WATER, MINING AND COMMUNITIES:Creating Shared Value through Sustainable Water Management

DISCUSSION PAPERMay 2014

This document was prepared by Rebecca Darling and

Veronica Nyhan Jones (IFC); Jelena Lukic (World Bank);

and Laura Read (Tufts University). The document is

based on IFC’s experience with clients, information

exchanged during three years of water and mining

industry roundtables, discussions with key informants,

and a literature search.

Special thanks to Raymi Beltran and Neil Moloney (IFC).

Key informants, contributors, and peer reviewers include

Bertus Bierman, Laila Ellis, Richard Garner, and Norman

Gridley (Anglo American); Mike Lelliot (Aquaterra);

Melissa Whellams and Christina Sabater (Avanzar); Ben

Wither (Barrick); Maria Figueroa Kupcu (Brunswick);

Oyunbileg Baasanjav and Jan Sheltinga (Canadian

Government, Department of Foreign Affairs, Trade and

Development); Marielle Canter Weikel (Conservation

International); James Dobbin (Dobbin International);

Jeff Jeter and David Williamson (European Bank for

Reconstruction and Development); Krista Hendry (Fund for

Peace); Patrick Gorman (Gorman Consulting); Anne-Marie

Fleury and Gemma James (ICMM); Craig Ford (Inmet);

Anton van Elteren (Netherlands Development Finance

Company); Nick Cotts and Scott Lewis (Newmont); Chris

Jochnick (Oxfam); Nicol Gagstetter, Mark Newby, and

Houston Spencer (Oyu Tolgoi); Chris Anderson and Bruce

Harvey (Rio Tinto); Sharon Flynn, Edgard Salazar, Omar

Aguilar, Dirk Arts (All of Rio Tinto Mining Peru); Amar

Inamdar (Shell); Nyamdorj Barnuud, Susan Giles, and John

Miragliotta (Sustainability East Asia LLC); Channa Pelpola

(Teck); Anders Berntell (Water Resources Group); David

Atkins (Watershed Environmental); Jorge Villegas, and

Marcus Wijnen (World Bank); Gillian Davidson (World

Economic Forum); Stuart Orr (World Wildlife Federation);

Arjun Bhalla, Richard Colback, Adriana Eftimie, Jennifer

Hruza, Brian McNamara, John Middleton, Patricia Miller,

Patrick Mullen, Roman Novozhilov, Rosa Orleana, Sunrita

Sarkar, Mohandas Seneviratne, Josef Skoldeberg, Dan

Vardim, and Robin Weisman (all of IFC), and many others.

The publication was edited by Anna Vanessa Karlo,

Deborah Horan, and Diane Stamm, with design and

layout by Think Tank Creative and Station 10 Creative.

Feedback on this publication is welcomed and should

be sent to Veronica Nyhan Jones at vnyhanjones@ifc.

org, Rebecca Darling at rdarling@ifc.org, and Jelena

Lukic at jlukic@worldbank.org.

An electronic version of this publication is available at

www.commdev.org.

NOTE: The findings, interpretations, views, and

conclusions expressed herein are those of the authors

and do not necessarily reflect the views of the Executive

Directors of the International Finance Corporation or of

the World Bank or the governments they represent.

Photo Credits: Cover, participatorylearning.net (top right), World Bank Photo Collection; This page, iStockPhoto; Page2, Raymi Beltran; Page 5, Sh_Ganbaatar; Page 7, Ted Pollett; Page 10, World Bank Photo Collection; Page 11, Rio Tinto Participatory Water Monitoring; Page 13, polepole-tochan/ThinkStockPhotos; Page 16, Raymi Beltran; Page 18, Rebecca Darling; Page 19, Ted Pollett; Page 20, Graeme Hancock; Page 22, Ted Pollett; Page 23, Ted Pollett; Page 24, Teck Resources (top), Anglo American (bottom); Page 25, Ted Pollett; Page 26, World Bank Photo Collection; Page 27, Shahin Shahablou/Eyes on Rights Humanitarian Photography (top), participatorylearning.net (bottom); Page 28, Teck Resources; Page 29, Jaume Juncadella Olivares/ThinkStockPhotos; Page 30, Rio Tinto; Page 31, Rio Tinto; Page 32, Anglo American (top and bottom); Page 34, Arjun Bhalla/World Bank; Page 35, Arjun Bhalla/World Bank; Page 36, Sh_Ganbaatar

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TABLE OF CONTENTS

3 Strategic Context

9 Tracing Water Through the Mining Life Cycle

12 Water as a Lightning Rod for Conflict

14 Creating Value through Effective Water Management

17 Laying the Groundwork: Sound Technical Systems and Stakeholder Engagement

21 Water, Mining, and Communities: A 3D Approach to Shared Water Management

DIMENSION 1: Internal Alignment across Company Functions

DIMENSION 2: Multidirectional Communications — Building Trust and Empathy

DIMENSION 3: Co-Managing Knowledge and Resources

33 Integrating the Three Dimensions: A Shared Value Approach to Water Management

36 Collaboration for a Sustainable Future

37 Bibliography

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2

3

WATER IS A SHARED RESOURCE. It is necessary

to sustain life and access to it is a human right.1

Communities, governments, and companies around

the globe are increasingly worried about water

quality and availability. According to Morgan Stanley,

mining uses 5% of water globally, but the industry

often receives the majority of the blame for negative

impacts, even when other sectors are drawing on and

impacting this resource.2 For example, in Peru, mining

consumes 1.46% of water used but receives the most

criticism for poor management (See figure 1).3 Such

criticism is based on both fact and perception and

is increasingly impacting business and community/

government relationships.

For the mining industry, for which water is crucial,

water management is more than just a technical

and economic challenge. The World Bank Group’s

Compliance Advisor Ombudsman (CAO), an

independent recourse mechanism that responds to

complaints from project-affected communities, shows

that water can be a catalyst for conflict. Since 2000,

water has been implicated in 47% of CAO cases, and

68% of mining-related complaints include water issues.4

The social and environmental dimensions of water

have a profound impact on the cost of developing new

projects, expanding existing ones, and most recently,

closing old mines. Some old mines require water

treatment into perpetuity. The economic value of water

1 United Nations General Assembly, Human Rights Council, Fifteenth Session, “15/9 Human rights and access to safe drinking water and sanitation,” October 6, 2010, http://www.right2water.eu/sites/water/files/UNHRC%20Resolution%2015-9.pdf.

2 Morgan Stanley Research. 2013. “S&R Valuation Framework: Spotlight on Mining.” Morgan Stanley Research Europe, London.

3 National Authority of Water, Government of Peru. 2012. Recursos Hídricos del Perú en cifras 2012 – II. Boletín Técnico 2012 – II Trimestre. P. 46. https://www.ana.gob.pe/publicaciones/publicaciones-2012/recursos-hidricos-del-peru-en-cifras-2012-ii.aspx.

4 Compliance Advisor Ombudsman (CAO), Caseload Data FY00–14, status as of April 30, 2014.

can be established using existing methodologies, but

the environmental, social, and cultural value of water is

more difficult to calculate because its value is perceived

differently by different stakeholders.

Mining companies face growing water risks related

to operations, regulations, reputation, and investor

expectations. At the 2014 national convention of the

Society of Mining, Metallurgy, and Exploration, Luke

Russell, the Vice President for External Affairs at Hecla

Mining, told attendees that water quality and quantity

issues are the fastest growing economic and social

challenge to mining projects today.5 The availability

5 Kosich, Dorothy. 2014. “’True Cost’ of Water Beyond Mining’s Ability to Calculate.” Mineweb. http://www.mineweb.com/mineweb/content/en/mineweb-sustainable-mining?oid=230465&sn=Detail.

FIGURE 1. Peru: Water Consumption by Sector

Source: ANA, April 2012

STRATEGIC CONTEXT

85.84%Agriculture

1.03%Industrial

1.46%Mining

11.67%Human

33

of water can affect the viability of extracting and

developing a mineral resource. In the exploration

and feasibility stages of a project, asset valuation

may not include full water supply and management

costs through postclosure. Often in these early stages,

companies’ primary concern with relation to water is to

find a supply sufficient for mine operations. Long-term

costs associated with gaining consistent access to water

may be overlooked, such as obtaining government

permits, building necessary infrastructure, securing

stakeholder acceptance of water use, and observance

of dynamic environmental issues. International

regulatory trends toward steeper water pricing

may dramatically increase operational costs in many

jurisdictions. Meanwhile, water use data are often

not projected into the future and are just starting to

be tracked consistently, though not by all companies

in all countries. Compliance with new, more rigorous

environmental legislation and lender requirements is

causing mining companies to reevaluate water and to

design corporate-level strategies to address water issues

for the first time. Many in the industry are embracing

new water efficiency and recycling methods, driven

by the necessity to cut or better predict costs. This is

happening with new vigor inside the fence of mining

operations. But with many mining licenses and other

economic activities such as agriculture and energy

production drawing on the same watersheds, a more

coordinated and cumulative approach is required.

“Without trust, facts don’t matter.”––Gillian Davidson, Director, Head of Mining and Metals Industry, World Economic Forum

ICMM LAUNCHED THEIR WATER STEWARDSHIP FRAMEWORK IN APRIL 2014

The goal of the Water Stewardship Framework is to outline a common industry approach for what

is a complex and locally-defined issue. The Framework emphasizes that water stewardship requires

a management approach based on finding solutions that work for businesses and other water users.

The Framework is intended to provide a clear water-related objective for the industry, defining water

stewardship in a meaningful way for the industry through four key elements: be transparent; adopt a

catchment-based approach; effectively manage water resources; and engage pro-actively and inclusively.6

6 International Council on Mining and Metals. 2014. “Water Stewardship Framework.” International Council on Mining and Metals. London. http://www.icmm.com/document/7024.

4

DRIVING SUSTAINABLE GROWTH through the monetization of risks, Veolia created the True Cost

of Water tool. The tool provides decision-makers with a pragmatic metric to drive revenue resilience and

license to grow. The True Cost of Water monetizes the financial impacts of water risks so that return on

investment and pay-back period are no longer based on current direct costs alone, but also include risk-

based costs. The framework enables companies to prioritize and more effectively manage investments in

sustainable solutions aiming at building resilience and ensuring long-term profitability.

CALCULATING THE COSTS OF WATER

IFC’s Financial Valuation Tool assists firms to plan, prioritize, measure, and scale site-level sustainability

investments. It is designed to supplement a company’s traditional discounted cash flow valuation model.

The FV Tool calculates a probable range for the net present value (NPV) back to the company from a

portfolio of sustainability investments, including value protected through risks mitigated and value created

through productivity gains. The tool compares two different sustainability investment scenarios based on

the risks and opportunities (such as social license for water access) faced by an operation, such as a mine

or pipeline, to help managers decide which scenario is likely to yield the most value for the company by

creating positive impact for surroundings communities via spending on irrigation, sanitation, recycling, etc.

5

Too often, the social factors related to water are given

little attention early in the planning and operations

stages, when stakeholders are less active and critical

engineering choices are made. This is changing,

however. Numerous companies and consultant

studies7 report that failure to earn social license — a

community’s tacit approval of a project — is one of the

greatest risks facing mining companies. Several mining

companies have had projects shut down because of

community-led protests, many sparked by concerns

over a mine’s use of water. Guatemala’s Marlin gold

mine became front-page news in January 2005 after a

referendum in which 43% of voting-age residents voted

to reject mining in the area. Distrust is still rife despite

massive post-crisis ameliorative efforts on all fronts. In

Peru, there was public outcry over Yanacocha’s plans

to convert four natural lakes into reservoirs. Some

feel that opponents of the plan used the project as

a political platform after the company had obtained

the required permits. In Peru and globally, civil society

organizations continue to voice concerns about mining-

related issues, such as water management, community

development, and environmental stewardship.

Although water is only one of many issues that concern

local stakeholders, it is highly emotional and galvanizes

people into action.

In addition to these social complexities, climate change,

industrial competition, population growth, and food

insecurity are adding to global anxiety around water

that often plays out locally. The industry is aware of this

risk. Fortunately, there are a growing number of tools

available to help companies understand the risks and

opportunities around water, including:

7 Ernst & Young. 2012. “Business Risks Facing Mining and Metals 2012–2013.” Ernst & Young, London.

• Ceres Aqua Gauge, GEMI Local Water Tool

• UN CEO Water Mandate Disclosure Guidelines and

Water Action Hub

• World Business Council for Sustainable Development

Global Water Tool

• Water Footprint Network Water Footprint

Assessment Tool

• World Resources Institute WRI Aqueduct

• World Wildlife Fund Water Risk Filter

Some of these tools can be used to understand early

potential sensitivities around water quantity and

quality, and watershed ecosystems. Unfortunately there

does not seem to be a similar abundance of tools to

help local communities understand and manage water.

This may be adding to the distrust between companies

and local stakeholders who cannot access information

to help them collaborate with companies from an

informed position.

The Carbon Disclosure Project’s (CDP) 2013 report

analyses the critical implications of water for the

mining and metals sector based on data collected

from 36 companies in 2012. It highlights how these

companies have already been affected by water-

related issues and how they are accounting for and

valuing water in order to build both short- and long-

term resilience strategies. Of the companies the CDP

surveyed, 90% report exposure to substantive water

risk over the next five years. The CDP also states that

mining companies that take the initiative to mitigate

6

IN RESPONSE TO IFC INVESTMENT EXPERIENCE, the new IFC Performance Standards on

Environmental and Social Sustainability (2012) emphasize water conservation plus identification and

mitigation of water resource impacts within the wider ecosystem services context. For more guidance,

see the following Performance Standards (PS) and accompanying Guidance Notes:

PS 1. Assessment and Management of Environmental and Social Risks and Impacts

PS 2. Labor and Working Conditions

PS 3. Resource Efficiency and Pollution Prevention

PS 4. Community Health, Safety and Security

PS 5. Land Acquisition and Involuntary Resettlement

PS 6. Biodiversity Conservation and Sustainable Management of Living Natural Resources

PS 7. Indigenous Peoples

PS 8. Cultural Heritage

http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/ IFC_External_Corporate_Site/IFC+Sustainability/

Sustainability+Framework/Sustainability+Framework+-+2012/ Performance+Standards+and+Guidance+Notes+2012/

7

water risks report better financial performance.8

Investment firms now recognize the long-term impact

of water management on the financial outlook of

mining companies. Morgan Stanley has developed

an Investing With Impact Framework9 to evaluate

companies based on their attention to and investment

in reduced water consumption and risk.

The International Council on Mining and Metals

(ICMM) produced a series of water management

case studies to highlight innovative ways the mining

industry has responded to water challenges. These

case studies are available at www.icmm.com/www.

icmm.com/water-case-studies.

IFC is seeing technically sound investment projects

face complaints or closures because of water-related

issues. As a financial institution, IFC is motivated to

understand the causes of these conflicts and to work to

identify solutions to support clients in improving water

management practices (see page 7). For the last three

years, IFC has been convening the mining industry and

related stakeholders to explore concerns and good

practices around inclusive water management. Drawing

from the experiences of IFC, industry partners, civil

society, academics, and government, this discussion

paper emphasizes social water risks that mining

companies and their host communities face and

presents a three-dimensional approach for beyond-the-

fence water management supported by robust technical

assessment and conservation practices.

8 Carbon Disclosure Project. 2013. “Metals and Mining: A Sector under Water Pressure.” Analysis for Institutional Investors of Critical Issues Facing the Industry, Carbon Disclosure Project. London. https://www.cdp.net/Docs/investor/Metals-Mining-sector-under-water-pressure.pdf.

9 Morgan Stanley. 2012. “Investing With Impact: Creating Financial, Social and Environmental Value.” London. http://www.morganstanley.com/globalcitizen/pdf/investing-with-impact.pdf?v=07112013.

The rest of this discussion paper is organized as follows:

Section 2 traces water through the mining life

cycle highlighting multiple realities experienced

by various stakeholders. Section 3 discusses water

as a source of conflict spurred by facts and/or

rumors. Section 4 focuses on creating shared value

and growing opportunity for all through effective

water management. Section 5 details laying the

foundation using sound technical systems integrated

with stakeholder engagement. Section 6 presents

the three-dimensional water management approach,

which includes a) internal alignment across company

functions; b) multidirectional communications —

building trust and empathy; and c) co-managing

knowledge and resources with other decision-makers.

Included in Section 6 are brief case studies illustrating

engagement with diverse stakeholders throughout the

mine life cycle for sustainable water solutions. Section

7 discusses integrating the three dimensions for a

shared approach to water management based on a

current case from Mongolia. Section 8 concludes with

a discussion of collaboration for a sustainable future

where more practice sharing is needed.

“ For these companies, no water means no business.”—Carbon Disclosure Project, Metals and Mining: A Sector under Water Pressure

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9

ALL MINES MUST ACCESS and manage water

to construct, operate, and close a project. Total water

consumption depends on the type of mineral or metal

being extracted and on company practices. The physical

location of the mine can make access to water more or

less problematic because access to groundwater, surface

water, and desalination sources are all site-specific.

Companies generally track the water used by individual

projects, but aggregated data are limited. A 2010 Teck

Sustainability Report10 revealed 125 million cubic meters

10 Teck, Sustainability Report, 2010, http://www.teck.com/DocumentViewer.aspx?elementId=198097&portalName=tc.

of water withdrawals (groundwater, surface, other),

with a recycling/reuse rate of 90%. Anglo American

wants to achieve water-neutral mines by 2030 where

80% is recycled and 20% is cleaned to standard. But

such goals and statistics are not publically available for

the vast majority of mining companies. Achieving high

recycling and reuse rates demonstrates commitment to

water conservation, quality standards, and investment

in appropriate technology. Table 1 graphically displays

water use during a project life cycle.

TRACING WATER THROUGH THE MINING LIFE CYCLE

TABLE 1. Water Use during Project Life Cycle

EXPLORATION

Wide range of water use during drilling

Risk of contamination from drilling additives and sumps;

stormwater management

Affected community’s perception of uncontrolled water extraction

PLANNING AND CONSTRUCTION

Runoff, spills, sediment, settling ponds

Possible chemical contamination, monitoring needed

Develop process to account for water use and related costs/risks

OPERATIONS

Demand during mineral processing, dust suppression, and evaporation losses

Manage wastewater discharge, seepage, groundwater from mine pit

dewatering, and runoff

Account for water in all operation cycles incorporating data from all prior phases

CLOSURE AND POSTCLOSURE

Long-term contamination risk, potential need for water during

postclosure land useRigorous monitoring needed Water plan and program legacy

99

WATER AVAILABILITY

Industry concern around access to water is exacerbated

by the fact that mineral deposits are increasingly located

in regions where water is scarce or governance of

water resources is weak. Just as mining in water-scarce

regions is on the rise, so too is the competition for water

within the mining industry (for example, multiple water

concessions for mining companies drawing from the

same source) and across industries, including commercial

agriculture, subsistence farming, livestock herding

and fisheries, tourism, logistics, and manufacturing.

Population influx tied to resource development and

related infrastructure results in even greater water use.

These factors, plus the uncertainty of climate change,

may drive companies or governments to monopolize

water supplies as legislation allows. In many contexts, no

single entity, including the government, has sufficient

information to make sound judgments regarding who

has which water rights and with what impact. This

makes coordination of data and water use across a

watershed even more critical. A new focus on cumulative

environmental impacts of multiple industry projects

can help promote understanding of common risks and

opportunities for shared value across one region. In

most contexts, local stakeholders do not have sufficient

knowledge about the water cycle and its users to form

and voice opinions about policies and practices.

WATER QUALITY

Companies are more stringently and responsibly

managing water after experiencing myriad legal

challenges, costly fines, and damaged reputations

caused by water mistreatment and contamination

problems. Various participatory water monitoring

efforts have helped to manage quality while also

building trust and credibility across diverse stakeholder

groups. For example, bringing community leaders to

a reservoir to catch, cook, and eat local fish together

with company managers can be a constructive

complement to showing technical lab test results

processed in another country. Engaging locals can

also yield valuable understanding and insight into

watershed practices and management.

However, not all current water risks have clear

responsible parties. Pinpointing specific liability

upstream or downstream can be difficult and politics

can influence this process. Legacy issues involving water

contamination or ongoing water impacts by inactive

sites translate into financial and reputational costs for

the whole industry. Communities living with negative

impacts from a project long discarded are motivated to

fiercely guard against any further damage. In countries

with little regulatory oversight and minimal data

collection or disclosure, societal anxiety related to water

can quickly lead to action against a project. In some

cases this can be driven more by fear than by fact.

“ Water conflict is about people…it’s not just an environmental issue…and needs more than a technical fix.”–––CAO Office, World Bank Group Ombudsman

10

RIO TINTO, IN COOPERATION WITH LOCAL COMMUNITIES, implements its Participatory

Environmental Monitoring and Evaluation Program at several of its projects. Oyu Tolgoi LLC, a copper

mine operated by Rio Tinto in Mongolia, provides local herders with monitoring equipment, including

GPS locators, cameras, tape measures, measuring tables, and recording manuals that are used to carry out

water monitoring. Below is an excerpt from an interview with N.Munkhbayar, Participatory Environmental

Monitoring and Evaluation Program Officer of Oyu Tolgoi LLC, talking about the program.

“ We have a lot to learn and study from Mongolian herders and we are gaining skills in this process.

Traditional Mongolian herding methods are based on observation of the natural environment

and seasonal phenomena. Herders are used to monitoring and observing water. All their lives,

herders observe water well levels, pastureland, wild life movement and they notice changes. Up

until now those observations have been informal and not scientifically recorded.

By implementing the participatory monitoring program, we are able to identify causes of changes

in water levels, numbers of animals, and pastureland yields. The Participatory Environmental

Monitoring and Evaluation Program, cooperating with herders, is a long-term project to be

implemented for many years. Herders are formally recording changes to pastureland, water levels,

and fauna populations caused by the natural environment, climate, and human factors. Water

levels are measured before and after watering the animals. The measurement data is consolidated

on a quarterly basis and the Oyu Tolgoi project water specialists compare the herders’ data with

our own data, analyze it, and deliver the findings to the herders.

Together we are able to create basic data and information for herders and miners to plan

effective pasture use and environmental protection.“

Source: http://ot.mn/en/node/2786

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12

CONFLICTS AROUND WATER can bring

reputational, operational, legal, humanitarian, and

financial risks to a project. Triggers for conflict include

water scarcity, lack of access, unclear rights, water

excess, impacts on water quality, unequal voice,

and a general lack of trust. Ineffective regulatory

environments may incorrectly signal to traditional

water users that mining companies can take what they

want at the expense of others and without oversight.

The threat and consequences of water pollution can

cause conflict, particularly when a potentially impacted

community relies on the water source for livelihoods,

such as agriculture, fishing, or animal husbandry.

Perceptions of high water use or potential for water

contamination by a new entrant are often sufficient

to trigger tensions and even conflict. Such perceptions

may be founded on scientific or unscientific data and

stem from the individual frames of reference, which are

formed by the information people have, the degree to

which they understand the information, the trust they

have in the individuals involved, and experiences they

have had in similar situations.

This tension is exacerbated by a lack of inclusive

decision-making processes and knowledge imbalances.

There is a growing list of companies whose

experience with water and conflict indicate that it

is more expensive to recover from conflict than to

prevent it. Broken trust takes longer to repair than a

concentrator or pipeline.

WATER AS A LIGHTNING ROD FOR CONFLICT

“ Water becomes the issue when there is a vacuum of trust.”— Chris Anderson, US Director, Communities and Social Performance, Rio Tinto, USA

1212

13

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TABLE 2. Energy – Water – Food Nexus: The Business Case

REDUCED RISK. Resilience planning that includes longer-term, more stable agreements among participants in the

supply chain will help reduce exposure to price volatility and help companies’ value chains react to unforeseen risks.

IMPROVED PRODUCTIVITY. Better insights into resource requirements and improvement of process

efficiencies with partners can generate successes in reducing or eliminating waste.

SHORT-TERM ROI SUCCESS AND LONG-TERM INVESTMENT PLANNING. By creating pilot initiatives

that utilize new technologies and/or resilience planning, companies will be better prepared to make longer term

investments and inform product innovation and potential industrial and social transformations.

ENHANCED BRAND AND REPUTATION. Companies with ambitious corporate social responsibility targets

can help their partners improve their social license to operate.

FULL COST ACCOUNTING OF RESOURCES AND IMPROVED ACCESS TO CAPITAL. In addition to

better cash flows and stronger credit ratings, members can access new financing models that provide leverage

from chain partners. A full cost-accounting structure that takes into account both today’s prices and the prices of

increasingly scarce natural resources is adjusted according to their value to the business and society.

Source: http://www.conservation.org/global/celb/Documents/BSC_Resources_vol2.pdf.

A SHARED VALUE APPROACH to water

management can turn risks into opportunities for both

companies and communities. For instance, companies

benefit from a water management approach that

results in the accurate assessment of asset value and

compliance with international financial institution

lending requirements. Companies can also increase the

value of a project by implementing leading social and

technical water management practices that expedite

permitting processes, facilitate mine expansion, and

secure water access. Managing impacts on ecosystem

services related to water (such as provisioning,

regulating, cultural respect, and preservation) provides

opportunities for ensuring the sustainability of the

business and improving relationships with local

communities. Veolia, an environmental services firm,

developed an innovative and sustainable solution for

a mining client where through the reverse osmosis

process, the “dirty” water left over during the purifying

process is used as a resource in the downstream mining

operations. Hundreds of tons of sulfate and sodium

chloride are saved each year as a result of this process,

decreasing operational costs and reducing the overall

carbon footprint by 600 tons CO2 equivalent per year,

both of which help to reduce pressure on stocks.11

Ensuring energy, water, food, and mineral/metal

security for an ever-growing population in the face

11 Veolia, information provided to IFC, May 2014, http://www.veoliaes.com/en.html.

CREATING VALUE THROUGH EFFECTIVE WATER MANAGEMENT

1414

of climate change is an urgent challenge commonly

referred to as the “Energy – Water – Food Nexus.”

Conservation International articulates the business case

for focusing on the Nexus in a report produced by its

Business and Sustainability Council (See Table 2).

This can only be addressed with leading innovation,

inclusion of important local knowledge, improved social

license, and enhanced reputation. Communities stand

to gain from improved local capacity for environmental

stewardship, enhanced voice, and expanded economic

opportunities. In addition, taking a co-management and

monitoring approach to water through collaboration

with other industrial actors and communities can

smooth operations, increase efficiency, help companies

calculate and anticipate costs, and create more enduring

investment agreements. Effective benefit sharing

requires sophisticated water management practices that

optimize tradeoffs and cooperation while minimizing

conflict. These benefits will likely be realized during

the life of the current project and can also carry over to

future endeavors via expansion, winning new licenses,

and replicating efficient practices. Obtaining and

sustaining social license to operate, specifically around

water and a company’s stewardship of it, can play a

direct role in a government’s decision to grant additional

exploration or mining licenses and necessary water use

permits. Developing water efficiency technologies for

one operation can often be replicated at other projects

in similar environments, creating more value for the

company. In recognition of this need to mobilize a critical

mass of private sector leaders, the United Nations CEO

Water Mandate calls for the business sector to recognize

the need to manage water resources more sustainably

and to collaborate with a wide range of stakeholders.12

Figure 2 graphically presents value drivers for a variety

of stakeholders.

12 United Nations, CEO Water Mandate, http://ceowatermandate.org.

SHAREDVALUE

Long-termWater

Availability

Efficient andTransparent

WaterGovernance

Local BusinessDevelopment

OptimallyIntegratedLivelihoods

SocialCohesion

EnhancedCapacity for

EnvironmentalStewardship

EquitableWaterPricing

High-QualityData

and SpatialPlanning

ConsistentIndustryPractice

Socialand

PoliticalLicense

VA

LUE FOR THE COMMUNITY

VALUE FOR THE COMPANY

FIGURE 2. Overview of Value Drivers

15

16

17

LAYING THE GROUNDWORK: SOUND TECHNICAL SYSTEMS AND STAKEHOLDER ENGAGEMENT

WHEN STAKEHOLDERS EXPERIENCE OR PERCEIVE A PROBLEM during exploration,

development, or mining operations, it generally

becomes a ‘real’ problem for the company, irrespective

of whether there is evidence of company impacts.

When there is a relationship built on trust between

the company and the community, dialogue and

meaningful participation can assuage fears, suspicions,

and anxieties. For these reasons, it is imperative

to include stakeholders early and regularly in the

planning process. Educating the community about the

technical aspects of mining and water, understanding

traditional beliefs and the community’s use of water,

incorporating those values and uses into water

management, and providing opportunities for

stakeholders to participate in the development and

monitoring of water plans can reduce misconceptions.

Table 3 details important aspects when training local

stakeholders on the technical aspects of water.

TABLE 3. Water Trainings: Building a Common Foundation of Knowledge Across Stakeholders

1. Identify a trusted expert to provide the information and training. For example, engage with local communities about who they trust: universities, environmental NGOs, research organizations, government, churches, etc.

2. Provide an overview of the mining process — describe the life of a mine, the potential sources of contamination at each phase of operation, and the estimated water usage. Include a visit to a mine if possible.

3. Map out the community’s understanding of the watershed (sources of water, locations upstream and downstream of project, tributaries).

4. Identify water uses and volumes across actors to determine what should be tracked and what national and international standards are applicable.

5. Explain what the baseline quality of the water is before the arrival of the project/mine and the different potential sources of contamination (e.g. industrial, agriculture, human, animal, domestic). This includes an explanation of the different types of contamination, such as microbiological vs. heavy metals, and related symptoms.

6. Engage the community in the selection of the laboratory (national or international) within limits. Explain the need for a certified laboratory and its capabilities.

7. Train on testing protocols (e.g. use of gloves, testing downstream before upstream). Employ experiential training by involving community in sampling activities.

8. Explain what will be tested. For example, what is a pH level, and why does it need to be tested?

9. Build capacity to interpret results and explain the need to sometimes triangulate results.

10. Work with community members to deepen understanding of what can impact water beyond mining activities and how these impacts might show up in water monitoring results. Identifying potential sources of water contamination is important so community members can work with the relevant government authorities (e.g. municipality, mining ministry, health ministry, etc.) to address the problem.

11. Make the overall training program as hands-on and practical as possible.

Source: AVANZAR, avanzar.biz

1717

Small technical teams, such as geologists undertaking

exploration who might have the first contact

with communities, often do not understand the

downstream social implications of their activities. Yet

they are the ones who set the tone for a company’s

future engagement with a community. Therefore,

these early engagers need appropriate training and

support before and during fieldwork. Strategies for

developing trust need to be part of the toolkit of all

personnel — from geologists and consultants to senior

managers. Some companies have policies that stipulate

that any manager who visits a site can engage with

workers at any level or with community members

about local activities. This interaction helps engender a

sense of ongoing company interest in the wellbeing of

the community and breaks down hierarchy.

Identifying stakeholders and understanding their

concerns can help in the development of a water

management plan that effectively integrates social

and technical priorities. Acknowledging multiple

realities, including that of the company and those

of the community and other affected parties, can

help bridge differences. Awareness of gender-specific

impacts is important; women may be more negatively

affected if water collection requires additional time

and effort, for example. However, they may prefer a

community-level water collection process to one that

offers individual access. It is important to ask their

preferences. In addition, although women usually

support decisions that result in greater sustainability

and improvements in household welfare, they are

often left out of decisions regarding extractive

industries and the environment. Companies need to

be aware of the many diverse groups that make up a

community and their diverse concerns and views, and

to include them in the much wider process of water

management. In short, the company should respect

the views of all members of the community. When a

positive tone is set early on in the process, it can often

carry throughout the project.

Table 4 compares the company and community views of

this reality.

To understand the community’s perspective on water,

begin with a project impact assessment. Include local

context analysis, and obtain a comprehensive picture

of the stakeholders and the opportunities and risks

that the project brings to them. This has to start at the

beginning of field exploration, regardless of whether

the company expects minimal ongoing impacts. Review,

and adjust if necessary, company policies to ensure

that they include conflict mitigation and trust-building

measures, with specific attention to issues related to

water. These can be project-specific policies.

High personnel turnover rates across the project

cycle will impact the timeline and continuity of this

investment relationship. It is common for concessions

to be held by different companies throughout the life

cycle of a project. Even larger companies that have

exploration divisions will have staff turnover in a

project as it moves from early exploration and advances

to construction and into operations. It can be difficult

to build relationships, trust, and continuity of policies

and practices with so many human resource changes.

Management systems, robust documentation, and

transition plans can help alleviate the potential for

problems associated with staff turnover.

Reducing water use is a key method for mitigating

social and financial risks, and best practices for

reducing the amount of water used should be

incorporated into operations starting with the design

18

TABLE 4. Two Realities: Reality of Community must be Reality for Company

COMPANY VIEW PHASE COMMUNITY VIEW

Small footprint

Don’t want to raise expectations Likelihood of project is low

Negative legacy from previous exploration

Exploration

Don’t understand mining process: risks or opportunities

Hope mine will bring jobs/services Anxiety due to lack of information

Defensive due to previous bad experience with other companies

Locals should be grateful for infrastructure

Sometimes construction and social engagement are on different schedules

Planning and Construction

Fear traditional ways or livelihoods will be lost because mine will deplete or pollute water

Weak rule of law erodes trust in company’s investment agreement

Think water comes from mountains

Concerns of policy capture

Providing treated water to locals

Undertaking consistent, robust environmental monitoring

Going beyond regulatory compliance

Politically opportunistic actors create distrust regardless of facts

Operations

Fear that all water is polluted

Lack of access to data or technical capacity to analyze and understand the quantity and

quality of water

Distrust in company’s findings

Lack of recourse: no way to be heard by company or government except by

blocking roads

Blamed for potential pollution

May have to pay for others’ damage

Compliant with the local laws but people still angry

Closure and Postclosure

Loss of access to clean water that company provided during operations

Concern with whom to hold accountable for postclosure water

quality/quantity problems

19

phase and continuing throughout operations.13 The

integration of new technologies (for example, filtered

and paste tailings), treatment of discharge for reuse

in the mining process, and water audits of existing

operations to determine inefficiencies in the use of

water, are three best practices to be considered.14

It is equally important to formulate solutions that

address specific issues. Companies must bring technical

knowledge, but also consider local values surrounding

water when solving problems.

13 More guidance is provided in IFC PS 3: Resource Efficiency and Pollution Prevention, and PS 6: Biodiversity Conservation and Sustainable Management of Living Natural resources; http://www.ifc.org/wps/wcm/connect/5aebfd004d5e3818b83cfa2389a1bab4/PS_Objectives_English.pdf?MOD=AJPERES.

14 Tailings are the waste derived from mining. Tailing dams are where this waste is stored.

In addition to comprehensive stakeholder engagement,

good technical practices must underpin any robust

water management strategy. Accurate water baselines

must be established and environmental and social

impact assessments conducted so that companies have

a solid understanding of surface and groundwater

resources and their overlap with community needs

and expectations — not only adjacent to the project,

but possibly hundreds of kilometers away. Developing

and using a rigorous Environmental and Social

Management System will enable a cascading risk

management approach based on the application of

avoidance, management, mitigation, and continuous

improvement measures.

“ We spend millions of dollars on technical water fixes only to find out that sometimes the problem was really social.”— Nick Cotts, Group Executive for Environmental and Social Responsibility, Newmont Mining Corporation

20

21

WITH A STRONG TECHNICAL BASE ESTABLISHED and an understanding of perceptions

and company and community realities, the following

three-dimensional (3D) approach is recommended:

(1) create internal alignment across company

functions; (2) employ multidirectional communications

strategies that build trust and empathy within

companies and across stakeholder groups; and (3) find

ways to co-manage water with other stakeholders. It

is critical to integrate these social water management

approaches with the activities and timelines of

the technical teams. These three dimensions are

interventions along a spectrum of a company’s control

over actions and outcomes. Internal alignment is fully

within a company’s control, while co-management

requires shared control and decision-making with

other stakeholders. Multidirectional communications

involves listening, outreach, and managing

perceptions, so it falls in the middle of the spectrum.

Following a discussion of these three dimensions, this

paper suggests a comprehensive approach for mining

companies addressing water use issues.

Throughout the co-management process, it is vital

to appropriately align 3D efforts with the technical

aspects of the mine’s development. Figure 3 presents a

hypothetical example of how the social and technical

stages of the mine should dovetail. This will look

slightly different for every project, but having a shared

roadmap across company functions will help keep

activities on schedule while presenting a consistent

face to the community.

WATER, MINING AND COMMUNITIES: A 3D APPROACH TO SHARED WATER MANAGEMENT

FIGURE 3. Social and Technical Integration

SHARED RISK, LEADERSHIP, ACCOUNTABILITY, AND VALUE

Geospatial Planning Watershed Data Sharing

Multistakeholder Partnerships Advanced Treatment Technology

Participatory Water Monitoring Water Conservation in Mine Life Cycle

Grievance Mechanism External Water Quality/Quantity Audits

Information Sharing Transparency Tailings Dam Audits

Project Impact, Stakeholder

Engagement, and Context Analysis

Environmental and Social Impact

Assessment, Baseline Data,

Geo-Hydrological Assessments

2121

DIMENSION 1: Internal Alignment across Company Functions

An integrated approach to water management

requires alignment across functions within a company,

including management, technical, human resources,

and communications roles. This should be completely

within the company’s control, unlike some other

aspects of water management. To achieve shared

goals, it is necessary to have consistent behavior and

incentives across the company’s operational functions.

Companies, such as Rio Tinto and Newmont Mining

Corporation, each define a holistic water vision and

foster co-ownership across departments and will likely

outcompete their rivals in efficiency and resiliency. The

following are recommended to achieve cross-functional

alignment and a reputation for stewardship:

1. Invest in internal collaboration to overcome silos and promote ownership. Train multiple business functions (operations,

finance, legal, communications, human resources,

and so forth) in the technical and cultural aspects

of water management. To bring the concept

of collaboration to tangible experience, have

managers from each department attend a

water sampling. Provide them with resources to

approach water management from the outset

of fieldwork and to make it relevant to their

own departments. The finance department

can quantify potential water savings through

improved management practices. Human

resources can create awareness among staff

of the importance of protection of local water

sources and what to do if they see potential

contamination. Lead by example — senior

management should have a focus on water

as part of their field visits and reporting

requirements. Reward collaboration across

functions with incentive structures that include

recognition, bonuses, and promotion.

2. Develop a shared vision for a company-wide water strategy owned by multifunctional teams (operations, environment, community relations, risk, human resources, legal, and security). Solicit input from all levels on priorities, risks,

opportunities, and stakeholder engagement and

access. Ensure that decisions are informed by

field staff who can provide ongoing field data.

Develop Key Performance Indicators for tracking

water-related duties and outcomes. A successful

model to follow is that of the Safety First culture

that permeates the mining sector in which every

employee and contractor in all departments must

understand and adhere to rigorous safety measures

in all functions.

3. Use language that executive-level staff understands. Training can bolster “multilingual

teams” able to translate the business case for

community engagement around water into

financial language that senior management

and technical staff understand. Techniques are

readily available to assist staff in quantifying and

calculating the potential value lost or preserved

through social and environmental actions, for

example IFC’s Financial Valuation Tool and Morgan

Stanley’s Investing with Impact Framework.

4. Reconcile time frames (technical deadlines vs. stakeholder horizons). The time that community relations staff needs to

address community concerns before an activity

can proceed is often different than the time that

construction or operations staff need to complete

technical or financial objectives. By working out a

22

shared time horizon, many community concerns can

be addressed and potential conflicts prevented. This

requires forethought, sensitization, and planning.

5. Create a shared internal database to track engagement and progress. Keeping track of

documents and correspondence with stakeholders

in a centralized, accessible database can help

measure progress on how interdepartmental

cooperation, shared community engagement, and

trust have changed over time. This accountability

can be useful in reflecting on successes and failures.

The two case studies explain how two companies

implemented the approaches described above.

23

CASE STUDY 1: TECK RESOURCES’ SOCIAL MANAGEMENT AND RESPONSIBILITY TOOLKIT (SMART)

Teck Resources, a diversified resources company with

13 mines in the Americas and active exploration across

the globe, began developing the SMART kit after

recognizing that social concerns are a major risk in

project communities and can affect operations if conflict

arises. Teck also saw the value in professionalizing the

management of social or community-related issues to

better understand and manage those risks and consider

possible opportunities.

SMART is a practical toolkit that reflects best practices

relating to social risk and performance management,

engagement, impact management, and sustainable

benefits throughout each stage of exploration. SMART

training targets all company exploration groups,

projects, and operations teams. Teck is investing

in its employees by offering dialogue training to

improve community engagement, creating an internal

Community of Practice intranet for sharing information,

lessons learned, and successes, and seeking support

among colleagues. SMART also includes plans to

incorporate a sophisticated centralized database to

track internal activities and progress on all projects.

CASE STUDY 2:ANGLO AMERICAN’S TECHNICAL AND SOCIAL MANAGEMENT TOOLS

Recently, Anglo American publicly updated its internal

water management strategy with the launch of two

tools — one that focuses on tracking and improving

water efficiency, and one that identifies and helps

manage various issues of concern, including water.

Anglo American’s Water Efficiency Target Tool (WETT)

was developed to track water use and savings across

projects, encouraging innovations in water reclamation,

reuse, and conservation. The Socio-Economic

Assessment Toolbox (SEAT) focuses on establishing

a deeper understanding of the socioeconomic

environment, identifying potential project impacts,

and developing an appropriate management plan.

Combined, the two instruments represent a cohesive

effort to address water as a risk to mining operations

that require both social and technical solutions.

Anglo American conducted a pilot implementation of

WETT in Rustenburg, South Africa, in 2011. AngloPlats’

mine in the region and the local municipality agreed

to build a water treatment plant to improve treated

sewage effluent quality, and also to reuse a portion of

a treated effluent in mine operations. This process is in

ongoing negotiations between the company and the

community, and highlights how monitoring through

a tool such as WETT can facilitate new innovations in

technology and social engagement.

24

DIMENSION 2: Multidirectional Communications: Building Trust and Empathy

Multidirectional communication (receiving and sending

information) is critical to building relationships and

avoiding conflict. Identifying key stakeholders and

incorporating their concerns early on in a culturally

appropriate and inclusive manner is crucial to obtaining

social license. Sharing information openly can build

trust, help demystify natural and technical water

processes, and minimize rumors related to mining.

The following actions are recommended:

1. Form a multidisciplinary communications team; go beyond media relations. This team should focus on listening to and

understanding stakeholders first, then articulating

thoughtful responses and follow-up. A diverse

but tight-knit communications group, which

may include men and women with social media,

community outreach, political, engineering, and

investor relations skills, can serve as a nerve center

to engage with internal and external parties to

foster two-way communications. Understanding

and reconciling multiple perspectives can

create cohesion within the company as well

as between the company and government

or community groups. To begin building this

cohesion, the communications team could initially

engage stakeholders and ask what their main

environmental and social concerns regarding the

project are; how they would best like to receive

communications; in what language; how often; and

in what format (video, comics, photos, etc.).

2. Use communication and engagement as a form of risk management. Do not wait until

a crisis has occurred to design response scenarios.

However appropriate, a response to a crisis can

still come too late to recover damaged relations

with the community. Be proactive in setting up a

communications infrastructure with continual

but manageable information flows. Crisis

response should be a part of a broader proactive

toolkit. A robust grievance mechanism provides

essential early warnings for risk management and

relationship building.

3. Communicate throughout the mine life cycle. Communities are more receptive

to collaboration if they are a part of a process

where communication is open and feedback

is incorporated into planning and practice.

Exploration, construction, operation, and even

closure involve multiple parties. Transferring

information between project stages — across

staff and to the community — is often overlooked.

Using the consultation suggested in action

1, set up protocols for receiving and relaying

information (through, among other things, town

hall meetings, notice boards, and radio) to the

community throughout the mine life cycle to

ensure continuity in relationships. Empower local

counterparts with information and understanding

of technical processes.

4. Use local languages and networks to ensure messages are heard and understood. Translate technical work

and documents into culturally appropriate

communications materials using local languages

and non-technical terms. For example, train locals

to test water quality instead of showing them

25

foreign studies whose findings state that the water

is not impacted by the project. Information and

awareness raising can be supported by community

relations teams, noticeboards, local newspapers,

community meetings, women’s networks, social

media platforms, and municipal and community

leaders. Use “digital dialogue” or short message

service programs from local staff to update the

community on new programs and initiatives.

Information from any trusted source can be much

more persuasive than scientific facts from strangers.

5. Share communications practices to build trust and bolster industry cooperation. If local people do not trust one mining company,

this lack of trust can negatively affect other

companies. Establishing higher standards of

transparency and frequent communication

can improve the community’s overall view of

the industry. By enhancing the population’s

knowledge of water and mining, there may be

significant economies of scope for companies to

capture. Mining companies across countries are

demonstrating the desire to learn from one another

and collaborate more, but they are also hesitant to

raise potential fears of collusion.

The following case studies explain how two companies

harness multidirectional communications.

26

CASE STUDY 3:NEWMONT YANACOCHA MINE, CAJAMARCA, PERU

The experience of the Yanacocha mine in Peru

illustrates how the company has engaged the full

spectrum of multidirectional communications, including

stakeholder engagement, to reach cooperative

solutions, rebuild relationships, and reduce social

conflict. As one of South America’s largest and

most storied gold mines, Yanacocha has alternated

between periods of social peace and conflict with the

communities in which it operates.

In 2000, a contractor working at the mine caused an

accidental mercury spill that affected the health of

several hundred people. In 2012, clashes between police

and protesters demonstrating against mining practices

led to five deaths. The twelve years in between these

two incidents were marked by relative calm: only two

grievances against the mine were filed with the World

Bank Group CAO for concerns directly linked to water.

In response to these complaints, Yanacocha recognized

the need for internal changes regarding water quality

monitoring, information sharing, and responsible

environmental management.

A group called Mesa de Diálogo y Consenso,

established in part with the CAO, worked for more

than four years to create a space for public and private

entities to convene and engage in mediation and

community capacity-building workshops. Through

this forum, a participatory water monitoring program

was established to address ongoing concerns over

protecting water quality, and to conduct a series of

information-sharing workshops aimed at addressing

water availability issues with the community irrigation

canals. More recently, a groundbreaking Listening

Study sponsored by Yanacocha and independently

conducted by the Centre for Social Responsibility in

Mining in 2012 found that many stakeholders believe

the mine is responsible for environmental damage and

has disregarded cultural sensitivities. In an effort to

convey a sincere commitment to change, the company

made several dramatic shifts beginning with moving

company headquarters from Lima to Cajamarca to

build closer relationships with host communities.

The company also sponsors a radio station providing

relevant information on a variety of topics to local

listeners and is encouraging staff to participate in

local organizations, boards, and schools, among other

outreach efforts. This cultural shift embraces respect,

listening, and relationship-building in a proactive

attempt to rebuild trust and rapport with local

stakeholders. Rebuilding trust is arduous, and it is still

to be determined whether the measures implemented

by Yanacocha will successfully change perceptions and

help obtain informal, but necessary, approval from the

regional government and local stakeholders.

27

CASE STUDY 4: TECK RESOURCES, CARMEN DE ANDACOLLO (CDA) MINE, CHILE

When Teck Resources acquired the CdA Mine, they also

inherited a water conflict because the previous owner

had not adequately communicated to the community a

change in plans that impacted the community’s water

supply. This resulted in protests and legal actions that

affected operations as well as Teck’s public image.

Teck realized that there would be no quick fix to

this problem, and that higher-level changes in the

company’s action plan would be needed.

In an effort to resolve the conflict, Teck implemented

a set of strategies to engage communities of interest

including:

• Conducting further hydrogeology field surveys and

sharing findings with interested groups

• Creating a participatory water-monitoring group, co-

owned by Teck and local stakeholders, to hold open

discussions and conduct field testing of water quality

• Formally committing to improve quality and quantity

of drinking water by signing an agreement with the

community to provide higher quality water and a

backup supply in cases of extreme shortage.

“Through ongoing dialogue and collaboration, there is

now recognition that water is a finite, shared resource,”

says Mauricio Gómez, CdA Mine’s Superintendent of

External Relations. “Continual investment and dialogue

about water sustainability will be necessary to ensure

both CdA’s and the community’s long-term viability.”

Since Teck began implementing new strategies, protests

have stopped and the local attitude has shifted to

promote company-community partnerships. Teck has

committed to maintaining a community of interest

water group, participating in co-monitoring programs,

and collaborating with local stakeholders on water

planning as part of a greater effort to foster open

communication and transparency.

28

DIMENSION 3: Co-Managing Knowledge and Resources

Water is a shared resource at the catchment level,

seeping beyond any project gates or dams that human

beings can build. As such, long-term management

strategies to optimize the productivity and accessibility

of water can only be defined and supervised by

multistakeholder partnerships. Co-management of

resources in this context can mean collaboration

between company and community; company and

government; or among industry, government, and

community. In regions where mining activity is

concentrated, cumulative impacts require even

more multistakeholder cooperation. Companies are

also seeing the benefit of collaborating with each

other as well as with the government and affected

communities on water management strategies.

The following actions are recommended:

1. Build a platform to share knowledge with local partners. Examples of this range

from an external water board that oversees joint

fact-finding and coordinates information sharing,

to selecting several members of the project team to

meet regularly with a broad cross-section of people

within the community. These meetings are an

opportunity to share company information about

water use, but also to hear from communities on

issues such as changing water patterns, concerns

about water quality and availability, and to gauge

local knowledge on how to improve water use.

2. Diversify sources of expertise and data. Academic researchers, activist groups,

non-governmental organizations, elected officials,

ADVANTAGES TO A SECTOR-WIDE APPROACHA sector-wide approach to delivering accurate information consistently in a culturally appropriate way

helps build capacity and trust across a region. It strengthens relationships across companies, enabling

coordinated approaches to challenges and opportunities with communities. Shared management

between the industry and the impacted communities eases tensions and facilitates joint solutions finding.

An analysis of projects within Australia’s mining sector found that collective efforts across sectors were

able to successfully address cumulative environmental impacts. The majority of the collaborations

involved diverse stakeholders, including the government, although most were nonbinding efforts.15

Industry experience shows that successful multistakeholder collaborations include the following steps:

selecting an independent chairperson to facilitate, adopting a committee- or board-style structure, using

media for public transparency and communicating updates, and holding occasional workshops to engage

with local communities and train them.

ICMM’s new water strategy emphasizes such opportunities for sector-level collaboration.

15 Centre for Social Responsibility in Mining & Centre for Water in the Minerals Industry, Sustainable Minerals Institute, 2010. Franks, DM, Brereton, D, Moran, CJ, Sarker, T and T, Cohen. “Cumulative Impacts — A Good Practice Guide for the Australian Coal Mining Industry.” The University of Queensland. Australian Coal Association Research Program. Brisbane. 29

and local citizens potentially have the capacity and

will to collect water quality data related to mining

projects. Increasing the breadth of expertise can

improve data quality and validity in the public’s eye.

Engage with communities first to determine which

non-governmental organizations or universities are

most credible to them. Then work with other parties,

including civil society, community members, local

government, academics, media, donors, companies,

and other sectors to provide a credible, trusted,

third-party analysis to interested stakeholders.

3. Establish a common, transparent starting point. Use data from detailed public baseline

studies. This information can be used to reach

agreement on shared goals and objectives, establish

roles and responsibilities, and chart progress over

time. This is also an opportunity to collect data on

community perceptions around water and mining.

The data from these surveys can inform alignment,

communications, and co-management strategies. It

is also important to update these data at regular

intervals throughout the mine life cycle and adjust

management strategies accordingly.

4. Design a participatory monitoring program to build awareness, skills, and trust among diverse parties, including local communities. This program can be

designed and managed through a third party, or

through the company with an external board,

and should have formal rules for collecting and

reporting data. Most important is to follow

internationally-recognized scientific guidelines

for water sampling, analysis, and reporting of

data. Local stakeholders must have influence over

what indicators are tracked. The company and

local stakeholders should agree on what points to

monitor, what parameters will be tested (with the

guidance of a technical expert), how often samples

should be taken, who should take the samples,

what labs should be used, how results can be best

communicated back to the community, and what

national and/or international standards will be

used to analyze the results. Long-term commitment

by the company and other sponsors to provide

resources (human and financial) is key to ensuring

continuity over time.

5. Capitalize on new technologies. Satellites,

cell phones, and spatial mapping make it possible to

establish a common comprehensive geo-database of

important water information in a country, region, or

community. Today, many different sources of data

can be triangulated to improve water management

strategies. Implementing new research into

desalination, reuse, and treatment methods can

engage diverse actors and build new platforms of

cooperation and trust. Increasingly sophisticated

tools are available to simulate water management

scenarios, including multistakeholder negotiations

and resource-sharing plans.

The following two case studies provide examples of

how to co-manage knowledge and resources.

30

CASE STUDY 5:RIO TINTO LA GRANJA COPPER PROJECT PERU

Rio Tinto Mining Peru (RTMP) is developing the La

Granja project located in the district of Querocoto,

Cajamarca. Over 80% of residents of this district are

small-scale farmers with low productivity. Despite

the region’s abundant water resources, inadequate

management, distribution and use of water limit

agricultural production. Rio Tinto has initiated an

innovative integrated water management approach with

local farmers to mitigate conflicts around mining projects

related to competition between farming and mining for

access to water resources.

This strategy, which Rio Tinto is implementing at an

early stage of development, aims to lay the foundation

for trusting relationships with farmers of the

Querocoto district, and to facilitate expansion to the

lower basin districts, where agriculture is also the main

economic activity.

Managing water in an integrated way is a great

challenge due to the presence of several stakeholders

who rely on the same water resource but have different

points of view. RTMP worked together with the

communities in the district to diagnose the situation

in a participative way in order to identify all direct and

indirect water users and the problems associated with

water management. Through this diagnosis RTMP found

that there was a lack of formalized oversight of water

resources by the government, a lack of organization

among the farmers, and inadequate use of agricultural

technologies available to the farmers. To address these

issues, RTMP has supported farmers in establishing and

formalizing water user committees that will help build

knowledge about how much water is available, how it is

distributed, and for what purposes.

RTMP also found that community elders were seen as

experts in water management. RTMP approached them

about assisting in forming the user committees. The

company’s strategy was to communicate its willingness

to support the farmers in obtaining water use permits.

RTMP also sought to deepen stakeholders’ understanding

of the La Granja project, so during the participatory

diagnosis and the water user committee meetings, the

company explained the status, timelines, technical, and

economic aspects of the project, and fielded questions

from community members. Through the diagnosis,

connecting with community elders, forming the water

users committees, and, finally, in the ongoing process

of supporting the farmers’ pursuit of water permits,

RTMP has built trust not only with the farmers, but

with the wider community as well, and has increased

the involvement of the local and national government

on water management. By allowing the community to

participate in monitoring procedures and in interpreting

results, the company has been able to build trust because

the community understands how water in mining can be

controlled and kept clean without generating negative

impact in the valley.

As a water stakeholder in the area, RTMP is committed

to the sustainability and success of water management

in Querocoto. Together with key government and

community leaders, the company is part of a working

group called the Integrated Management of Water

Resources of the District of Querocoto. The group is

preparing a water resource management plan that will

consider the needs of all water users.

31

CASE STUDY 6: ANGLO AMERICAN, QUELLAVECO PROJECT, PERU

In 2013, representatives of Anglo American’s Quellaveco

project in Peru negotiated 26 specific agreements with

community and government representatives using

a mechanism called a “dialogue table” designed to

allow a mining company, local authorities, and local

communities to agree in advance on the company’s

roles and responsibilities vis-a-vis the community.

In Quellaveco’s case, the process required 18 months

and 22 meetings that produced agreements covering

major areas of concern, including the use of water

resources, mining environmental impact issues, and the

social investment in the community that the mining

company plans to make.

Proponents of the dialogue table say it can build trust

between a mining company and the community in

which it operates, but caution that a successful dialogue

table must include stakeholders that truly represent

everyone involved. All sides in negotiations must clearly

understand the agreements reached and their potential

impact to reduce the possibility of future conflict.

The parties must agree that any agreements made at

the dialogue table are binding and that monitoring

mechanisms are employed for compliance only — not to

reopen issues already decided. There also needs to be a

mechanism to communicate the agreements reached to

the larger community.

If done well, a dialogue table can help reduce tensions

between a mining company and the community, and build

trust over the long term. In the case of the Quellaveco

project, agreements reached will govern construction and

operation of the mine for an estimated 32 years.

32

INTEGRATING THE THREE DIMENSIONS: A SHARED VALUE APPROACH TO WATER MANAGEMENT

THE MOST COMPREHENSIVE AND EFFECTIVE STRATEGY for managing water issues

incorporates all three previously discussed dimensions,

supported by implementation of best industry practices

in water conservation during the project cycle. Proper

alignment of internal functions allows mining companies

to maximize risk and opportunity assessment, create

accountability, anticipate problems before they occur,

and resolve issues that arise in a timely fashion with

a harmonized voice. By creating a multidirectional

communication strategy, companies can transparently

engage with stakeholders. Finally, fostering a co-

management environment with other parties (companies,

local stakeholders, and/or government) in an affected

region ultimately benefits the sector as a whole.

A THREE-DIMENSIONAL APPROACH

• Consider and integrate water management issues

from the very beginning of the project.

• Adopt a company-wide strategy that coordinates

and rewards the efforts of senior management,

technical, communications, and community-

relations staff.

• Invest in a multidirectional communications plan

throughout the mine life cycle. Listen to the

expectations of the community and consistently

make information available and accessible.

• Work toward shared responsibility and local capacity

building. Demystifying the technical side of how

companies manage water in their operations

through a water management curriculum (possibly

delivered by a neutral third party) can help establish

common vocabulary and build trust for dialogue and

shared decision-making.

• Partner with other companies, including those not

directly involved in mining, active in the region to

share best practices and build trust.

The following case study describes a water management

approach for shared value.

33

CASE STUDY 8:A SECTOR-WIDE, MULTISTAKEHOLDER WATER MANAGEMENT INITIATIVE IN MONGOLIA

More than 13 mining and exploration companies

operate in or are exploring South Gobi Desert in

Mongolia, an arid region that is home to a primarily

nomadic population of 56,000 people. Limited

consultation about water use between these

companies, surrounding communities, and government

has contributed to fears that increased water demands

for mining could dry up crucial water systems,

deteriorate pastureland, and negatively impact culture

and livelihoods. As a result, in 2013, the local citizens’

representative council in the South Gobi province

passed a resolution banning the use of groundwater

for mining operations. While the council decision

was later voided by the national government, which

ruled that water use decisions were beyond the scope

of the citizens’ council, the resolution demonstrated

the negative local sentiment toward the mining

sector and its water use in the region. The mining

sector, meanwhile, failed to publicly recognize water

as a shared risk, leading to even greater anxiety for

locals, spawning mistrust, and inviting conflict. This

apprehension has been stoked by misinformation, little

public data, and insufficient communication.

Mining companies realized they needed a platform

to identify shared challenges, successes, and common

ground for collaboration on the social and technical

management of water in the South Gobi. In response,

IFC, along with several mining companies and donors

(Canada DFATD, EBRD, FMO, WB, WRG), started

convening the mining sector for a series of roundtable

discussions. Through these quarterly roundtables,

participating companies developed short- and medium-

term action plans to improve internal alignment

and use multidirectional communications on water

management. The roundtables are held in two parallel

tracks: one for decision-makers of the participating

companies to ensure the activities continue in line

with the overall business objectives; the other supports

technical staff charged with integrating best practices

into their work programs. In longer workshops, the

technical teams from the water, environment, social,

and community-relations staff exchange ideas, successes,

and challenges through facilitated sessions and group

work, some of which they lead collaboratively. In this

way, the ‘boots on the ground’ staff builds relationships

across functions within their own organizations and

with their peers from other companies operating in the

same region. They also develop professional skills by

focusing on improving water management practices.

The internal alignment of technical, environmental,

and social staff within companies and across

the industry involves raising awareness of the

responsibilities, realities, and risks of water

management across business functions. Mechanisms

to do this include company presentations on water

management, mine site visits for peer-to-peer learning,

and training that integrates both the technical and

social aspects of water management. In addition, the

roundtable companies are collaborating across the

sector to develop symmetric standards and policies,

increase public information-sharing, and engage

communities in participatory monitoring.

Recognizing that deliberate and factual information

outreach can aid in demystifying water in mining

and facilitate shared responsibility, the companies

helped develop a training module for Integrated

Water Resource Management (also the new regulatory

34

goal of the Government of Mongolia). The aim is to

offer this module to broader stakeholder groups —

government, civil society, communities, academia,

and media — building knowledge for informed and

increased co-management of water. To help track

impact and drive future interventions, the companies

participating in the roundtables helped design a

baseline survey to determine population perceptions

of the impact of mining activities on water resources.

Among other key findings, the survey found that

residing in a mining-impacted district is the most

important factor leading people to perceive that

mining impacts the quantity and quality of water

for both household and work purposes. Survey

respondents said the most significant factors affecting

the quantity of cooking and drinking water (from

most significant to least) are: 1) mining; 2) weather;

3) grazing; 4) informal mining. In fact, grazing and

agriculture are the most water intensive sectors in

the country. Finally, important for the companies to

consider as they work to improve multidirectional

communications around water management,

respondents’ main sources of information were —

in order of importance — television, community

meetings, government meetings, and rumor. The data

will be made public to inform and align company

water management activities with stakeholder

perceptions and government priorities.

The efforts are expected to reduce social tensions,

minimize information asymmetry on water resources,

and encourage company-community-government

collaboration on water management.

35

ALL WATER ISSUES ARE LOCAL. To effectively

manage risks associated with water access and use,

companies must engage stakeholders from the very

beginning of a project. A concerted, coordinated

approach, incorporating all levels and all functions

within the sponsor company, is essential as a

foundation for success. Sustainable water management

creates significant opportunities for companies that are

proactively finding ways to use water more efficiently

and manage it more collaboratively.

Companies can prevent or mitigate conflicts over water

by investing in internal alignment, multidirectional

communications, and co-management with local

stakeholders, including communities, governments,

and other industry players. Critical to this 3D approach

is the collaboration of technical and nontechnical staff,

which may be vital for starting or continuing economic

activity in a region where communities and the private

sector depend on water for livelihoods and operations.

The case studies presented in this discussion paper can

serve as a catalyst for companies to review internal

policies, create innovative strategies, and explore

new partnerships for managing water. Incorporating

social elements through the methods suggested in

this discussion paper can lead to establishing trust,

open communication, environmental monitoring, and

shared value — all factors that have been shown to

reduce conflict.

Engaging in co-management among parties who clearly

understand watersheds and water cycles moves the

debate away from a competitive zero-sum game to a

negotiated and sustainable sharing of resources.

COLLABORATION FOR A SUSTAINABLE FUTURE

36

37

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