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Sustainability in the extractive industries is a paradox

  • Adopting environmental management as a central part of the extractive business model has been a priority over the past two decades, making environmental impact assessments (EIA) critical to companies’ operations.
  • The purpose of an EIA is to identify, describe and quantify all potential impacts of a mining operation. The goal is to avoid, minimize, restore and compensate for all environmental damage.
  • When consultative processes are added and implemented properly, they can significantly improve a mine’s profitability by limiting environmental mitigation costs and avoiding conflict with local and indigenous communities.

The irreversible consequences caused by mineral extraction and the financial obligations imposed by legal systems in advanced economies have forced companies to embrace environmental management as a core component of their business models. Employee executives work diligently to demonstrate their employers’ commitment to preserving the environment and improving the well-being of local communities. They are supported by consultants, non-governmental organizations and government officials who are all committed to improving practices in the extractive sector. Some companies define their development projects and activities as ‘environmentally and socially responsible’, while promoting the ‘wise use’ of non-renewable resources. Increasingly, the term “sustainability” is being used to describe these corporate policies – despite the obvious cognitive dissonance inherent in using the word to describe extractive industries.

The regulatory process that governs the environmental and social impacts caused by mineral exploration and exploitation is organized through a technical study known as an Environmental Impact Assessment (EIA).

The purpose of an EIA is to identify, describe and quantify all potential impacts. The environmental impacts of the mining industry are well known and are the likely origins of the mitigation hierarchy, summarized as: (1) avoid, (2) minimize, (3) restore, and (4) compensate.

Occasionally an EIA can lead to the cancellation of a project, but more often it motivates the developer to change a particularly harmful aspect of a project, or to provide more generous compensation to affected communities. There are two broad classes of securities:

(1) Direct consequences arising from the construction and operation of the mine, oil well or associated infrastructure, such as a waste treatment facility or pipelines where a failure is caused by a design error, human error or a natural disaster (e.g. earthquake) may lead to catastrophic damage to natural ecosystems and nearby communities.

(2) Indirect effects, which are more remote and more difficult to quantify; for example, deforestation in landscapes with key transportation means or water degradation caused by recurring seeps and leaks that can alter ecological processes far downstream of mining sites and oil fields. Also called secondary impacts, these impacts are real and significant, especially if they harm long-standing communities whose livelihoods depend on natural ecosystems.

Assuming the project makes progress, EIAs are developed in parallel with an Environmental Action Plan (EAP), which has four basic objectives that align with the mitigation hierarchy.

Both tools involve consultation processes and, when properly implemented, can significantly improve a mine’s profitability, in part by reducing the costs of environmental mitigation and avoiding conflict with communities. Despite advances in using the EIA as a risk management protocol, the mining industry is populated by old-fashioned engineers and geologists who view EIA as a public relations document. They are often driven by short-term cost considerations and timelines that reflect their reputation as project managers. Consequently, the EIA is often used as a checklist of tasks that must be completed before commencing mining operations.

Group of male Perrhybris pamela butterflies feeding on minerals in clay along the Tambopata River. Image by Rhett A. Butler.

Progressive companies, on the other hand, use the regulatory and consultation processes to improve their operations and protect their investments. A controversial project can be challenged by civil society organizations in the court of public opinion; Regulatory agencies may be populated with allies, but officials will respond to controversy by delaying decisions. A poorly executed EIA or an unfair consultation process can cripple a project and destroy financial capital. Worse still, the unforeseen consequences of a catastrophic event can lead to bankruptcy when injured citizens take legal action through civil suits or when governments impose fines and damages due to negligence.

Since around 2015, companies have become aware of investor demands to comply with ESG principles, including the obligation to adopt best management practices. Not surprisingly, these are almost a mirror image of the mitigation hierarchy. Below are some examples of the environmental and social impacts associated with the extractive sector in the Pan Amazon.

“A perfect storm in the Amazon” is a book by Timothy Killeen and contains the author’s views and analyses. The second edition was published by The White Horse in 2021, under the terms of a Creative Commons license (CC BY 4.0 license).

To read previous chapters of the bookfind chapter one here, chapter two here, chapter three here and chapter four here.

Chapter 5. Mineral raw materials: a small footprint, a big impact and a lot of money

  • Mineral resources: the wealth that generates the most impact in the Pan Amazon | Introduction March 21, 2024
  • The environmental and social obligations of the extractive sector March 26, 2024
  • Mining in the Pan Amazon in search of the world’s most precious metal April 4, 2024
  • Illegal mining in the Pan Amazon: an ecological disaster for floodplains and local communities, April 9
  • The ongoing oil industry’s ecological mismanagement impacts the Pan Amazon, April 17
  • Aging infrastructure and oil spills: the cases of Colombia, Peru and Ecuador, April 25
  • State management and regulation of extractive industries in the Amazon, May 2, 2024
  • Is the Extractive Sector Really Beneficial to Pan Amazon’s Economy? May 8, 2024
  • Extractive industries look to degraded land to prevent further deforestation in the Pan Amazon May 15, 2024
  • Global Markets and Their Effects on Resource Exploitation in the Pan Amazon, May 21, 2024

Article published by Mayra

Biodiversity of the Amazon, Mining in the Amazon, Corporate Social Responsibility, Corporate Social Responsibility, Deforestation, Extractions, Finance, Forests, Gold Mining, Indigenous Communities, Sustainable Development, Threats to Rainforests, Threats to the Amazon

Latin America, South America

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