The Untapped Opportunity in Extractives
The extractives sectors—including oil, gas, and mining industries—present an opportunity for social change on a massive scale: Of the world’s ten biggest companies, three work in extractives. While operations are increasingly located in poor or developing countries, extractives companies can use the power of their scale to provide critical economic development opportunities in the emerging, resource-rich countries in which they operate.
Through FSG’s research on extractives, we’ve found that there is a clear business case to support those communities. Extractives companies lose billions to strife. To cite one of many examples, in Nigeria, unrest and attacks on foreign workers and pipelines in the Niger Delta caused oil production to slip by 18% between 2005 and 2008, costing tens of millions of dollars in lost revenue per day.
The sectors often respond reactively to this strife—by attempting to address the immediate causes of these risks: community tension, demands, and protest. Existing approaches have led to mixed results at best, however, and there is a perception within the industry that current approaches are falling short of solving the business need while failing to address issues in local communities.
To unlock social and business value while addressing these business concerns, some extractives companies have started thinking about societal issues in a fundamentally different way. Michael E. Porter has helped to drive this growing concept in recent years, and he recently presented to an audience in Calgary on how extractives companies can benefit from creating shared value with their communities. His slides below (also found here) include real-life examples of global companies that are making it work: Anglo American’s Water Reclamation Facility in South Africa; BP’s Local Staffing and Content Program in Azerbaijan; and BHP Billiton’s World-Class Supplier Program in Chile. The slides also detail the five common challenges extractives companies facewhen they embark on creating shared value.
If you are interested in learning more about this research, join us for the breakout session "Shared Value Partnerships: Lessons from the Extractives Industries for Other Sectors" at the Shared Value Leadership Summit, May 13-14 in New York. Learn more and register.