Social engagement - Costs

Author: Meghan Cartwright

The Robert M. Buchan Department of Mining

Queen's University

Created: March, 2009

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This topic is part of a series of topics related to social engagement. Further information can be found on the main page for that topic.

While engagement often represents a new source of monetary and time costs for a company, it also provides a wide range of potential opportunities. The benefits of successful engagement are often difficult to quantify in a general way because of the enormous variety in social and environmental situations where engagement is implemented. However, while the benefits can be difficult to surmise in a general sense, there are an enormous number of examples where direct benefit, both financial and social, has resulted from successful engagement. Costs associated with engagement can be split into three categories: the cost of pursuing an engagement strategy, the cost which can result from a lack of a successful engagement strategy, and the potential economic benefit provided by good engagement.

Pursuing an effective engagement strategy involves costs in terms of both time and money. These costs are incurred in a variety of different ways; an effective engagement plan requires a large number of different actions to occur over what can be a large time frame. Examples of direct monetary costs that might be incurred include:

• the creation of a labour force which is tasked with managing and enacting the engagement plan;
• the cost of hosting community events or meetings;
• publicity costs;
• philanthropy;
• education; and
• social services (Department of Industry, Tourism and Resources of the Australian Government, 2006).

Each of the costs listed above also requires a commitment of time on the part of the company to direct enactment of the engagement plan. This time commitment includes not only the people present at events, but also the time spent planning and developing an engagement plan. This is a high cost because the time of high level planners in a large corporation is a valuable asset.

The amount of resources required to develop and implement an engagement plan will vary depending upon social, economic, and environmental conditions in the target area. For example, in a community where a low standard of living exists, and many social indicators are negative, an effective engagement plan would require more thought, time, and money to achieve results seen elsewhere. On a positive note, in such communities drastic changes can be seen occurring through a well-designed engagement strategy (Aboriginal Engagement Task Group, 2008). Affecting such positive changes in a community results in people being happy with a company, and this in turn leads to a slew of positive effects for the company; not the least of which being the lack of angry people.

The costs associated with a lack of effective engagement are even harder to quantify than those listed previously. This is because of the large variety of problems which can arise when relationships between companies and communities fail. The problems can range from low productivity to terrible social conditions to direct impediments to operation. Having a poor relationship between community and company can result in poor relationships between employees and employers. This poor relationship can spawn low morale, which can cause economic losses, drops in safety, decreases in employee health, and a diminishing of reputation (Aboriginal Engagement Task Group, 2008). When a mine is operating in a small community, the company needs to appreciate that it bears a responsibility for some of the social conditions which exist due to its presence. One example is the issue of substance abuse. If substance abuse becomes a problem as a result of a mine development in a community, and the mine does nothing to address the problem, then it will feel the effects through a decrease in employee health, morale, and productivity. The most serious result of failure to engage with the community is a strong resistance to an operation. This resistance can be brought upon in a number of means; including environmental concerns, ownership, land destruction, social inequality, cultural beliefs, and many more (Department of Industry, Tourism and Resources of the Australian Government, 2006). This resistance has the potential to cause an operation to close or suffer significant losses, obviously at an enormous economic cost to the company. Some examples of possible situations are resistance resulting in a government permit not being awarded for a project, direct operational impediments like road blocks or vandalism, or a permit being revoked based upon environmental concerns. The best way to avoid this resistance is to ensure that the reason for the resistance does not exist; and this is the role of an engagement strategy.

Many potential economic advantages arise from good engagement strategies. One of the major goals of an engagement strategy is to build capacity among stakeholders. By building capacity among stakeholders a company can create relationships and initiatives which are mutually beneficial. Some examples are: a trained, long-term workforce; local contractors to provide services to the mine at rates cheaper than external sources; increased community services and business; improved social moral; and others (Aboriginal Engagement Task Group, 2008; International Finance Corporation, 2009). These benefits provide stability as well as real financial gains.

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