Evolution of Relationship between Resource Producing Companies and Host Communities

From Community Affairs through Community Relationship, Community Development, Sustainable Community Development, Corporate Social Responsibility and to Social Risk Management/Social Capital Development. We have now learned that resource producing companies, and other host community-bound companies, face social risks and should manage these risks in order to develop social capital that enhances profitability and supports the company’s bottom-line. This is no different from how financial, human and technological risks are managed and the capital developed.

Strategy Paradigm Perception Conflict Risk Management/Strategy Social Contract


Perspective on Relation
Community Affairs Philanthropy/Charity/Corporate Appreciation/Mutual suspicion Nuisance /Charity/ Sympathy

Mutual suspicious

Conflict management/ None none Distant Benefactor/Mutual Suspicion
Community Relations Community Assistance/Access rights Necessary evil/ Appeasements/ Charity/Recipients Conflict Resolution/Containment MOUs Passive apprehension
Community Development CSR/FTO/Corporate Brand Beneficiaries/ Stakeholders Conflict Prevention/engagement MOUs Paternalism
Sustainable Community Development Social Investment/FTO/Corporate Brand Beneficiaries with responsibility/ Critical Stakeholders Conflict Prevention/engagement GMOUs Positive Paternalism
Community Partnership Development Social Risk Management/Social Capital Development/Brand/Profit Partners with obligations and expectations Productive conflict/ Mutual responsibility/ Engagement JV / Insurance /Mutual Assurance Active Positive Interaction/ Mutual responsibility

Community Affairs:

Quite surprising that at some point in history resource-producing companies actual had this kind of strategy towards host communities. This cannot even be considered a relationship. It is what you have with your neighbour’s protective dog – mutual acknowledgement that you also live in the neighbourhood but with mutual suspicion of the intentions of each other. Hence, even the best intentions are tested and validated. The dog will not come to your aid if you are assaulted. You are also not under any obligation to feed the dog, although from time to time you may throw over the fence some bones for the dog to dine on. There is the notion of charity, nuisance, and sympathy at the core of this interaction, in addition to the mutual suspicion. Conflict was always imminent, as no usurpation of boundaries, however innocent, would be tolerated by either party.

Community Relations

Interactions evolved into community relations from community affairs. In this paradigm a notion of charity-recipient relationship became dominant. Companies saw themselves as rendering some assistance to communities in exchange for non-hostility by a “restive, envious” neighbour. Companies defined and cultivated relationship with key individuals in the communities they considered influencers and centers of power, whom they expected to come to their aid as mediators and dampeners in the event of disagreements or conflict with communities. Community Relations was underpinned by a paradigm of strategic containment and disengagement. Conflict resolution was dominant in the relationship as there is no internal mechanism for trust building or conflict prevention.

Community Development, and Sustainable Community Development

These introduced real engagement, however, still held paradigm of benefactor-beneficiary and a notion of “Corporate Social Responsibility”. The very idea of responsibility for host communities seems somewhat flawed because the responsibility of managers of a company is to shareholders and they are not expected to use company’s resources held in trust for purposes other than building and sustaining the value of the enterprise. Moreover, communities often felt offended by the perception of a “strange” corporation feeling “responsible” for them or their needs. Hence, this paradigm has yielded not much result in building predictable and peaceful relationship between resource-producing companies and host communities.

Companies began making “social investment” in order to secure “Freedom To Operate” or Social License to Operate. Companies continued treating communities as beneficiaries of their “kindness and goodwill” that should be returned in kind as responsibility-to-grant a license to operate in the community. The drive for sustainability also made companies to look more deeply into issues of conflict prevention. In this regard, sometimes they built internal Community Relations & Development (Or Community Stakeholder Management) Organizations that became so large as to be a burden to the bottom-line. These large internal organizations and the cost of maintaining them often became difficult to justify to shareholders, so they go through cycles of boom-and-burst.

Social Risk & Social Capital

What we propose that needs to be integrated into the way resource-producing companies operate in communities is the paradigm of social risk and social capital.

Companies ought to acknowledge that like financial, technological, human capital and other risks, they face social risks by reason of the social milieu of their business. Hence, these companies should consciously and deliberately build social capital as they would build financial, human and technological capital to pursue profitability and sustainability. As a business risk, social risk can easily be communicated to shareholders and how it affects the company’s bottom line can be shown, more easily that an operating expense for community intervention and charity. A risk holder at the strategic level of the organization, such as Chief Social Risk (Capital) Officer might be appointed whose role would be the management of social risk and development of social capital in a coherent strategy. In similar way to how companies seek out and develop partnership with individuals and organizations capable of either supplying, insuring, contributing or delivering financial, technological or human capital, companies ought to seek out holders of the social capital they need to engage in order to be profitable and sustainable in the communities they operate. These holders, insurers or providers of social capital could be the communities themselves or components of them.

Companies ought to understand the social risks that affect their businesses and how to build the social capital or manage these risks from the strategic level, not at the operational level.

From this perspective, the communities are not beneficiaries or entities that companies should be responsible for, but are potential partners capable of delivering and sustaining the social capital needed by the business. As partners they have obligations. If that obligation is to deliver the social capital, then they are obligated to deliver it. And as partners, who have delivered certain capital, they should have right, like the financial and technological capital partners, to a share of the output as return to their social capital. Interactions become interdependent and mutually assured.

Building such relationship is a difficult task for organizations, given the often absence or inadequacy of community institutions with the capacity to partner in such a relationship, however it is the most sustainable paradigm in the interaction between resource-producing companies and the communities host to their operations.

Article contact: Joshua Gogo (PhD);  joshua.gogo@Ldcsgroup.com

Leave a comment

Your email address will not be published. Required fields are marked *