By Rachel Adrian, Fall Intern
Extracting with Purpose, a new study from consulting firm FSG and the Shared Value Initiative, details the ways that companies in the extractives sector (oil and gas, mining etc.) can create positive societal outcomes by tying their business’ success to that of their community through shared value. Shared value is the unique opportunity for businesses to align their business priorities with social goals. This is not the same as corporate social responsibility or philanthropy, but is rather a new way to achieve both business and societal success. In this article, we present a summary of the key findings from the report.3 Strategies for Shared Value CreationThere are three main strategies for creating shared value in the extractives sector. By implementing any one of these strategies, extractives businesses can make an incredible impact on the communities they operate in.
Reconceiving products, by-products and target markets: Most traditional extractives companies produce huge amounts of waste. Sometimes they can figure out a way to re-purpose this waste and make it useful for the surrounding community.
Redefining productivity in local value chains: By putting structures in place to improve the local workforce and purchase materials locally, extractives companies become much more sustainable, cost-efficient and are able to stimulate the local economy through their operations.
Creating an enabling local environment: Extractives companies can invest in community infrastructure, play a more active role in the community and create a positive community atmosphere. A vibrant, engaging community will entice employees to stay in operating areas longer, decreasing the financial burden of a fly-in, fly-out workforce. Positive local environments also improve mental health within the company and ultimately improve business performance.
Why is Shared Value Important in the Extractives Sector?The extractives industry is responsible for sourcing and producing many of the raw materials in products that we use every day. Although not always on the top of our minds, they play an incredible role in everyday life. These companies are known for their huge economic output, but this output hasn’t traditionally translated to the betterment of the community. Extractives companies have immense opportunity to improve business operations, while also improving conditions in the communities around them. By implementing shared value, these companies can re-align their business efforts with the needs of the community.A Few Examples: There are many companies already taking steps towards Shared Value and exploring the incredible benefits to their bottom line. I’ve taken a few as examples to illustrate how each of the three strategies listed above can equal a mutually beneficial relationship for society and business.
The Dawson Creek Reclaimed Water Project is a joint venture between Shell and the City of Dawson Creek in British Columbia, Canada. Plagued by yearly droughts, Dawson Creek was facing a severe lack of clean, usable water and had to cut off water supplies to extractives companies. Shell helped to develop a water reclamation plant to treat waste water and make it useful for municipal and industrial activities. The water reclamation plant provides valuable water for the city as well as a critical source of revenue. Shell also benefits as they have a guaranteed source of water for the next decade. This is an example of the first strategy outlined above as Shell was able to find a way for the city to utilize a common waste product and improve their operations.
The Suncor Social Prosperity Wood Buffalo project aimed to improve infrastructure, community engagement and inspire social change in the Municipality of Wood Buffalo in Northern Alberta, where many of Suncor’s operations occur. They were able to improve quality of life in the area and reduce transportation costs as many of their employees were able to move to Wood Buffalo. This can be used as an example of the third strategy outlined above. Suncor used their resources to help the community work together and improve social services for everyone.
The Newmont Mining Corporation has established a very successful apprenticeship program to train locals to fill technical positions within the company. There has traditionally been a lot of violence in Ghana’s Gold Coast mining operations but this company has found a way to mitigate this harsh environment and gain respect from their employees. The workers earn higher wages and are able to build their skillset, while the company reduces costs as they don’t have to bring in more costly expatriate workers to fill technical positions. This is an example of the second strategy outlined, as the company was able to source employees locally and avoid extra transportation costs.
By moving away from the traditional, philanthropic approach to addressing societal issues, companies can have a real, sustainable impact and transform communities.
Why Shared Value?The past few years have seen a tremendous increase in discussion relating to corporate social responsibility. To be competitive, companies can’t just ‘give money away’ anymore, they have to find ways to make real impact. Past discussions around corporate giving emphasized the division between business and society but with shared value, we hope to do just the opposite and allow them to work (and prosper!) as one.Shared value isn’t just for the extractives sector. Through our creative process, any business can adopt a defined social purpose, make a difference in their community and add value to their bottom line. There are a myriad of models for how business can interact with society (see the figure below). Creating shared value requires companies to take the first step and be bold in their endeavors, here at JS Daw & Associates we help businesses make this connection. Read the full Extracting with Purpose Report here!