title: Conflict translates environmental and social risk into business costs.
abstract: Sustainability science has grown as a field of inquiry, but has said little about the role of large-scale private sector actors in socio-ecological systems change. However, the shaping of global trends and transitions depends greatly on the private sector and its development impact. Market-based and command-and-control policy instruments have, along with corporate citizenship, been the predominant means for bringing sustainable development priorities into private sector decision-making. This research identifies conflict as a further means through which environmental and social risks are translated into business costs and decision making. Through in-depth interviews with finance, legal, and sustainability professionals in the extractive industries, and empirical case analysis of 50 projects worldwide, this research reports on the financial value at stake when conflict erupts with local communities. Over the past decade, high commodity prices have fueled the expansion of mining and hydrocarbon extraction. These developments profoundly transform environments, communities, and economies, and frequently generate social conflict. Our analysis shows that mining and hydrocarbon companies fail to factor in the full scale of the costs of conflict. For example, as a result of conflict, a major, world-class mining project with capital expenditure of between US$3 and US$5 billion was reported to suffer roughly US$20 million per week of delayed production in net present value terms. Clear analysis of the costs of conflict provides sustainability professionals with a strengthened basis to influence corporate decision making, particularly when linked to corporate values. Perverse outcomes of overemphasizing a cost analysis are also discussed.
authors.affiliation: Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia; d.franks@uq.edu.au abebbington@clarku.edu.
authors.forename: Daniel M
authors.initials: DM
authors.lastname: Franks
authors.affiliation: Corporate Social Responsibility Initiative, Harvard Kennedy School, Cambridge, MA 02138;Shift, New York, NY 11205;
authors.forename: Rachel
authors.initials: R
authors.lastname: Davis
authors.affiliation: Graduate School of Geography, Clark University, Worcester, MA 01610;Institute for Development Policy and Management, University of Manchester, Manchester M13 9PL, United Kingdom; d.franks@uq.edu.au abebbington@clarku.edu.
authors.forename: Anthony J
authors.initials: AJ
authors.lastname: Bebbington
authors.affiliation: Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia;Rubenstein School of Environment and Natural Resources, University of Vermont, Burlington, VT 05401; and.
authors.forename: Saleem H
authors.initials: SH
authors.lastname: Ali
authors.affiliation: Centre for Social Responsibility in Mining, University of Queensland, Sustainable Minerals Institute, Brisbane, QLD 4072, Australia;
authors.forename: Deanna
authors.initials: D
authors.lastname: Kemp
authors.affiliation: Centro Peruano de Estudios Sociales, Jesús María, Lima 11, Peru.
authors.forename: Martin
authors.initials: M
authors.lastname: Scurrah
mesh_terms: D003159:Community-Institutional Relations / Q000191:economics*; D003220:Conflict, Psychological; D003247:Conservation of Natural Resources / Q000379:methods*; D004777:Environment; D019652:Extraction and Processing Industry / Q000191:economics* / Q000379:methods; D006801:Humans; D007407:Interviews as Topic; D011362:Professional Corporations / Q000706:statistics & numerical data*; D012306:Risk
keywords: regulation