Sustainability in the extractive industries is a paradox

Adopting environmental management as a central component of the extractive business model has been a priority in the last two decades, which has made environmental impact assessments (EIA) critical for companies’ operations.
The objective of an EIA is to identify, describe and quantify all potential impacts of an extractive company. It seeks to avoid, minimize, remediate and compensate for all environmental damage.
When consultation processes are added and are properly executed, they can substantially improve a mine’s profitability by limiting environmental mitigation costs and avoiding conflicts with local and Indigenous communities.

The irreversible impacts caused by mineral extraction and the financial liabilities imposed by legal systems in the advanced economies have forced companies to embrace environmental management as a core component of their business models. Cadres of employees work diligently to show that their employers are dedicated to preserving the environment and improving the welfare of local communities. They are supported by consultants, non-governmental organizations and government functionaries who are all committed to improving the practices of the extractive sector. Some companies define their development projects and operations as ‘environmentally and socially responsible’, while promoting the ‘wise use’ of non-renewable resources. Increasingly, the term ‘sustainability’ is being used to describe these corporate policies – despite the obvious cognitive dissonance inherent when the word is used to describe the extractive industries

The regulatory process that governs the environmental and social impacts caused by the exploration and exploitation of minerals is organized via a technical study known as an environmental impact analysis (EIA).

The objective of an EIA is to identify, describe and quantify all the potential impacts. The environmental impacts of the mining industry are well known and are the probable origin of the mitigation hierarchy, summarized as: (1) avoid, (2) minimize, (3) remediate and (4) offset.

Occasionally, an EIA can lead to the cancellation of a project, but more often it motivates the developer to modify some particularly noxious aspect of a project, or to provide more generous compensation to impacted communities. There are two broad classes of impacts:

(1) Direct impacts, which stem from the construction and operations of the mine, oil well or associated infrastructure asset, such as a waste treatment facility or pipelines where a failure caused by a design flaw, human error or an act of nature (e.g., earthquake) can lead to catastrophic harm to natural ecosystems and nearby communities.

(2) Indirect impacts, which are more remote and harder to quantify; for example, deforestation on landscapes with key transportation assets or aquatic degradation caused by recurrent leaks and spills that can alter ecological processes far downstream from mine sites and oil fields. Sometimes referred to as secondary impacts, they are real and significant, particularly when they harm long-established communities whose livelihoods are dependent on natural ecosystems.

Assuming the project moves forward, EIAs are developed in parallel with an environmental action plan (EAP), which has four basic objectives that adhere to the mitigation hierarchy.

Both instruments incorporate consultation processes and, when properly executed, can materially improve the profitability of a mine, in part by limiting the costs of environmental mitigation and avoiding conflict with communities. In spite of progress in using the EIA as a risk-management protocol, the mining industry is populated by old-school engineers and geologists that view EIA as a public relations document. They are often driven by short-term cost considerations and timelines that reflect upon their reputation as project managers. Consequently, the EIA is often used as a checklist of tasks that must be completed before the initiation of mining operations.

*Group of male Perrhybris pamela butterflies feeding on minerals in clay along the Tambopata River. Image by Rhett A. Butler.*

In contrast, progressive companies use the regulatory and consultation processes to improve their operations and protect their investments. A controversial project can be challenged by civil society organizations in the court of public opinion; regulatory agencies may be populated with allies, but functionaries will react to controversy by delaying decisions. A poorly executed EIA or a dishonest consultation process can paralyze a project and destroy financial capital. Worse still, the unforeseen consequences of a catastrophic event can lead to bankruptcy when aggrieved citizens take legal action though civil suits or when governments levy fines and damages caused by negligence.

Since about 2015, companies have become cognizant of investors’ demands that they comply with ESG principles, which include commitments to adopt ‘best management practices’. Not surprisingly, these are almost a mirror image of the mitigation hierarchy. Following are some examples of the environmental and social impacts associated with the extractive sector in the Pan Amazon.

“A Perfect Storm in the Amazon” is a book by Timothy Killeen and contains the author’s viewpoints and analysis. The second edition was published by The White Horse in 2021, under the terms of a Creative Commons license (CC BY 4.0 license).

To read earlier chapters of the book, find Chapter One here, Chapter Two here, Chapter Three here and Chapter Four here.