mining activities.
The social license has, historically, been based on the acceptance of the fundamental that host communities are empowered and can effectively withhold or provide support for an intended operation and for this support, once granted, to be revoked or reduced based on the response from the relevant companies.
As Scot Anderson indicated, societal expectations play a significant role, and this is clearly evident in the exploration and mining industry, where the level of support from a community is often dependent on the extent to which the company meets these societal expectations.
Importantly, while a community level agreement could be entered into with the community, addressing various aspects governing the relationship, the social license is generally intangible and is normally always subject to the specific geographic location, and the cultures, beliefs and expectations of the host community. The social license is dynamic and subject to the ever shifting societal expectations, which develop as time goes by.
There are, of course, critics of companies that actively foster the social license. These critics express the view that mining companies engage in CSR and foster social licenses for self-preservation purposes and, in the extreme, the motive of profit.
What seems certain is that, while there are differences of opinion between companies and communities on the methods of engaging with one another, the most efficient and effective methods and approaches appear to be those that are more collaborative in nature, which also tends to have the added benefit of relationship and trust building, over time. Whichever approach is adopted, it can only succeed on the bedrock of a fundamental understanding, particularly in the South African context, that communities are diverse, and often fragmented, with different values, goals and expectations. Perception may not be aligned with reality but remains a critical aspect to be addressed.
As communities become more and more empowered through, among others, knowledge and the support of the regulators, the social license will play a critical role in determining whether projects can get off the ground and operations can continue, successfully and sustainably.
Unlike regulatory authorisations, the social license is not issued and, importantly, reflects the status of the relationship between the mining company and the community, at any given point. An analysis of the status of the social license will provide the mining companies with a useful indication of whether it is meeting the communities' expectations from time to time, and the level of risk that this status presents to the mining company.
In summary, the social license is becoming a critical component of any successful exploration or mining operation.
Compliance with environmental laws
One of the challenges identified above is compliance with environmental laws, which must be read within the context of the general challenge relating to regulatory uncertainty.
The best example is the uncertainty that remains, despite several amendments to the relevant legislation (the Mineral and Petroleum Resources Development Act 28 of 2002 (NEMA) and the National Environmental Management Act 108 of 1998 (NEMA)), regarding environmental authorisations within the mining industry.
Historically, there was a long standing debate regarding whether, in addition to the environmental management plan or environmental management programme, environmental authorisations were required for the so called "listed activities" under NEMA, which were carried out on prospecting or mining areas and, ultimately, who has the final say with regard to environmental aspects in relation to prospecting and mining operations.
The first aspect appeared to have been cleared up in the matter of the City of Cape Town v Maccsand Proprietary Limited, where the court held that environmental authorisations for activities listed under NEMA were required, in addition to the mining permit held by the company. While the company held a mining permit, as opposed to a mining right, it appears that the principles applied equally to the circumstances where the company holds a mining right.
An attempt has been made to address the second aspect by means of the implementation of the "One Environmental System", through the National Environmental Management Laws Amendment Act 25 of 2014 (NEMLA 3) published on 2 June 2014, which came into force and effect on 2 September 2014. Under the "One Environmental System", the Minister of Mineral Resources will issue environmental authorisations and waste management licenses in terms of NEMA and the National Environment Management Waste Act, 2008. The Minister of Environmental Affairs would be the appeal authority in respect of these environmental authorisations. However, the implementation of the "One Environmental System" remains uncertain, despite these attempts.
Prospecting and mining activities were specifically incorporated into the NEMA listing notices of GNR 544, 545 and 546 in Government Gazette 3306 of 18 June 2010, which meant that a separate environmental authorisation was required in respect of those listed activities, once the requirement came into force and effect on a date to be proclaimed and after the transitional periods provided for in the NEMA and MPRDA Amendment Acts, respectively.
These Amendment Acts provided that the amendments to NEMA, in relation to mining activities, would take effect 18 months after the date on which the MPRDA Amendment Act took effect. The MPRDA Amendment Act came into force and effect (subject to certain of the sections, not coming into force and effect) in June 2013. These amendments include the repeal of section 38 of the MPRDA, which regulated environmental management, and replacement by sections 38A and 38B. Section 38A provides that the Department of Mineral Resources (DMR) is the responsible authority for implementing the provisions of NEMA in respect of mining. Section 38B provides for transitional arrangements, and any environmental management plan or environmental management programme that had been approved in terms of the MPRDA is deemed to be an environmental authorisation. Unlike section 38A, which is subject to the 18 months transitional process, that is it would come into force and effect after the 18 month transitional process, section 38B is not subject to the transitional period, and this creates uncertainty as to when section 38B will take effect.
In addition, sections 39 to 42 of the MPRDA (which addressed the environmental management plans) environmental management programmes, rehabilitation and financial arrangements have been deleted, leaving a substantial gap in the law, particularly in view of the fact that sections 38A and 38B have not yet come into force and effect.
To add further uncertainty, NEMLA 3 comes into operation three months from the date of its publication in the Government Gazette, that is 2 December 2014. NEMLA 3 confirms that the Minister of Mineral Resources is the competent authority in respect of environmental matters for the exploration and mining industry. It also, in respect of the financial provisions, requires banks, insurance providers and trusts to include provisions for rehabilitation, de-commissioning and remediation of negative environmental impacts. This is an extremely onerous provision and goes far wider than the financial provisions contained in the MPRDA, prior to its amendment.
Section 28 of NEMLA 3 repealed section 14(2) of NEMLA 2, which in effect deleted the provisions providing for the 18 month transitional period after the commencement of the MPRDA Amendment Act, with effect from 1 September 2014. The MPRDA Amendment Act specifically refers to the transitional time periods prescribed in section 14(2) of NEMLA 2. NEMLA 3 has, however, deleted the transitional period to 7 December 2014, with effect from 1 September 2014.
It appears that the unintended consequence is that there is even further uncertainty regarding environmental authorisations, for the mining industry.
Fundamental proposed amendments – Compensation for occupational injuries and diseases
High profile claims for occupational diseases and the number of persons being fatally injured in the mining industry appears to have prompted, to some extent, proposed amendments to the compensation mechanisms and, in particular, the Compensation for Occupational Injuries and Diseases Act 130 of 1993 (COIDA).
Compensation for occupational injuries and diseases is regulated, in respect of the mining industry, by COIDA and the Occupational Diseases in Mines and Works Act 78 of 1973 (ODIMWA).
In the event that a mine or works has been declared a "controlled" mine or works, in the event that an employee contracts one of the six diseases identified as compensatable diseases under ODIMWA, then the employee is entitled to compensation under ODIMWA for that disease. Any other occupational diseases, that is other than the six compensatable diseases, are compensated under COIDA. Any occupational injuries are compensatable under COIDA in these circumstances.
Where a mine or works is not a declared "controlled" mine or works, compensation for occupational injuries identified in Schedule 3 to COIDA and any compensation for any occupational injuries is payable under COIDA.
In terms of COIDA and ODIMWA, compensation is administered and paid, generally speaking, through the office of the Compensation Commissioner. However, COIDA contemplates the establishment and licensing of mutual associations. In the case of the mining industry, a mutual association has been licensed, namely the Rand Mutual Assurance (RMA).
The Minister of Labour, Mildred Oliphant, approved the draft Compensation for Occupational Injuries and Diseases Amendment Bill. However, it has not yet been presented to the Cabinet for approval.
The proposed amendments are far reaching and focus on administrative and substantive amendments.
The key proposed amendments generally fall into three categories:
1 Governance and finances of the Compensation Fund.
2 Rehabilitation, reintegration and early return to work framework of injured and/or diseased employees into the workplace.
3 Improvement of the mechanism for the monitoring and enforcement of COIDA.
It is beyond the scope of this article to address the proposed amendments, in detail. However, certain of the proposed amendments impact significantly on the obligations of an employer in relation to employees who have contracted an occupational disease, or sustained an occupational injury and in particular, their re-integration into the workplace. The proposed amendments include the following:
- Definition of "benefits" – the proposed amendment includes both compensation and rehabilitation in terms of COIDA. This is now aligned with the proposed amendment to include extensive obligations to rehabilitate and/or provide for reintegration of an employee into the workplace, after an accident.
- Definition of "dependant of an employee" – the definition has been widened to include any widow or widower who, at the time of the employee's death, was married to the employee according to civil law, civil union, customary law, life partner and any other marriages recognised in terms of any other law, and any other person who was at the time of the employee's death living as husband and wife. It also includes a posthumous child, step child, adopted child and a child born out of wedlock, who is a learner or who is wholly or partly financially dependent on the employee, a parent, a brother, a sister or half-brother or half-sister, grandparent or grandchild, who was wholly or partly financially dependent on the employee.
- Definition of "disability" – the definition has been widened to include, in respect of the provisions on rehabilitation, and means a permanent, long-term or recurring physical or mental disability.
- Definition of "occupational disease" – the amendment includes mental disorders and is not therefore restricted to the traditional occupational diseases.
- Definition of "reasonable accommodation" – this definition has been included and means any modification or adjustment to a job or to the working environment that will enable an employee to have access to or participate and advance in employment.
- Definition of "rehabilitation" – this definition is included and means measures, services and facilities, also in the form of clinical, vocational and social rehabilitation provided for in the new chapter, V11A, provided with a view to the reintegration of employees exposed to an occupational injuries or disease back into work and to enable them to attain and maintain maximum independence, full physical, mental, social and vocational ability and full inclusion and participation in all aspects of life.
- Section 25. The proposed amendment is that, if an employee is involved in an accident while, with the consent of the employer, the employee is being trained in organised first aid, ambulance or rescue work, firefighting or any other emergency service, or the employee is engaged in or about his or her employer's mine, works or premises in organised first aid, ambulance or rescue work, firefighting or any other emergency services, or with the consent of the employer is engaged in any organised first aid, ambulance or rescue work, firefighting or any other emergency service on any mine, works or premises, other than the employer's and the person is undergoing any work related training in furtherance and pursuance of the employer's business, the accident is deemed to be in the course and scope of employment.
- Section 35. The proposed deletion of section 35(2) removes the protection from claims against senior managerial employees. Currently, section 35(2) of COIDA provides that there is no claim by an employee or a dependant of an employee against the employer (section 35(1)) and senior managerial employees, which specifically, for example, includes the engineers appointed in terms of Regulation 2.13.1. If the amendment is passed, the protection against claims will only be in respect of the employer, that is the corporate entity, and it may be necessary to consider additional protection for senior managerial employees from an insurance perspective.
- Section 65. The proposed amendment to section 65(2) includes that if an employee has contracted a compensatable disease, and if the Commissioner is of the opinion that the recovery of the employee is being delayed, or that his or her temporary total disablement is being prolonged by some other disease of which the employee is suffering, the Commissioner may approve medical aid also for such other disease for so long as he or she may deem it necessary.
- Chapter V11A. The proposed insertion of V11A relates to rehabilitation, reintegration and early return to work. It requires the Compensation Fund (in the case of the mines the RMA), to provide facilities, services and benefits aimed at rehabilitating injured employees and employees suffering from occupational injuries or diseases to return to their work and to reduce and/or remove any disability resulting from their injuries or diseases. The chapter is extremely detailed in relation to what, when and how the facilities etc must be provided, and impacts, significantly, on aspects which are traditionally addressed in terms of the Labour Relations Act, such as suitable alternative employment and related aspects.
With the significant emphasis on the social license, compliance with environmental laws, and the proposed amendments to extend the responsibility of an employer in relation to occupational injuries and diseases, it seems that there needs to be a fundamental shift in thinking, possibly to a new concept of the "triple bottom line".
To close out, a comment in the Model Mine Development Agreement issued by the International Bar Association summarises the situation as follows: "MMDA 1.0 is based on the belief that mining investors, and countries, and civil society share some fundamental interest, and all interests benefit from long term stability of investment conditions. Long term stability comes when all interests benefit from an agreement, and when the agreement contributes to both business success and the sustainable development of the societies in which mines operate."