Corporate social responsibility of mining companies in Kyrgyzstan and Tajikistan

Resources Policy 45 (2015) 202–209

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Resources Policy journal homepage: www.elsevier.com/locate/resourpol

Corporate social responsibility of mining companies in Kyrgyzstan and Tajikistan Juha Kotilainen n, Evgenia Prokhorova, Rauno Sairinen, Heidi Tiainen University of Eastern Finland, Department of Geographical and Historical Studies, PO Box 111, FI-80101 Joensuu, Finland

art ic l e i nf o

a b s t r a c t

Article history: Received 2 December 2014 Received in revised form 28 May 2015 Accepted 1 June 2015

The article analyzes the emergence of and practices related to corporate social responsibility (CSR) policies of the mining industry in Kyrgyzstan and Tajikistan. The study draws from an analysis of publicly available CSR reports and additional interviews with the stakeholders of the mining industry in these countries. The forms and emergence of corporate social responsibility policies with relevance to the mining industry and the post-socialist context are first reviewed. The roles of the national and local contexts in the formation of the CSR practices are then investigated. The differences of the emergent CSR models in these two countries are analyzed, as well as the underlying factors for the differences or similarities. It is concluded that despite the shared Soviet legacy, the CSR policies of the mining companies have clearly been diverging in Kyrgyzstan and Tajikistan. The difference emerges from the ways in which the mining companies adapt their CSR practices to the different sets of stakeholders. The CSR practices are influenced strongly by the national context in which the mining operations are conducted. The study shows that CSR activities of the mining industry should be analyzed as consisting of global commitments on the one hand, and varying forms of national and local scale implementations on the other hand. & 2015 Elsevier Ltd. All rights reserved.

Keywords: Corporate social responsibility Mining industry Central Asia Kyrgyzstan Tajikistan

1. Introduction With a shift from cheap and easy resources to expensive and more difficult, the global mining industry is expanding to new regions and facing increasing challenges related to social and environmental constraints to its operations (Prior et al., 2012). In line with the strategies within controversial industries (Du and Vieira, 2012), in order to overcome these social and environmental restraints, the mining industry has been adopting and developing corporate social responsibility (CSR) policies across regions and societies. While these policies have common characteristics, such as a focus on the benefits for local communities from the mining operations, there is also divergence in the design of CSR policies and their implementation strategies in concrete business environments (Gallagher and Weinthal, 2012; Hilson, 2012). Central Asia is one of the regions that has been in the focus of the global mining industry. As former Republics of the Soviet Union, the Central Asian countries have a legacy with the extractive industries. However, the post-Soviet period has seen major transformations in the relations between the state and the extractive and natural resource industries (Heathershaw, 2011; n

Corresponding author. Fax: þ358 13 318 039. E-mail address: juha.kotilainen@uef.fi (J. Kotilainen).

http://dx.doi.org/10.1016/j.resourpol.2015.06.001 0301-4207/& 2015 Elsevier Ltd. All rights reserved.

Cummings, 2012; Doolot and Heathershaw, 2015). The key issues that have risen have been related to the position of the local communities, the state and the international actors within the field of mining. The Kyrgyz Republic and Tajikistan experienced a sharp rise in large-scale mining operations in the second half of the 20th century as a part of the development strategies of the Soviet Union (Rumer, 1989), but the dissolution of the Soviet Union triggered a profound crisis of these industries as enterprises struggled to adjust to global competition and disruption of former supply chains (Bogdetsky et al., 2001, 2005; Levine, 1996, 2011). Currently, mining companies face long-standing community expectations for the development of the infrastructure and improvement of social services, that were previously provided by the state through the state-owned mining companies (Bogdetsky and Novikov, 2012). There are severe political challenges for developing the mining industry in Kyrgyzstan and Tajikistan. The two countries have not been politically very stable and, following independence, a succession of governments and two revolutions in Kyrgyzstan and civil war in Tajikistan have discouraged foreign investment. A high level of corruption plagues the Kyrgyz Republic and Tajikistan, as they were ranked 154th and 157th, respectively, on a list of 178 countries by Transparency International (2012). Against this background of complications with social, economic and political

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development, the emergence of corporate responsibility policies in these countries presents a current significant phenomenon that deserves closer examination. While the political conditions in the Kyrgyz Republic and Tajikistan currently differ substantially, their situations as post-Soviet Central Asian societies merit comparison. On a general level, it is a relevant question why and how the similar legacies as post-Soviet states have led to potentially different developments. In this article, we analyze the existing corporate social responsibility policies of the mining industry in Kyrgyzstan and Tajikistan. We explore whether corporate social responsibility policies have been announced for mining operations in the Kyrgyz Republic and Tajikistan; what is the content of these CSR policies; whether there are similarities or differences in the emergent CSR models within the mining industry in these two countries; and what factors underlie the difference or similarity in the CSR policies and practices. We first explore the basic conditions for the mining industry in these two countries, and then turn to debates over the relations of corporate social responsibility, local development and transitional societal conditions. Our analysis of empirical material consists of the investigation of CSR policy documents provided by mining companies of various origins currently operating in Kyrgyzstan and Tajikistan, as well as supplementary interview data.

2. Mining in Tajikistan and Kyrgyzstan In both Tajikistan and Kyrgyzstan much potential has been recognized to lie in developing mining operations, and some existing production facilities of the resource industries play major roles in the national economies (Bogdetsky et al., 2005; Bogdetsky and Novikov, 2012). While there seems to be political will within the governments for supporting the expansion of the activities of the resource industries (Gullette and Kalybekova, 2014; Doolot and Heathershaw, 2015), there is, nevertheless, much difference regarding the means and politics for materialising these general level plans. The Tajik economy is heavily controlled by the state, with strong administrative control for businesses to enter the country. In an international survey of countries with the best conditions for business, Tajikistan placed 139th (EBRD, 2011). Uranium mining, which had been an important economic activity prior to independence, collapsed with the Soviet Union. The geology of the country was not as well researched as in Kazakhstan and Kyrgyzstan, and the data remained confidential until recently (Bogdetsky and Novikov, 2012). The majority of mining and ore processing plants are located in northern Tajikistan, where there are significant reserves of copper, lead, zinc, silver and gold. The government has recently announced plans to develop bauxite ores along with increasing hydropower capacities to support the aluminum and other mineral processing industries, and a plan to develop the large silver deposit of Kani-Mansur in northern Tajikistan. The Anzob mining plant develops significant antimony reserves in the Zaravshan and Hissar Mountains. An important player in the resource industries is the Tajik Aluminium Company with a smelter 50 kilometers west of the capital, Dushanbe, that relies on imports of raw materials and uses inexpensive hydropower to extract aluminum. As a major asset for the state, the ownership of the plant and its incorporation in global economic and political assemblages have contributed to the political-economic globalization of the state of Tajikistan (Heathershaw, 2011). In the international survey of countries best suited for business opportunities, the Kyrgyz Republic was ranked 44th (EBRD, 2011). Therefore, it initially seems that in comparison to Tajikistan, the Kyrgyz economic system and its institutions have developed more towards a national economy that is lucrative for foreign

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investments. The share of the mining industry of Kyrgyzstan's GDP was 14% in 2011 (KEITI, 2011). The geology of Kyrgyzstan is well researched and the mineral reserves are well explored, but prior to independence actual mining activities in the country were limited to a few strategic mines extracting uranium, mercury, antimony, gold, coal and rare-earth elements for the needs of the entire Soviet economy. Since achieving independence, Kyrgyzstan has gradually opened itself up to international investors and become a member in the World Trade Organization (WTO). Most areas with mining prospects are currently allocated for exploration and development, and Kyrgyzstan ranks third in gold production in Central Asia after Uzbekistan and Kazakhstan (Bogdetsky and Novikov, 2012). Nevertheless, the mining industry in Kyrgyzstan rests to a large extent on one mining project, Kumtor. The deposit was discovered in the Tien Shan mountains in 1978, studied during the 1980s by Soviet geologists, and launched in the early 1990s. The mine contributes 65 per cent of the production of the Kyrgyz mining industry and is a substantial source of taxes, social fund payments and employment (Bogdetsky and Novikov, 2012). The Kumtor gold mining enterprise is jointly owned by the Kyrgyz state and the Canadian company Centerra, and the arrangement has been a target for heavy political criticism and speculations on nationalization of the mining company (Gullette, 2014). While the Kumtor mine is important due to its economic significance, during the last decade Kyrgyzstan has witnessed a broader increase in local mining conflicts. The criticism by the inhabitants in the local communities has been focussed on concerns on environmental damage, distrust in the government, and lack of engagement with the local communities by the companies (Oxus International, 2013). The underlying reasons for the conflicts have covered poor economic situation locally, inability of the state to provide social services, poor participatory rights, unrealistic local expectations towards the industry, and the struggles by the local authorities and communities to gain more power in the decision-making processes (Tiainen et al., 2014). It is important to note, however, that local communities are not univocal and it is often hard to determine who or which group best represents a local community (Gullette, 2014). According to data provided by the World Bank, there has been an increase in the contribution of mineral rents into the national GDPs in the Kyrgyz Republic and Tajikistan (Fig. 1; Fig. 2). However, the data does not provide information on the transformation of the share of the resource sector of the national economy, nor more detailed data on the economic importance of the mineral exports. This in part calls for research that would go beyond statistics and focus on company level analysis of the mining industry. The previous studies reviewed above focus to a significant extent 14 12 10 Mineral rents (% of GDP) 8 6

Ores and metals exports (% of merchandise exports)

4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fig. 1. The share of mineral rents of GDP, and ores and metals export of merchandise exports in the Kyrgyz Republic (source: World Bank Data Base http://databank.worldbank.org/data/home.aspx).

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1.8 1.6 1.4 1.2 1 Mineral rents (% of GDP)

0.8 0.6

0.4 0.2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fig. 2. The share of mineral rents of GDP in Tajikistan (source: World Bank data Base http://databank.worldbank.org/data/home.aspx).

on environmental and social conflicts on the one hand, and on the position of the resource industries within the national politicaleconomic systems on the other hand. What is lacking is an investigation of current state of corporate social responsibility policies executed by the companies in the extractive industries in the Kyrgyz Republic and Tajikistan. The examination of CSR policies will therefore fill a gap in literature by pointing out the strategies that mining companies have been adopting as a reaction to pressures from stakeholders, in order to secure continuation of mineral exploration and extraction in the two countries. Next, we explore the current tendencies in research on CSR relevant for an analysis of the situation in the two Central Asian countries in question.

3. Corporate social responsibility in the mining industry, postsocialism and emerging economies Generally, corporate social responsibility (CSR) policies depend on issues such as size of a company, its industrial profile, the country of its origin, and personal orientations of top managers (Falck et al., 2011; Yakovleva, 2005; Jenkins and Yakovleva, 2006). While often understood as voluntary activities that go beyond governmental regulation and core profit activities of businesses (Chapple and Moon, 2005), it has also been suggested that business core activities and obedience to legislation could be considered as CSR activities (Carroll, 1991). CSR practices have been found to vary significantly between industrialized and developing countries, and comparative studies of CSR practices shedding light on the mechanisms behind such diversity have been called for (Williams and Aguilera, 2008; Gallagher and Weinthal, 2012; Lim and Tsutsui, 2012). Traditionally, CSR has been studied within the context of developed industrialized economies, and it has often been described as emerging from civil activism and public demands for transparency, human rights and ecological and social sustainability of businesses. For developing and emerging economies, CSR has been seen as a controversial practice. It has been argued that there are severe obstacles to achieving corporate responsibility in developing countries where the institutions, standards and appeals systems are relatively weak (Kemp, 2001). Moreover, CSR strategies have been argued not to address the actual problems in developing countries (Campbell, 2012). Countries with a weak legal system and poor institutional and economic setting have been found to be particularly probable contexts for companies to underperform in CSR (Ringov and Zollo, 2007; Yakovleva, 2005). It has even been pointed out that CSR practices often have a negative impact on emerging economies as there are fundamental problems related to the capacity of private firms to deliver development

through local community development projects (Frynas, 2005). On the other hand, however, it has been argued that CSR would be an important tool for helping less developed economies to reduce environmental risks and poverty, update social and industrial infrastructure and fight corruption (Visser, 2008). Nevertheless, there seems to be a large consensus on the need to adjust CSR practices to the contexts of developing countries where the challenges faced by societies and businesses differ from those in developed countries (Blowfield and Frynas, 2005; Ite, 2005; Visser, 2008; Hilson, 2012; Gallagher and Weinthal, 2012). Little research has been conducted on CSR in the former Soviet Union republics of Central Asia (see, however, Artemyev et al., 2012; Lindberg and Torjesen, 2012; Mahmood and Humphrey, 2013), let alone on CSR in the extractive sector there, while the partial shift in the countries from state to private ownership entails a profound change in the relations between businesses and society that also influences the emerging models of CSR practices. The history of industrial mining provides numerous examples of environmental disasters caused by mining operations or their legacies and poor worker safety practices resulting in high injury rates and occupational diseases. Furthermore, mining operations are often conducted in less-developed, remote and relatively poor regions that serve as sources of raw materials for global markets while the benefits of mining are often realized outside the mining areas (Gifford et al., 2010). Mining operations often run the risk of disturbing other sources of livelihoods and provide only small local benefits and compensations, thereby causing growing socioeconomic inequalities and land-use conflicts. As a result, the mining industry has faced growing demands from non-governmental organizations, local communities and activists to improve its environmental and social performance (Cowell et al., 1999; Warhurst, 2001). A number of global initiatives to promote CSR principles and practices among mining companies have appeared, including the Global Reporting Initiative, the International Council on Mining and Metals (ICMM) and the Extractive Industries Transparency Initiative (EITI). The emergence of global CSR norms and intensified debates on sustainability in mining have promoted the adoption of CSR policies and practices among mining companies (Dashwood, 2007). Many transnational mining companies have started to forge global CSR strategies to be applied to all their operations (Kapelus, 2002; Dashwood, 2007). Generally, CSR strategies aim at mitigating negative impacts of mining and maximizing its benefits for society, and include charitable giving, environmental management systems, tight safety regulations, and more systematic local economic development programs (Hamann, 2004). While the company-specific management systems vary in comprehensiveness and detail, the basic components of the systems often consist of formal policy documents (e.g. code of corporate conduct and policies addressing health, safety, environment and community issues); designated health, safety, environment and community units responsible for the implementation of CSR policies; a process for assessing and monitoring environmental, social and technical risks and impacts of business operations; and CSR reports. Moreover, the significance of carrying out CSR procedures already during the exploration stage has recently been better acknowledged (Luning, 2012). What CSR becomes in practice is influenced by a local situation, traditions, the way that the company places itself in the global context, the strength of stakeholder demand, scope of environmental and social concerns, past environmental incidents related to the mining sector in the region and in regard to the specific minerals mined, as well as the structure, ownership and leadership of a particular company (Falck et al., 2011; Yakovleva, 2005; Jenkins and Yakovleva, 2006). Local and national economic, political, environmental, social, legal and cultural characteristics have a strong impact on CSR. Governments and NGOs have been

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regarded as the main actors involved in negotiations of sustainable practices in mining. Local communities that are situated in the vicinity of mining operations are increasingly seen as a key stakeholder group that often objects mining projects (Kapelus, 2002; Jenkins and Obara, 2008). The rise of community activism is grounded in the incapability of governments to defend the interests of local communities (Gifford et al., 2010) and the need of communities to ensure economic benefits from mining due to poor taxation systems (Warhurst, 2001). Consequently, mining companies attempt to secure a social license to mine through various community initiatives, including charity, infrastructure improvement, health programs, support to local businesses through procurement policies, and sustainable livelihood projects (Jenkins and Obara, 2008). However, consultations with local stakeholders are often limited to a small number of key representatives of communities (Jenkins and Obara, 2008; Clark and Cook Clark, 1999). Recently, mining companies have begun to employ more versatile forms of communication that provide more possibilities for getting feedback from local communities. Negotiations with local communities are particularly important in developing countries, where mining companies are often unable to take into account local contexts, including value systems and power relations within communities (Kapelus, 2002) and, in effect, to build comprehensive conflictsolving and consultation mechanisms to prevent local mining conflicts (Kemp et al., 2011). In developing countries, the dependency that CSR strategies create between the host community and the mining industry has also been identified as a problem (Jenkins and Obara, 2008). A few issues are worth considering for CSR specifically in the Central Asian countries. In post-socialist economies, CSR practices have to navigate between expectations rooted in socialist heritage and new forms of capitalism and business culture (Mahmood and Humphrey, 2013). A feature of the mining industry in Central Asia is its multinational composition, as companies from Western countries, the post-Soviet space and China participate in exploring and developing mineral deposits in the region. It has been noted that in emerging economies a firm's country of origin has a stronger influence on CSR than the industrial sector it represents (Amaladoss and Manohar, 2013), which suggests that in Central Asia CSR practices might vary considerably from one company to another. For example, due to their increasing presence in Central Asia, Chinese companies could have significant influence on CSR practices in the region. The implications of Chinese investments in Asia for CSR have been discussed by Frost and Ho (2005) who take up the issue of whether Chinese investments might further or hinder CSR initiatives. In China, following the socialist tradition of enterprises being burdened with non-business-related responsibilities, legislation has been crafted that gives business tasks of CSR (Kuo et al., 2012). However, while Chinese firms engage in CSR activities they do not know how to disclose and communicate them, and Noronha et al. (2013) conclude that CSR reporting there is at a preliminary and exploratory stage. As explored above, there are, on the one hand, challenges related to CSR in the mining industry, and these challenges become especially complicated in developing countries. On the other hand, there are issues related to CSR in Central Asia as a crossroads for industrial actors originating from very different backgrounds and drawing from very different traditions of industrial and business operations, as well as post-Soviet legacies of social responsibilities attached to industries. With our goal in the examination of this crossroads, we next set out to investigate the CSR policies of companies operating for the exploration and extraction of minerals in the Kyrgyz Republic and Tajikistan.

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4. Methods and research material In what follows, we explore CSR reports published on the websites of mining companies operating in the Kyrgyz Republic and Tajikistan. Company websites are a usual media for communicating CSR policies and practices due to wider stakeholder interests and their information needs (Amaladoss and Manohar, 2013). In the case of Kyrgyzstan we had a list of 999 sub-soil resource licenses, as for 22 December 2010 (Prokhorova et al., 2013). In order to limit the number of companies we focussed on licenses for gold mining only. In the case of Tajikistan we compiled the list of mining companies by consulting local mining experts and analyzing mining-related news pieces by regional news agencies. We then searched for English and Russian language websites of those companies, and included as our data all websites we managed to locate. We included websites of headquarters as well as websites of the local operations in Kyrgyzstan and Tajikistan in the research material. The extent of CSR disclosure was evaluated according to the amount of text related to CSR. Based on the study by Chapple and Moon (2005) on CSR disclosure among Asian companies we evaluated the extent of CSR reporting as follows: 1-2 pages – small, 3 to 10 pages – medium, more than 10 pages – extensive. Since the analysis of websites provides limited data about the content of CSR practices and their implementation, and as company reports often reflect the approaches of headquarters and might not coincide with the perspectives of CSR practitioners at the level of a single mine (Yakovleva and Vazquest-Brust, 2011), also structured and thematic interviews with key stakeholders were conducted (Prokhorova et al., 2013). They were focussed on stakeholders involved in the debates on the social responsibility of the mining industry in the two countries. In Kyrgyzstan, eight interviews were carried out with mining companies, two with the state administration, six with NGOs and one with a legal expert. The case of Tajikistan included five interviews with mining companies, three with the state administration and three with NGOs. All the mining companies selected for interviews were either at the production stage or close to it and represented the three largest groups of multinational mining companies in the area: Western companies, companies from the post-Soviet space and Chinese companies. The representatives of the state administration were from ministries and agencies dealing with geological, environmental and economic issues. All the interviewees were promised anonymity. In order to fulfill this promise, we cannot provide here details on the organizations that the interviewees represented. The interviews were carried out in spring 2012. The first round of interviews was carried out by the local partners, who were provided with a structured interview guide prepared by the research team. The second round of interviews was conducted in May 2012 by the members of the research team. These were thematic interviews. The general aim of the interviews was to provide data to supplement the material from company webpages concerning the social responsibility policies of the companies. Instead of being provided with a strict definition of CSR, the interviewees were allowed to comment freely on the practices related to the responsibilities of the industry towards the local communities and society at large. The questions were arranged into three broad categories: environment, employee relations and community practices. Specifically for the companies, the questions concerned the actions that the company takes in addition to its mining operations to contribute to local development and wellbeing; means of communication with the local communities; the expectations of the local communities towards companies; environmental risks and their management; health and safety risks; and benefits provided to employees. For the other stakeholders, the themes followed the same topics but from the other actors'

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perspectives. The interviewees were contacted with the help of the local partners. Hand written notes were taken during all the interviews, but some of the interviews were also recorded with permission. In addition to the interviews, in Kyrgyzstan members of the research team attended a two-day round table discussion on local conflicts between the mining companies and local communities, which provided an opportunity to observe on-going debates on the topic.

5. Company reporting on CSR We were able to locate websites for nine gold-mining companies operating in Kyrgyzstan and three mining companies in Tajikistan. One of them, China-based gold-mining company Zijin Mining Group, operates in both countries, while two companies operating in Kyrgyzstan had two web-sites each: that of the headquarters and one representing the local operations. Altogether 13 web-sites were included in the analysis (Table 1). The relatively small number of mining companies with webpages suggests that public disclosure of information through the Internet is not a wide-spread practice in the region. All but one of mining companies that report on their operations in Kyrgyzstan and Tajikistan were foreign-owned companies listed in foreign stock exchanges. The exception was Kyrgyzaltyn, a company that represents the interests of the government of Kyrgyzstan in gold mining projects. The companies that are listed in stock exchanges tend to disclose more information on their operations. In the interview material, the representatives of mining companies explained that their listing in a stock exchange pushes them to support global CSR agendas in order to attract investors. The extent of information on CSR included in the company reports varied significantly (Table 2), as did their contents. Larger companies tend to disclose more information on CSR. This finding is in line with the suggestion that ownership of a company, country of its origin, and its size have an impact on the level of CSR commitment and disclosure (Yakovleva, 2005, 69). The result could therefore be explained by the larger organizational capacity of companies to develop CSR policies and reporting, as well as the greater likelihood of them attracting attention from civil society activists. The contents and extent of CSR related material within the reports were often focussed on mentioning specific projects and CSR-related activities without reporting quantitative data. Only three companies extensively reported quantitative figures. Typically, texts related to CSR contained statements concerning Table 1 Websites analyzed. Name of company

Operations in KG or TJ

Website of the company

Website of local subsidiary

Centerra Gold

KG

www.kumtor. kg

Central Asian Minerals and Resources Chaarat Gold Gold Fields Highland Gold

TJ

www.centerragold. com/ http://www.camarplc. com/

KG KG KG

Kazakhmys Kentor Gold

KG KG

Kryso Resources Kyrgyzaltyn Manas Resources

TJ KG KG

Zijin Mining Group KG and TJ

www.chaarat.com/ www.goldfields.co.za www.highlandgold. com/ www.kazakhmys.com http://www.kentor gold.com.au/ http://kryso.com/ www.kyrgyzaltyn.kg www.manasre sources.com/ www.zjky.cn/english/

www.tcg.kg

the corporate commitment to conduct business in socially responsible ways and provided some examples of their CSR activities. A clear phenomenon in the CSR reporting was a lack of information on specific CSR projects and policies in Kyrgyzstan and Tajikistan. In all but two cases the information on company operations in these countries was limited to technical descriptions of deposits and contained very limited information on CSR programs and projects. To some extent the dearth of site-specific information can be explained by the fact that many companies are still exploring minerals and have not yet commenced production in these countries. However, lack of focus on local affairs also suggests that the information on the webpages is provided more for an international audience than the local population. Also the language of the information on the webpages strongly suggests that the CSR communication is mainly targeted to the international audience, such as shareowners, investors, international NGOs and international lending banks, as all companies provided CSR information in English. Only three companies operating in Kyrgyzstan provided information on their operations in the Kyrgyz language. To the best of our knowledge none of the mining companies operating in Tajikistan disclosed information in Tajik on their webpages.

6. Contents of CSR activities While CSR reporting has been designed to meet primarily the expectations of the international audience outside of Kyrgyzstan and Tajikistan, on the basis of the interview data it seems nevertheless that the contents of the CSR activities of the mining companies have been shaped in a close dialogue with the stakeholders in the host countries. Both in Kyrgyzstan and Tajikistan the governments play key roles in shaping the environmental, health and safety dimensions in mining company operations by setting and enforcing environmental norms and standards. As it was expressed in the interviews, in order to obtain a mining license a company must conduct a feasibility study with a compulsory environmental impact assessment section, and environmental monitoring and reporting is carried out regularly as a part of a governmental control system. As a result, environmental, health and safety issues in mining companies are typically supervised by a special department or a specialist responsible for monitoring and reporting on these issues to the state agencies controlling the performance of companies. Interestingly, however, the companies whose representatives were interviewed pointed out that compliance with the legal requirements is a part of their CSR principles in the region as the authorities are not always able to enforce the compulsory norms. Such a statement would tell that while the state is lacking administrative capacity to control obedience to the norms it has set, there would be social pressure for the companies to obey the legislative norms. This could be a result of the state holding the power to cancel exploration and mining permits. The situation illustrates how CSR practices can be closely related to compliance with legal requirements, and they do not always appear to be understood by the actors and stakeholders as practices reaching beyond the legal standards (cf. Chapple and Moon, 2005). It was stated in the interview material with the state administration in Tajikistan that the practice of environmental administration would have become stricter, leading to a better observation of legislative norms by companies. With a lack of reliable statistical data it is difficult to verify the argument, and there is no further evidence of such improvements. In Kyrgyzstan, similar improvements, driven by the on-going reformation of the mining legislation and changes in licensing systems, were noted in the interview material.

J. Kotilainen et al. / Resources Policy 45 (2015) 202–209

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Table 2 CSR disclosure of mining companies in Kyrgyzstan and Tajikistan. Market capitalization (in million Number of US dollars) companies

CSR coverage

Companies with CSR stand- Companies with CSR section alone reports in Annual Report

Companies with CSR section at web-pages

Z 1000

4

2

2

4

100–1000 o 100 Unknown

3 3 1

extensive 3 medium 1 medium 2 small 1 medium 2 none 1 small 1

0 0 0

3 0 0

2 2 1

According to the interview material, a transformation towards more participatory approaches to environmental management can be noted in Kyrgyzstan. Whilst the traditional attitude there is that environmental issues are discussed only among specialists, it is giving way to an idea that also the general public should be involved in the planning phase of mining operations and in the monitoring of the environmental impacts of mining. As a concrete example, the company Gold Fields has established a communitybased independent environmental monitoring group. Such a change in attitude has been generated by the recent protests against mining operations in various local communities in Kyrgyzstan (Tiainen et al., 2014). As a part of these disputes, environmental concerns are brought forward by local communities in the vicinity of the mining projects (Gullette, 2014). In Tajikistan, no such shifts towards more inclusive environmental dialogues were visible in the research material. The interview material validates that in addition to the environment, contribution to social issues is considered to be the most important aspect in the relations of the companies with the broader society. In both countries the companies are involved in infrastructure development projects that include road building and maintenance and construction of schools. This finding is in line with previous research that showed that community policy is the most established form of CSR in Asia more generally and that more companies report on their community policies than on other dimensions of CSR (Chapple and Moon, 2005). In Kyrgyzstan and Tajikistan the mining companies focus primarily on the maintenance of secondary schools, as public funds are not enough to maintain the school infrastructure, and companies thus supplement the shortages in public finance. Mining companies in both countries also participate in charity activities, including direct food or fuel support to the poorest families or other groups in local communities including elderly people and families with several children. Another important form of community policy mentioned by the mining companies and other stakeholders is employment, mainly manual jobs, they provide for local inhabitants. These nonspecialists are often hired with short-term contracts. Experts, on the other hand, tend to come from outside of the local communities and often abroad from countries such as China, Russia, Canada, and Australia. It is shown throughout the interview material that companies predominantly contribute to social issues in both countries through ad-hoc small-scale projects organized as a response to direct requests for assistance from a community. A downside of CSR programs is that they may result in economic dependency of the local communities on mining companies, and expose the community to risks of commodity price fluctuations, high unemployment caused by modernization of mining operations and depletion of resources (Jenkins and Obara, 2008). Recently, according to the interview data, the mining companies in Kyrgyzstan have shown signs of shifting their focus from social assistance towards support for the development other businesses in their host communities, in order to decrease the dependency of the communities on the mining companies and help them survive mine closures. Microcredit schemes, local subcontracting and business training of local entrepreneurs have been

considered as instruments of local capacity building. Most of these schemes in Kyrgyzstan, however, are still at the planning stage. Changes in community policies are linked to the acute local protests against mining companies (Gullette, 2014; Tiainen et al., 2014), and the new schemes are used by the companies to mediate the conflicts. Most of the interviewed companies in Kyrgyzstan and Tajikistan conduct their own community development projects within their general organizational structures. However, many companies in Kyrgyzstan consider establishing external social funds to carry out community development projects. These considerations are based, on the one hand, on the idea that the social fund would be managed as an independent organization, allowing the mining company to concentrate on its core mining operations instead of turning into a provider of various social services. On the other hand, the companies see the social fund as a control organization that would ensure the efficient use of the social investments and hence guarantee the desired effect for the benefit of the company image. Generally, the proliferation of mining conflicts in Kyrgyzstan (Gullette, 2014) has pushed the companies to deepen and widen their dialogues with local communities. According to the interview data, even small exploration companies now tend to have a specialist responsible for communication with local communities. The companies explain that working with local communities is of utmost priority for mitigation of local resistance towards mining operations. The interviewees pointed out that state agencies have tended to distance themselves from local conflicts and companies are urged to deal with them directly. While direct appeals for social infrastructure assistance usually come from local or regional authorities, a growing number of companies engage an increasing number of local stakeholders in dialogues. Many of the interviewed companies consider signing a formal tri-party agreement between the company, the government and the local community in order to regulate the relations between the communities and the companies. As a forerunner, Talas Copper Gold (a subsidiary of Gold Fields) has signed an agreement with a local community and the State Agency for Geology and Mineral Resources in January 2012, obliging the company to create socio-economic development programs before the end of the exploration stage. In Tajikistan, in contrast to Kyrgyzstan, it implicitly seems through the research material that motivation for local social activities emerges not so much from local pressure as such but from expectations by the central government towards the activities of the companies in this respect. Unlike in Kyrgyzstan, in Tajikistan the companies typically do not have a specific department dedicated to social issues, but a deputy director or other senior manager may be responsible for them. This can be partially explained by the small size of the companies and them being at the exploration stage, and partially by the absence of a need to conduct negotiations with multiple stakeholders. 7. Conclusions Despite shared Soviet legacy, CSR policies of mining companies in Kyrgyzstan and Tajikistan have clearly been diverging. The

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difference emerges from the ways the mining companies adapt their CSR practices to different sets of stakeholders. In Kyrgyzstan, the local conflicts concerning environmental and social issues have had a key role in driving the companies to pay more attention to practices through which they engage with the communities. Additionally, in order to mitigate the dependency of the local communities on the mining operations, the companies have been shifting their focus from charity programs to programs that promote other livelihoods than mining. As there are many companies that consider similar approaches for solving and preventing the local conflicts it seems that the companies follow each other closely and learn from the actions of other companies in the region. In contrast, in Tajikistan, the state still plays a key role in the negotiations with the mining companies and there is less pressure to engage other stakeholders and increase the disclosure of information. Companies operating in Tajikistan are more willing to stick to less formalized forms of community policies based on ad hoc charity projects. On the basis of results from the investigation of the two countries in this research, it can be concluded that the contents and implementation of CSR practices are influenced strongly by the national context in which the mining operations are conducted. In Kyrgyzstan, there is a strong bottom-up element in the formation of the contents of the CSR strategies, since they are launched by the companies in response to the demands by local, regional and national stakeholders. In Tajikistan, this approach is lacking and stakeholder demands are more limited to coming from national scale governmental demands. In terms of formal commitments to CSR principles there is less difference, as they are determined by the company headquarters. The companies that are dependent on investments through stock exchanges pay more attention to communicating their commitment to CSR principles through their webpages and Annual or CSR reports. The larger the company and the stricter its potential public scrutiny, the more CSR information is disclosed. Small companies often tend to limit their CSR communication to stating their general commitment to CSR principles without revealing details about specific projects. In addition to the diverging trajectories of CSR in Kyrgyzstan and Tajikistan, there is a further diversifying tendency in natural resource management and the adoption of corporate social responsibility policies into mining activities. It has been concluded elsewhere that negotiations over CSR strategies in practice tend to lead to uneven regional development results (Heisler and Markey, 2013). Clearly, there is a risk of this being the case in Kyrgyzstan as well, especially as the companies investing in local infrastructure and development are encouraged to do so to prevent local conflicts in the places where they are planning mining operations. However, this kind of policy may leave other places less lucky with the location of mineral deposits outside the flows of investments, in effect leading to an emergence of an uneven social and economic spatial structure. By creating difference in wealth and wellbeing between localities, such a situation might in turn at a later stage play a role in an escalation of political conflicts on a larger scale. The study has shown that CSR activities should be analyzed as consisting of global commitments on the one hand, and varying forms of national-scale and local implementation practices on the other hand. In line with the findings by Yakovleva and VazquestBrust (2011) we found that mining companies in Kyrgyzstan and Tajikistan negotiate different dimensions of CSR policies with different stakeholders. Communication on CSR commitments is clearly driven by pressure from the international audience. In Tajikistan, the dominant position of the central authorities is apparent in all CSR sections, while in Kyrgyzstan the local communities are playing increasingly important roles in determining not only the social responsibility policies of the companies towards

the communities but also practices of environmental protection. Overall, therefore, the analysis of commitments to CSR should be supplemented with a close examination of its contents and implementation, as these vary significantly between companies and countries. Despite the apparent global convergence of CSR policies and principles, the national institutional contexts with sometimes diverging local patterns play key roles in the formation of CSR practices. In such a three-scale structure, mining companies have to merge ethical requirements expected by investors with national and local demands. The study showed that CSR is largely used by the companies as a tool to respond to instant pressures, which leads to the local stakeholders being some of the key actors in defining the contents of CSR programs and, more importantly, the more concrete forms of CSR activities. At the same time, the approach of many companies to use only English on their webpages to report their activities can be considered to hamper transparency, because it limits the access of local stakeholders to the information. Therefore, the companies should make more efforts to communicate their general CSR-related values to the local populations by using local languages in their Annual Reports and webpages.

Acknowledgments The research was funded by the Ministry of Foreign Affairs of Finland (grant decision HEL8189-46). We would like to thank Sanna Ahvenharju, Johan Lunabba, Pasi Rinne and Jürg Hutter from Gaia Consulting, Sharifa Khudobakshova, the Geology Institute under the Government of Tajikistan, the Mining Association in the Kyrgyz Republic, Kalikova and Associates, Viktor Novikov, and all the interviewees for cooperation during the research, as well as the anonymous reviewers for comments on the manuscript.

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