ICMM letter 1

Citation

(2007), "ICMM letter 1", Corporate Governance, Vol. 7 No. 3. https://doi.org/10.1108/cg.2007.26807caa.001

ICMM letter 1

Note from the Editors: Further to the Sethi collection of papers in Vol. 6 No. 3 (2006), comment has been received from ICMM challenging certain views stated. Both ICMM and the author have given us, the Editors, permission to publish the subsequent correspondence.

ICMM letter 1

30 January 2007

Dear Editors

Re: A failed strategy of using voluntary codes of conduct by the global mining industry

This letter responds to the above article published in Corporate Governance, Volume 6, Number 3, 2006.

At the outset, we wish to state that we welcome constructive and informed evaluations of our activities. It would have been useful if the authors could have discussed in advance the approach adopted, including a clear statement of the evaluation criteria. If the authors had shared with us the draft in advance, this would have ensured that the evaluation was based on correct and complete information. Since the authors did not discuss this in advance or send this paper to us for comment prior to publication, we set out below relevant facts about ICMM.

We would suggest that a fair and reasonable assessment would also take into account the contextual circumstances. In this case fair and reasonable implies being realistic about the time required to plan, develop, review and decide-upon, and implement major cultural change and business performance improvement systems.

Finally, and in terms of the substance of the evaluation, industry codes of conduct can only be one input into ensuring sustainable development outcomes. Such outcomes depend on collaborative action by governments, community based organizations, labor unions, donor agencies and others. This is why ICMM’s sustainable development framework and its supporting work program are developed together with other key actors on the sector.

What are the relevant facts about ICMM?

To provide a proper context for this response, the following facts need to be noted:

• •

  ICMM was established in October 2001 and it has progressively developed governance, program and membership requirements since. Thus it is a new organization and the code being evaluated was developed concurrently with ICMM’s foundation phase which was disrupted by the death of the inaugural secretary general.

• •

  ICMM is governed by a Council composed primarily of member company CEOs. The organization’s by-laws provide for an Executive Committee but no such body has existed since 2002.

• •

  ICMM has adopted a Sustainable Development Framework which has three parts: a set of Sustainable Development Principles, an accompanying reporting procedure [the Global Reporting Initiative’s Sustainability Reporting Framework together with the Mining and Metals Supplement] and a pilot procedure for independent third party assurance of performance and reporting. Compliance with the requirements of the framework is mandatory for all company members and the Council is responsible for ensuring compliance.

• •

  The above reporting supplement was developed by way of a partnership between GRI and ICMM and when published, in 2005, it was one of only two industry specific supplements. The indicators in the supplement were developed by a multi-stakeholder working group comprising ten non industry participants (for example, IUCN, the National Union of Mineworkers of South Africa, Oxfam International, WWF Australia, indigenous peoples’ representatives, investors, the World Bank Group) in which ICMM representatives were a minority. The reporting framework was sent out for a three month period of public consultation and once finalized, was signed off by the whole working group. ICMM company members are required to report “in accordance” with GRI which is the highest level of reporting.

• •

  The independent pilot assurance procedure was developed after completion of the reporting supplement and the consultation process included reviews of the draft by expert bodies such as Accountability and the Institute of Chartered Accountants of England and Wales.

• •

  In order to “flesh out” the principles and reporting requirements, ICMM’s work program is focused on development of toolkits and good operational practices for the sector. To date guidance documents on biodiversity (with IUCN), emergency response (with UNEP), materials stewardship, metals environmental risk assessment, fostering community development (with the World Bank) and enhancing the contribution of mining to economic development (with World Bank and UNCTAD) have been prepared. In addition, formal position statements on mining and protected areas, revenue transparency, climate change, mineral resources and economic development and indigenous peoples (draft) have been agreed to. To communicate these and other initiatives a “Good Practice in Mining” website has been established in partnership with a number of UN agencies and the UK government’s Department for International Development.

• •

  All ICMM company members are required to adhere to the Framework and formal position statements, and it is expected that good practice guidance will be incorporated into companies’ operating procedures. A complaints hearing procedure has been established to address any representations about members’ compliance with ICMM’s requirements.

Thus, in summary, we believe that a substantial amount has been achieved in ICMM’s short life but we also recognize that much remains to be done, particularly on full implementation throughout all member companies. This is occurring as time and resources allow.

Is the paper soundly based?

Much of the evaluation and the conclusions drawn are based on incorrect or inaccurate information. Examples of this are as follows:

• •

  ICMM’s Sustainable Development Framework has three elements as previously explained and the Principles (stated on page 231 as being “the framework”) are only one element. The principles are based on the Mining Minerals and Sustainable Development report (MMSD) which was a two year consultation process to identify the issues relating to sustainable development in the sector. There is complete alignment of the issues identified in the MMSD report with those embodied in the Extractive Industries Review chaired by Dr Emil Salim. In addition, ICMM undertook a “gap analysis” comparing current standards with relevant conventions and guidelines (e.g. Rio Declaration, the Global Reporting Initiative, OECD Guidelines on Multinational Enterprises, World Bank Operational Guidelines, OECD Convention on Combating Bribery, ILO Conventions 98, 169, 176, and the Voluntary Principles on Human Rights and Security). The second element, the GRI sector supplement, was developed by a multi-stakeholder group. Thus, it is not correct to say that the framework “defined the issues from the perspective of the industry and offered solutions defined by the industry” (p. 231 and 233).

• •

  ICMM’s Principles, reporting, third party assurance and position statements have been formally adopted by the Council and compliance with them is mandatory. Thus, it is incorrect to say that the framework is “voluntary” [p. 235] and that “individual companies [can] adapt to their own situation … or by creating their own codes of conduct” (p. 231).

• •

  ICMM company members must report “in accordance with the GRI framework on their performance against the Principles by 2007. An allowance of two reporting cycles was given to enable all members to develop the necessary capacities and data. Thus, it is inaccurate to say that “ none of the current members of ICMM provide any information indicating compliance with … ICMM’s SD Framework” (p. 232).

• •

  The Principles are just that – principles – and are overall statements of intent. Details and specific criteria are given in the accompanying explanatory “amplifications” (p. 233) and more so in the GRI supplement. Furthermore, requirements for external assurance have been formally adopted and are mandatory. Thus, it is incorrect to say “they [the principles and the framework] … lacking in specificity, objectivity, standards of compliance and their relevance to … problems that currently exist” (p. 233) or that “ICMM does not provide any information as to how company performance would be independently verified and results reported to the public” (p. 233) and similar statements elsewhere (p. 234).

• •

  ICMM published a report on indigenous peoples’ issues in 2004 and a draft position statement in 2006, and has since undertaken substantial consultation with interested parties, including jointly convening with IUCN, an international roundtable workshop. Thus the allegation [p. 234] that no information is available about ICMM’s approach to indigenous peoples’ issues is incorrect.

• •

  ICMM’s Executive Committee has not existed since 2002 and thus the note about the committee and its members (p. 235) is incorrect.

The above are only examples of false statements in the paper – there are many others. This incorrect information paints a wholly inaccurate picture of what ICMM has achieved and what is required of its members.

Is the paper fair and reasonable?

The paper gives next to no information about ICMM’s history, nor the resources and time normally required by any industry group to establish itself and develop its procedures. No account is taken of ICMM’s short life and the disruptions that occurred early in its establishment. Thus, we believe the paper is unreasonable and unfair in its expectations of what the members should be achieving at this stage.

Does the paper demonstrate an understanding of how sustainable development can be achieved in the mining sector?

Finally, and as noted by both the Extractive Industries review and the MMSD report, sustainable development outcomes in the mining sector depend on actions by all parties: governments, communities, labor, etc. ICMM fully recognizes that performance by companies needs to improve – which is the rationale for our sustainable development framework. However, there is need for parallel and collaborative actions by all parties in the sector. This is why ICMM works closely with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, with the Initiative for Responsible Mining (IRMA) and with the Council for Responsible Jewellery Practices.

Are the paper’s conclusions valid?

The paper’s conclusions are based on almost entirely incorrect or inaccurate information, and they fail the test of reasonableness. Thus, we believe that the conclusions are false and misleading. No attempt was made to contact staff at ICMM to obtain a factually correct understanding of the relevant circumstances.

This outcome is most unfortunate for, as stated at the outset, ICMM welcomes evaluations of its activities and we would have assisted with any enquiries from the authors. We would also be pleased to assist the authors should they decide to review and correct the paper which is obviously necessary. We acknowledge that ICMM faces many challenges, not least in developing and implementing its Framework. This paper was a good opportunity for an informed third party to review these challenges and suggest constructive improvements. Unfortunately, we believe this opportunity has been largely missed.

Yours sincerely

Paul MitchellPresident paul.mitchell@icmm.com

Author response

February 6, 2007

Dear Editors

Re: A failed strategy of using voluntary codes of conduct by the global mining industry

I am responding to your inquiry concerning ICMM’s assertions that our paper “A Failed Strategy of Using Voluntary Codes of Conduct by the Global Mining Industry” was somehow misinformed and that as an “informed third party” we largely missed an opportunity to review the challenges faced by the extractive industry and “suggest constructive improvements.”

For the record, let me state that we did provide a draft of our paper to Mr. Mitchell for his comments, and he did send us copious comments. However, in our view, those comments amounted to a justification of lack of progress by the mining industry in creating and implementing a viable set of standards with appropriate assurances through independent external monitoring and transparent reporting.

Unfortunately, Mr. Mitchell’s letter reinforces our earlier conclusion by demonstrating that nothing substantial has changed:

1. 1.

   Mr. Mitchell admits that ICMM Council is governed by the same group of CEOs whose companies are to be monitored. Mr. Mitchell states that “although the organization’s by-laws provide for an Executive Committee but no such body has existed since 2002.” This fact needs explanation. Why is it that the industry’s leadership has been reluctant to create an Executive Committee? How can Mr. Mitchell expect us to take ICMM seriously when the industry has not been able to create an Executive Committee in a five-year period?

2. 2.

   It has been more than six years since ICMM’s framework was established. This process preceded another 2+ years of consultations among the companies and various external groups in designing the framework. And yet, to date all ICMM and its members can show by way of progress is that the group is developing the necessary toolkits to create detailed standards with which to evaluate, monitor, and report member companies’ performance. It would appear that no monitoring and independent reporting has been done. Nor do we know as to what, if any, changes have been made by the member companies in their mining operations. Mr. Mitchell must know that in a recent meeting of the industry group in London in November 2006, the industry members could not even agree to a language as to the need for monitoring and reporting and the timetable to accomplish them.

3. 3.

   Finally, we certainly did not miss the opportunity to offer constructive suggestions for improvement. As a matter of fact, these are clearly stated in our article on page 235. Furthermore, these recommendations were not pulled out of thin air but were based on 20+ years of experience in developing, monitoring, and auditing codes of conduct in a variety of industries including the mining industry.

In conclusion, I state that nothing in Mr. Mitchell’s letter contradicts or refutes our conclusions in the CG article. On the contrary, his comments about ICMM’s lack of “real progress” affirms our findings that ICMM is unlikely to achieve any meaningful progress as long as its monitoring process is controlled by the CEOs of the same companies whose performance is being monitored.

Should Mr. Mitchell feel so inclined, I would be happy to invite him to attend our forthcoming 2nd International Conference “Globalization and the Good Corporation,” which would be held in New York on June 26-28, 2007. At this conference, in a session devoted to industry-wide codes of conduct, Mr. Mitchell would have a proper forum to discuss ICMM’s performance in the presence of an informed group of industry experts, NGOs, academic researchers, and representatives of international financial and aid organizations, such as the World Bank and the UN Global Compact.

Best regards.

Sincerely,

S. Prakash SethiUniversity Distinguished ProfessorPresidentInternational Center for Corporate Accountability, Inc.