Mining Mnes' Community Risk Management Practices

A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Taarup-Esbensen, Jacob Doctoral Thesis Managing Communities – Mining MNEs’ Community Risk Management Practices PhD Series, No. 14.2018 Provided in Cooperation with: Copenhagen Business School (CBS) Suggested Citation: Taarup-Esbensen, Jacob (2018) : Managing Communities – Mining MNEs’ Community Risk Management Practices, PhD Series, No. 14.2018, ISBN 9788793579750, Copenhagen Business School (CBS), Frederiksberg, http://hdl.handle.net/10398/9620 This Version is available at: http://hdl.handle.net/10419/209063 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/3.0/ www.econstor.eu COPENHAGEN BUSINESS SCHOOL MANAGING COMMUNITIES – MINING MNES’ COMMUNITY RISK MANAGEMENT PRACTICES SOLBJERG PLADS 3 DK-2000 FREDERIKSBERG DANMARK WWW.CBS.DK ISSN 0906-6934 Print ISBN: 978-87-93579-74-3 Online ISBN: 978-87-93579-75-0 Jacob Taarup-Esbensen MANAGING COMMUNITIES – MINING MNES’ COMMUNITY RISK MANAGEMENT PRACTICES Doctoral School of Business and Management PhD Series 14.2018 PhD Series 14-2018 Managing communities – Mining MNEs’ community risk management practices By Jacob Taarup-Esbensen Supervisors: Associate Professor Michael Wendelboe Hansen Institute of Management, Society and Communication / Centre for Business and Development Professor Hans Krause Hansen Institute of Management, Society and Communication / Centre for Business and Development Doctoral School of Organisation and Management Studies Copenhagen Business School Jacob Taarup-Esbensen Managing communities – Mining MNEs’ community risk management practices 1st edition 2018 PhD Series 14.2018 © Jacob Taarup-Esbensen ISSN 0906-6934 Print ISBN: 978-87-93579-74-3 Online ISBN: 978-87-93579-75-0 The Doctoral School of Business and Management is an active national and international research environment at CBS for research degree students who deal with economics and management at business, industry and country level in a theoretical and empirical manner. All rights reserved. No parts of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without permission in writing from the publisher. 2 Acknowledgements To Ditte, Silas and Noah – who bear with me despite my many faults. There are many people to thank for this project and no doubt some have not received the praise that they deserved. Working since 2013 on this project, I have had numerous friends, both old and new, including some I didn’t know I had, helping me and supporting the idea of doing research on mining companies in Armenia. I would like to express my sincere gratitude and appreciation to the following. At Copenhagen Business School, thank you to my two supervisors Michael Wendelboe Hansen and Hans Krause Hansen, who have asked me difficult questions along the way, which has not only been challenging but has also provided me and the project with a clear direction. Also a special thanks to my colleagues and friends at the Institute of Management, Society and Communication, who have watched over my academic development and encouraged me to be creative and take risks. Thank you to my fellow PhD students, who are the only ones who really know the struggle it takes and the price paid to complete the task. Thank you to my Armenian friends, the Ambassador of the Republic of Armenia to the Kingdom of Denmark and Norway, H. E. Hrachya Aghajanyan, Tatevik Revazian, Anna Shahnazaryan, representatives of the Armenian government, the many unnamed villages, the village heads and the mayors in the cities and small mining towns I have visited in the past three years. Not least, thanks to Suren Movsisyan, my friend and the co-author of one of the papers, who has been a beacon of optimism and positive energy throughout the process. Also, the people who have dedicated their professional life to mining and natural resource extraction in Armenia deserve a special thank you, as they let me visit their offices and production sites, providing me with unique insights into the extractive industry’s inner workings. ErhvervsAkademi Sjælland also deserve a special note, as they supported the project despite doubts about the practical application and results of the project. Poul Faarup and Jens Lautrup Nørgaard took on some organisational battles on my behalf to make room for the project to develop and unfold as the years passed. Jacob Taarup-Esbensen Frederiksberg, 2017 3 English summary This PhD reflects the effort to close a gap in the multinational enterprise (MNE) risk management literature on the identification and mitigation of risk arising from local communities. Small villages and towns that are situated geographically close to the MNEs’ place of operation have increasingly been identified as a source of risk (BSR, 2003; ICMM, 2015). The mining industry is one of the most exposed to risks from local communities, where there historically have been many conflicts between mine owners on one side and the people living close to the mine on the other (Godoy, 1985; Hoskin, 1912; Lynch, 2002; Morris, et al., 2012). And with access to new communication technologies, it is possible for even the remotest communities to communicate effectively to a wide global audience, enabling non-governmental organisations, politicians, investors and other civil society actors access to up-to-date information about mining MNE operations. This improved outreach has meant that mines have been closed due to conflicts with local communities and therefor a need had arisen for MNEs to implement management practices that can effectively mitigate these types of risks. Taking the Armenian mining industry as its starting point the thesis seeks to answer the research question: How do mining MNEs manage community risk in Armenia? Subsequently the Ph.D. contributions to the MNE risk management literature within four areas, firstly, by its conceptualisation of risk as sensemaking, where it is the conceptualisation of threats and opportunities that are determining factors in both risk management and perception of risk exposure. Secondly, the thesis conceptualises local communities as communities of place which are socially or physically affected by mining projects, and civil society and other interest organisations as communities of interest, representing two forms of community that have goals that can be both aligned and contradictory. By explaining the relationship between the two forms of community and the mining MNE, the thesis contributes to the MNE literature by presenting the mechanisms that determine how they interact and how possible risks materialise. Thirdly, the thesis shows how communities of place present risks to the mining MNE by applying its resources to financial, political or cultural actors, either directly or by partnering with communities of interest. And finally, knowing that MNEs are outsiders to the local context, the thesis presents the management practices that these companies utilise to mitigate community risks, both in the initial planning and construction phases as well as when the project matures. There is no doubt that mining operations affect communities of place in a wide range of ways and that some of these impacts will elicit reactions that can, in turn, threaten business continuity (Franks et al., 2014; Harvey, 2014; Kemp & Owen, 2013; Labonne, 1999). The PhD 4 takes the mining MNE as its focal point, beginning by conceptualising risk from a sociological perspective and examining how risk managers make sense of the risks that they face when dealing with possible community risks. Following this, local communities are conceptualised as communities of place, being located geographically close to mining MNEs’ site of operations and affected both socially and physically by its activities. Communities of place evaluate both the opportunities and the risks involved when confronted by the changes that come with mining activities and can in this way both present a risk, if they decide to take direct action against the company, and an ally, as they can support and thereby legitimise the actions of the mining MNE. In contrast to these communities stand communities of interest, who are not directly impacted by mining activities and who evaluate the project as either a risk, as is often the case with critical NGOs, or an opportunity, in cases

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