In September eNews, I highlighted the concept of Creating Shared Value that has been developed at Harvard University and is now gaining currency across business, including the minerals and petroleum sectors. I noted how progressive stakeholders in mining and development across government, civil society and business have been seeking outcomes from mining investment that represent shared value, if not yet using that term.
Shared value defined is a management strategy that is focused on companies creating business value by generating economic and social value for other stakeholders in their businesses. What appeals to IM4DC about shared value is that by definition, it delivers value in different dimensions to all of the different stakeholders.
During the past week, two reports have been released that highlight the potential for minerals and energy companies to create shared value:
Responsible gold mining and value distribution: a global assessment of the economic value created and distributed by members of the World Gold Council
This report finds that, based on data from 15 World Gold Council members, of the US$47bn paid out in 2013, almost 80% of that total spend (US$37.4bn) was incurred in the country of operation. From that spend, US$26.4bn (71%) went to suppliers, US$6.3bn (17%) on wages and US$4.7bn (12%) to the government in taxes and royalties.
Extracting with Purpose: Creating Shared Value for Profit and Prosperity in the Oil and Gas and Mining Sectors’ Companies and Communities
Published by the Shared Value Initiative at Harvard University and FSG, the white paper highlights how companies in oil, gas, mining and minerals can create shared value by pursuing opportunities that tie business success to the prosperity of host communities and countries.
I was privileged to speak at the launch of the value distribution from gold mining report at which FSG’s Mark Pfitzer previewed the shared value white paper. In my remarks, I focused on the need for collaboration between stakeholders if strong shared value outcomes are to be achieved from resources development. Actions for creating shared value necessarily involved not only a project operator, but also others, including other companies in the region, suppliers, governments at all levels, business and community associations, and education and training providers.
Of course, which companies look to enhance long term business outcomes, other stakeholders will have different perspectives on ‘value’. It is therefore important that each stakeholder understands the value drivers of others in order to be able to contribute to value for others. The World Economic Forum project on Mineral Value Management – A Multidimensional View of Value Creation from Mining within its Responsible Mineral Development Initiative is focused on developing approaches to: shared understanding of the benefits and costs of mineral development, and collaborative processes for stakeholder engagement, focusing on designing a multi-stakeholder approach to develop a better understanding of different groups’ needs, expectations and priorities.
A copy of my remarks on creating shared value through collaboration is available here. I note that the international development community has a role to play to support developing country partners to maximise the development potential of mining and build shared value. IM4DC is proud to be part of this effort, promoting approaches that support shared value outcomes, including leading practice negotiation and mediation, revenue system design, development of local enterprises, education and training, community development and women’s empowerment.