The Success and Failure of Social Risk Management Systems: Mining MNCs in Armenia

    Research output: Contribution to conferencePaperResearch

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    Abstract

    When it comes to social risks is the business of mining properly one of the most exposed types of activities that a company can engage in. For Multinational companies (MNC) it is not only about maintaining good relations with customers, investors and local communities but also more distant stakeholders, not directly related to the business, who can raise issues that can have a significant impact on operations. Potentially threatening the MNCs ability to maintain its social license to operate and thereby initiating a stop of mining operation at a significant cost to the company. This paper is based on the case example of Teghout coppermolybdenum mine in North-Eastern Armenia, supplemented with evidence from other mining MNCs in the country, using interviews with key stakeholders, onsite fieldwork and public available information. It is found that MNCs in Armenia adopt a standards based social risk management strategy and that this strategy is based on the adoption of an international Corporate Social Responsibility (CSR) standard promoted by the World Bank. However, the fieldwork reveal that local and regional stakeholders, from whom social risk rise, feel disengaged from the process, continue to raise questions about transparency and in some cases actively oppose mining activities and that this is happening despite the use of stakeholder engagement management systems that is promoted through the standard. My hypothesis is that the implemented social risk management systems are ineffective because they lack organisational embeddeness, which makes the MNC unable to recognise the value of weak ties and therefore fail to build legitimacy and trust with local stakeholders. I argue that this is happening because MNC use of the CSR system focuses on building strong ties and legitimacy with investors and government, rather than on building trust with the local communities that actually pose the biggest social risk. This insight into the use of CSR standards has consequences for our perception of how effective these systems are in reducing social risk and the impact on the risk management that both MNCs and their investors are practicing in turn potentially threatening their social license to operate and thereby risking a ‘stop of operation’.
    Original languageEnglish
    Publication date2014
    Number of pages17
    Publication statusPublished - 2014
    EventThe 40th EIBA Annual Conference 2014. European International Business Academy - Uppsala University, Uppsala, Sweden
    Duration: 11 Dec 201413 Dec 2014
    Conference number: 40
    http://eiba2014.org/program/

    Conference

    ConferenceThe 40th EIBA Annual Conference 2014. European International Business Academy
    Number40
    LocationUppsala University
    CountrySweden
    CityUppsala
    Period11/12/201413/12/2014
    Internet address

    Cite this

    Taarup Esbensen, J. (2014). The Success and Failure of Social Risk Management Systems: Mining MNCs in Armenia. Paper presented at The 40th EIBA Annual Conference 2014. European International Business Academy, Uppsala, Sweden.
    Taarup Esbensen, Jacob. / The Success and Failure of Social Risk Management Systems : Mining MNCs in Armenia. Paper presented at The 40th EIBA Annual Conference 2014. European International Business Academy, Uppsala, Sweden.17 p.
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    Taarup Esbensen, J 2014, 'The Success and Failure of Social Risk Management Systems: Mining MNCs in Armenia' Paper presented at, Uppsala, Sweden, 11/12/2014 - 13/12/2014, .

    The Success and Failure of Social Risk Management Systems : Mining MNCs in Armenia. / Taarup Esbensen, Jacob.

    2014. Paper presented at The 40th EIBA Annual Conference 2014. European International Business Academy, Uppsala, Sweden.

    Research output: Contribution to conferencePaperResearch

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    AB - When it comes to social risks is the business of mining properly one of the most exposed types of activities that a company can engage in. For Multinational companies (MNC) it is not only about maintaining good relations with customers, investors and local communities but also more distant stakeholders, not directly related to the business, who can raise issues that can have a significant impact on operations. Potentially threatening the MNCs ability to maintain its social license to operate and thereby initiating a stop of mining operation at a significant cost to the company. This paper is based on the case example of Teghout coppermolybdenum mine in North-Eastern Armenia, supplemented with evidence from other mining MNCs in the country, using interviews with key stakeholders, onsite fieldwork and public available information. It is found that MNCs in Armenia adopt a standards based social risk management strategy and that this strategy is based on the adoption of an international Corporate Social Responsibility (CSR) standard promoted by the World Bank. However, the fieldwork reveal that local and regional stakeholders, from whom social risk rise, feel disengaged from the process, continue to raise questions about transparency and in some cases actively oppose mining activities and that this is happening despite the use of stakeholder engagement management systems that is promoted through the standard. My hypothesis is that the implemented social risk management systems are ineffective because they lack organisational embeddeness, which makes the MNC unable to recognise the value of weak ties and therefore fail to build legitimacy and trust with local stakeholders. I argue that this is happening because MNC use of the CSR system focuses on building strong ties and legitimacy with investors and government, rather than on building trust with the local communities that actually pose the biggest social risk. This insight into the use of CSR standards has consequences for our perception of how effective these systems are in reducing social risk and the impact on the risk management that both MNCs and their investors are practicing in turn potentially threatening their social license to operate and thereby risking a ‘stop of operation’.

    M3 - Paper

    ER -

    Taarup Esbensen J. The Success and Failure of Social Risk Management Systems: Mining MNCs in Armenia. 2014. Paper presented at The 40th EIBA Annual Conference 2014. European International Business Academy, Uppsala, Sweden.