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Proc Natl Acad Sci U S A. 2014 May 27;111(21):7576-81. doi: 10.1073/pnas.1405135111. Epub 2014 May 12.

Conflict translates environmental and social risk into business costs.

Author information

1
Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia; d.franks@uq.edu.au abebbington@clarku.edu.
2
Corporate Social Responsibility Initiative, Harvard Kennedy School, Cambridge, MA 02138;Shift, New York, NY 11205;
3
Graduate School of Geography, Clark University, Worcester, MA 01610;Institute for Development Policy and Management, University of Manchester, Manchester M13 9PL, United Kingdom; d.franks@uq.edu.au abebbington@clarku.edu.
4
Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia;Rubenstein School of Environment and Natural Resources, University of Vermont, Burlington, VT 05401; and.
5
Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia;
6
Centro Peruano de Estudios Sociales, Jesús María, Lima 11, Peru.

Abstract

Sustainability science has grown as a field of inquiry, but has said little about the role of large-scale private sector actors in socio-ecological systems change. However, the shaping of global trends and transitions depends greatly on the private sector and its development impact. Market-based and command-and-control policy instruments have, along with corporate citizenship, been the predominant means for bringing sustainable development priorities into private sector decision-making. This research identifies conflict as a further means through which environmental and social risks are translated into business costs and decision making. Through in-depth interviews with finance, legal, and sustainability professionals in the extractive industries, and empirical case analysis of 50 projects worldwide, this research reports on the financial value at stake when conflict erupts with local communities. Over the past decade, high commodity prices have fueled the expansion of mining and hydrocarbon extraction. These developments profoundly transform environments, communities, and economies, and frequently generate social conflict. Our analysis shows that mining and hydrocarbon companies fail to factor in the full scale of the costs of conflict. For example, as a result of conflict, a major, world-class mining project with capital expenditure of between US$3 and US$5 billion was reported to suffer roughly US$20 million per week of delayed production in net present value terms. Clear analysis of the costs of conflict provides sustainability professionals with a strengthened basis to influence corporate decision making, particularly when linked to corporate values. Perverse outcomes of overemphasizing a cost analysis are also discussed.

KEYWORDS:

regulation

PMID:
24821758
PMCID:
PMC4040549
DOI:
10.1073/pnas.1405135111
[Indexed for MEDLINE]
Free PMC Article

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