Social Investment in Supply Chains: Mining the Possibilities

Description

Tintio SA (Tintio), a Peru-based mining company, planned to open a gold mine in Ica, the southern region of Peru. But like other mining companies, Tintio often had rocky relationships with the communities in which it operated. Tintio had tried to improve its practices and relationships over the years, but in 2021, it still experienced pushback from assorted stakeholders. Company leadership needed to decide how best to compensate and benefit the local community through corporate social investments. It had to choose among three options: (1) the traditional, required canon minero, in which mining companies paid corporate income tax, part of which compensated communities for production activities; (2) the voluntary payment system of regalos, or gifts that the company paid to the government; or (3) the voluntary Peruvian Works for Taxes (WfT) program, begun in 2008, which was more structured than regalos and involved the mining company overseeing a proposed project in place of paying future taxes. Simply adhering to the required canon minero or gifting the community through the regalos system could be far simpler than the WfT mechanism, but the results could be less substantial. While navigating the complexities of the mining industry and its reputation in Peru, Tintio leadership had to decide which option, or combination of options, to choose. It needed to positively affect the community, satisfy the Peruvian government, and create substantial and sustainable projects and improvements.

Keywords

Business ethics community compensation mechanisms corporate ethics corporate social investment mineral extraction mining Natural resources Peru stakeholder engagement Supply chain management Taxes