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What’s Good for the People is Good for the Company?

Analysis of the Effectiveness of Corporate Social Responsibility Programs in Latin America

Case Studies: Colombia, Chile, Peru

Larry Chirinos

&

Kristy Wright

Florida International University

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Abstract

“Goodness is the only investment that never fails” (Thoreau, 1854). While extractive industries

have built reputations that have either been costly or effective, this billion dollar business has left

little to the imagination when setting up shop in a country. The flourishing of natural resources in

Latin America has attracted many companies to invest and become involved in the extractive

industry. Minerals, oil, and copper are all valuable as well as profitable. However, extraction and

processing of such resources can be dangerous and toxic to people and the environment.

Communities and companies alike have bared the burden for many years, while lawsuits, profits,

oil spills, protests and loss of revenue have skyrocketed. Focusing on specific examples of

extractive industry companies acting in Colombia, Chile, and Peru, we will explore related

corporate social responsibility (CSR) programs that have stakeholders second guessing their

approaches. Depending on one’s perspective, CSR programs for these three countries have made

negative and positive impacts. Looking at environmental concerns, legal issues, economic

profits, and business gains, we will explore in depth how CSR programs in Colombia, Chile, and

Peru can benefit the communities, how they can work with the private sector and possibly U.S.

Southern Command, as well as why certain stakeholders may not be currently benefiting from

CSR programs in the extractive industry. In addition, we will explore these programs can reach

success to become effective in the future.

Keywords: CSR, communities, social responsibility

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What’s Good for the People is Good for the Company?

Analysis of the Effectiveness of Corporate Social Responsibility Programs in Latin America

Case Studies: Colombia, Chile, Peru

Corporate Social Responsibility (CSR) is a concept that assesses and accounts for the

impact a business organization’s activities have within its local and extended operating

environment, including environmental concerns and social welfare. One aspect focuses on the

company’s efforts to fulfill what regulators and other environmental protection groups require.

This is also referred as corporate citizenship and it entails short-term costs that are identified to

have minimal financial benefit for an organization. However, CSR promotes the positive social

and environmental development, and tends to define the positive voluntary activities introduced

by the company towards the initiation of an environment that is socially and environmentally

sustainable.

Many companies incorporate CSR practices in their operations, considering it as an

effective measure. When organizations operate responsibly, they have an effective role in the

promotion of a country’s values internationally, resulting in sustainable development of the

communities involved. By controlling diverse assets, companies tend to have a strong influence

on both the community and the country’s economy. While some companies may have billions of

dollars in cash in their custody, which are capitalized in socially conscious investments and

programs, other organizations have been noted to engage in a feigning interest of corporate

responsibility. However, many large organizations focus resources on the maintenance of a

stable environmental program and social welfare initiatives that benefit employees, customers

and the entire community. Although profit may be defined as the major objective in any

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business, it is important to note that responsible businesses usually attract many investors. The

attraction of CSR for an investor is its minimized risks, as well as its lack of vulnerabilities. For

this reason, companies have taken interest in the advancing approach of Corporate Social

Responsibility in their businesses. In this paper we will discuss the important role companies

provide to Colombia, Chile and Peru to work with and contribute to the community and the

environment (Hindle, 2008). These include Ecopetrol and OXY in Colombia, Minera Escondida

and BHP in Chile, as well as Antamina and Barrick Gold in Peru.

In Colombia, there has been an improvement in the mining industries, which includes

establishments that extract natural minerals of all types such as coal, crude petroleum and natural

gases. There has been much criticism on the impact these products have on the country’s

economy and environment. Based on the industrial practices of the 1980s and 1990s, which

generated great harm to the economy and environment, the government subsequently imposed

various restrictions on the Colombian mining sector. As a result of regulatory action, CSR

programs were developed and implemented to facilitate corporate compliance. The regulatory

pressure is expected to focus companies on generating a sufficient supply of clean energy that is

environmentally sustainable (Haslam, 2004).

Ecopetrol is the National Oil Company of Colombia and is ranked as the largest company

in Colombia. It is fully owned by the state and is the largest petroleum producing company in the

country. According to research, it is evident that a major part of Colombia’s commodities growth

is generated by Ecopetrol, with its $60 billion worth of investment in oil development. The

company is engaged in exploration, extraction, refining, transporting, and distribution of

hydrocarbons and its by-products. Ecopetrol has been noted to improve its corporate governance

with an aim of producing quality product and good service. To combat corruption, the company

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employs the elements of the national transparency index (ITN), and has been recognized by the

CorporaciónTransparencia, making Colombia one the 10 best countries in terms of sustainable

results. Ecopetrol’s CSR programs and other initiatives have resulted in increased employment

rates in the communities and have greatly improved living conditions.

Occidental Petroleum Corporation (OXY), based in California, is one of the world’s

largest independent oil firms. OXY’s discovery and exploitation of oil fields in Colombia has

provided immense profit for the company and significantly funded the Colombian government.

OXY has extensive assets and operations in Colombia, including more than 100 oil producing

wells, making its activities in Colombia a critical element of the company’s global strategic plans

and operations. Through its adherence to CSR concepts and programs, OXY claims to have its

efforts aimed towards the provision of safe and healthy workplaces. They also focus on

protecting the environment, developing a positive economic impact on communities, and

adhering to the cultural norms and values of affected communities. This is successful through the

recognition of fundamentality of CSR in the company’s success (Ecopetrol, 2008).

Chile, being the leading producer of copper has expanded its activities to the mining

industry. This is a country that has low political risks in addition to advanced domestic exports

focusing on infrastructure and an ample supply of energy. However, in the past there have been

tragedies that have caused this country to experience both international and local attention, which

have turned out to be unsuccessful, and thus carried a negative image to the mining sector. In the

case of Minera Escondida and BHP, it is not clear why the country would want to sign into a

joint venture contract with several companies. The Chilean government had waited for more than

ten years until it began to reap significant tax income from the mining industry’s operations.

However, the situation was sustainable due to the absence of local communities that could have

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been inconvenienced by the mining actions of Escondida. While the community has been the

emphasis of Escondida’s CSR objectives, the environment is just as important to Escondida. The

communities have been faced with threats related to surface water and ground water shortage,

and in 2015, new freshwater projects will offer a safe and sustainable water supply, reducing the

dependence of the region’s aquifers, which contain water used to supply wells.

Barrick Gold is a Canadian gold mining company that established itself in Peru, but in

the process, has done great harm to the Peruvian people. For this reason, the Peruvian

governments have opted not to trust any other foreign company. Barrick Gold is the biggest gold

mining country in the world; it has made major profits in its operations but has left major losses

in sustaining a stable environment. These losses include such things as toxic spills, use of

cyanide and the resulting pollution and health risks to the people working or living around

mining sites. A report by Consalata missionaries, who questioned those existing in the mining

region, casts doubts on Barrick Gold’s claimed CSR practices. Canada has located itself

decisively in Peru. In accordance to Foreign Affairs, the Canada-Peru Free Trade

Agreement offers stability and transparency by allowing Canada and Peru to share

information, as well as allowing both parties see what investment transactions actions are being

performed. While the FTA is destined to remove any upcoming Peruvian administration’s ability

to alter mining guidelines of Canadian corporations, Canada appears to have located itself firmly

in Peru (Blowfield & Frynas, 2005).

CASE STUDY 1: Colombia

The current growth of Colombia’s mining industry, which following the definition of the

North American Industry Classification System includes establishments that engage in extracting

natural minerals of all kinds, such as solid minerals including coal and ores and liquid minerals

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such as crude petroleum along with natural gas (Industries at a Glance, 2014). The usage of these

natural minerals has generated debate as to the impact of the mining industry on the country’s

economy, environment, and communities (Reyes, 2012). Haunted by the malpractices of big oil

companies in the 1980s and 1990s that had harmed the environment and communities (Utting &

Ives, 2006); an immense pressure is unsurprisingly placed now on Colombia’s mining sector

with regards to its corporate social responsibility (CSR) to improve its sustainable development

(Reyes, 2012). Current pressure will not only be about the sufficient supply of energy, but it will

also be about clean energy that is environmentally sustainable (Pemberthy, 2012).

Confronted with diverse issues so common in a developing nation, just like Colombia,

CSR in this country is more easily criticized than appreciated. One factor Paul Haslam, a

researcher (2004) cited is the low involvement of the private sector in carving Colombia’s CSR

policies. In addition, researchers Blowfield and Frynas (2005) have observed, most CSR cases

show that stakeholder dialogue and engagement is key to the success of CSR. For example, in

May of 2012 the community of Tame in The Arauca set an agreement with Ecopetrol and OXY

and their subsidiaries to work with the Tame community (Notiangen, 2012). Added to this,

Haslam (2004) further argues the weak involvement of the Colombian government in the

promotion of CSR is failing at integrating CSR policies into government policy as a whole. This

perhaps could explain the conflict between corporations and communities. For example, the

adoption of several corporations for sustainable CSR, whose impact could not be immediately

felt, was not appreciated by communities which due to deep level of poverty would

understandably prefer short-term, yet easily felt benefits such as direct economic benefits or

positions. (Baena, 2009/10)

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Whether CSR is good for business or good for the people or good for both, remains

debatable until today. Focusing on the CSR of the two main oil companies in Colombia,

Ecopetrol S.A. and OXY (Occidental Petroleum Corporation) argue that CSR is good for the

company and likewise for the people. As many corporations have argued, “… there is a solid

business case for CSR, which is associated with ‘win-win’ strategies; doing good

environmentally and socially and can simultaneously improve a company’s competitive

advantage, reduce costs, enhance staff morale and reduce staff turnover” (Uttin & Ives, 2006, p.

15).

Formerly known as the National Oil Company (NOC), not only is Ecopetrol S.A. the

largest company in Colombia which is 100% state owned, but it is also the country’s main

petroleum company (Ecopetrol, 2008). In fact according to Silberwasser and Gomez of the

Compass Group, a major part of Colombia’s commodities growth is Ecopetrol with its $60

billion worth of investment in oil development (Greenberg, 2008, p. 1). Other than this,

Ecopetrol is also among the four main petroleum companies in Latin America and among the 35

largest world’s petroleum companies (Ecopetrol, 2008). Fully engaged on exploring, exploiting,

refining, transporting and distributing hydrocarbons and its by-products, (Ecopetrol S.A., 2014)

Ecopetrol with its oil producing fields widely spread and its transportation network of pipelines

(SEE APPENDIX A and B for maps of oil pipelines) and poly-ducts installed throughout

Colombia (Ecopetrol, 2008), Ecopetrol has undeniably impacted the lives and conditions of the

communities (Benavides, 2012), hence the need for the company to demonstrate to the

communities that the company is good for them.

Aside from its massive commercial activity in Colombia, Baena’s (2009/2010) study on

CSR in Colombia reveals that Ecopetrol has had a strong CSR principal focus on five areas, such

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as education, infrastructure (i.e., roads, aqueducts, sewer systems and rural electrification),

productive projects for economic development, institutional and communitarian reinforcement,

and environmental preservation. In the conduct of its CSR, Ecopetrol has made efforts, such as

attending community inquiries and putting-up citizen participation offices in areas of its

operation, purposely to directly communicate and engage with community in order to have a

better grasp of their needs. Other means of direct communication with stakeholders also include

periodic publications, the Web page, and reports to outside bodies (Ecopetrol: SCR Report,

2006). To carry out its socio-economic development programs, Ecopetrol also founded and

administered a number of oil-related foundations, such as Ecopetrol Foundation for the

Development of Catatumbo Region (FUNDESCAT), Ecopetrol Foundation for the Development

of Middle Magdalena Region (FUNDESMAG), High Magdalena Region Foundation (FAM),

and Pipelines of Colombia Foundation (ODC) (Baena’s (2009/2010, p.6)

Cognizant of the importance of quality education for the long-term development of the

developing nation of Colombia, Baena’s (2009/2010) study has further revealed that central to

Ecopetrol’s CSR is the encouragement of academic excellence among Colombian communities,

hence its program of Scholars for Colombia since 1986. Under this program, Ecopetrol has

sponsored selected students to higher education at home and abroad, has donated computers to

public schools, and has helped build public libraries complete with reading materials. Ecopetrol

has also committed to help improve the labor skills of Colombians and to help provide

employment in the region, hence its training program for certified skilled electricians,

mechanics, and welders. Ecopetrol has also engaged itself in the issue of adequate housing

through its program of Solidarity Ecopetrol. Under this program, employees are encouraged to

volunteer in building houses for Colombia’s poorest urban communities. Having learned from its

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painful experience in opposition to the workers some years ago, Ecopetrol, together with the

Unión Sindical Obrera (Worker’s Union), worked together in the establishment of a National

Commission on Human Rights and Peace with corresponding regional sub-committees,

purposely to foster and to push for peaceful coexistence and conflict resolution (Ecopetrol: SCR

Report, 2006).

Ecopetrol’s CSR initiatives, Baena (2009/2010) notes, have undeniably raised

employment rates in recipient communities and have greatly improved their conditions of living.

However, knowing that such improvements could potentially result to people’s rural to urban

migration that may in the future jeopardize community development, it is noteworthy that

Ecopetrol’s education program is being developed within the framework of “educating the

communities for the benefit of the communities” (Ecopetrol: SCR Report, 2006). Furthermore,

workers have been trained towards conflict resolution hence the attainment of a better

management-worker relationship and a relatively peaceful working environment (Ecopetrol:

SCR Report, 2006).

Discussing the function of the company, these initiatives, particularly the encouragement

of citizen participation, have also provided Ecopetrol valuable information regarding the fears,

interests, perceptions, and issues of communities regarding the company. For example,“Interest

was expressed in issues such as the quality of gasoline, the products the company sells, the

mechanism established by Ecopetrol for co-financing social investment projects, and the

payment of royalties to Departments and municipalities up until 2004…” (Ecopetrol: SCR

Report, 2006, p.1). This enables Ecopetrol to deal more effectively with its stakeholders

(consumers, communities, investors, government) thereby strengthening its economic and

political positioning in the country.

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Occidental Petroleum Corporation OXY is one of the world’s ‘independent’ oil firms.

Based in California, OXY operates in three core regions: the United States, Middle East/North

Africa, and Latin America with more or less 11,000 employees worldwide (OXY, 2010). Since

its discovery of more than 700 million barrels of oil in Peru in 1971, it is also among the top oil

firms in Latin America, as well as the leading transnational oil company in the Andean region. In

1983, it discovered the Caño Limón oilfield in the Department of Arauca in the northeastern part

of Colombia. This suddenly made the oil-importing nation of Colombia become an oil-importing

nation. (United Nations, 2003) Besides, this oil field has provided OXY hundreds of millions of

dollars of profit, has significantly funded the Colombian government, and has drawn substantial

US military aid to Arauca (Occidental Petroleum in Colombia, 2008). As an example, when plan

Colombia started in the beginning of the year 2000, a part of the project was dedicated to fight

against guerrillas and paramilitary. The United States provided equipment and training to the

Colombian military as a result, from 2001 to 2004, attacks on oil pipe lines and oil refineries

significantly decreased (CSR Report for Congress 2005). OXY has a massive production plant in

Colombia with more than 100 oil producing wells making the country a strategic part of OXY’s

global production and operation (United Nations, 2003).

However, OXY’s earlier operation in Colombia was met with great resistance, more

prominently by the U’wa people and was marred with grim cases of human rights violations,

environmental degradation and total disregard of indigenous people’s ancestral domain

(Goldman, López, & Ramos, 2007). Its hostile relationship with the community has made it a

favorite target of guerilla attacks (Izquierdo, 2001). From 1989 to 2000, its Caño Limón pipeline

in Arauca has been struck for more than 473 times hurting OXY and the ecosystem with 1.5

million barrels of crude oil spilled into the forest and rivers – far greater than the 36,000 barrels

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oil that Exxon Valdez spilled (Leech, 2000). In the past few years, following the incessant

concern and commitment in CSR policies of Colombia’s public and private sectors, OXY has

implemented well-developed CSR programs in Colombia, along with several oil and gas

companies (Baena, 2009/2010).

Today, OXY proudly claims that all its efforts are geared towards the provision of a safe

and healthy workplace, the protection of the environment, the creation of a positive economic

impact on communities, and respect and adherence to the cultural norms and values of

communities anywhere it operates. It clearly recognizes the importance of CSR in the success of

the company. It prides itself on the company’s culture of highest standards of and personal

accountability in work. Knowing the vitality of building a harmonious relationship with its

stakeholders, OXY commits to building trust with all its stakeholders – stockholders and

investors, neighbors and local communities, host governments, civil society organizations and

educational institutions, contractors and suppliers, employees, and industry partners. OXY’s

local business management ensures that the company’s CSR is congruent to the needs of

corresponding local communities. For example, El Alcaravan foundation, founded by OXY and

Ecopetrol, helps the local communities by creating educational programs, such as Learning for

Life, that helps the illiterate community nearby in the Arauca region (OXY, 2012).

OXY’s efforts to be a responsible oil firm in Colombia is, in fact, being recognized, as it

was recommended by the US Embassy in Bogotá for the Secretary of State’s Award for

Corporate Excellence (Lefer, 2009). Though it did not win the award, and though its nomination

is being criticized, one thing cannot be denied – that OXY despite the difficulty of operating in

the conflict-ridden and poverty stricken nation of Colombia has accepted and performed its CSR

practices to the best of its ability. In fact, even the National Jesuits Committee on Investment

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Responsibility (2011) has noted that “By 2010, it was evident… the Company was fulfilling its

objectives of being an industry leader with respect to human rights… Oxy places its corporate

reputation as an explicit value to protect and is steadily improving its reporting to stakeholders.

(p.9) The Committee furthers that OXY’s CSR did not simply enable it to achieve advantageous

social goals but even a significant return on investment.

Both companies studied have illustrated a ‘triple bottom line’ CSR. This model is also

known as 3Ps in reference to the company’s profit and loss account, people’s account, and planet

account (Hindle, 2008). Although they have gone through a different route, both nonetheless

recognized that a company’s success rests on the combined 3Ps. Following this CSR framework,

both have proven that CSR is impacting societies in various ways: (1) the socio-economic

programs have capacitated communities to improve their living conditions, (2) the responsible

corporate governance has increased productivity and thus the higher ROI which in the end also

improves the economy of the country, (3) the engagement of oil companies with their

stakeholders has resulted to clearer expectations from both sides, has educated both sides, has

further improved the concept and implementations of CSR which, in some ways, has help

mitigate conflict. Having impacted positively on communities, having been recognized by award

giving bodies, and having been able to operate continuously, it can be assumed that their

programs have been effective, although these may not be sufficient to address the structural root

of Colombia’s poverty. Furthermore, the experience of OXY has proven that having a social

license from the community is far more important that having a battalion of army for companies

to operate safely. As illustrated in the study, community engagement and participation which

allows the coordination of the company’s programs will pave the way for the community to

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accept and appreciate the program as well as better understand the need of the community to be

able to implement programs that truly are relevant to the community’s needs.

Indeed, what is good for the company is good for the people, because if this is not the

case, as illustrated by OXY’s earlier practice in Arauca, the company will never succeed.

Therefore, companies should be socially responsible and profit should not be their sole interest.

Rather, companies should understand that their success lies on being relevant, which means

being able to positively impact on the development and progress of communities and societies,

and on achieving sustainability. These can only be achieved by truly committing themselves to

CSR. Hence, what is good for the company is good for the people, if the company follows the

triple bottom line principle.

CASE STUDY 2: Chile

Chile produces 35% of the world’s copper (IDB, 2012). It has a production share in the

world production market that averages to almost 40% in the last 12 years (SEE INDEX 1, 2, 3)

(IDB, 2012). This has opened up an exceptional opportunity for the country to engage in the

mining industry and to attract investment from businesses in domestic and foreign mining (IDB,

2012). Chile is not only a leading producer due to its mineral wealth but it is an attractive and

competitive place for mining. Chile has a low political risk as well as good domestic and export-

oriented infrastructure with a reliable energy supply (IDB, 2012). The mining industry affects the

environment, the community as well as health and safety. Recent tragedies in Chile have turned

the public’s attention to mitigating risks and disasters that occur in the mining industry bringing

a negative image to the mining industry. While Chile has several mines, one mining company in

particular has actually benefited the community while also transforming the meaning of what it

takes to be a good corporate citizen.

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Minera Escondida, located in the Atacama Desert of Chile producers copper concentrate

and copper cathodes (SEE APPENDIX C for location of copper mine). This mine is the world’s

largest copper producer (BHP Billiton, 2014). Minera Escondida, according to the U.S.

Geological Survey’s estimates of 2007, has 1.483 million tons of metal worth U.S. $10.12

billion, mainly as metal in concentrate, creating 26% of Chilean Production (BHP Billiton,

2014). The mine itself is owned 57.5% by BHP Billiton, 30% by Rio Tinto and 10% by JECO,

and 2.5% by JECO 2 (BHP Billiton, 2014). In 2006, Escondida was the largest foreign

investment in Chile, with a cumulative investment of U.S. $5.64 billion (Mine Site, 2013).

Escondida employs more than 2,300 people directly and creates another 1,900 permanent jobs

through contractors (Mine Site, 2013).

After successive phases of expansion, total investment in Escondida approaches. The

mine plays a significant role in Chile's economy with 2.6% of Chile's gross domestic product

(Mine Site, 2013). It is one of the ten largest companies in the country (Mine Site, 2013). Minera

Escondida has been an attractive private investment as nationalization occurred in the 1970s.

Enacted in 1974, under the DL600 law, foreign companies that invest more than $50 million are

given the opportunity to opt-in a tax at the time of the investment and regulatory framework,

where the initial tax cannot be changed for 20 years (Natural Resource Charter, 2011). While

Minera Escondida desired to minimize political risks, they created an ad-hoc conglomerate with

BHP Billiton, Rio Tinto, and JECO Corporation, this also included International Finance

Corporation (IFC) to guarantee stability (Natural Resource Charter, 2011). This joint venture was

desirable for the government as it decreased the risk for individual partners, by allowing smaller

companies technological capacity to participate in this mining project and increasing

coordination costs between investors, which allows governments to lower tax avoidance (Natural

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Resource Charter, 2011). While BHP Billiton was a senior partner, there were no increases in

coordination costs for the owners, as a government would want, and due to this, multiple

investors of equal size would have tax avoidance measures that were more difficult to operate

(Natural Resource Charter, 2011).

In the case of Escondida, it is not clear for the country to have had this conglomerate. The

Chilean government waited for more than a decade until it started to receive substantial tax

income from the operations. However, the situation was sustainable due to the absence of local

communities that could have been distressed by the operations of Escondida, and by saving

distant communities that resented the use of scarce water by the mining operation (Natural

Resource Charter, 2011). While Chile was in dire need of foreign capital, these advantageous

investment conditions became less accepted as the country became more stable (Natural

Resource Charter, 2011). Since the 1990s the FIC (Foreign Investment Committee) has played a

key role in Chile’s sustained growth. While the committee has no legal capability it can promote

and support corporate practices that embolden an ethical approach to business management in

Chile (Natural Resource Charter, 2011). In addition, Escondida’s investment regulation under the

DL 600 had been in place for more than 14 years, this made investors more confident with long

term sustainability due to their legal framework (Natural Resource Charter, 2011).

One of the most important aspects of the FIC and companies under the DL 600 law are to

promote social responsibility (Natural Resource Charter, 2011). While attracting foreign

investment at the same time, Chile’s Minera Escondida had begun to publish sustainability and

social responsibility reports (Dufey, 2008). These reports along with financial information are

submitted annually to the FIC regarding their business results and FDI in Chile (Dufey, 2008).

Having this public access to information has helped create a tool of CSR for Minera Escondida

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and BHP Billiton (Dufey, 2008). This also aided the FIC in highlighting the importance of CSR

in foreign investment. While achieving sustained improvement in corporate management, this

also helped the company to transition from policies to practice in order to improve the current

management systems. The sustained improvement in corporate management has reached new

levels for Chile, who came a long way from the 1990s where they only talked about CSR. In

2006, the FIC began to incorporate CSR policy into Chile’s strategic objectives (Dufey, 2008).

Under article 12 of the DL 600, the FIC is the only entity authorized on behalf of the Chilean

state to accept the inflow of foreign capital from abroad under this decree and to stipulate the

terms and conditions of the respective contracts (Dufey, 2008). This committee represents the

state of Chile in its dealings with investors who opt to use Chile’s Foreign Investment statute

(DL 600). Under this article, Chile can accept contracts that they believe are good for business

and the community’s best interest while eliminating others that aren’t. According to Article 1,

“the regulations of this statute apply both to foreign individuals and body corporates and to

Chilean individual residents and those domiciled abroad who transfer foreign capital into Chile

and enter into a foreign investment contract”(Dufey, 2008). Article 1 is significant because it

ensures that Chilean government will stipulate the terms and conditions which all parties must

abide to in the foreign investment contract.

Following a reliable framework under the FIC and the DL 600, Minera Escondida

initiated and implemented their CSR (corporate social responsibility) program by actively

working with public and private institutions and community organizations, directing its

contributions to several cultural, educational and social initiatives that are geared towards

improving the quality of life of the inhabitants of the Antofagasta region (Mine Site, 2013). In

1996, the company created the Minera Escondida Foundation (Mine Site, 2013). The Foundation

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maintains permanent cooperative relationships with indigenous people, especially with the

Atacamenian communities, through an office in the San Pedro de Atacama community, where

the work is mainly focused on educational issues (Mine Site, 2013). Also, Minera Escondida

created the Centro de Entrenamiento Industrial y Minero (CEIM) (Industrial and Mining

Training Centre), the objective of which is to structure and develop the labor skills of mining

industry workers, as well as workers from other productive sectors. (Mine Site, 2013). Minera

Escondida differs from other mining projects in the sense that it focuses first on the impact of

neighboring communities.

The mine itself is located in a semi-arid region with no permanent settlement within 120

kilometers (SEE APPENDIX D for photo of open mining pit) (IFC, 2000). While the staff lives

in and around the city of Antofagasta, the region has less poverty and better employment

opportunities although it presents a strong dependence on mining (IFC, 2000). The company

tries to supplement services that the government cannot finance in the region, particularly in

education and health (IFC, 2000). What sets Minera Escondida apart from other mining

operations is that it approaches community development by targeting local residents with limited

resources (IFC, 2000). The company benefits the inhabitants of the region by providing

employment as well as large mining-related activities (IFC, 2000).

Dating back to 1989, Minera Escondida had begun working with the Antofagasta

community to support events and activities that the community identified as needs (IFC, 2000).

Minera Escondida’s Foundation established in 1996 expressed its motto “sustainable mining

through health, education, and quality of life” (IFC, 2000). Assessing Minera Escondida’s

corporate social responsibility programs in Antofagasta we look to the Fundacion Minera

Escondida. The collaborative efforts of the programs Competitive Fund and MEL Workers has

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shown data that, since 2003, has managed to demonstrate an effective community involvement

among workers and social organizations (FME, 2014). This program aims to strengthen the

relationship between company employees and civil society, while the main objectives are to

promote and strengthen the work of the employees of Minera Escondida and its partners, at all

levels of the company (FME, 2014). FME has also a Safety Training at Home program. This

entails delivering training information, giving guidance and providing materials to support

accident prevention (FME, 2014).

In addition, there are eight institutions that make up this network, including a corporation

to help burned children (COANIQUEM), a National Emergency Office (ONEMI), Red Cross,

National Cancer Corporation (COGNAC), Mutual Security, Social Security Institute (IPS), Fire

Department and the Association of people living with HIV (FME, 2014). In addition, The Soccer

+ program, started in 2009, aims to promote spirit and strength in children and adolescents

between seven and 14 years, whom are residents of populations with high rates of social

vulnerability to the community by conducting social workshops in soccer (FME, 2014).

Currently, this is run on thirteen sectors, including seven under the support of this institution and

the other six by the Municipality of Antofagasta (FME, 2014). These several programs have

helped aid the needs of the people in the community while also building a relationship with

stakeholders allowing project sustainability and positive networking (BHP, 2013). In addition,

the foundation has provided more than US $20 million since its creation in 1996 (FME, 2014).

This has helped set a benchmark for the selection of suppliers and contractors whom are

motivated to mitigate risks by creating values for stakeholders, communities and clients (Blanco,

2003). While participating as leading actor rather than spectator, Minera Escondida’s

stakeholders have focused their interests through corporate governance, taking into account the

20

triple bottom line, satisfying the needs of the people, planet, and profit (Busacca, 2013). This

innovative foundation will increase competitive advantage by creating a shared vision between

stakeholders and increasing the impact the company has on its concerns for society (Busacca,

2013).

The Minera Escondida Foundation works to improve the quality of education in the

Antofagasta Region through strengthening skills, with special emphasis on early childhood

education, which has been one of its strategic objectives(FME, 2014). By promoting quality

education, and encouraging greater involvement of the school community, it has deepened its

alliances with local and regional stakeholders to consolidate work that reflects the views of

different actors expanding educational improvement for the Antofagasta region (FME, 2014).

The Future Children Today Programme Escondida offers is a partnership between FME, the

University of Western Sydney in Australia, Junji, Integra Foundation and the Ministry of

Education, which aims to build an aptitude community and provides educational leadership

through the integration of community families and early childhood centers in the Antofagasta

region (FME, 2014). The program currently includes 20 early childhood "kindergartens" in the

communes of Antofagasta, Calama and Tocopilla, 15 more than at its inception in 2008, while

focusing its efforts on enhancing leadership (FME, 2014). These education programs have

impacted the community generating a positive response as Minera Escondida continues to strive

towards efficient and valuable programs for the people of Antofagasta.

While Escondida has done much to improve the community, the needs of everyone may

not always be met. In 2013, according to BBC, 2,500 workers at the Escondida mine were asking

for better pay, an annual bonus and improved working conditions (BBC, 2013). BHP Billiton,

which controls the mine, had not yet responded to their demands, according to union leader,

21

Marcelo Tapia (BBC, 2013). The last time workers at the Escondida mine went on strike was in

2006, where the standoff continued for almost a month (BBC, 2013). This had a large impact on

BHP's production numbers, reporting a 19% drop in copper output during the third quarter of

2006 (BBC, 2013). The strike was expected to cause a production loss of as much as 3,000 tons a

day, according to some estimates (BBC, 2013).

An agreement based on BHP's latest offer, which included a wage increase of 4

percentage points above inflation and a 9,5-million peso ($17 633) bonus for each worker was

offered (BBC, 2013). In addition, in the fourth year of a 48-month contract, workers would get

an additional increase of 1,3 percentage points above inflation and an increased bonus. BHP

declined to provide specific details about the union's new deal (BBC, 2013). However, Chilean

laws allowed the company to replace striking workers, which weakened the impact of the

movement, union spokesman Marin said (BBC, 2013). August 25th, BHP stated that it hired 50

replacement workers to help boost production during the strike (BBC, 2013). Although BHP has

offered some concessions to Escondida’s permanent workforce, the union (Sindicato Escondida)

said they do not adequately address the imbalance between corporate revenue and workers’ take-

home pay (BBC, 2013).

This strike does not provide a positive social license for the Antofagasta community, nor

does it help build relations with BHP. However, a company as large as BHP needs to be

reasonable. The cost of the mining business can be high, as proven by the devastating occurrence

of the mining accident in 2006 at the Carola-Agustina mine in Chile (ESMAS, 2006). During

this incident, 70 workers were trapped, which led to two deaths (ESMAS, 2006). The large

exposure of the Carola-Agustina mining incident instantly brought to light the need for CSR

programs by shifting the focus to the needs of the community. Since this incident, companies

22

such as Minera Escondida and BHP need to be cautious in their corporate social responsibility

initiatives, but there are certain limitations a company has that would help explain the strike. For

example, the money received by the subcontractor does not equal the total of salaries that pay its

laborers; it must also cover the expenses of the subcontracting business, such as a chain of small

subcontractors and their workers (Cademartori, 2002).

Even where the work is specialized, the increased revenue stays in the hands of the

subcontractor management, leaving the workers little influence to negotiate for higher pay

Cademartori, 2002). There are indications that hourly wages of subcontracted laborers are lower

(Cademartori, 2002). Subcontracted laborers are also supervised by the enterprises that use their

services and this leads to uncertainty as to the assumption of a lack of social responsibility

towards workers (Cademartori, 2002). Permanent workers receive many benefits, such as

assistance in buying a home, collective medical insurance, as well as study grants for workers’

children (Cademartori, 2002). This illustrates that the workers who went on strike cannot be

offered more pay because they receive so many benefits. Even though Escondida is making a lot

of money they are also spending a lot of money. Although Escondida is not perfect, the good

outweighs the bad.

Minera Escondida and BHP represent CSR at all levels of the company, and under the

DL 600 law, CSR is a main objective in the foreign investments of both companies. While

building a profound reputation and creating sustainability, Minera Escondida and BHP are

corporate social responsible citizens to the Antofagasta mining region of Chile. Based on the

research presented up to this point it is safe to say that Minera Escondida meets the triple bottom

line, which means that profit, planet, and the people are all taken into account (Economist, 2009).

Minera Escondida satisfies the needs of the stakeholders with a 65% increase in the net operating

23

cash flow and a 25% reduction in cash outflows from investing activities that lead to a US S7.8

billion increase in free cash flow (BHP, 2013).

There are three environmental projects underway in 2014 that are primarily concerned

with Escondida’s leach supply, organic growth, and water supply. Although the community has

been the focus of Escondida’s CSR practice, the environment is just as important for Escondida’s

operations. The communities are faced with risks related to surface water and ground water

scarcity, and these new projects will provide a secure and sustainable water supply, minimizing

the reliance of the region’s aquifers (BHP, 2013). Lastly, the community and the workers benefit

each year while Minera Escondida and BHP Billiton provide a community based approach

through multiple programs and social organizations that are committed to providing a quality life

for the people in Antofagasta. This is an example of a company who is consistent with their

initiative to build trust and value between the communities, stakeholders, and the company itself

by mitigating risks in their zero harm operations (Blanco, 2003).

CASE STUDY 3: Peru

Mining has shaped Peru beginning in the mid-16th , when by the Spanish conquerors first

arrived, then in the 19th century by the British and Americans (Crabtree, 2002), making Peru the

7th largest world producers of precious minerals (SEE APPENDIX E for map of oil fills and gas

pipelines) (PricewaterCoopers, 2013 p. 4) and the 2nd largest mineral producer in Latin America

(Borregaard & Dufey, 2002, p. 4). Globally, Peru ranks first in silver; third in zinc, bismuth, tin,

and copper; fourth in lead, arsenic trioxide, molybdenum, and rhenium; and fifth in gold. Within

Latin America, Peru ranks first in the production of gold, silver, zinc, lead, tin, and tellurium;

then ranks second in the production of copper, molybdenum, and bismuth. (Gurmendi, 2009, p.

24

15.1) By 2014-2015, 49% of Peru’s FDI is seen to concentrate on mining (Rudarakanchana,

2014).

Peru’s economy historically depends greatly on its very rich and mega-diverse natural

resource base (Póveda, 2007a). The most significant is its mining industry, having

contributed1% to its GDP, having employed 5% of the industrial sector, and having consistently

generated the biggest foreign exchange revenues (61.8% of Peru’s $23.8 billion total export

revenues) in 2006 (Gurmendi, 2009, pp. 15.1, 15.3). However, mining has also become a

constant source of social turmoil in the country, due to the absence of a sensible legal framework

that would compel CSR (Póveda, 2007b).

CSR of mining companies in Peru started only in late 1990s, with the intention of

pacifying Peruvian protests against mining and the general world-wide criticism of the cost and

benefits of mining. Hence, CSR is a corporate response to challenges arising from the

relationship between the industry and society, specifically between common good and private

interest. (Lemieux, 2009) For mining companies, CSR is achieving the balance between

community needs, environment protection, and profitability (Jenkins 2004, as cited in Jenkins &

Yakovleva, 2006).

The CSR principle that ‘what is good for the company is good for the people’ sounds

logical, believing that sustainable development is beneficial to all. It is a win-win solution.

However, its correctness depends on a given social context. A very good case to ponder on is the

Antamina Mining Company (AMC) in Peru, not only because AMC is the biggest and most

socially responsible mining company in the country, but also because it operates in a country

characterized by wide socio-economic inequality.

AMC and CSR

25

The AMC that commenced operation in October 2002 (World Bank, 2010, p. 93) is an

open mining pit located 200 kilometers from Huaraz City, San Marcos district, Huari province,

Ancash region ( SEE APPENDIX F for photo of AMC’s open mining pit) (Antamina, 2012, p.

12). The Antamina deposit is situated in the Callejon de Conchucos, lying between the two

cordilleras – the Blanca and the Huayhuash. It has a principal deposit of 4,300 meters above sea

level, estimated in August 1998 at proven reserves of 500 million tonnes. (Pascó-Font, Hurtado,

Damonte & Salas, 2001, p. 177) With the largest mining investment in Peru, AMC has five

operating units to extract and trade copper and zinc concentrates: 1) the mine, located in the

Antamina Ravine, has an estimated life until 2029 and a total reserves of 745 million metric tons;

2) the tailings dam, located in the Huincush Ravine at 4,075 meters above sea level has a storage

capacity up to 550 million tons tailings; (3) the Yanacancha camp, which houses the concentrator

with the highest level of automation all over the world; 4) the 302-kilometer long slurry pipeline,

which facilitates the loading and export of ores to the Huarmey port; and 5) the Punta Lobitos

port, located in Huarmey, receives, filters, stores, and ship loads the transported slurry

concentrates for export. Among the world’s leading mines, the AMC markets mainly to China

(US$1,846,358,904), Germany (US$433,292,479), Japan (US$400,488,081), Chile

(US$376,877,465), Finland (US$38,778,117), and South Korea (US$230,608,573). (Antamina,

2012, p. 14) The AMC is a consortium of four global leading companies: BHP Billiton

(33.75%), Xstrata (33.75%), Teck Resources (22.50%), and Mitsubishi Corporation (10%)

incorporated and privatized in 1996 under the Peruvian laws, (Pascó-Font et al. 2001, p. 177;

Antamina, 2012, p. 12).

More importantly, the AMC is most committed to CSR, as recognized globally and

locally by the Business Monitor of Corporate Reputation (MERCO) in 2012 (Antamina, 2012, p.

26

23). It is among the active founding members of the Sustainable Development and Mining Group

(De Echave et al., 2009, as cited in Lemieux, 2009, p. 16). It was “the first company to enter into

voluntary contribution agreement with the Government” (World Bank, 2010), called the

Antamina Mining Fund (AMF) (APEC, 2011). Its reputed CSR is evident from construction to

operation and expansion.

During construction, the AMC initiated to relocate and compensate with new lands and

basic services for affected families. However, the lack of suitable relocation sites and land, plus

the affected families’ preference to reside in the valley’s urban centers stopped the relocation.

Instead, AMC agreed paying US$33,000 each of the 52 affected resident families. Upon the

commencement of its operation, AMC tried to gain the Peruvians’ trust and confidence in the

company by using different mechanisms, ultimately to promote community participation and

public consultancy, believing that Social License from the community is vital. The company also

developed a joint monitoring program which helped educate the people about their environment.

This significantly lessened the number of complaints and arguments, and also resolved related

issues (APEC, 2011, pp. CS4-2-CS4-3) .

Evidently, AMC’s CSR has benefitted Peru’s local communities and economy. Its

initiated Community Development Plan (CDP) meant to support community education,

economy, and culture, consequently obtaining the trust of the locals through its three platforms,

Association Ancash, the Community Relations Office, and the AMF, which have helped boost

tourism in the area by 25%, has created employment for 300 locals, has economically

empowered thereby improved the quality of life of women in nearby communities, and has

helped fund Peru’s education, health, nutrition and infrastructure. In 2007-2009, the

Demographic and Family Health Survey data showed significant improvements on the health

27

condition and practices of women and children in the Ancash region. At the end of 2009,

significant improvements in education were also noted, specifically measurably improved

communication skills of students in 300 schools, teaching skills training in 65 schools, a

distribution of an additional 35,752 desks, and maintenance work for 77 schools. The company

has also undertaken 74 social and productive project priorities by each provincial municipality,

following the National Public Investment System (pp. CS4-10-CS4-11).

Truly, AMC’s CSR greatly improved its image and socio-economic prominence.

However, the burden of financing these community development activities creates AMC’s

financial difficulties. Furthermore, mining remains under close watch locally and globally, both

by the media and NGOs. Similarly, power struggle over control of Peruvian’s natural resources

persists. (pp. CS4-11-CS4-12)

With only 13 years of operation, the AMC is still young, yet it was able to surpass

complex challenges and to achieve economic viability, becoming the leading local and global

mining company. What made this possible was AMC’s development of its institutional

capacities established within a broad CSR framework (Portocarrero, Sanborn, Castillo, &

Chavez, 2007).

Evidently, CSR is a good thing to AMC because it helped the company established its

economic viability and become one of the most reputable and leading mining. CSR is also good

for the people, because in the absence of sufficient government services, it has become an

effective tool in compelling AMC to address peoples’ needs and to become environmentally

responsible. In this sense, the CSR principle that ‘what is good for the company is good for the

people’ is true.

28

It should be noted however that despite AMC’s sterling CSR performances, the tension

between the AMC and the Peruvians continues in various forms, because the ugly truth remains

that while the AMC enjoys its profitability, its CSR activities have not freed Peruvians from dire

poverty. Contrarily, the presence of AMC constantly reminds Peruvians that the natural wealth

they should be enjoying is instead enjoyed by few economically powerful people that are not

even Peruvian. AMC’s sterling CSR performance may reduce but cannot resolve social unrest

and tension in Per, as its causes are structural in nature and cannot be simply addressed by CSR,

much less by a single mining company, such as AMC. Despite the AMC’s award winning CSR

performances, the social tensions between the AMC and the community will continue, and the

demands of affected communities and Peruvians will never be satisfied.

The extractive nature of mining is not simply depleting natural resources but is greatly

harming the environment, constantly creating problems affecting communities. While the AMC

may have been burdened by CSR demands, its economic gains from extracting valuable Peruvian

minerals is in fact so much more than what it returns to communities. While the AMC greatly

profited from the Peruvian wealth, and while displaced Peruvian communities have to be

contented with AMC’s CSR, the environmental hazards that inevitably go with mining will

unfortunately be borne by Peruvian communities. In this sense, the CSR principle that ‘what is

good for the company is good for the people’ is not true.

The principle that ‘what is good for the company is good for the people’ is true at certain

extent only as the AMC case illustrated. This principle becomes logically true, if the problem

being addressed by CSR is not structural in nature, and if the economic activity is not inherently

destructive. For example, the government truly addresses the problem of national and human

development. But if this is not the case, this principle becomes problematic because as the case

29

of AMC shows the burden of addressing poverty is passed on by the government on socially

responsible companies, such as AMC. On the other hand, while the CSR helped make AMC

successful, it did not help resolve the poverty of Peruvians which causes constant dissatisfaction

and continued demands. From another perspective, the AMC will always be under close watch

and will always be protested against despite its proven sterling CSR performance, due to the

harmful nature of mining activities. In short, CSR in mining is not always a win-win solution.

While the above case highlights the aforementioned company Antemina and its

wonderful CSR practices, another company in Peru has not had such success. Displaying the

dark side to foreign companies, we will look at the case of Barrick Gold showing the other side

of Peru’s story when good turns bad. Barrick Gold, a Canadian mining company, has done more

harm for the communities in Peru that make any Peruvian not want to trust another foreign

company again.

Barrick Gold is the largest gold mining company in the world, with its headquarters in

Toronto, Ontario, Canada (Barrick, 2014). Established in 1983, this company has accumulated

wealth in many places of the world by doing business in Canada, the U.S., Peru, and Tanzania

just to name a few countries (Barrick 2014). While acquiring billions, this company may have

been successful in profit, however, they have suffered in environmental sustainability. Barrick

Gold has been accused of a number of environmentally unsound practices by environmental

groups such as contributing to toxic spills, using cyanide, mercury, and poisoning populations

creating a horrible social license with communities (Hageen, 2013). In 2009, the company was

excluded from the Government Pension Fund of Norway, one of the world’s largest sovereign

wealth funds following accusations connected with the Porgera Gold Mine in Papua New Guinea

30

(Ministry of Finance, 2009). When under investigation, the Council had stated, “an unacceptable

risk of contribution to ongoing and future environmental damage” (Ministry of Finance, 2009).

In relation to local populations, indigenous leaders described the adverse effects of

Barrick Gold (Saunders & Lowrey, 2008). While these leaders spoke of Barrick’s tactics, they

mentioned suppressed dissident voices, dividing communities, and manipulating local and

national politics (Saunders and Lowrey, 2008).

Barrick’s gold rush extended to Peru, causing an uproar for the country. Peru is the

world’s sixth gold producing nation (Rolandi, 2012). In 2011, 164 tons of gold was extracted in

the Andean region, accounting for 6% of the world’s gold production (Rolandi, 2012). As

reported by the Consalata missionaries who interviewed those living in the region, “When there

is an open gold mine, destruction is everywhere, instead of trees there is desert, instead of a river

there is water poisoned with mercury and fuel; instead of a community there is a brutalization of

society ” (Rolandi, 2012). This alone would make anyone skeptical of Barrick Gold’s CSR

practices. 40% of conflicts involving the local communities are regarding mining (Engler, 2011).

In 2005, Barrick headlined a Canadian newspaper, which reported a violent conflict that left two

protestors dead (Engler, 2011). In addition, a year after Reuters reported, thousands of protestors

were angry at a court decision to waive a $141 million tax payment levied on Barrick Gold

(Engler, 2011). Canada has positioned itself firmly in Peru.

According to Foreign Affairs, the Canada-Peru FTA (free trade agreement) locks in

market access for Canadian investors in Peru providing stability and transparency for their

investments (Engler, 2011). While the FTA is designed to remove any future Peruvian

government’s ability to change mining regulations of Canadian companies, Canada seems to

have imperialized Peru.

31

The Pierina mine is located in the Andean Cordillera in the northern-central of Peru,

approximately ten kilometers northwest of the city of Huaraz (SEE APPENDIX G for location of

Pierina mine in relation to city) (Barrick, 2014). The Pierina mine is an open-pit and truck and

loader operation producing 97,000 ounces of gold in 2013 at a sustaining cost of $1,349 per

ounce (Barrick, 2014). As of August 2013, the Pierina mine has begun closure activities but at

this point the damage had been done as the Pierina mine has been opened since 1998 (Barrick,

2014).

The Huascaran Mountains, the highest mountains in Peru located in Huaraz, provide the

Marinayoc community, an indigenous population, a place to live with water and food (Saunders,

2013). This makes the community a close neighbor of Barrick Gold’s Pierina mine, which is

situated ten kilometers away from the city (Saunders, 2013). The issue at hand is the water cycle

for the Marinayoc community which has been disrupted by the mine. Barrick Gold

acknowledged this and offered to treat the water in a purification plant before it was released

from the mine to the community, but the community does not want to use water that comes from

the mine, even if it is treated and certified (Saunders, 2013). The community stated, “If we

accept the company’s proposal, who will treat the water after the gold is exhausted and Barrick is

gone” (Saunders, 2013). The community proposed that fresh water be pumped from the rivers

and streams of the neighboring mountain valley, the Cordillera Blanca, so that they could avoid

dependence on Barrick for water (Saunders, 2013).

To combat this issue, about 100 protestors from the Marinayoc community gathered at

the Pierina gold mine in Huaraz (Claps, 2013). The community demanded that the Toronto-based

company fulfill its promise to bring fresh water into the community due to the massive open pit

that contaminated their water sources (Claps, 2013). This protest resulted in the death of

32

Nemesio Poma Rosales, a local citizen, and left four others wounded after the police opened fire

(Claps, 2013). A day after, the Human Rights Watch issued a letter to the current President of

Peru, Ollanta Humala, expressing concern over the use of lethal force during protests (Claps,

2013).

Following the confrontation, the company helped initiate a process for constructive and

peaceful dialogue with communities near the mine according to Barrick (Barrick, 2014). Led by

the government in Peru and the Marinayoc communities, the committee claims to be working on

encompassing water resources, environmental safety, and sustainability for the region (Barrick,

2014). Over the years, Barrick has explored several solutions to the water problems, including

delivering water by truck (Saunders, 2013). However, as previously mentioned, the locals in the

community questioned how long this solution would last. Carrying water in a truck every day

from a secure source is not the solution—especially for a billion dollar gold company such as

Barrick, who cannot afford these risks, nor maintain these high costs of damage.

Barrick is spending more money by cleaning up after themselves than if they had

implemented and started with a corporate social responsibility plan. Instead, Barrick has been

careless and sloppy. This has cost them profits as well as their social license to the community.

Trust in the community has dwindled. According to a local resident, “Barrick’s subsidiary at

Pierina has not made good on anything, they were just making us believe things, after that

nothing. Now to get anything little for the village, we go to them begging, imploring, and how

much wealth are they availing themselves of” (Saunders, 2013). This illustrates that the

communities have lost trust in Barrick Gold, and they are desperate for answers.

Barrick Gold has not only built for itself a bad track record in previous countries, but due

to the dispossession of lands, destruction of water sources, and the ignoring of international

33

rights has led to several distraught and dilapidated environmental issues. Speaking of

international rights, Peru being an assigned member to the ILO (International Labor

Organization) since 1919 makes them legally binding to the convention (ILO, 2014). The ILO

instrument that is open to ratification on dealing specifically with the rights of indigenous and

tribal peoples (ILO, 2014). Article 7 of the Convention No. 169, states that indigenous and tribal

peoples have the right to “decide their own priorities for the process of development as it affects

their lives, beliefs, institutions and spiritual well-being and the lands they occupy or otherwise

use, and to exercise control over their economic, social and cultural development” (ILO, 2014).

In addition, Article 4 of the Convention calls for special measures to be adopted to safeguard the

persons, institutions, property, labor, cultures and environment of these peoples. In addition, the

Convention stipulates that these special measures should not go against the free wishes of

indigenous peoples (ILO, 2014). Upon examination of these articles, Barrick Gold is clearly not

meeting the needs of the indigenous people.

Companies should operate in ways that secure long-term economic performance by

avoiding short term behavior that is socially detrimental or environmentally wasteful (Porter &

Kramer, 2006). While Barrick Gold grew in profit, the communities surrounding suffered. This

company does not meet the triple bottom line because it puts profit before the people and ignores

the community needs. The prevailing approaches to CSR are so disconnected that they are

obscuring the greatest opportunity, which is for the company to benefit the society (Porter &

Kramer, 2006). Barrick Gold’s reputation and lost license to operate also make Peru’s case a

failure for CSR, the consequence of this fragmentation being that companies do not take action

to support both the community as well as their business goals (Porter & Kramer, 2006).

34

CONCLUSION

In conclusion, we note from the three organizations that what is effective for individuals

is effective to the community. This means that companies are expected to be socially responsible

and profit should not be their key goal. Instead, companies should focus on the impact they have

on the environment and the community. Companies are expected to note that their success

depends on their relevance; this means that they should be able to have a positive influence on

the development of the communities. This has been noted to be achievable through the

commitment of the organization to CSR. When comparing Colombia’s CSR practices to Chile’s,

both countries are meeting the obligations of the communities by effectively working for the

people. In Colombia, the foundation’s key role and development towards education can also be

seen in Chile. These have shown that the private investing companies manage to work well

without the government’s control. These foreign companies have implemented strategies that

offer a new way to look at the relationship between business and society that does not treat

corporate success and society as a zero-sum game (Kramer & Porter, 2002).

While mitigating harm and overcoming obstacles, these countries and their companies

have reinforced corporate strategy through social progress. On the other hand, Peru is a case that

illustrates good vs. bad. When a CSR program is implemented, a majority of the community

benefit, yet while when a CSR program is not implemented, the majority suffers. Companies can

no longer afford to think short-term, but must evolve or they risk their survival (Kramer &

Porter, 2002). Every company operates within a competitive context and this affects its ability to

carry out its strategy in the long run. Being responsible implies improving relations with local

governments while transforming value chain activities to benefit society. While the more closely

35

tied a social issue is to the company’s business, the greater the opportunity to benefit society

(Kramer & Porter, 2002).

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Appendix A: Ecopetrol's pipeline map1

1 http://www.ecopetrol.com.co/contenido.aspx

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Appendix B: Pipelines and drilling in Colombia2

2 http://www.icij.org/project/us-aid-latin-america/narcotics-and-economics-drive-us-

policy-latin-america

44

45

Appendix C: Minera Escondida’s copper mining location3

3 http://www.mitsubishicorp.com/jp/en/pr/archive/2010/html/0000010118.html

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Appendix D: 4 Minera Escondida’s Open Mining Pit

4 http://www.mining.com/bhp-billiton-approves-usd554-million-investment-at-escondida/

47

Appendix E: Map of Peru with Mining Locations5

5 http://alfredocortes.com/2011/12/01/oportunidades-en-la-industria-minera-de-peru

48

Appendix F: Antemina’s Open Mining Pit6

6

http://www.larepublica.pe/04-06-2013/consideran-que-multa-a-antamina-es-infima-a-diferencia-de-

experiencias-internacionales

49

Appendix G7: Location of Pierina mine in relation to city of Huaraz

7 http://www.darwinresources.com/s/Rurimarac.asp

50

Indices:

81.

92.

8 http://www.bhpbilliton.com/home/aboutus/sustainability/reports/Documents/2013/BHPBillitonSustainabilityReport2013_Interactive.pdf 9 http://www.scribd.com/doc/188904737/Minera-Escondida-Informe-Sustentabilidad-2012-pdf

51

3.10

10 http://www.scribd.com/doc/188904737/Minera-Escondida-Informe-Sustentabilidad-2012-pdf