CEO letters: Social license to operate and community involvement in the mining industry

• Author: Vicente Chirivella‐González,Beatriz García‐Ortega,Blanca de‐Miguel‐Molina
• DOI: http://doi.org/10.1111/beer.12205
• Published date: 01 January 2019
• Date: 01 January 2019

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  wileyonlinelibrary.com/journal/beer Busines s Ethics: A Eur Rev. 2019; 28:36–55.

© 2018 John Wiley & So ns Ltd

1 | INTRODUCTION

Although it is ver y important for mi ning companies to work with t he

communities in w hich they operate t o achieve a Social Lice nce to

Operate (SLO), few st udies have discusse d this issue. More im por‐

tantly, these stu dies have not taken into a ccount the value of t he

CEO discourse in det ailing the compa ny’s actions that a im to im‐

prove relations wit h these communities. This pap er fills this gap by

analysing both t he reports co mpiled by mining com panies and the

letters of the ir CEOs. For this purp ose, different C orporate Socia l

Responsibilit y (CSR) theo ries have been integr ated into the exist‐

ing SLO framework . The theories applied are th e legitimacy theory

(Gao & Hafsi, 2017), the resource dependence theory (Boutilier &

Zdziarski, 2017), th e signalling theo ry (Connelly, Ketche n, & Slater,

2011) and the institut ional theory (Vashc henko, 2017).

Why and how do mining f irms become invol ved in their com‐

munities? Traditionall y, the literature on C SR has analysed th e

relationships between companies and communities through an in‐

terpretatio n of the legitimacy theor y (Dennis, Buchholtz , & Butts,

2009), in which companies invest in the communities in which

they operate th rough donations a nd infrastruc tures. The aim o f

these investments is to strengthen their company’s reputation

(Graafland & Mazereeuw‐Van der Duijn Schouten, 2012), as mining

firms are seen as generators of negative social and environmental

impacts (Mo ran, Lodhia, Kunz, & Huisingh, 2 014; Richert, Ro gers,

& Burton, 2015; Rod rigo, Duran, & Are nas, 2016; Van der Plank,

Walsh, & Behrens, 2 016). However, obtaining commun ity accep‐

tance of mining pr ojects (SLO) impli es more than thes e invest‐

ments. SLO requires credibility and trust, in addition to legitimacy,

which means dialogue and community participation in decisions

Received: 22 May 20 17 

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  Revised: 22 June 2018 

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  Accepted: 22 Augus t 2018

DOI: 10 .1111/bee r.12205

ORIGINAL ARTICLE

CEO letters: Social license to operate and community

involvement in the mining industry

Blanca de‐Miguel‐Molina1 | Vicente Chirivella‐González2 | Beatriz García‐Ortega1

1Department of Management, Universitat

Politècnic a de València (Spain), Valen cia,

Spain

2Department of Applied Statistics,

Operational Research, and

Quality, Unive rsitat Politècni ca de València

(Spain), Valencia, Spain

Correspondence

Blanca de‐Miguel‐Molina, Department

of Management, Universitat Politècnica

de València (Spa in), Camino de Vera s/n,

building 7D, 46 022 Valencia, Spain .

Email: bdemigu@omp.upv.es

Abstract

This paper aims to analy se how the discourse of CEO letters and other f actors influ‐

ence community involve ment and Social Licence to O perate (SLO) in the mining in‐

dustry. The analysis i s based on qualitative inf ormation disclosed in su stainability

reports and C EO letters from 32 mining fi rms. Content analysis was u ndertaken to

obtain data for the s tudy, and then a regression analysis and a multipl e correspond‐

ence analysis were used to te st the hypotheses defined in t he study. The results indi‐

cate that the CEO discours e influences how a firm ex presses the impor tance of

gaining its SLO, the phil anthropic activities in which co mpanies become involved and

the destinations of t he investments in th e communities in which th ey operate. The

results also show cha nges in the discourse be tween 2011 and 2015, which are, in

part, explai ned by the difficult situation e xperienced by the sector duri ng this period.

The paper contribu tes to the Corporate Social Respo nsibility literature by integrati ng

different theor ies from this field into t he SLO framework. The a nalysis carried ou t

and the results ob tained are useful for both CEOs and Su stainability Managers , espe‐

cially in managing thei r relationships with th e communities where th ey operate or

intend to operate.

KEYWORDS

CEO letters, com munity involvement, mi ning firms, social licence t o operate

    

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DE‐MIGUEL‐MOLINA et al.

(Boutilier, 2014; Nysten‐Haarala, Klyuchnikova, & Helenius, 2015;

Prno & Slocombe , 2012). Although SLO is nowadays an im portant

issue for the indu stry’s fir ms, the works on th is topic are scarce

(Costanza, 2 016; Moran et al., 2014; Prno & Sl ocombe, 2014).

Moreover, the majorit y of works on SLO are based on one or jus t

a few cases (Chesh ire, 2010; Costanz a, 2016; Coumans, 2011;

Holley & Mitcham, 2 016; Nysten‐Haaral a et al., 2015; Teschner,

2013). In this paper, we have integr ated the traditiona l perspective

with the more rec ent SLO framework.

What factors influence the implementation of SLO? Considering

what the literat ure has stated about CSR , it could be suggested th at

the participation of companies in communities to achieve SLO is de‐

termined by a fir m’s resources and situ ation (Catalão ‐Lopes, Pina,

& Branca, 2016; Ga o & Hafsi, 2017), the loc ations where mini ng

companies ope rate (Prno & Slocombe, 2012) a nd the CSR guideline s

related to the mini ng industries (Koivurova et a l., 2015; Ranängen &

Lindman, 2017). Wi th respect to these guidel ines, over the last few

years, CSR re porting has evolved in the mi ning industry and sever al

CSR princip les and guidelines set out by inte rnational organisations

have been incorp orated into their reports . These CSR principles in‐

clude FPIC (Free, Pri or and Informed Co nsent) and SLO. Alth ough

both principl es intend to assure communit ies participation, t he FPIC

requires state involvement to guarantee that communities partici‐

pate in decisions related to mining projects, while SLO only requires

community participation. In this paper, we analyse all these factors

in relation to the S LO, considering both di fferences bet ween firms

for each year and t he changes for each f irm between t wo periods

(years 2011 and 2015).

How do mining companies communicate their commitment to

the communit y? From a CSR perspe ctive, discourse about invol ve‐

ment in the commun ity is presente d in sustainabil ity report s and

CEO letters (Tengbl ad & Ohlsson, 2010). CEO let ters have been

considered not on ly as a means to communicate the ori entation of

firms in relatio n to social issues (A ggerholm & Trapp, 2014; Bram mer

& Millington, 2 005) but also as a channel to sh ow that a CEO thinks

about the commo n good (Dam & Scholte ns, 2012; Dennis et al. ,

2009). However, we have found fe w works referring to CEO lette rs

in mining indust ries and also a lack of papers lin king SLO and CEO

letters. In t his paper, we use the CEO discours e to measure SLO. For

this purpose, we h ave applied the model de veloped by Boutilier an d

Thomson (2011), which considers legitimacy, credibility and trust,

as well as an analysis of w hat the CEOs include i n their message s

and its relatio nship with the implement ation of SLO.

Therefore, our p aper is based on t wo topics, SLO and CEO dis‐

course. Appl ying differen t theories, ta ken from the CSR ar ea, we

analysed the di scourse includ ed in sustainab ility repor ts and CEO

letters from 32 m ining firms from 2011 and 2015. A con tent analysis

of these docume nts was carrie d out to obtain the co des related to

the activit ies and investme nts of companies in t heir communitie s,

locations where they operate, the CSR guidelines followed, expres‐

sions referring t o SLO and elements in the C EO discourse. The codes

obtained were u sed to answer to the fol lowing questio ns, and test

the hypotheses defined:

1. What factor s influence the invol vement of mining fir ms in their

communities to a chieve their SLO? and

2. How does the CEO discourse influence the involvement of mining

firms in their co mmunities so they can ach ieve a SLO?

The paper is str uctured as fol lows. After this i ntroduction ,

Section 2 summ arises the the ory about SLO and C EO letters.

Sections 3 and 4 p resent an empirical study ab out the influence of

different var iables and CEO discourse on mini ng firms’ involvement

in the communit y to reach SLO, including th e evolution of these var i‐

ables and this di scourse betwe en 2011 and 2015. Conclusio ns are

shown in Secti on 5.

2 | LITERATURE RE VIEW

2.1 | Social L icence to Operate

Operating in mining requires both legal and social approval (Cheshire,

2010; Holley & Mitcham , 2016). The former impli es authorisat ion

by a government to oper ate a mine, whereas the latter me ans con‐

sent given by the comm unity, known as a SLO. When a c ompany

or project obt ains support from the comm unity, it has gained social

legitimacy to s tart or continue its o perations (Costanza , 2016). Prno

and Slocombe (201 2) indicated that it i s also essential fo r a project

operating nea r them to have obtain ed this type of acce ptance be‐

cause it demon strates that the community h as participated in deci‐

sions about the mi ne.

The literature o n a SLO in the mining industry has a nalysed dif‐

ferent aspect s related to this topic , such as the concept and it s origin

(Prno & Slocomb e, 2012), what companie s do to obtain the lice nce

(Fuisz‐Kehrbach, 2015; Pr no & Slocombe, 2014; Van der Pl ank et

al., 2016) and how a SLO can be m easured (Boutil ier & Thomson,

2011). Although ther e are abundant stu dies about socia l responsi‐

bility in minin g companies, the number of wor ks focused on SLOs is

narrower, as some auth ors have pointed out. For examp le, Prno and

Slocombe (2012) st ated that the lite rature on SLOs is an eme rging

topic, while Costanza (2016) indicated that studies focusing on how

firms try to e arn this licence are scarce . Others, such as Moran et a l.

(2014), pointed out that, i n general, the literatur e related to sustain‐

able developme nt in mining is scarce when com pared to the amount

of total literatu re on the subject. Sec tions 2.1 and 2.2 includ e a liter‐

ature review on SLO.

2.1.1  | SLO definitions

The term SLO was fir st used in 1997 by a mining execu tive named

James Cooney (Boutilier, 2014). Gunningham, Kagan, and Thornton

(2004) defi ned it as the “demands and expect ations from communi‐

ties, environm ental groups an d civil society to b e covered by com‐

panies.” Prno and Sl ocombe (2012) went fa rther and indi cated that

a company or projec t obtains this licence if it “has the ap proval and

acceptance of soc iety to conduc t the mining acti vities.” Therefor e,