GROUP 2YIU PAK YIN, VALERIE 11238844DCHANDRAATMADJA, ANGELINE 11708622D

How DIFFICULT Is It For MINING COMPANIES To Conduct CSR?

Company Background• Freeport – McMoRan Copper & Gold• Headquarter: Phoenix, Arizona• President: Richard C. Adkerson • Chairman: James R. Moffet• Incorporated under the laws of state of Delaware on Nov 1987• Global Employee: ~ 36100

Organizational Chart

FCX• US based natural resource company• Mineral assets, oil and natural gas resources• A leading international company in the industry• The world’s largest producer of molybdenum

Operating Mines

Personnel

US

Indonesia

South

America

Africa

Others

0

5000

10000

15000

20000

25000

30000

35000

Contractors' PersonnelEmployee

Financial Status

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20121910 2212 2371

41795790

16939 1779615040

1898220880

18010

640 823 704 2177 28696555

-12710

65039068 9140

5814

Operating Income/Loss From Year 2002 to 2012

Revenues (in millions) Operating Income/Loss (in millions)

Environmental Obligation

• Various law and regulation (e.g., CERCLA, state laws)• Pollution, Disposal of hazardous wastes• More than 100 active remediation projects• Increasing costs ( especially in Indonesia)

Corporate Image• The largest publicly traded copper and molybdenum producer• Excluded from the investment portfolio of the Government

Pension Fund of Norway in 2006• The nominee of The Public Eye Award in 2012

CASE STUDY

Freeport – McMoRan Copper & GoldIN

INDONESIA

• Good CSR practice1. Participate in Community investment 2. Assist in Public Health3. Establish performance target

• Bad CSR practice1. Bribery in Indonesia

2. Environmental Pollution

3. Low Wages

Participate in Community investment

• Invested over $11 million in STEM education programs• Established community

foundations or social funds in Indonesia, Peru, the United States and the DRC• Launched

Freeportinmycommunity.com to record those good CSR practice from Freeport

Assist in Public Health

• Coordination with local governments and NGOs to provide significant resources to help communities.

• Strictly Prohibited the usage of Mercury in mining gold or copper

• Incident rate of Malaria is reduced with the aid of Freeport donation and cooperation of NGOs and governements

Establish performance target

• Set up a list of performance in CSR with a target date• Targets focused on different

area like business ethics, human right, environmental issue etc.• Printed on the sustainability

report as an evidence for the company to follow

Bribery• Freeport paid over 70 million

USD to the police in Indonesia during 2001 – 2010 for security reasons• National Police in Indonesia

claimed that the money is paid for “lunch meal” for police• Indonesian Corruption

Organization reported to the US Department of Justice about this issue

Environmental Pollution in Pupua Province

• Freeport threw dumps over 100,000 tons mine dumps into river without any treatment everyday• Cause caused flooding, re-

routing of the rivers, and destruction of forests nearby.

Long Working hour, Low Wages

• 22 thousand people working in Freeport

• Average working hour :12-14 hours per day

• Earn only 3.5 dollars per hour in 2011, (while the lowest wage of Freeport workers in the world between 30-50 dollars per hour.)

• Labour strike triggered during 2012 and several people died in the strike

• Freeport agreed to raise over 20% of the wages in 2012

BABSON FRAMEWORK

1

•Identify Issues (Difficult to implement CSR in Mining Company)

2

•Gather Information

3

•Brainstorm alternatives

4

•Evaluate alternatives from various ethical perspectives

5

•Make a decision and examine your confidence in it from different ethical perspectives

6

•Prepare to explain your ethic

7

•Reflect on your decision making process.

10 PRINCIPLESCompany Stakeholder Responsibility

1. stakeholder interests

2. stakeholders are real and complex people

3. solutions that satisfy multiple stakeholders

4. intensive communication and dialogue

5. voluntarism

6. Generalize the marketing approach.

7. Never trade off the interests

8. primary and secondary stakeholders.

9. Constantly monitor and redesign processes

10. Act with purpose. Act with aspiration.

International Council on Mining and Metals Sustainable Development Framework

Implement and maintain ethical business practices and sound

systems of corporate governance.

Uphold fundamental human rights and respect cultures, customs and values in dealing with employees

and others who are affected by our activities.

Implement risk management strategies based on valid data and

sound science.

Seek continual improvement of our environmental

performance.

International Council on Mining and Metals Sustainable Development Framework

Contribute to conservation of biodiversity and integrated

approaches to land use planning.

Facilitate and encourage responsible product design, use, re-use, recycling

and disposal of our products

Contribute to the social, economic and institutional

development of the communities in which we operate.

Implement effective and transparent engagement, communication and independently verified reporting

arrangements with our stakeholders.

Freeport Framework

Evaluation of Freeport’s CSR Practices• Implement and maintain ethical business practices and sound

systems of corporate governanceComply with or exceed the requirements of host-country laws

and regulations

Freeport paid over 70 million USD to the police in Indonesia during 2001 – 2010 for security reasons

• Uphold fundamental human rights and respect cultures, customs and values in dealing with employees and others who are affected by our activities

Average working hour :12-14 hours per day Earn only 3.5 dollars per hour in 2011

• Seek continual improvement of our environmental performance

Implement an environmental management system focused on continual improvement to review, prevent, mitigate or ameliorate adverse environmental impacts

threw dumps over 100,000 tons mine dumps into river without any treatment everyday

• Contribute to conservation of biodiversityPlan operation activities to minimize the impacts on the

ecosystem

flooding, re-routing of the rivers, and destruction of forests nearby

Destroy the ecosystem and natural habitats of endangered species

Decrease biodiversity

• Contribute to the social, economic and institutional development of the communities in which we operate

Low wage but long working hours Labour strike triggered during 2012 and several

people died in the strike

• Implement effective and transparent engagement, communication and independently verified reporting arrangements with our stakeholders

Under-table transactions with local government Corruption with invalid data and report Badly harm the interest of stakeholders

ETHICAL MININGGold industry added at least USD$210billion of gross value added to the global GDP in 2012.

26% of exports 36% of exports 75% of exports

GHANA TANZANIA MALI

(AFRICAN ECONOMIC OUTLOOK, 2013)

Papua’s economic dependence on mining is approximately 30%. (Papos, 2013)

Quantifying the Impact of Responsible Gold Mining

MINING COMPANIES are GENERALLY UNETHICAL.

TRUE OR FALSE?

Expectations from society• Last year, Freeport-McMoRan invested more than $23 million in Arizona communities,

most of which were in Southern Arizona, focusing on education, health, environmental improvement and economic development investments. (Freeport in My Community, 2014)

Why are they unethical?

Why only in Arizona? Why not so much in other areas?(Government regulations, Education of community, etc.)

Conflicting Shareholder Goals• It is difficult for companies to conduct CSR practices as a charity.

This is why Gov’t regulations are important – where they act as an excuse to unwilling shareholders.

Nature of Work

Lack in Mining Technological Developments focusing on safety• In 2012, investment in technology R&D by the mining industry was a mere

0.2% of revenue. Other industries invest as much as 30%. (Kachan, 2014)

Freeport. Are they really unethical?• The Papuan community led by Governor Lukas Enembe has requested for a 10% shares from

Freeport for the compensation of their many years of operations in Papua and their little contributions to the community. (Jakarta Post, April 19 2013.) This is despite the fact that

• Freeport has paid USD$955,600,000 in royalties and taxes to the Indonesian government in 2012 (Kurniawan, I. , 5 Feb 2013)

841200000

52800000

34500000 27100000

Breakdown of Royalties and Taxes

Central Gov'tDistrict Gov'tProvincial Gov'tOther Gov't Bod-ies

Papuans contested that the money is redistributed as such there were insufficient developments done in Papua. The request to be a shareholder is one so that they can obtain direct benefit from their contributions to Freeport.

What can you expect and cannot expect from a mining company.

CANNOT CAN

Be Totally Environmentally Friendly

• Minimize impact through R&D• Make recurrent improvements on

existing practices (stop chemical dumping)

• Prevention and mitigation

Guarantee absolute Safety of Workers

• Pay better wages to compensate for risk

• Buy better technologies to aid mining activities

ConclusionAbove all while they are bound to take some things from the community that they possibly cannot restore, they have the power to build infrastructures that can help build the lives of the people. It’s all about give and take.

MNCs:• Double-edged sword. • They could either hurt communities or help them and both ways it is one that has

significant impact. Hence, they should be carefully approached.

Countries should be aware of their bargaining powerCountry > Resource bound MNC

Reference• http://www.thejakartaglobe.com/archive/police-admit-to-receiving-fre

eport-lunch-money/#.Uxs6zfmSxoM

• http://www.thejakartaglobe.com/archive/icw-to-report-freeport-to-us-department-of-justice/484928/#.Uxs6iPmSxoM

• http://www.bloomberg.com/news/2013-10-22/freeport-indonesia-agrees-wage-increase-deal-to-avert-strike.html

• http://www.bbc.co.uk/news/business-15398639• http://www.fcx.com/sd/pdfs/WTSD_2012.pdf• http://www.nytimes.com/2005/12/27/international/asia/27gold.html?

pagewanted=all&_r=0

• http://www.earthworksaction.org/files/publications/GoldenRules_FINAL.pdf

• http://www.circleofblue.org/waternews/2012/world/global-gold-rush-the-price-of-mining-pursuits-on-water-supply/

Reference• http://www.thejakartapost.com/news/2013/04/19/papua-administratio

n-wants-10-freeport.html• http://us.bisnis.news.viva.co.id/news/read/387791-siapa-penikmat-terb

esar-pajak-dan-royalti-freeport-

• http://www.africaneconomicoutlook.org/en/countries/west-africa/mali/• http://www.papuapos.com/index.php/warta-daerah/kab-tolikara/

item/2660-ekonomi-papua-bergantung-oleh-tambang

• http://www.freeportinmycommunity.com/

• http://www.aljazeera.com/news/asia-pacific/2011/12/2011121442219366287.html

• Kachan 2014 http://www.kachan.com/pressrelease/new-emerging-green-mining-technologies-report