Nickel firm finds gold in sustainability

Falconbridge 1

Falconbridge, one of Canada’s premier mining companies, is on a remarkable journey toward sustainability.

It began ten years ago in the Dominican Republic where the company had been running its subsidiary, Falconbridge Dominicana (Falcondo), in a nineteenth century, paternalistic management style that gave the short end of the stick to Dominicans.

It has transformed Falconbridge’s management into a collaborative, participatory style and has brought huge benefits to the Dominicans, the environment, and Falconbridge itself.

In discussions with executives at the company’s Toronto headquarters, I tried to put my finger on what had been the transforming impulse within Falconbridge. As nearly as I can make out, it was a burgeoning sense of ethical responsibility. What George Gordon, the  corporate secretary simply calls « Doing the right thing.’’

As powerful a motivator as this is, however, Falconbridge realizes that it will only take the company a limited distance toward sustainability. Travelling farther requires explicit policies, and so Falconbridge recently adopted a sustainable development policy that is among the best that I have seen.

But more than policies are needed. Operating sustainably requires a total mind set that applies to every decision made. In this sense, process — how the company makes its decisions — is even more important than the decisions themselves.

I’m not sure Falconbridge’s senior officers agree with this. But at this stage, it doesn’t matter, because their journey thus far has been dramatic.

And if the company hasn’t yet crystallized its specific objectives into a conceptual framework for handling all decisions, if it hasn’t yet defined its identity in terms of sustainability — so what? The likelihood of this eventually happening under its sustainable development policy is pretty high. And its record in the Dominican Republic offers every hope that it will.

In 1972, when the Falcondo mine opened, it was the largest single nickel-mining expansion ever undertaken. But outside of the jobs it provided, and the company-town amenities that flowed from the development, Dominicans received precious little benefit.

In its first 16 years, Falcondo shipped metals worth $1 billion, and paid $4 million in taxes. Part of the reason for the paltry return to the Dominicans was the Falconbridge decision to finance the mine almost entirely with borrowed money. That meant Falconbridge could keep its cash reserves at home intact. It also meant that it could keep taxes in the Dominican Republic low because of Falcondo’s high expense in paying off loans from North American bankers.

A large part of the reason also was the skyrocketing price of oil in the early eighties. In only half of Falcondo’s first 16 years did the company show a profit. And total deficits were 2 1/2-times total profits.

In 1988 there was a showdown with the Dominican Government that resulted in a changed relationship. The government and Falcondo agreed to a formula that encourages the company to shut down when nickel prices are low (thereby preserving mineral reserves, avoiding losses, and producing profits and tax revenues when good prices return). Long-term debt was paid off. The tax rate increased from 30 to 50 per cent, and both profits and taxes went up substantially. During shutdowns, another formula encourages Falcondo to switch employees to maintenance instead of laying them off.

Independently of these developments, Falcondo now has a management team that is almost all Dominican instead of almost all Canadian; it has cut dust emissions significantly, it recycles all the water it uses, and it is deeply involved in helping Dominicans build sustainable communities through extensive initiatives in education and community health.

« One of the things we learned at Falcondo,’’ says Dr. Albert Cecutti, vice-president for the environment, « is the importance of ongoing discussions with local people.’’

The other major lesson is that « Going in almost like colonizers is not the way to go. We learned we don’t have to run everything. The sooner we reduce our Canadian expatriate involvement, the better.’’

The journey has been a textbook illustration of how collaboration, fairness, and dialogue can benefit everyone.

 

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