Blue Monarch Management

Tag: sustainability

  • Sustainability in Mining and Natural Resources: Corruption

    Sustainability in Mining and Natural Resources: Corruption

    Good governance adds sustainable value to global supply chains. Last week we published a short interview with Giuliana Fonseca, an international mining professional who shared her experience with governance and operating procedure design that progressive companies use to prevent and detect instances of fraud, corruption, and bribery in mining, processing, and supply chain operations. Here is the link to the interview.

    This week, I expand the discussion to take a brief look at some of the causes and effects from corruption in the mining industry.

    Corruption in the International Mining Industry

    Corruption is a pervasive and systemic problem in the international mining industry, affecting both developing and developed countries. Corruption can occur at any stage of the mining value chain, from exploration and licensing to extraction and revenue management. It can undermine the social, economic, and environmental benefits of mining, while exposing companies and host governments to legal and reputational risks. Some of the main drivers and forms of corruption in the mining sector can be distilled to three broad categories.

    • Weak governance and regulation. In many resource-rich countries, the mining sector is characterized by weak institutions, lack of transparency, accountability, and inadequate enforcement of laws and standards. Weak regulatory oversight creates opportunities for rent-seeking, bribery, patronage, and political interference in decision-making processes. For example, mining companies may pay bribes to obtain or renew licenses, evade taxes and royalties, or bypass environmental and social safeguards. Alternatively, government officials may abuse their authority to award contracts or licenses to favored companies, manipulate bidding processes, or divert public funds for personal gain.
    • Complex and opaque transactions. The mining sector involves multiple actors and transactions across different jurisdictions and levels of government. These include exploration and production companies, contractors and suppliers, intermediaries and brokers, regulators and tax authorities, state-owned enterprises, sovereign wealth funds, local communities, civil society groups, international financial institutions and donors. The complexity and opacity of these transactions make it difficult to track and monitor the flows of money, goods, or services complicating efforts  to detect and prevent illicit practices such as money laundering, transfer pricing, tax evasion, and fraud.
    • High stakes and competition: The mining sector is characterized by high stakes and fierce competition, both within and between countries. The potential for large profits and rents attracts investors and operators, but also creates incentives for corruption and conflict. Mining projects often involve large upfront investments, long-term contracts, and uncertain returns, which increase the risks and uncertainties for both companies and governments. Global demand and supply of minerals are influenced by geopolitical and market factors, which can create volatility and pressure on prices and revenues. These factors can affect the bargaining power and behavior of the parties involved, and lead to disputes and renegotiations.

    Negative Impacts from Corruption

    There can be negative impacts from corruption in the mining sector.

    • Reduced public revenues and benefits. Corruption can reduce the amount and quality of public revenues and benefits generated by the mining sector and affect their distribution and allocation. It can also distort the allocation of public resources and spending, favoring certain groups or regions over others, or diverting funds from priority sectors such as health, education, and infrastructure.
    • Increased social and environmental costs. Corruption can increase the social and environmental costs and risks associated with mining activities and undermine the protection and fulfillment of human rights obligations. It can also fuel social conflicts and grievances, by eroding trust and legitimacy, exacerbating inequality, contributing to  marginalization, and violating the rights and interests of local communities.
    • Diminished investment attractiveness and competitiveness. Corruption can diminish the investment attractiveness and competitiveness of the mining sector and affect the long-term sustainability  of the industry. It can also damage the reputation and credibility of mining companies and their host governments,  expose them to legal and regulatory sanctions, civil litigation, and public scrutiny.

    Conclusions

    The interview with Giuliana highlighted that there are incremental gains to be had from introducing strong governance and effective controls in the mining, processing, and global supply chain industries. While global market dynamics have always driven robust, high stakes competition across the industries and that the presence or absence of effective regulations and oversight can influence the potential for corruption, it’s interesting to note that the complexity and transparency of transactions as a function of advancements in data and technology increase the level of risk to global resource industries. The direct impacts from corruption to companies and communities trying to promote investment and grow diverse benefits streams can be extensive.

    In the next and final article of this short series, I build on the insights from the interview with Giuliana Fonseca to look at industry governance solutions that drive new benefits, reduce cost, and manage risks – all in support of the case for strong governance.

    About

    Jeff Peterson is the Founder and CEO of Blue Monarch Management and is a professional Management Consultant specializing in Strategy, Governance, and Organizational Development for companies designing and driving transformational investments.

  • Sustainability in Mining and Natural Resources: An Interview with Giuliana Fonseca

    Sustainability in Mining and Natural Resources: An Interview with Giuliana Fonseca

    Governance is the foundation of sustainability, as it determines how the company defines its purpose, sets its strategy, and implements its actions. Governance also reflects the company’s values and principles, which guide its decisions and behaviors. We were fortunate to have met Giuliana Fonseca, a young, international mining professional,  who recently completed her MBA at the Ivey School of Business at Western University. As Giuliana is evaluating her next career opportunities, she agreed to participate in an interview with us to explore an interesting sustainability topic related to her past work experience in international mining and the transportation of high-value commodities. The discussion builds awareness around the topics of anticorruption and antibribery illustrating how well-designed operating procedures and technologies can enhance trust across a global supply chain. Giuliana witnessed first hand how successfully executing the strategy  leads to real economic benefits and long-term viability for a company. We have included her LinkedIn profile here.

    The interview has been edited, paraphrasing for flow without compromising content.

    Blue Monarch: Can you describe your educational background and work experience  in the context of sustainability?

    Giuliana: I hold a Bachelor’s degree in Business Management from the Pontifical Catholic University of Peru and I just finished my MBA at Ivey Business School, Western University. My professional experience has been heavily oriented towards governance, risk management, and compliance, particularly in industries where sustainability is a critical concern. For example, at one of the last companies I worked for, I developed and implemented AML/CFT processes and standardized mineral traceability processes, directly addressing environmental and ethical sustainability in the mining sector. My roles have consistently involved creating systems and strategies that promote sustainable practices and compliance with regulatory standards.

    Blue Monarch: What have you studied and why?

    I chose to study Business Management to gain a comprehensive understanding of organizational dynamics and strategic decision-making. One key elective I selected was Development and Social Responsibility, taught by Dr. Gerardo Castillo. He demonstrated that sustainability is not just about avoiding harm to the environment, but about actively taking care of it and considering all stakeholders. This foundation has been crucial in my roles that require balancing business objectives with ethical considerations. My recent MBA studies at Ivey Business School are focused on enhancing my leadership and strategic management skills, with a particular interest in sustainability and its integration into business practices. I believe that combining business acumen with sustainability principles is essential for driving long-term organizational success and societal impact.

    Blue Monarch: Can you describe your international work experience?

    I have gained international work experience through various roles that required collaboration with global teams and adherence to international standards. For instance, in my previous job, I worked on the registration process of a processing plant with Swiss refineries, ensuring compliance with global standards. Additionally, my time at EY in Lima, Peru allowed me to become familiar with good corporate governance practices. These experiences have equipped me with a global perspective and the ability to navigate diverse regulatory environments.

    Blue Monarch: How do corruption and bribery happen in the mining industry?

    Giuliana: Corruption and bribery in the mining industry can occur at various stages, from obtaining permits and licenses to operational activities and export processes. It often involves illicit payments to government officials or manipulation of regulatory requirements to gain favorable treatment or expedite processes. Such practices undermine legal and ethical standards, leading to environmental degradation, loss of revenue, and social injustices. Corruption can also happen inside different levels in a company. There is a lot of risk and so preventative measures can be taken, including training, security procedures aligned with specific levels of employees in the organization, and background checks that might identify high risk individuals with personal circumstances that might make them susceptible to corruption and bribery. When evaluating potential suppliers, sustainable companies follow due diligence processes, evaluate available blacklists, and conduct web searches. I have observed instances that would warrant not continuing with a particular supplier relationship.

    Blue Monarch: Can you provide me with an overview of what anti-corruption and anti-bribery initiatives are and how they add value to the global mining industry?

    Giuliana: Anti-corruption and anti-bribery initiatives include stringent regulatory frameworks, transparency requirements, third-party audits, and the implementation of compliance programs. These initiatives add value to the global mining industry by promoting fair competition, attracting ethical investments, and ensuring sustainable resource management. By reducing corruption, these initiatives enhance the industry’s reputation, increase investor confidence, and contribute to social and economic development.

    Blue Monarch: Why might these initiatives be considered sustainable business practices and who do they benefit?

    Giuliana: These initiatives are considered sustainable business practices because they promote long-term economic stability, social equity, and environmental protection. They benefit a wide range of stakeholders, including companies, investors, governments, local communities, and the environment. By fostering a culture of integrity and accountability, these practices ensure that the benefits of mining activities are distributed fairly and sustainably. A sustainable company might build up its focus on community relations by developing an understanding of what the community needs and what it expects. It is very interesting how companies from different parts of the world handle this role. Mines might enhance social equity by working with local communities to help build infrastructure, provide jobs, and improve local and regional conditions.

    Blue Monarch: How have technologies and standard operating procedures been applied to these initiatives?

    Giuliana: Technologies such as blockchain for traceability, automated compliance monitoring systems, and data analytics for risk assessment have been applied to anti-corruption and anti-bribery initiatives. Standard operating procedures (SOPs) included regular audits, employee training programs, and clear reporting mechanisms. These technologies and SOPs enhance transparency, streamline processes, and reduce the risk of unethical practices. We have used advanced data analytics to flag changes in patterns for stakeholder behaviors.

    Blue Monarch: Did you see an impact?

    Giuliana: Yes, I observed a significant impact from these initiatives. For example, at one company, the implementation of AML/CFT processes and mineral traceability standards not only reduced associated risks by 35% but also, once the traceability process is fully accredited, it would allow the company to charge a premium price per ounce of semi-processed gold. These outcomes demonstrate that rigorous compliance and ethical practices can lead to both improved operational efficiency and financial performance.

    Blue Monarch: What were your top learnings from your work on these initiatives?

    Giuliana: My top learnings include the importance of integrating compliance and sustainability into core business strategies, the effectiveness of technology in enhancing transparency and accountability, and the value of fostering a culture of integrity within organizations. Additionally, I learned that stakeholder engagement and collaboration are crucial for the successful implementation of anti-corruption and anti-bribery initiatives.

    Blue Monarch: What do you think needs to happen next? Where should companies explore further investment in these kinds of initiatives?

    Giuliana: Next, companies should focus on enhancing their technological capabilities to improve transparency and compliance monitoring. Investment in advanced data analytics, blockchain for supply chain traceability, and continuous employee training programs are essential. Companies should also strengthen their partnerships with governments, NGOs, and other stakeholders to create a unified approach to combating corruption and promoting sustainability in the mining industry.’

    Our engagement with Giuliana was rich and very rewarding. This interview introduces some of the complexities of designing systems and procedures in natural resource industries with an eye to ethics, technologies and data, standards, and value in the end-to-end global supply chain. Next week, we will share part two of the article, which unpacks some of the analysis and governance related to the interview.

    About

    Jeff Peterson is the Founder and CEO of Blue Monarch Management and is a professional Management Consultant specializing in Strategy, Governance, and Organizational Development for companies designing and driving transformational investments.

  • Sustainable Companies: Retention & Productivity

    Sustainable Companies: Retention & Productivity

    Building a sustainable business in 2024 is challenging. Late in 2021, we started a pivot towards becoming a more responsible company which I shared in a recent article, Our Direction in Sustainability – Blue Monarch Management. Our company is cycling through its fourth iteration and is about to engage in a period of sustainable high growth – a fifth iteration.  Despite being a knowledge company staffed with uber-bright, ambitious, and creative management consultants, building an operating model that could meet the needs of today’s modern professional consultant has been one of the more complex challenges we have faced to date. This complexity to meet the needs of our professional staff (and more broadly, workers in general across most industries) has shifted significantly over the last decade, particularly in response to disruptive global events. Well-researched trends and trajectories have emerged, and businesses have invested heavily in trying to understand them – one foot in the past pining for a return to the ‘good ole’ days we understand’ and one foot in the future that we don’t yet understand while simultaneously trying to anticipate where to go next to create some advantage. It is hard to criticize the modern executive, inundated by the exponential volatility and uncertainty of managing not one but several ambiguous and highly complex shifts in the competitive landscape. Go ahead, pick a few favourites:

    1. The War for Talent.
    2. Hybrid work environment.
    3. The ‘Gig Economy’.
    4. The ‘Sharing Economy’.
    5. The Great Resignation.
    6. Generative AI.
    7. Robotization.
    8. Increasing awareness of mental health issues and the need for better supports.
    9. Diversity, Equity, and Inclusiveness.

    I have worked for many years with the professional bodies representing Canadian (and now global) Certified Management Consultants. I review industry reports. I shape policy and professional development initiatives, and I am watching the industry shift rapidly with the disruptive introduction of many new forms of consultants – some take on the flavour of traditional management consulting, but many others are displacing traditional management consulting through technology, automation, changes to how information is sourced or accessed. There has also been an infusion of new consultants drawn from a many different career backgrounds (science, health, engineering, the arts, etc.) because businesses demand specialized knowledge outside of the realm of traditional business, strategy, and leadership. At an industry level, this is cause for great celebration as consulting, particularly management consulting, is an excellent career path for people seeking challenge, empowerment, income, and insulation to the whims of company business cycles. The industry changes also afford modern businesses greater access to portable knowledge, the ability to grow and shrink their workforce with more flexibility, and an increased level of disruption that can improve the resiliency of a company. Management consulting, as a global industry, is valued into the hundreds of billions of dollars with strong growth projections and fundamentals, so I feel secure in the knowledge our company will remain relevant, albeit awash in competition requiring focus on adaptability and agility as a permanent state to remain relevant.

    What do these trends have to do with building and operating a sustainable business and why is management consulting important here?

    It’s still about the People.

    People inspire, operate, and sustain businesses. And businesses don’t always understand the needs of their people or how to unlock the full potential from their workforce. Josh Bersin’s recent  HR Predictions for 2024: The Global Search For Productivity – JOSH BERSIN article is very insightful, and his annual trends and predictions are always an excellent read. He cites a stark rise in employee burnout from 2019 to 2023 and highlights key trends such as (younger) employees taking back their power to ‘act as they wish’ and quietly leave for another company. His key message in this report was that companies are hunting for productivity gains – and this is critically important – the speed to reinvent faster than the competition.

    Bersin’s team recommends that  companies focus on building a high-retention model (playfully named ‘labour-hoarding’) to allow for career growth. They emphasize that it is essential for top leadership to better understand the ‘needs, desires, and demands’ of their workers with better focus on listening and delegation (read: empowerment). Some compelling supporting evidence identifies that the top needs of the workers are the desire for career advancement, personal empowerment, and to have a societal impact.

    To a professional advisory firm like Blue Monarch, the implications are twofold. First, we need to be in tune with who we hire and what our team members need. Our organizational structure, career development, culture, learning and mentorship practices, operating model, values, and leadership must absolutely acknowledge these needs and trends. Our organizational culture needs to be tailored whenever possible to the unique requirements of each person in our firm. The task is exhausting and complex and is absolutely essential to get right.  The imperative is critical when you consider that as professional management consultants operating as trusted advisors and working on strategy and tactics with business leaders, our people can have tremendous impact on a great many companies and communities. Long-term relationships built on trust and knowledge transfer matter – so retention and productivity matter. Quality matters. Additionally, we work with clients to help them better understand and develop their own people. This implies that businesses we work with also need to pay attention to the needs of their people and make smart, well-timed investments that address the evolving needs of today’s modern workforce. That is sustainability.

    About

    Jeff Peterson is the Founder and CEO of Blue Monarch Management and is a professional Management Consultant specializing in Strategy, Governance, and Organizational Development for companies designing and driving transformational investments.