Barrick Gold Corporation - Assignment Example

BARRICK GOLD CORPORATION Student name: Code & course Professor’s name University City Date Barrick Gold Corporation Question 1 . Stakeholder’s concern is an imperative aspect for any business; hence a company should conform to the stakeholder’s requirements. Whereas a corporation’s objective is to generate profits, it is entitled to observe its moral obligations for the community. As such, Barrick has showcased such attributes, where it insists on maintaining its businesses at the expense of the people. Despite Barrick’s aim of augmenting profits and maintaining business, it has blindfolded the community members by initiating projects that appear to support the community. For instance, in the Pascua Lama project Barrick created a pediatric ward in Argentina where children in the Husco valley were provided with school buses to facilitate transport services. Barrick has furthered to pay for the creation of a book on the history of the Diaguita indigenous tribe. Tentatively, it has initiated water systems improvement; showcasing its support for the cultured Diaguita tribe. Tentatively, Campisi (2008), states that Pascua Lama Project promised job opportunities to the local communities from both sides: Argentina and Chile. On the other hand, Barrick in its Environmental impact report (EIR) revealed its support of maintaining the glaciers as a primary source of water. Barrick has undertaken its operations contrary to its commitment by infringing the core obligation of corporate social responsibility; that is a consensus with the community. In Tanzania, for example, Barrick’s security shot at local area residents who explored the mining site seeking gold remnants. In Barrick’s Papua New Guinea mining site, their workers allegedly raped women in the area. In a letter to the Barrick Gold 2010 annual general meeting presented by residents of the Huasco Valley in Chile, it claims that the Pascua-Lama project had seized the people’s ancestral land by denying them access, corrupted their culture; where the project has led to the destruction of flora and fauna. Studnicki-Gizbert is quoted as saying that Pascua Lama project is a performance but not a consultation (Solyom, 2012), because Barrick offer the locals with incentives and projects without consulting them if they really do need the project, it is like buying them out (May, Cheney, & Roper, 2007). It is evident therefore that Barrick failed to consider the immediate stakeholder prior to the commencement of the project. The conformance to stakeholder’s requirement could have enable it garner significant support. Question 2 Stakeholders play an important role in an organisation; as such stakeholders can be secondary and primary stakeholders. Simply put, primary stakeholders are entities or individuals who have direct interests or benefit from the operations of a business or corporation. Some of these entities include but not limited to stockholders/investors, employees, creditors and debtors of a company (Friedman, & Miles, 2006). On the other hand, secondary stakeholders can become primary stakeholders in the event that the company employs them. In this case, the primary stakeholders are the stockholders, employees (both local and experts from abroad), suppliers and governments (Argentina and Chile). The Pascua lama project’s local stakeholders are the immediate community. Contrariwise, the international groups can be divided into two main categories: international organizations such as the international labour organization (ILO), World health organization (WHO), and United Nations Environmental Program (UNEP), and Non-governmental organizations. When dealing with local stakeholders, there need be a direct consultation in order to carry out a project such as the Pascua Lama Project in order to understand the people’s concerns and obtain subsequent approval. Contrary to such expectation may result in significant unrest among the locals. , In Barrick’s case, it did initiate community development projects but this was not sufficient to gain support and approval from the local people. In order to carry out any project on occupied land, the stakeholders of a project ought to respect the culture, values, beliefs and decisions of the local community. The objective of international groups such as environmentalists is to voice and fight for the rights of the oppressed and underprivileged in the society. The international groups are involved in the rule of law promotion through the provision of knowledge, exposures, diffusion of capacities and conditionality. The international organizations depend on conditionality because they possess authority to prosecute and reinforce laws and statutes governing organizations. Non-governmental organizations do not have the power and authority to enforce laws, but they use capacity building and demonstration strategies to spearhead issues voiced by the local stakeholders. The international groups have the finances and influence to impact issues that the local stakeholders cannot. The international groups help expose the crimes and hidden agendas that corporations carry out while at the same time they help the corporations to deal with pre-set conditions and laws. In the Pascua Lama project, local stakeholders are easily gullible with short-term advances as it can be seen that the local farmers are divided over the existence and benefits of the project. It is evident therefore that dealing with local stakeholders present significant challenges since it necessitates the need for direct communication and consultation. On the other hand, international groups play a mediating role in voicing the larger stakeholder’s needs. Question 3 Consensus aspects in decision making pertaining the compliance to licensing. Simply put, it presents guiding principles that mandates the start of any project. Whereas different approaches to consensus are in place, unanimous consensus is widely used. In reference to the Pascua-Lama project, a unanimous consensus is required to obtain the social license to undertake mining activities. The claims by the Huasco Latino are that through exploiting their much anticipate and important social needs, Barrick is ‘buying’ the local’s trust. Clouded by the expensive social benefits, some locals have accepted and approved the project as a beneficial and viable exploitation. The Corporation should have consulted the locals by conducting surveys on of their needs so that they can buy them out. The consensus should originate from both the government and the local community; without such a process in place then the project should otherwise not have been approved. The Pascua Lama project was only approved by the authorities, but not the local people. A corporate responsibility is only one side of the coin in obtaining a social license for carrying out a project, a corporation should go a step further to investigate the economic, physical and cultural effects of a project on both the short-term and long-term (Dashwood, 2012). The long-term effects of the Pascua Lama project are; glaciers melting and leaving the area with no sustainable water and corruption of their culture. Permission to commence a project can be divided into two categories: firstly, ‘active permission’ which can be defined as the permission that is legally binding and is being conferred by the local or state authority, secondly, ‘passive’ permission which is not legally binding and is being conferred by a non-authoritative party. For the Pascua Lama Project, they were conferred the active permission to carry out the project but they had a partial passive permission. The local authorities gave the go-ahead for the project to be carried out, and this was permission enough to commence the project without the agreement of the local authority. A passive consent cannot enable a project to be carried without an active permission, but the converse is true. A passive permission only acts as reinforcement to an active permission. People who confer passive permissions have the power to stop active permissions through demonstrations, lawsuits and implementation of laws. The Huasco Valley region residents filed two lawsuits, one on the environmental degradation by the project, the other on the introduction of a different culture. In 2006, protestors demonstrated in front of the presidential palace in Chile. Conclusively, it is important to note that agreement by international organizations such as the United Nations is imperative in the commencement of a project because they set statutes that concern corporations. Agreement by non-governmental organizations is not important since their approval is not legally binding, and it will need a court order or a protest to warrant an injunction or termination. In conclusion, the residents of Hausco valley did not agree with the Pascua Lama project but it did proceed. Question 4 Environmental Impact Assessment of environmental impacts is important in the establishment of industrial projects. In different ways establishments and operations of these projects affect the environment, and consequently affecting human lives. Environmental entities being significant players in ecological balance therefore need protection from destructive negative impacts. With the reduction global fall in life expectancy, there have been outrageous concerns for contributing factors towards this fall (Biswas & Agarwal 2013, pg 15). In most cases, this has been attributed to health concerns. Arguably, the increasing trends in industrialization have exerted significant implications on health (Dixon et al. 2013, pg 63). Industrial technologies and operations are used release emissions to the environment that cause damage to the environment. Other operational activities also cause destruction to the environment. As such, region occupants in industrial regions have developed concerns towards the environment and climate change aspects. There has been a global outcry for existing industries and industries being established to set measures towards sustainability and green technologies in order to conserve the environment (Dixon et al. 2013, pg 51). As a result, industries are forced to conduct environmental research with regards to their operational mechanisms and technologies so as to provide environmental impact assessment reports and keep environmental records that show priority and concerns for the environment. Processes of industrialization or installation of industry technologies have different diverse implications or impacts on the environment (Reid 2013, pg 29). Such impacts may be prominently evidenced by effects on agricultural activities, domestic operations, cultural domains, health statuses and other destructive aspects that affect human life (Biswas & Agarwal 2013, pg 64). As such, it is necessary for industrial establishments and projects to consider the environmental impacts the industrial processes would have on the environment. In this case, industries are obliged to observe social responsibility, that is, not only serving profitability interests of the company but also ensuring sustainable solutions to the livelihoods of the people (Kolk 2012, pg 81). In as much as the industrial operational procedures are essential for the economic development and improving standards of living, responsibility towards environmental conservation is tantamount. Therefore, no levels of environmental degradation should be tolerable for industries. Instead, industries are required to install environmental conservation measures or inclusion of technologies that provide environmental impact management solutions. According to the study, the establishment of the Pascua-Lama project by Barrick Gold Corporation has faced rampant opposition due to environmental concerns of the local populations. Clearly, despite the numerous benefits the company would present to the population in terms of improving the socio-economic positions, the populations surrounding the project seems to have unquenchable concerns regarding the environmental impacts of the project. This opposition is similar to the Omani’s rejection of natural gas and oil energy production technologies due to environmental concerns and preference to renewable solar energy technologies (Huijts, Molin & Steg 2012, pg 529). Similarly, it can be compared to the Australian National Broadband Network project that was put to a halt due to opposition as a result of improper disposal and handling of asbestos fibres (Handzic & Durmic 2014, pg 57). To begin with, the project is reported to have contributed to 50-75% loss of glacial deposits which for a long time has been a water source for the residents whose environments experiences desert conditions. In addition, the mining processes involve large explosions and blasting of rocks, which according to environmental studies distorts soil structure and conservation thus impairing the functions. As a result, there are fears and concerns that during the 25 years of operations and after the operational period, the project may negatively impact on the environment and affect the lives of the neighbouring communities, while in profitability benefitting other nations (Arenson, Jakob & Wainstein 2015, pg 32). However, the concerns are mainly, environmental rather than economic. Barrick on their part has arguably put in place adequate measures on environmental impact management. Despite the substantial damage to glaciers, the company has set strategies to control water quality and provide distribution channels for water to the community for domestic and agricultural use. However, the destruction of the main water source, the glaciers, seemingly show that very little can be done to control the situation. Subsequently, the report reveals encroachment to other water reservoirs, the forests. In the long run, due to spatial factors with regards to the project developments, destruction to glacial deposits and forests are inevitable. Despite conducting a thorough environmental impact assessment and installing ‘green measures,’ the company is yet to meet the locals’ demands and expectations of sustainable environmental management. With the majority asking the company to abandon the project and leave; there is minimal, rather, no solution left for environmental management by the project. In conclusion, assessing environmental impact in developing and operating industries is important. Even more important is focus on measures on environmental management that would significantly cut down on the impacts. Implementation of these measures requires strategic planning and management of industrial emissions and environmental resources within or around the industries’ location. This way, projects and operations are able to run without posing any threat to the environment. Question 5 Way Forward for Barrick Businesses and companies’ successes are mostly gauged by the abilities of the companies to manage and control the external and internal factors. Effective control of these factors is key in optimizing profits and countering operational challenges. However, in other cases there are tendencies of these environments getting out of control. Such situations place these entities in positions where they are forced to make particular strategic decisions regarding their operations. As the founder, Peter Munk, observes the Pascua Lama mining project is in the middle of a storm that would generally affect the company’s operations. Unfortunately, these challenges arose under dramatic circumstances having been less anticipated by the company’s management (Kronenberg 2013, pg 78). Peter Munk further explains the absurdity of their position in that the governments that begged the company to develop in their countries to contribute to their economic and infrastructure development later bowed to local opposition of the projects and rejected their developments. As a result, the company is hit by unprecedented challenges not only from external factors such as local resistance and fall in gold market prices but also internal factors from shareholders oppositions (Arenson, Jakob & Wainstein 2015, pg 28). Additionally, the company has so far gone ahead into supporting local infrastructure and facility developments with the aim of winning over the populations support in the implementation of the project. This is beside organizing a series of public meetings and sensitization activities aimed at garnering support for the gold mining project. However, despite all this financially costly efforts and initial developmental efforts, the surrounding population is yet to be convinced by their environmental management mechanisms. On the contrary, all the effort put in by the company are seen as mass hypnosis strategies and public displays. In the success of business entities or operations, managing the external factors is tantamount (Cullen & Parboteeah 2013, pg 36). As such, companies are involved in strategic planning measures, and implementation of strategic management plans to counter potential external barriers to successful market penetration and operations. In extreme cases, where external markets are seemingly unmanageable, businesses are forced to make crucial decisions for the sake of the entity’s progress (Cullen & Parboteeah 2013, pg 55-56). These crucial decisions may entail either engaging in a different venture or quitting operations, in particular, uncontrollable regions. This saves on costs and avoids incurring numerous over running cost as is in the cases of Barrick. Using the Porters Five Forces Analysis of Barrick’s Pascua Lama Project, the project would seem to perform well in the internal and external markets. However, with both the governments of Chile and Argentina, seemingly backing out their support, gold market prices falling, and subsequent pressure from the shareholders to quit, the project may cave in due to the pressures. With these considerations; in the positive interest of Barrick, it would be advisable to put completely a halt to the project. To conclude, failure to control internal or external business environments may slow down or halt operations leading to losses. While these losses may generally affect other company’s operations, crucial and critical decision making in the interest of the company is inevitable. The most important lesson drawn from the Pascua Lama study is that the internal and external business environments are never steady. As such, business entities need to always be prepared to counter these changes and make important decisions. Question 6 Challenges in operations of project usually exert implications on the companies. These implications not only affect the current but also future operations. Most companies strive to counter this challenges but one that is always difficult to fully counter is adherence to CSR. While most companies have strategies for CSR, some pay insignificant attention to environmental details and attract concerns from the public. This section examines three aspects of the case study regarding Corporate Social Responsibility. The Implications on the Future of Barrick and Gold Mining Industry Business analysts have always insisted that under all operational circumstances and challenges, businesses ought to recognize the significance of the situation in dissemination of knowledge crucial for future strategy formulation (Cullen & Parboteeah 2013, pg 27). In effect, reactions and trends in the external and internal business environments are potential shapers of plans since they offer valid lessons. At the same time, the current and future implications of the forces and pressures from these environments cannot be undermined. On Barrick, these implications are massive not only on current operations but also future operations. According to the study, the company had incurred a heavy cost overrun with the end-of-project costs escalating to an astounding $8.5 billion, with the production still pushed back to 2016. In addition, the shareholders were expecting and demanding profitability from the project developments, which seemed uncertain especially with the fall in the gold market prices. Notably, the company had ventured into seeking social consensus by avidly installing environmental management systems and funding public education programs regarding the project (Arenson, Jakob & Wainstein 2015, pg 30). However, in the long run, these strategies were seemingly futile. As a result, the company is faced with a major decision to make on whether to hand on and renegotiate positions with the governments and surrounding population (an expensive venture) or close down the project (implying a loss on the already incurred costs). So far, this compilation of situations forced the resigning of Munk. In the future, in the implementation of the projects, the company may review their strategies for gaining social consensus without incurring massive costs. At the same time, the company may tend to be more cautious in the negotiation of operations deals with governments. However, with the market instability of gold prices, the company may face operational challenges at various mines leading to losses or insignificant profits. Arguably, like suggested by some environmentalists and business analyst, the company may opt out the establishment of new mines in other nations. The gold mining industry will also have significant lessons to draw from this study. To begin with, it is important to anticipate market reactions and various market changes as a result of different market dynamics (Cherniwchan 2012, pg 442). Gold prices are unstable and may regularly fluctuate, including going low such that the profits in relations to the production costs may be insignificant (Clark 2013). The industry may in future consider cost effective mining and production technologies to counter this fall in prices. In addition, the industry would need to reorganize their environmental management structures and strategies for Corporate Social Responsibility. Standards of Social and Environmental Social Impacts Corporate Social Responsibility is key in gaining public trust and support in the operation of entities (Brown 2013, pg 17). With the drastic rise in industrialization and improvement of technologies, certain aspects of these developments have not augured well with the human populations. Cases of pollution, mostly water, soil and air pollution have significantly impacted by human activity, and human lives causing depletion of resources and serious health complications (Kronenberg 2013, pg 75). As such, health and environmental concerns in the recent years have been the main influencers of public acceptations and attitudes towards implementation of various developmental technologies of projects. In most cases, communities are more inclined to accepting green and safer technologies as compared to the potentially harmful project. Considering companies’ operations, standards of these responsibilities should be similar. Compromising standards of social and environmental responsibility due to the nature of operations is similar to corporate greed; where more attention is paid on profits despite the harm done by the consumers (Brown 2013, pg 54). As such, the gold mining industry should be no exception to the governing principles of social and environmental responsibility. On the contrary, these measures should be strictly enforced, and the companies urged to strategize on and implement sustainable environmental management technologies. Environmental and Social Damage Environmental and Socio-cultural factors are important aspects of human lives. These factors are not only significant in the advantages they present to human existence but to the attachments and meanings they give to the lives of communities (Epstein & Buhovac 2014, pg 15). For instance, communities tend to guard their ancestral lands succinctly. Moreover, others would strictly guard and protect their environment from any harm as it may be their source of livelihood. Regardless, all these are essential parts of human life and existence without which life becomes unbearable. In the development of projects and industries, spatial factors are inescapable. Tendencies to encroach land and certain environmental reserves are common due to the need to increase production space (Epstein & Buhovac 2014, pg 17). At the same time, environmental management presents extra cost that most entities are unwilling to incur. In both of these cases, there are serious implications for the social-cultural and environmental aspects of the surrounding populations. In such cases, the public is more likely to disregard or reject the project. In as much as industrial development is a positive indicator of economic progress and in most cases contributes to other developments, human life is most essential. Despite the market for vanity, damage to any of the environmental or socio-cultural elements is direct interference with human life that is unacceptable and unjustified (Brown 2013, pg 102). Therefore, whichever nature of the company, including gold mining companies, there is a need to adhere to levels of social and environmental responsibility in order to regard the environment and social factors. This way is winning the social consensus, and acceptations become easier. In conclusion, adherence to Corporate Social Responsibility is necessary for all projects and industries. Under whatever circumstances, compromises must not be allowed to these responsibilities in order to safe guard the environment and socio-cultural factors. 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