Does the Principle of Compensation Provide a Solid Basis for Establishing Corporate Environmental Responsibility : A Case Study of Madagascar’s Mining Industry

Abstract

The mining sector has been criticized for its lack of environmental responsibility, but a certain amount of progress has been evident. At the same time, a number of developing countries have opted for an environmental management framework underpinned by the principle of compensation. Even though this principle is closely aligned to corporate social responsibility, it does not appear to represent the most effective way of achieving corporate social responsibility. Based on a case study in Madagascar, we examine the application of the principle within a mining project and show that its inadequacy stems from failing to consider the population’s response to the actions taken by companies. In our study, the principle of compensation was strictly applied, but the local population began to clear the forest once the mining project was underway. Our findings hence suggest that corporate social responsibility in this kind of context would be more effective if it were based on a stakeholder approach. In addition, our case study sheds new light on how the stakeholder approach should be interpreted.