Environmental and social commitment has been a way of life for gold mining company Gold Fields for many years. Philip Woodhouse explains to Gay Sutton how the company has been formalising its sustainable development strategy and how it’s being embedded throughout the company and the supply chain.
Gold is one of those materials that manages to touch us all. At one end of the spectrum, it has played a fundamental role in the foundation of global banking and finance; at the other, it is the basis for many of the most beautiful and decorative forms of art.
Behind this glossy and expensive precious metal lies the gold mining industry, run by organisations that are working together to improve their operational practices and establish their corporate responsibility credentials. In 2001, a number of the world’s top tier gold mining companies got together to form the ICMM (International Council for Mining and Metals). “This is a CEO-led organisation and its aim was to set up a platform to promote sustainable development in the industry and enable mining companies to share best practice,” explains Philip Woodhouse, head of Sustainable Development at Gold Fields, one of the world’s largest unhedged producers of gold, and an ICMM and Global Compact member.
The company is based in Sandton, Johannesburg, with operational gold mines in South Africa, Ghana, Australia and Peru. It has a long history of commitment to the environment and to the local communities in which it operates. “Sustainable development is not new to us,” Woodhouse says. “We have been investing in things like environmental education, socio-economic development and communities since the 1980s. But we’re now consolidating all of this into an overall sustainable development framework.”
This consists of an overarching sustainable development policy that provides the overall strategy for the business. Underpinning this are eight interlinked frameworks that articulate and define each aspect of the sustainable development policy and provide the management system through which it operates. These are continuously being drawn together, improved upon and refined as part of an ongoing process.
For each of the eight policy frameworks, the company is developing a set of practice guide documents which are used throughout the business, spelling out the protocols for dealing with each subject, and exactly what the company expects of its employees. Gold Fields draws together peer groups—committees of experts and managers from across the company—to create these guides. The peer groups do extensive external research to discover the best practice that is available, and combine this with their own knowledge and experience to write the guide.
“And the guide has to be realistic,” Woodhouse warns. “You can’t demand something that is unrealistic for the operations, or it just becomes a moot point. Neither can we be too prescriptive, because we operate in jurisdictions from South Africa, to 4,000 metres above sea level in the Andes mountains of Peru, to the outback of Australia and the tropical climates in Ghana.”
When it comes to disseminating the guides and implementing the policies, “the approach we take is: here is the soccer field. Play on the soccer field and everyone will be happy. Stray off the soccer field and we’ll have to take corrective action,” Woodhouse says.
From the corporate governance perspective, Gold Fields complies with two international standards: the King Report on Corporate Governance in South Africa 2002 and the Sarbanes Oxley act. It has a full set of protocols in place for both and is currently working on aligning with the third version of the King Report, which will be coming out shortly.
The main thrust of the company’s ethics and corporate governance policy, though, has been to set up a code of ethics. “This has been in place for quite a few years,” Woodhouse explains. “It spells out the behaviour we expect from our employees and aims to ensure they act in a manner beyond reproach.” The code provides user friendly guidance on how employees should deal with all issues to ensure ethical behaviour.
Policing behaviour is not always easy, though. “To support that, we make use of an independent third party tip-off provider,” Woodhouse explains. “So if anyone suspects someone is not adhering to our code of ethics, they can phone the hotline, which is anonymous. We investigate from there, and we have a whole protocol on how we investigate and close out on these issues.”
On the subject of human rights, Gold Fields has developed a range of general practice guides on issues as wide ranging as freedom of association and upholding the right for cultural difference. Many of the guides are also aimed at issues that are pertinent to specific locations. In Ghana, for example, illegal artisanal mining is prevalent, so a guide has been developed to provide ways of dealing with this.
The company is now looking at further embedding human rights awareness throughout the organisation. “Recently, we have been putting together a training tool kit which can be used to train our employees in both the issues and their obligations. We began by doing some high level human rights training with acknowledged experts for senior management, and now we’re rolling out a formal programme throughout our operations,” Woodhouse explains. This will become part of the induction training for new employees, as well as for contractors coming on site.
The Gold Fields risk management framework is also very well defined and is approached from several angles. Each operation analyses the possible risks to the smooth running of its business and enters the information into a risk register which is updated quarterly. All identified risks are evaluated for significance and mitigating actions are assigned. Corporate office reviews these registers, ensuring that cross pollination occurs across the sites and that knowledge is shared.
Meanwhile, a sub-committee of the board of directors reviews the approach to the wider picture of risk management, and the strategies that have been developed to mitigate these risks. “We look at a huge range of things, from what would happen if oil prices surge or the gold price crashes, through to how we will cope with climate change, the risk of political instability in the countries in which we operate, or what we would do in the event of a major natural disaster,” Woodhouse explains. “The evaluation process is very important in this. We have a matrix that looks at the consequences of a risk versus the probability of the risk actually manifesting itself.” The responses are then tailor-made to the situation. To mitigate environmental risk, for example, Gold Fields has become ISO 14001 certified at each of its sites, but continues to look for ways to reduce potential environmental risk even further.
“With climate change, the probability is very high—we know it’s happening,” he points out. “The consequences are fairly low at the moment, but will be much higher in the future. One of the actions we’ve taken is to employ independent external parties to help us develop a long term strategy for dealing with this—a strategy against which we can measure ourselves.”
On occasion, Gold Fields is able to remove a risk completely, but even then, risk management on that issue is never simply discontinued. “We archive the risk so that we can revive it if necessary. Risk management is a constantly evolving process,” he explains.
As one might expect, Gold Fields also has a well established health and safety policy, along with the relevant supporting documents and framework. As part of this, it has gained OHSAS 18001 certification; and uses the health and safety management systems to drive the process of continual review and improvement.
“We have, for example, put together a Safe Production Rules document, which states our golden rules—the rules you just don’t break. And in this case, they really are prescriptive. For example, wearing your personal protective equipment is non-negotiable—thou shalt!”
One of the key pillars of Gold Fields’ environmental policy and management system is ISO 14001 conformance, which is independently audited at each site. There is a formal incident reporting process in place that reports regularly to the board. But again, policies constantly need updating and new guides need to be created. The company is currently working on a new biodiversity practice guide, which will shortly be added to the list. “We’re also in the process of finalising our climate change strategy, which will then be integrated into a practice guide,” Woodhouse says.
From the environmental perspective, the company has also been focusing on ways of becoming more energy efficient. A member of staff in Perth, Australia, is specialising purely in this and has a number of projects underway, including a wind resource modelling project to determine the feasibility of using wind power, and installing a 720 kilowatt array of solar panels at the Agnew mine to power the offices. “He’s been instrumental in numerous projects that effect gains in energy efficiency, from influencing practices at the sites through to even making sure our haul roads are designed properly to reduce our diesel consumption,” reveals Woodhouse.
Combining these initiatives with simple energy management plans such as replacing old light bulbs with energy efficient ones has improved energy efficiency by some 10 per cent across the organisation.
The company is also looking at innovative ways of aligning with best practice principles in terms of reducing carbon footprint. “At our Beatrix mine we encounter pockets of methane gas which are liberated as we mine,” says Woodhouse. “They’re a serious safety risk because methane is potentially explosive if encountered in high enough concentrations. Being mindful of this risk, we deploy a whole suite of control actions to ensure the safety of our employees; but there is also an opportunity to capture the gas, and use it to run a power-generating steam turbine. And this links to our risk register,” he continues. “Energy is going to become more expensive in the future so we’ve got to become a lot wiser as to how we use energy in our operations—and we need to capitalise on all of our opportunities. Thus, our strategic management systems are not only designed to mitigate potential risks but also geared to identify and capitalise on potential opportunities.”
Power consumption across the company, along with all the environmental initiatives, is reported to a sub-committee of the board known as the Safety, Health and Sustainable Development Committee. “This committee is responsible for ensuring we continue to live by our sustainable development policy framework,” explains Woodhouse. “One of the important metrics they monitor is how many gigajoules of energy we are using to produce an ounce of gold. So far, we’ve shown a downward trend on that.
“We have also embarked on a rather exciting initiative in terms of biodiversity,” he continues. “We are a founding member of Leadership for Conservation in Africa. Africa has huge natural resources, but in many cases it can benefit from a business perspective. Conservationists are passionate experts in conservation; and we are business people aiming to make returns for our shareholders. We wondered what would happen if those two minds met. We could provide advice on how to achieve conservation in a way that leads to socio-economic development in countries that desperately need it.” Today, 16 African countries have joined the organisation and it attracts high profile support from their governments, from industry and from numerous charitable organisations.
In the area of supply chain management, the company has always expected its suppliers and contractors to abide by its health and safety, environmental and ethical rules, as well as to conform to its management systems. “Now, we’re trying to go a lot further,” says Woodhouse. “We’re encouraging big suppliers to come on board with things like socio-economic investment in the local communities. And we’ve had some successes there.”
Encouraging suppliers to adopt similar principles of sustainable development in their own organisations poses some interesting practical questions. “The question is, how do we go forward and manage this? I think it’s going to be a process of education that spans over years and will be an area of constant evolution,” says Woodhouse.
Gold Fields has a strong policy of employing local suppliers and labour in its own operations, and exceeds 40 per cent of its procurement spend on local and previously disadvantaged South Africans. And in the new Cerro Corona mine in Peru, some 60 operators at the plant are people from the local community who have no previous experience in a mining company. “A lot of our transport contracts are with local community members too, and this has a profound effect on the local economy,” says Woodhouse. “But the challenge for us now is how to pull all this together and get the maximum leverage out of it.”
Working with and within the communities in which it operates has always been one of Gold Fields’ strong points—it has a long history of building schools, upgrading roads and providing access to electricity, healthcare and clean water. But there are always new challenges. “If you can’t attract teachers to the area, the school just stands empty. So we also build living quarters for the teachers,” Woodhouse explains.
The company also carries out healthcare education in local communities. In Peru, for example, it found that historically, local people were experiencing respiratory problems. “In the end, we figured this out,” says Woodhouse. “At 4,000 metres above sea level, breathing is a challenge at the best of times. It’s cold, but more importantly, most of the houses had fires for cooking and heating but had no chimneys. So they were exposed to the health implications of wood smoke.” Gold Fields’ solution was to assist the community with putting proper cooking facilities into the houses, and this also helped to eradicate another health issue—posture problems.
The company also works to stimulate the economic development of the region. It has helped to improve the milk yield of the local dairy farming industry through encouraging the use of pastures, and is now engaged in building a centralised dairy processing plant for the community.
“In each country where we operate we’ve set up a foundation dedicated to socio-economic development within the community,” explains Woodhouse. “For a percentage of profit and every ounce of gold produced we put aside funds, which are administered by a board of trustees and are used purely for socio-economic investment.
“The days have long gone when commodity sectors can simply rely on market forces to push their product,” he continues. “To me, it’s becoming increasingly important to brand yourself. We have in fact had government officials recognise us for what we do in local communities and actually invite us to mine in their countries, so our efforts are bearing dividends. Responsible practices represent a competitive edge.”
Gold Fields’ approach to stakeholder engagement is open and transparent. “If people want to throw stones at us, we can only learn from that,” Woodhouse says. The company’s policy is to engage with local communities at the earliest opportunity and then maintain that engagement throughout the time it is operating in the area. Even at early exploration level, as soon as geologists report that a site might be suitable for mining, the community affairs specialists move in and begin meeting with the local community in a two-pronged process of discovering their expectations and educating them about Gold Fields. Then, once mining operations are established, the company continues meeting with committees from the local community, and holds forums to continue to discuss local issues and needs. All socio-economic investment is based on a comprehensive process of engagement.
The efforts of the last few years to formalise this diverse range of policies and processes into an integrated sustainable development strategy have certainly paid off. “Increasingly, our efforts are being recognised in a positive light and in recent months we have revised our vision and values, which now strongly support our sustainable development framework. Sustainable development is not a just a concept in Gold Fields, it is the way we do things,” he concludes.