External stakeholders

As the mining industry grows globally, companies are being forced to become more accountable to a wider array of stakeholders, according to a global survey by Amsterdam-based KPMG International.

Forty-eight per cent of the companies polled recognized external groups as stakeholders, and 35% said they were actually changing the way they do business because of these stakeholders.

The report, titled Mining — A Survey of Global Reporting Trends, is based on the responses of 40 large mining companies, in Australia, Canada, South Africa, the U.K. and the U.S.

Stakeholders include shareholders, customers, environmental agencies, indigenous communities, and suppliers of employees. The needs of these groups often conflict with the demands and expectations of mining companies.

Given these external pressures, mining executives are faced with two concerns: the broadening of social responsibilities, such as the environment and local communities; and financially driven business risks, such as commodity prices and foreign exchange.

The survey found that, in their annual reports, 98% of companies reported on environmental issues, while 85% reported on local communities. Also, all the companies surveyed discussed commodity prices, and 83% referred to foreign exchange.

The reporting process begins by issuing a “mission statement”; quantitative and financial data are taken into account; goals are stated; and the company finally produces a report, verified by a third party.

“There is still more to be done,” says Lee Hodgkinson, KPMG’s national mining director. “Without established systems for measuring performance, particularly for social issues, a company may not earn its ‘social licence’ to operate.”

Ninety per cent of the companies included reserve estimates, 42% stated goals and strategies for outlining reserves, 25% linked their exploration work to the impact on reserves, and 10% indicated that their reserves were independently audited.

A mining company’s ability to raise equity remains a top priority, and, increasingly, companies around the world are reacting to the dominant position of the U.S. capital markets. For example, while only a fifth of the companies surveyed are based in the U.S., two thirds trade securities or debt there, in accordance with generally accepted accounting principles (GAAP) in the U.S.

“The U.S. capital market is so significant that we even found examples of non-U.S.-based companies that are not listed on the U.S. exchanges using U.S. GAAP,” says Hodgkinson. “The reason is that they know they have U.S.-based shareholders.”

The survey includes a financial accounting section that contrasts U.S. GAAP with Australian, Canadian, South African and British GAAP. Findings on non-financial reporting include examples of unusual disclosures in exploration, operations, environmental management and social responsibility.