Editor’s Note: The post was originally published on BSR’s website on November 7, and is republished with permission. See original post here.  We continue to track issues of transparency and governance in the extractives sector following our flagship report Extractive Company Values in late 2016.

The U.S. government’s decision to withdraw from the Extractives Industry Transparency Initiative (EITI) landed with the thud of inevitability in early November. The stated explanation for the decision—which affirms a commitment to EITI principles and focuses on unique aspects of the U.S. tax system—has little credibility, given the current state of play in the anti-corruption field.

While the U.S. policy environment may be shifting, extractives companies would nevertheless be well advised to continue to pursue holistic, innovative approaches to stakeholder engagement, strategy, and values in order to restore and maintain the public trust, which is increasingly essential to protecting their reputations and licenses to operate.

The EITI was created in 2002 as a joint effort by government, business, and civil society to help citizens of resource-rich countries hold their governments accountable. EITI aims to provide the public with knowledge of exactly how much money oil, gas, and mining companies pay to governments in taxes, royalties, and other fees.

Its essential goal, however, is the protection and support of fundamental human and civic rights. The premise? With access to this information, citizens can try to ensure that these vital financial resources are used for public health, education, and infrastructure, rather than to enrich powerful figures linked to national governance.

Corruption used to be viewed as a problem afflicting developing countries, but this is no longer the case. The release of the Paradise Papers by the International Consortium of Investigative Journalists has picked up and amplified Lux Leaks, the Panama Papers, and other whistleblowing efforts. Just as money launderers can easily buy property in New York and San Francisco, offshore tax havens are used by politicians, the children of dictators, and some of our most prestigious multinationals.

Transparency activists immediately slammed the U.S. decision on EITI, emphasizing that traditionally recalcitrant Russian and Chinese energy companies now adhere to higher disclosure standards than the U.S. demands of American enterprises. America has already stepped away from its goal of being a role model on human rights, climate justice, transparency, and international cooperation under the current administration. The turn away from EITI is more of the same.

Of greater interest than Washington’s isolationist agenda is what energy and extractives companies might gain from the U.S. decision to stall on transparency regulations. The short answer is: not much. But responses to the EITI debate provide fresh evidence of a widening split over how oil and gas majors regard the sector’s long-term future, as well as their relationship with investors and the public.

Those companies that have made corporate commitments to meet the EITI’s standards of payment transparency include BP, Repsol, Shell, and Statoil. It is no coincidence that these are the very companies that have also chosen openly to embrace the Paris climate agreement while touting their investments in gas and renewables. Exxon Mobil, too, publicly supported the Paris Agreement in the wake of Donald Trump’s election.

The big strategic distinction in the oil industry is no longer over whether to acknowledge and plan for the existential challenges facing the sector; it is about how transparent companies ought to be while the energy transition proceeds. To this end, two strategies have emerged.

The first has been to acknowledge the science of climate change and the problematic history of the sector’s relationship with the government, and then to model best practice on disclosure to regain trust. Some companies, mainly based in Europe, are making headway in this direction—with the understanding that, when it comes to transparency, the horse long ago bolted from the stable. Because companies today must act as if everything they say or do might become public, disclosure has become the optimal approach to issues like payments to governments and political candidates, plans for stranded assets, or strategies to meet a low-carbon future.

The second option has been to invest in the carbon transition and support transparency aspirations publicly while privately obstructing and stalling specific regulations and disclosure efforts for as long as possible. This approach may seem foolish to observers, but it buys some time for big investors and incumbents of the C-suite, who seem to think they might squeak through to retirement before the deluge strikes.

Oil and gas companies are perfectly aware of the deep deficit of trust. Some corporations seem to have concluded that efforts to move beyond a defensive public relations stance are destined to fail; indeed, the reputational benefits accruing from a more progressive approach have been mixed. So, with much of the debate polarized and entrenched and no clear path to public approval, some companies are retreating to the practices of habit as they wait to be dragged into the present after all other options have been exhausted.

With traditional approaches to managing corporate reputation no longer fit for purpose, companies need to devise strategies that extend far beyond reactive communication and public relations. Those corporations that hope to be considered innovative will need to embrace a holistic approach to stakeholder engagement, strategy, and values that prioritizes the importance of restoring trust, regardless of whether public policy requires them to do so.

Alison Taylor is Director, Sustainability Management, at BSR, a global nonprofit business network and consultancy dedicated to sustainability. Alison leads BSR’s sustainability management practice and also works closely with energy and extractives member companies. She focuses on approaches to sustainability through risk management, strategy, stakeholder engagement, transparency, ethics and governance, and organizational change.

Editor’s Note: 

The piece below by Uwe Gneiting, a Research and Policy Advisor for the Private Sector Department at Oxfam America, and originally published here on July 13, 2017, struck a chord with Cornerstone’s research team.

In October 2016 we published Extractive Company Values, an in-depth report illustrating how mining companies’ “attentiveness” to material environmental and social issues provides predictive insight into their potential for successful execution of their strategies. In the report, we posited that a mining company’s approach to managing local community concerns is one key indicator of attentiveness, and therefore of a company’s likelihood of strategic success.

As Uwe’s piece highlights, Tahoe Resources’ alleged mishandling of community concerns at its Escobal silver mine in Guatemala hit the stock hard in the near term and throws a shadow over its operations there; and the signs were there for investors who look beyond pure financials.

Further, July 18, Seeking Alpha reported that the gold mining company Goldcorp “experienced a significant setback when its proposed Coffee Gold project [in Canada] was delayed based on a failure to sufficiently consult potentially affected indigenous groups.” Read more on this instance here.

One of the world’s largest silver companies just lost 40% of its value – it shouldn’t have surprised investors:

It doesn’t happen every day that a mining company, and investment analyst darling, loses more than a third of its stock market value within just a few days. Tahoe Resources, the parent company operating the Escobal silver mine in Guatemala, saw its stock price plunge last week after the Guatemalan Supreme Court suspended the company’s mining license for two of its projects in the country.  Escobal is Tahoe’s flagship mine and one of the largest silver mines in the world.  The temporary suspension is the result of a legal suit brought by Guatemalan civil society organization CALAS (an Oxfam partner) against the Ministry of Energy and Mines for the ministry’s failure to respect the consultation rights of indigenous Xinca communities’ when granting the mining license for Escobal to Tahoe’s Guatemalan subsidiary.

Tahoe’s stock price plunge as a result of the suit has left investors furious. Just days after the announcement, some began to file a class action law suit against the company arguing that it provided false and misleading statements, and failed to disclose to investors the details of its consultation obligations and the resulting risks of suspension.

The case of Tahoe’s Escobal mine is illustrative of the risks companies face when they do not seriously consider the concerns of the indigenous communities where they operate and their right to free, prior and informed consent. It also highlights investors’ challenge to marry financial and social considerations in their investment decisions and to obtain accurate information on local practices and the impacts of mining companies abroad.

Did Tahoe mislead its investors?

Tahoe’s troubles around the Escobal project shouldn’t be news to investors. Tahoe has faced significant community opposition in Guatemala for years, which civil society organizations, including Oxfam, have amply highlighted. Furthermore, the company has faced legal challenges in Guatemala and Canada for its conduct around obtaining its mining license and responding to community protests. Just over the past few weeks, communities located around the Escobal mine have reengaged in peaceful protests to bring attention to the harmful social and environmental impacts of the project.

Yet, in its public communication, Tahoe’s executive leadership has repeatedly denied claims of community resistance or wrongdoing. The company’s CEO has refuted claims of conflict with communities by arguing that ‘indigenous issues’ do not play a role at Escobal and that legal procedures are without merit. The company has also boasted its strong corporate social responsibility programs and community relations as reassuring evidence that the project is advancing smoothly.

Investors looking at buying or selling Tahoe stock have thus been faced with competing accounts of the situation in Guatemala. Attempts to strengthen regulatory oversight to clear up these information gaps have so far been without success. As a result, investors have been forced to use their own judgment to put together an accurate picture of Tahoe as an investment prospect.

Some investors drew the right conclusions early on. In 2015, the Norwegian Pension Fund pulled out of Tahoe citing human rights concerns. Yet, for the majority of Tahoe’s investors the company’s favorable production schedule and revenue forecasts appear to have trumped concerns of potential human rights risks and their financial implications.

This is sobering not only because the costs of company-community conflicts in the extractive sector have been shown to be significant, but also because community resistance to mining projects is extremely common in Central America – which any informed investors should have been aware of.  El Salvador, for example, recently passed a law banning mining in the country. Guatemala also has a long history of communities resisting mining projects (Goldcorp’s Marlin mine is case in point) and trying to change its current mining law. Community-level conflict is thus not a risk that can be managed by an individual company, but illustrates fundamental opposition to the extractive industry’s development model in a region where governance isn’t strong enough to adequately manage risks and distribute benefits.

The key lesson here is this:  Investors need to take a closer look at the human rights implications of their investments. Those investment advisors and fund managers who are forward-looking enough to consider the risks associated with corporate disregard for human rights are better equipped to avoid the sorts of precipitous drops in stock price demonstrated in the Tahoe story. This case exhibits yet another way in which the socially-responsible investment community can outperform mainstream investors.

Photo: Horses and cows graze in the shadow of the Escobal mine. Los Planes, Santa Rosa, Guatemala. (Credit: Giles Clarke)


Below is an executive summary of our in-depth report. Click here for an extract of that report. The full version is available to clients of Cornerstone Capital Group. 


The extractive sector is vitally important to the global economy and will in fact be critical to a sustainable future. With a market cap of over US$6 trillion, the extractive sector encompasses over 5,000 companies. It provides raw materials for everything from energy creation to high-tech manufacturing to electronics. Even as the world starts to transition from greenhouse gas emitting commodities like oil and coal, natural resource extraction will remain essential. Smartphones and electric vehicles, for instance, require metals sourced from extractive operations around the world. Yet natural resource extraction is, by its very nature, environmentally destructive and socially disruptive — and managing the risks inherent in mining is of prime concern to extractive companies and the host countries in which they operate. Extractive companies’ success will be in part determined by their ability to position themselves for this future.

Risk Assessment in Context

The environmental and social (E&S) issues we address in this report highlight strategic concerns for any mining or extractive company. Tailings risk (tailings are the effluents generated in a mine processing plant, and require long-term, secure storage), community-company conflict, contract workers and labor disputes, and management of global reputational risk (using biodiversity impact as its proxy) create event risks such as mine failures, shutdowns or license denials. They also impact longer-term operational planning because they require proactive engagement with local, global and contextual stakeholders to assure passage. We assess selected companies’ corporate governance as it relates to actively managing E&S issues, identifying leaders and laggards based on relative “attentiveness” to material E&S concerns.

Detailed analysis of E&S issues provides predictive insight. We offer a proprietary framework to assess extractive companies’ underlying values, leadership, and culture based on a bottom-up analysis of material, yet underappreciated environmental and social (E&S) issues. We then explain how the issues impact specific items within a company’s financial statements.

Key observations. At a high level, we came away with these conclusions:


We evaluated companies according to seven metrics that together provide a clearer picture of their potential for long-term success in executing their strategies. These metrics are:

We performed our assessment on a range of representative companies, shown below. We “score” the companies on each of the seven metrics, then roll those up into an overall “attentiveness” indicator.


Sebastian Vanderzeil is a Global Thematic Research Analyst with Cornerstone Capital Group. He holds an MBA from New York University’s Stern School of Business. Previously, Sebastian was an economic consultant with global technical services group AECOM, where he advised on the development and finance of major infrastructure across Asia and Australia. Sebastian also worked with the Queensland State Government on water and climate issues prior to establishing Australia’s first government-owned carbon broker, Ecofund Queensland.

Carolyn Trabuco is a Managing Director and Global Thematic Research Analyst at Cornerstone Capital Group. Carolyn has spent more than 25 years in the global equity investment space where she has identified dynamic secular changes, made investment decisions, developed business and industry models, valued companies, and assessed risk around global commodities, companies and industries. Previous firms include Pequot Capital, Phibro, Montgomery Securities and Fidelity Management and Research.  She is an independent member of the Board of Directors of Azul Brazilian Airlines.

Michael Shavel is a Global Thematic Research Analyst at Cornerstone Capital Group. Prior to joining the firm, Michael was a Research Analyst on the Global Growth and Thematic team at Alliance Bernstein. He holds a B.S. in Finance from Rutgers University and is a CFA Charterholder.

Emma Currier is a Research Associate at Cornerstone Capital Group. Emma graduated with a Bachelors of Arts degree in Economics from Brown University in May 2016. While at school, she worked with the Socially Responsible Investing Fund and as a teaching assistant for the Public Health and Economics departments. She spent her sophomore summer researching differences between American and Indian educational styles in Arunachal Pradesh, India, and completed a summer investment bank analyst position with Citi in the Media & Telecom group in 2015.

We extend our thanks to Fiona Ewing, Cornerstone Capital Group summer intern, for her contributions to the report.

For Goldcorp Inc., one of the world’s largest gold producers with operations throughout the Americas, sustainable and responsible mining is a company-wide commitment. We aspire to be a leader in finding innovative ways to create long-lasting social and economic benefits through every phase of the mining lifecycle – from exploration to operation to the eventual closure and reclamation of a mine. Ultimately, we strive to make sure that the places where we operate are left in as good or better condition than how we found them.

To make our commitments a reality, we’ve established international guidelines, standards and benchmarks to help us set our objectives and track progress. These include the International Council on Mining and Metals (ICMM), the World Gold Council’s Conflict Free Gold Standard, and the United Nations Global Compact (UNGC). In 2015, the UN and its member states adopted 17 Sustainable Development Goals (SDGs), which address issues such as poverty, inequality and justice, and climate change. The goals are ambitious, but they provide an important framework for government, industry and communities to collaborate and achieve progress – together – by the year 2030.

As a signatory to the UNGC, Goldcorp embarked on a materiality analysis to understand issues of key importance to our diverse set of stakeholders, and then mapped our top issues, internal initiatives and strategies to the SDGs. This mapping exercise helped us to understand where synergies exist, where gaps should be addressed, and how our current activities can support the achievement of the Goals. As a result, we’ll be better able to align our efforts with the SDGs over time, in areas such as environmental protection, human rights, education and community building.

While there are multiple SDGs that Goldcorp identified as aligning with our corporate priorities, a few in particular emerged among our most material topics.

Goal #4: Education – Ensure Inclusive and Equitable Quality Education and Promote Lifelong Learning Opportunities for All

Having worked for many years in partnership with communities to improve access to training and skills development, we’ve seen first-hand just how important education can be in creating sustainable legacies. Some of our most innovative educational programs are the first of their kind, such as AMSTEP, a partnership with
the Oshki-Pimache-O-Win Education and Training Institute (OSHKI) to provide career skills to Aboriginal youth in signatory communities of the Musselwhite Agreement in Ontario, Canada. The program involves five months of intensive training and work experience to earn industry-recognized accreditation. The experience is uniquely immersive for students, exposing them to daily mining activity from surface to underground operations. For the community of Carrizalillo near our Los Filos site in Mexico, Goldcorp created a local scholarship program, constructed a kindergarten classroom and community computer center with equipment and internet access, and also improved sanitation in the local primary school.

Goals #7 and #13: Energy and Climate – Ensure Access to Affordable, Reliable, Sustainable and Modern Energy for All, and Take Urgent Action to Combat Climate Change and Its Impacts

Mining is energy-intensive; however, there is great potential in our industry to invest in energy efficiency measures, incorporate renewable energy into our power supply and reduce our carbon footprint. Goldcorp’s Energy Stewardship Strategy ensures that we continue to take active steps to manage our energy use and minimize greenhouse gas emissions. We have made significant progress, with GHG emissions trending downward both on an absolute basis and intensity, since 2013. At our Musselwhite mine, reducing base load electrical consumption and managing peak demand allowed the mine to eliminate the use of diesel in production, which saved approximately 13,000 tonnes of CO2 in 2015 alone.

Goal #12: Consumption – Ensure Sustainable Consumption and Production Patterns

Goldcorp has made several advances in minimizing the waste generated from the mining process and improving the way we transport, use and dispose of waste. Key among these initiatives is a comprehensive Tailings Stewardship Strategy implemented in 2015 as part of our Sustainability Excellence Management System. At our reclaimed Equity Silver site in British Columbia, Canada, we introduced automated monitoring to track information on water levels, pore water pressure, structural integrity of the tailings dam, and other important parameters in real-time, in order to ensure tailings dam safety and reliability. If the pilot program is successful, this innovation will be evaluated for deployment at all of Goldcorp’s sites.

Goal #16: Peace & Justice – Promote just, peaceful and inclusive societies

Last year, we updated our Human Rights Policy to reflect the changing social context in which we operate. Our revised policy better defines Goldcorp’s good business practices as well as our external commitments to the ICMM, the UNGC and the World Gold Council’s Conflict Free Gold Standard. New additions to this policy include clauses on community consultation, grievance mechanisms, resettlement planning, and potential measures in the event of non-compliance.

When we update our policies, each of our sites is trained on how to integrate human rights into its business practices. An example of our approach in action is at our Marlin mine in Guatemala, where all security staff are required to undergo annual training on the Universal Declaration on Human Rights and regularly scheduled reviews conducted by third-party experts include assessments of the background checks, training and interviews with security contractors.
We aspire to ensure that every site upholds fundamental human rights and respects local cultures, customs and values.

Companies like Goldcorp have a tremendous impact on communities through the local jobs and supply chains we create. By aligning our sustainability strategies with global initiatives such as the UN Sustainable Development Goals – and working in partnership within our industries and with governments – we can multiply positive impacts for communities worldwide.

 Brent Bergeron joined Goldcorp in November 2010 and was appointed Executive Vice President of Corporate Affairs and Sustainability in January 2015.  Prior to joining Goldcorp, he served as a senior executive with international experience in the fields of construction and infrastructure development, broadcast and media.