» Case Studies

Companies that have taken the time to integrate significant contributions to local communities into core operations are finding that they are able to deliver greater long-term value to shareholders and other stakeholders, as well as to future generations.

Following are examples of ways that respectful and comprehensive business-community engagements produced mutual benefits.

Local Knowledge Saves Money

A large mining company agreed to share its draft mine site construction plans with local community stakeholders. In a series of scheduled consultations, community members told the company representatives that the positioning of the entryway would render it useless for much of the winter due to snow drifts and wind currents. They also suggested repositioning the airstrip and reducing the buildings' footprint to be less intrusive to caribou migrations. The company revised its plans and avoided substantial financial losses.

The company took one additional critical step: it returned to the community stakeholders with the revised plans. Community members were able to see that they had been listened to, and their respect for and trust in the company increased. Conversely, company planners valued access to localized community knowledge.

Supporting Community Capacities Benefit Operations

In spite of the statistics indicating low levels of education, high crime, high rates of alcoholism and resistance to the presence of a multinational corporation, one company made direct contact with locals to identify existing skills and aspirations within the community. Based on this engagement and the data gathered, the company developed training programs using “learning by doing” approaches, and encouraged the formation of small businesses. The company also restructured its sourcing and procurement systems to enable small local businesses to bid successfully for contracts. This high-tech company now employs the vast majority of its 700+ employees locally. Localities that had once objected to the presence of a large multinational now offer wide support for the company. Many thriving local businesses also offer a competitive and increasingly high quality economic base to support company operations.

Replacing Violent Action with Peaceful Dialogue

Violent opposition characterized public opinion of a South American mining company, although company officials had been committed to good corporate practice. In spite of its efforts, the company management team had not fully understood the many and inter-connected livelihoods of the region. Misunderstandings existed on both sides. The company recognized the need to learn directly from the community and began a series of discussions that began with the local fishermen’s association and expanded to engagement with any group of people who shared common interests. The opportunity for a structured setting in which various parties could express their points of view provided a positive alternative to violent action.

These business-community forums now meet regularly. They reduced and eventually eradicated violent community action against the company. Community members were able to discuss issues and negotiate solutions, including proposing and receiving funding to support economic development projects that compensated disruptions to traditional livelihoods.

Creating a Win-Win Situation Through Economic Opportunity

A local businessman bid for a contract to produce rags locally. He was able to produce them at a price that was close to the winning bid, but lost to a non-local producer. He argues that the winning bid was so low because that contractor had other business with the company, which cut transportation costs. Still, he believed that as a local businessman, and in the interests of supporting local economic opportunity, the company should have offered him the business.

In order to mitigate resentment in the local economy, the company could have drawn on the example of another company's practice. Through consultations with communities in its area of operations, this company saw the potential of local small businesses, and required that contractors from outside the region find local partners to bid successfully on contracts. Thus, the company, which perceived itself as a citizen with obligations and rights in the community, was assured that it benefited from local contextual knowledge while enhancing its reputation. The community benefited from the income as well as from links to larger businesses.

Transparency Benefits Company and Communities

One company in South America paid a hefty $100 plus million to the central government for completing its construction under budget. The company wanted to ensure that the majority of this money would return to the communities surrounding the mine. It took two important steps:

First, with shareholder support, it decided to make the payment public, including through an announcement by the company’s President to local communities. Second, the company drew the support of elected officials to use their influence publicly to ensure that the funds reached the communities most affected by the company’s operations. The company even used its own lawyer to develop a media campaign, coordinated with supportive congressmen and lobbied with the government on behalf of communities in its area of influence.

Benefits to the community were:

• A major new road that increased mobility of several communities;
• Access to electricity for many local communities, and
• Improvement of education and health services.

While transparency has not always benefited the company involved, in this instance, the company’s success may be attributed to its proactive strategy of engaging localities with information and recognition of their rights to benefit from the company’s investment.

Companies are often reluctant to replace what are perceived as essentially government functions. Here, the company’s advocacy brought government resources to a neglected region. The cost of road construction alone was equivalent to 40 times the annual budget previously allocated to that region's infrastructure.

Local Youths Transform Industry Success

At independence, Uganda had a remarkably resilient economy resting on the export of peasant-grown coffee and estate-grown tea. The estate owners were for the most part non-nationals. The Uganda Company, originally a venture in economic development led by the Church Missionary Society (CMS), popularized the view that tea production was too complex to be entrusted to local peasants with minimal education levels.  Transporting the perishable tealeaf to processing plants required a sophisticated but rapid process.

The Nyakashaka Project involved changing these attitudes and using a small specialized team of agronomists to help in resettling youth with at least primary school education in understanding all aspects of tea production, including production of other high value crops to complement the staple tea crop. These were strawberries and flowers. The critical importance of getting product speedily to market was also conveyed by the Nyakashaka team.

This is a classic instance of blending corporate skills and organization. The external team was confident in its knowledge of tea production.  The youth of Nyakashaka grew in their confidence that they were fashioning a major cash-earning instrument. With local enthusiasm, a moderate level of education and willingness to delay pay-off, Nyakashaka became one of the principal success stories involving youth in rural development. The impact was much more extensive than anticipated and has precipitated the area's transformation, over three decades, into the center of Uganda’s export industry.