Mineral Economics (2023) 36:321–331

https://doi.org/10.1007/s13563-022-00345-z

ORIGINAL PAPER

Social aspects of business risk in the mineral industry—political,

reputational, and local acceptability risks facing mineral exploration
and mining
Leena Suopajärvi1 · Karin Beland Lindahl2 · Toni Eerola3 · Gregory Poelzer2

Received: 5 October 2021 / Accepted: 29 August 2022 / Published online: 12 September 2022
© The Author(s) 2022

Abstract
Mineral exploration is an industry of uncertainties. Only 0,1% of exploration projects become mines, as the volume, content,
and quality of a deposit all must be economically justifiable to find funding in the global financial market. However, the
business risk of mineral exploration is not limited to geotechnical and financial risks, as social aspects are now considered
the biggest risk facing the industry. Here, we identify three social aspects of business risk that may challenge the industry:
political, reputational, and local acceptability. Political risk arises when sectoral authorities and the related legislation come
into conflict, such as mineral versus environmental legislation. Reputational risk lies in the relationship between a company’s
past and current operations in combination with the legitimacy of the entire industry. Local acceptability risk parallels the
social license to operate, with poor corporate conduct, competition with other livelihoods, intrusion into culturally sensi-
tive areas, and local values critical of mining all potentially evoking resistance. Companies must be aware not only of the
nuances of each social aspect but also of the interplay between them to understand the full scale and scope of the business
risks associated with exploration.

Keywords Mineral exploration · Mining · Business risk · Political risk · Reputational risk · Local acceptability risk

Introduction mining, processing, and metallurgy. Economic risk relates

to the fact that mineral exploration is a business based on
If there could be only one word describing mineral explora- finding potential prospects. Hence, funding must be attracted
tion, it would be uncertainty (Olofsson 2020; Thomson and from global markets in a situation in which there is no cer-
Joyce 1997). And with uncertainty comes risk, of which tainty that the investment will be profitable. As often argued
many face the industry. Geotechnical risk concerns the vol- in the industry, an average of only one of one thousand min-
ume and quality of the mineral deposit, the accuracy of their eral exploration projects results in a mine (Moon and Evans
scientific assessment, and technological opportunities for its 2006; Thomson and Joyce 1997).
Up to the early 2000s, discussion of risks in mining and
mineral exploration was mainly limited to geotechnical and
* Leena Suopajärvi
leena.suopajarvi@ulapland.fi economic issues (Eggert 2010; Kemp et al. 2016). By the
late 1990s, the industry had an increasingly negative reputa-
Karin Beland Lindahl
karin.beland.lindahl@ltu.se tion, facing criticism for neglecting environmental impacts
and local community engagement. As a result, the concept
Toni Eerola
toni.eerola@gtk.fi of social license to operate (SLO) emerged as the indus-
try realized that it could be affected by the attitudes and
Gregory Poelzer
gregory.poelzer@ltu.se responses of the surrounding society (e.g., Boutilier and
Thomson 2011; Prno and Slocombe 2012; Thomson and
1
University of Lapland, Postbox 122, 96101 Rovaniemi, Joyce 1997). In the early 2020s, loss of acceptance of the
Finland business operation by the local community and/or society in
2
Luleå University of Technology, 97187 Luleå, Sweden general was identified as the biggest risk facing the mining
3
Geological Survey of Finland, PL 96, 02151 Espoo, Finland industry (EY 2020).

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This paper discusses the social aspects of business risk in
the mineral industry, which comprises mineral exploration
and mining. We focus on mineral exploration because
it is an industrial sector with high business risk. Also,
exploration has received much less attention than mining
in social science research, although it is an essential phase
and starting point of mining developments. In fact, in the
European Union resistance to mining developments usually
occurs in the planning phase of the mine (Kivinen et al.
2020) although resistance during the productive stages are
more common globally (Franks et al. 2014).
Until the late 2010s, the mining industry used the term
“social risk” when referring to the societal pressures facing
their business operations. However, recent academic discus-
sion more accurately distinguishes social and business risks: (i)
social risks are the expected negative impacts of mining-related
activities and threats on the people, whereas (ii) business risks
are the risk to mining operations from the people (e.g., Graetz
and Franks 2016; Kemp et al. 2016; Worden 2016, 2019). We
apply this distinction and discuss business risks in the mineral
industry, particularly during the exploration phase, i.e., at the
early stage of a possible mine development.
There are several reasons for zeroing in on social aspects of
business risk. Firstly, social science research about business
risks in mineral industry is under researched in comparison
with social risks, negative impacts, and concerns that mineral
exploration and mining are causing especially in the host-
communities of operation (e.g., Beland Lindahl et al. 2018,
2021; Poelzer & Ejdemo 2018; Suopajärvi et al. 2019a, b).
Secondly, exploring business risks in highly regulated
democratic countries is novel. While business risks in
developing countries are more often recognized, highly
regulated democracies, such as Finland and Sweden, are
typically assumed to offer a much more stable environment
for businesses and economic activity (Fraser Institute 2019).
Thirdly, from a practical point of view, conflation of social
risk and business risk in the industry may cause misdiagnoses
among companies leaving real concern about social risks,
negative impacts to the people and to the environment aside
in their corporate strategy (Worden 2016). For companies to
understand both business risks and social risks is necessary
as there are rebound dynamics between the two: if risks to the
people are perceived as too high, “it could lead to hostilities
and opposition that threaten project viability or corporate
reputation” (Kemp et al. 2016, p. 24). In other words,
environmental and social risks may turn to business costs, to
the situation where business risk is realized (Franks et al. 2014).
Fourthly, mineral extraction is expected to expand around
the globe. The transition to carbon neutral energy production
and traffic is expected to increase the demand of cobalt, rare
earths, lithium, platinum, and nickel. This development will
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L. Suopajärvi et al.
drive an intensification of mineral exploration, opening new
mines, and reopening of old mines (Lébre 202 et al.; Valenta
et al. 2019). Consequently, “battery boom” expanding the
areas of mineral exploration and new mining is likely to
generate more criticism and conflicts—and associated
business risks (Eerola 2022; Franks et al. 2014).
Responding to these gaps and needs, the aim of this
paper is to explore the social aspects of business risk in the
mineral industry and in mineral exploration in particular.
Based on our research and participation in R&D projects, the
academic literature, and empirical examples from northern
Scandinavia (i.e., Finland and Sweden), we identify and
elaborate categorization of three social dimensions of
business risk, namely: (i) political risk, including unstable
political conditions and incoherent jurisdiction and
regulation; (ii) reputational risk, including a company’s
own reputation and the legitimacy of the whole industry
in the eyes of the public; and (iii) local acceptability risk,
which can engender resistance in the local context where
the industrial operation is taking place. There may also be
situations where two or even all three risks are realized, as
shown in Fig. 1. Figure 1 serves as the basis of the analysis,
looking at each of these business risk dimensions in details
and the relationship between the dimensions.
In the following section, we briefly discuss business risks
in the mineral industry in general. After that, we focus on
the three social aspects of business risk in their respective
sections. We illustrate our discussion with empirical
examples from Finland and Sweden. The paper ends with a
discussion and conclusions.
Local
Polical
Acceptability
Risk
Risk
Reputaonal
Risk
Fig. 1  Three types of business risk and their combinations
Social aspects of business risk in the mineral industry—political, reputational, and local…
Social aspects of business risk in mineral
exploration and mining
From a sociological perspective, risks are socially
constructed expectations that unwanted results may be
realized in the future. Risks involve uncertainty—they
are future possibilities in a situation in which there is
no definite knowledge of what might happen (Aven and
Renn 2010; Beck 1992, 2009). As an industry, mineral
exploration is considered particularly risky. As Thomson
and Joyce (1997) pointed out, mineral exploration is a
time-consuming, expensive, highly competitive, and,
until the later stages of a project, secretive activity. To find
potentially lucrative but rare deposits, vast areas must be
surveyed, visited, examined, and evaluated. Exploration is
a dispersed and transitory activity laden with uncertainty
and ambiguity, clearly differing from mining, which is
carried out at fixed locations over extended periods of time
and provides revenue from extraction.
In addition, it is uncertain whether an individual
exploration project will ever become a mine. The final
operator of a project is also unknown until the last stages of
mineral exploration. In fact, as aptly pointed out by Luning
(2012), an exploration license may change hands several
times, going from junior to major companies or to other
juniors. Furthermore, the progress of exploration projects
is generally episodic, with periods of intense activity
separated by periods of little or no activity. The process is
often protracted, and it is not uncommon for several years
to elapse between first identifying the economic potential
of a mineral deposit and the decision to mine.
As regards mining, discussion of the definitions of
social risk and business risk is mainly of Australian origin
(Graetz and Franks 2016; Kemp et al. 2016; Worden 2016,
2019). Graetz and Franks (2016) identified five types of
business risks, i.e., social, technical, economic/financial,
environmental, and political/legal risks, any of which may
pose the ultimate risk of being forced to end a profitable
endeavour. As stated earlier, geotechnical and economic/
financial challenges in mineral exploration are recognized.
Environmental risk, i.e., the costs and consequences of
environmental contamination or destruction, in mineral
exploration is relatively minor compared to that of
mining (Eerola 2017) and can be further reduced with
the application of new low-impact mineral exploration
technologies (Eerola 2021). What is left are the social and
political aspects of business risks, which are less known
in the exploration industry.
Graetz and Franks (2016) defined business risk as
“the potential threats to, and unwanted impacts on, inter
alia, a company’s operations, reputational capital, market
share and profitability, as a consequence of operational
323
decisions and strategies, and the exogenous responses
of other actors to these decisions and strategies” (pp.
588–589). This definition argues that business risk is a
result of (i) decisions made by the company and (ii) public
pressure that affects both a company’s ability to operate
and its reputation. However, other research suggests that
there are also socioeconomic and cultural preconditions,
always unique to each local context, that the company
cannot change through its conduct and operations, and that
may pose a serious risk to a project (Beland Lindahl et al.
2018; Prno 2013; Prno and Slocombe 2012; Suopajärvi
et al. 2019a). Hence, it is not only company performance
but also site-specific local preconditions that shape the
interactions between companies and local actors. We link
the important role of local context to Worden’s (2016; in
different context earlier Miller & Lessard 2001) concept
of social acceptability risk, i.e., the likelihood that the
project will meet opposition from stakeholders and the
consequences of that opposition, and introduce the concept
of local acceptability risk.
Another social aspect of business risk is political/legal
risk, which includes, according to Graetz and Franks (2016),
change of legislation/regulation, nationalization, and loss
of regulatory license to operate (p. 589). We argue that,
for example, unstable political conditions and incoherent
jurisdiction and regulation are parts of the social domain and
therefore treat political risk as a social aspect of business risk.
In addition, we argue that there also exists a reputational
risk that affects a company’s performance. While Graetz
and Franks (2016, p. 589) seem to claim that diminishing
reputational capital is a result of a social type of business
risk, we see reputational risk as a business risk of its own.
The reputation and legitimacy of the whole industry may
affect individual mining or mineral exploration projects—
and vice versa. In the following sections, we review the
relevant academic literature and discuss the significance
of political risk, reputational risk, and local acceptability
risk at the mineral exploration stage and provide empirical
examples of these three social aspects.
Political risk for the mineral industry
According to Graetz and Franks (2016), political/legal
business risk exists in the form of threats “from the state,
principally to corporate entities operating within the political
society” (p. 598). However, this definition calls for deeper
scrutiny of what constitutes the “state” as well as “political
society”. States and politics are more complex and globally
interdependent in the 2000s than ever before (Eriksen 2014;
Therborn 2011). Reflecting general governance trends,
political power in mineral politics has shifted from the state
level to transnational levels of government (e.g., the European
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Union) as well as to local communities (Prno and Slocombe
2012). These vertical shifts have been followed by horizontal
shifts, creating a situation in which power rests not only with
governments but also with non-governmental organizations
(NGOs), globally operating multinational companies, and
their industrial associations. States are still important, but
mineral governance increasingly involves negotiation and
cooperation rather than the traditional state-led processes of
“coercion, command and control” (Prno and Slocombe 2012,
p. 349). From a business point of view, changing forms of
governance offer opportunities in the form of collaboration,
negotiation, and bargaining, as well as increased complexity
and uncertainty, which also increase business risks.
Polity, policy, and politics are concepts that can be used
to help disentangle the complexity of “political society”.
First, polity refers to a historically formed and established
political arena consisting of actors and their relations
(Palonen 2003). Polities, like state governments, are usually
sectorally organized into ministries, each with its own area
of responsibility and objectives. Hence, the state polity is
not monolithic: it is not “one”, but harbours different and
sometimes competing interests, not least in the mineral
industry context. As in many other countries, the Swedish
permitting process is governed by mining policy (Minerals
Act 1991) and environmental policy (Environmental
Code 1998:808). Accordingly, there are two ministries
representing different, and sometimes conflicting, objectives.
The same arrangement exists in Finland, where in the early
2020s the Ministry of Environment sought to reform the
Nature Conservation Act and Decree with the objective of
improving integration between the Act and other natural
resource legislation, including the Mining Act. The goal is to
effectively prevent the fragmentation of habitats (Ministry of
Environment 2021). This has evoked concern in the company
Mawson Oy, which is conducting mineral exploration and
planning a mine in and near conservation areas in Finnish
Lapland, and in municipalities supporting mineral exploration
and mining in the area (Lapin Kansa 2020a, b). Indeed,
more effective nature conservation legislation may conflict
with the sectoral objectives and interests of the Ministry of
Economic Affairs and Employment, which is promoting mine
developments in Finland (Finland’s Minerals Strategy 2010).
Hence, unaddressed goal conflicts and a weakly coordinated
polity are sources of uncertainty and business risk for
companies, which need a stable investment scenario with clear
terms of reference and predictability (Poelzer 2019).
Policy refers to a plan of action agreed on or chosen by
an entity. Policy is a set of normative guidelines aiming
to achieve specific purposes, including the inclusion and
coordination of different actions, and implementation
measures (Palonen 2003). As in many other countries,
Finland’s minerals strategy (2010) and Sweden’s Minerals
Strategy (2013) have sectoral mineral strategies promoting
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L. Suopajärvi et al.
mineral extraction and mining industry growth. Sweden and
Finland are generally known as countries with stable and
favourable mining policies. The Fraser Institute evaluates the
favourability of different jurisdictions for industry investments
using a Policy Perception Index. It argues that approximately
40% of investment decisions are determined by policy factors,
such as onerous regulations and taxation levels. Finland has
been described as “a top jurisdiction worldwide” (Fraser
Institute 2019, p. 38), and Swedish policy has also typically
been assessed as favourable. However, in 2020, Sweden’s
rating dropped to position 20 out of listed 77 countries/
regions as investors criticized its regulatory enforcement and
regulatory inconsistencies (Fraser Institute 2019, 2021).
Risks associated with policy making may result from
drastic changes in sectoral policy that can be hard and
costly for a company to accommodate. However, risks can
also be associated with how policies are implemented.
Several Swedish examples illustrate how conflicting goals
within national policy frameworks can result in long and
unpredictable permitting processes with business risks
including long lead times, unexpected outcomes, and
litigation (Beland Lindahl et al. 2018; Poelzer 2019).
How mineral policy is formulated and implemented is a
result of politics, different political actors striving for power
to influence what themes are raised to the agenda and to
create power relations so that they can decide on matters
deemed relevant (Palonen 2003). Political risk in mineral
exploration and in the minerals sector more generally can
arise from citizens’ mistrust of the industry, legislation, or
the authorities framing the sector. As argued by Graetz and
Franks (2016), distrust is a strong motivating factor that
can lead actors such as NGOs, communities, and individual
citizens to commence protests and political actions, which
in turn may lead to political changes affecting the mineral
industry and individual projects.
In the late 2010s, several citizens’ initiatives were
submitted to the Finnish parliament demanding amendments
to the Mining Act. Voices were raised calling for stricter
environmental legislation and for taxation that would
enable the state and host communities to benefit from
mining (Citizen Initiative 2019a, 2019b, 2019c). Swedish
studies suggest that confrontational mining resistance is
likely to grow at the national level when the state offers
little access or influence to mining-sceptical actors in either
policy formulation or implementation, and when there is
a sufficient number of simultaneously ongoing contested
licensing processes. In cases involving indigenous people,
weak or contested indigenous rights may also spur resistance
(Zachrisson and Beland Lindahl 2019).
Political business risks are associated with the overall
performance and legitimacy of the political system, i.e.,
polity, policy, and politics. Lack of trust in mineral-related
decision making is found among citizens affected by
Social aspects of business risk in the mineral industry—political, reputational, and local…
ongoing or planned mining projects in Sweden and Finland.
Recent surveys show that almost half of respondents in
Finland and Sweden argued that mining permits are given
to mining projects on flimsy grounds and that environmental
monitoring was not trustworthy (Jartti et al. 2020; Litmanen
et al. 2015; Saariniemi 2018; Suopajärvi et al. 2019a).
These results are striking, as most people in these welfare
states generally trust their government and authorities, and
typically think that state authorities act in a trustworthy
manner (Rothstein 2002; van Oorschot et al. 2006).
Hence, one of the most important tasks of the political
system is to develop institutions, including regulations, that
are responsive to citizen demands and thereby promote
legitimacy and predictability in decision making and society.
Tightening up environmental or economic requirements in
line with citizen demands may in fact reduce mistrust in
the licensing processes and monitoring, reducing political
business risks for the industry.
Reputational risk for businesses in the mineral
industry
The concept of social license to operate (SLO), referring
to local acceptance of industrial projects, emerged in the
mining industry in the late twentieth century because of
negative reputational issues within the sector (e.g., Boutilier
and Thomson 2011; Prno and Slocombe 2012; Thomson and
Joyce 1997). While the SLO predominately concerns local
acceptance (Moffat et al. 2016; Thomson and Boutilier 2011),
there is increasing recognition that societal-level factors
also play an important and interacting role at the local level
(Lesser et al. 2020). Recognizing that the reputation of the
whole industry also affects single projects, international-level
standards, such as the Extractive Industries Transparency
Initiative (EITI) and Towards Sustainable Mining (TSM), aim
specifically at accomplishing this task. Self-regulation of the
whole industry is important, and as Boutilier and Thomson
(2011, p. 8) argue, “the task of achieving socio–political
legitimacy is much less under the company’s direct control,
much less familiar, and much more complex”.
Macro-discursive expectations create the shifting context
in which companies operate and try to gain an SLO from
stakeholders (Parsons et al., 2014) . Distributional and
procedural fairness have emerged as factors affecting national-
level attitudes towards mining in Australia, China, and Chile
(Zhang et al. 2015). Similar findings have emerged in the
Finnish context (Jartti et al. 2020), while a study in Sweden
showed how societal-level attitudes and issues related to
mining affected a project-level SLO (Poelzer et al. 2020).
Societal expectations extend beyond the project level, both
to the overall governance of the industry and to the conduct
and standards by which companies operate. While mineral
exploration primarily involves research and discovery, it is
325
part of the mining cycle and often associated with possible
mine development at a later stage. Therefore, attitudes towards
mining and perceptions of mineral exploration tend to go
together (Beland Lindahl et al. 2021).
The Talvivaara case in Finland seriously impaired the
image of the national mining industry (Sairinen et al. 2017).
In the autumn of 2012, a toxic leak in the Talvivaara mine’s
gypsum pond induced a criminal investigation of downstream
water pollution. A survey conducted in four Finnish provinces
before the Talvivaara gypsum-pond leak showed that mining
and mineral exploration were widely approved by their
populations (Jartti et al. 2014) , but after the accident, the
overall national approval of the industry declined (Jartti et al.
2017). The criticism of mining was strongest in Uusimaa
Province, where there is no mining at all (Jartti et al. 2017).
The Talvivaara case is a crucial element of mining conflict
in Finland, making it almost impossible to talk about the
mineral sector without referring to it (see Heikkinen et al.
2013; Sairinen et al. 2017; Tiainen et al. 2014). This was
also reflected in interviews with residents (n = 31) in Finnish
Lapland in 2019–2020, in which every single interviewee,
whatever the opinion about mineral exploration, referred to
Talvivaara: “We don’t want another Talvivaara here” (see
Beland Lindahl et al. 2021). The Talvivaara example shows
that an accident or poor performance of one company or
operation may create reputational risk for the entire sector.
The SLO literature often stresses that a good
company–community relationship is based on positive
engagement (Moffat and Zhang 2014), reciprocal dialogue
(Mercer-Mapstone et al. 2018), and the open exchange of
information (Zhang et al. 2018). Failure to achieve such a
relationship can affect company reputation beyond the affected
community, as any vocal community opposition can exert
indirect influence on it through the mass and social media
(Graetz and Franks 2016; Prno 2013). Hence, reputational risk
is constantly present in a company’s operations. Furthermore,
and perhaps even more importantly, if a company’s reputation
has once been lost, it is hard to regain it.
To cite an example from Sweden, the British company
Beowulf Mining PLC started exploration activities in
Jokkmokk Municipality in 2006, planning to extract iron ore
from one open-pit mine and possibly to develop additional
mines in the area (Beowulf Mining 2020). Their subsidiary,
Jokkmokk Iron Mines AB (JIMAB), was granted permission
to carry out test extractions in 2013, but the company’s plans
to extract minerals in the Kallak/Gállok area has been a
source of controversy since its inception. Interaction between
the company and the affected indigenous Sámi reindeer
herding communities broke down at an early stage of the
process and, despite the company’s efforts to re-establish
relations at a later stage, trust never developed (Beland
Lindahl et al. 2016, 2021). The protests culminated in 2013
when local and external protesters temporarily stopped the
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test extractions and were removed by the police. The project
has become increasingly politicized and acquired symbolic
dimensions related to the rights of indigenous people,
distributional justice, and concern for northern nature.
When Beowulf initiated graphite exploration in the
Saimaa Lake region in Eastern Finland in the late 2010s
through Ab Fennoscandian Resources Oy, the company
was immediately associated with its conflict with the Sámi
people in the above-mentioned Kallak/Gállok case (Kallio
2016). The company’s disrepute spread more quickly than
its operations, and local attitudes were sceptical from the
beginning. Apparently, the company also did not engage
sufficiently with the local community in Finland from the
outset, and it was soon involved in a dispute in the region
(Kokkonen 2018; Leino and Miettinen 2020). This example
shows how a company’s failed performance in one locale can
affect its, and the industry’s, reputation not only locally, but
also nationally and globally.
Local acceptability risk for mineral exploration
An extensive body of literature examines the local acceptance
of mining—i.e., the SLO (e.g., Boutilier and Thomson 2011;
Lesser et al. 2017; Litmanen et al. 2015; Owen and Kemp
2013; Parsons et al. 2014; Prno 2013; Prno and Slocombe
2012; Poelzer et al. 2020; Suopajärvi et al. 2019a). For the
present purposes, we oapproached the literature to learn how
and why a company can lose local acceptance of its operations
by actors in the host community. Local acceptability risks as
social acceptability risks in general concern the likelihood
that a project will meet opposition from stakeholders and
the consequences of that opposition (Worden 2016). These
risks may arise because of the company’s own mode of
operation or be caused by external factors, such as the unique
socioeconomic, land use and cultural features of the local
community and, negative environmental and social impacts
expected by the host community initially.
While considerable research has explored the SLO in
mining, literature on the social license to explore (SLE) is
relatively scarce (for exceptions, see, e.g., Beland Lindahl
et al. 2021; Caron et al. 2016; Eerola 2017; Luning 2012;
Lyons et al. 2016; MacKenzie et al. 2020; Suopajärvi et al.
2019b; Thomson and Joyce 1997). This is not to say that social
licensing at the exploration stage is unimportant—quite the
contrary. Mineral exploration is often a newcomer in a locality,
especially in greenfield sites, i.e., unexplored or underexplored
areas. Mineral exploration companies represent the mining
industry in many local communities’ first encounters with the
industry, at a stage when relationships take shape.
The SLO literature on mining argues that the local
“context is a key” (Prno 2013, p. 584), and this is true for
SLE as well, as all exploration sites differ, and companies
must adapt and take into account specific features of the
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social structure and land use in a given area. For example,
previous experiences of mining or natural resource industries
in a locality, underlying value-based disagreements about
land use and the use of natural resources, or strong local
livelihoods threatened by mining may influence companies’
ability to gain SLE (Beland Lindahl et al. 2016, 2018, 2021;
Suopajärvi et al. 2019a).
Local acceptability risk elevated by a strong competing
industry is exemplified in several places in Finland where
the tourism industry has been critical of mining and mineral
exploration. In Kuusamo Municipality in northeast Finland,
where the large Ruka ski resort is located, mineral exploration
has been strongly contested (Lyytimäki and Peltonen 2016).
In Kittilä Municipality in Finnish Lapland, where the Kittilä
gold mine has a strong local SLO, new exploration projects
have been also opposed near the Levi ski resort (Kantola
et al. 2019). Besides tourists, holiday homeowners are
among the stakeholders most critical of the expansion of
mining areas, and thereby also of mineral exploration. Such
resistance has often been described in terms of not in my
backyard (NIMBY), whereas Eerola (2017 p. 20) referred to
the phenomenon as not in my leisure area (NIMLA).
Local acceptability risk is also high in culturally valued
areas. For example, Europe’s only indigenous people, the
Sámi, with their traditional nature-bound culture have
resisted mining in their home area in northern Scandinavia.
The above-mentioned resistance involving indigenous
people in the Kallak/Gállok case gained extensive media
coverage, and Sámi resistance in the Swedish Rönnbäcken
case mobilized support from international NGOs and the
UN Rapporteur on Indigenous Rights (Beland Lindahl et al.
2016; Zachrisson and Beland Lindahl 2019). In Finland, in
the River Tana valley, Karelian Diamond Resources had to
withdraw from diamond exploration because of local Sámi
resistance that also gained international media coverage
(Lassila 2018). These examples show that local acceptability
risk may have an impact on the decisions of global companies
and financiers.
A specific livelihood in northernmost Europe is reindeer
herding, which is also a traditional livelihood among the
Sámi people. Reindeer herding, and the people engaged in it,
are particularly vulnerable to mineral exploration and mining,
since reindeer herding requires access to large areas of land
suitable for grazing. Small local groups with little resources
at their disposal tend not to present strong opposition, but as
businesses are expected to work ethically (e.g., Graetz and
Franks 2016), their resistance may become relevant. Not
acknowledging and respecting indigenous rights or traditional
livelihoods is becoming increasingly risky for the mining
industry in northern Europe. The intersection of indigenous
rights and mining-related developments in Scandinavia has
become an increasingly contested socio–legal arena (Larsen
et al. 2018; Raitio et al. 2020) .
Social aspects of business risk in the mineral industry—political, reputational, and local…
These examples illustrate the diversity of local contexts and
local acceptability risks. The resistance of local stakeholders,
those who are affected by the operations or those who can
influence the developments at the local level (Lesser et al. 2017;
Prno 2013), may lead to conflicts and lawsuits causing delays
and even stop the operation (Franks et al. 2014). Assessments
of attitudes in one place cannot easily be generalized to other
places. Nevertheless, insights into the contextual conditions
and drivers shaping attitudes can be generalized and help
explain, even predict, local attitudes to exploration and mine
development across Europe (Beland Lindahl et al. 2021).
Although local context is important, company performance
also matters. As illustrated above, poor corporate conduct
in mineral exploration can be related to, for example, target
selection in sensitive areas (e.g., nature conservation areas, Sámi
homeland, reindeer herding areas, and tourism destinations) with
associated lack of communication and stakeholder engagement
from the beginning (see Eerola 2021; 2022).
Discussion: social aspects of business risk
in mineral exploration
Risks concern the future. We argue that three social aspects of
business risks—political, reputational, and local acceptability—
are particularly relevant to mineral exploration. Mineral
exploration is time consuming, often lasting decades, while
legislation, public opinion, commodity prices, markets, and
the production and demand of the explored metal may change
quickly (Eggert 2010; Thomson and Joyce 1997) and affect
the conditions of the project. In a changing socio–political
operational environment, mineral exploration companies need
to be aware of the social aspects of business risks to make
informed and proactive decisions to manage those risks.
Although power is increasingly diffused in mineral
governance, the state is still a key actor setting the legislative
and regulatory frame for the industry (Prno 2013).
Nevertheless, this does not mean that there are predictable
political conditions for the industry. From a company’s point
of view, political risks are primarily associated with sudden
political changes and/or uncertainties arising from weakly
coordinated polities, policies, and political processes. Power
struggles between sectorally organized national political
institutions, and their associated interest groups, are common
in most Western democracies. Despite offering overall stable
conditions, the political climate may change rather quickly
in democratic societies such as Finland and Sweden, as
parliament is re-elected every fourth year, possibly resulting
in changes in mineral sector policy (Zachrisson and Beland
Lindahl 2019). Hence, business always faces a political
risk, which mineral exploration companies must manage.
How companies act in the political arena can increase or
decrease the risks faced. Supporting stricter environmental
327
or economic requirements in line with citizen demands may,
for example, help reduce mistrust of the licensing processes
and monitoring, thereby reducing business risk for industry.
Another set of business risks concern the reputation of
companies and projects. The experiences and opinions of
various groups in civil society, ranging from the smallest host
communities to NGOs operating globally, are easily amplified
through the mass and social media (Eggert 2010; Thomson
and Joyce 1997). In the Global North, the Internet and social
media are widely used, and national media ownership is
not centralized. A company’s track record follows it to new
locations. The conduct and standards of each company affect
the legitimacy of the whole industry, as became evident in
Finland in the Talvivaara case (Sairinen et al. 2017; Tiainen
et al. 2014). Therefore, a mining and mineral exploration
company’s reputational risk depends not just on its own
performance, but also on the performance of other companies
in the sector. Thus, individual companies within the global
mineral exploration and mining sector depend on one another
to ensure proper conduct and reduce reputational risk.
Local stakeholders are seen as key actors because of their
proximity to the project and because people living in the
area are most affected by the operations. If they oppose the
project, this may cause delays and increase operator costs
(Franks et al. 2014; Lyons et al. 2016; Prno 2013; Prno and
Slocombe 2012; Thomson and Joyce 1997). Local criticism,
possibly supported by national NGOs, can delegitimize
a project and lead to the withdrawal of investors, thereby
ending the project (Eggert 2010; Franks et al. 2014; Thomson
and Joyce 1997). Also, lack of mutually beneficial local
relations may prevent a company from recruiting local labour
and thus benefitting from local actors’ support. Mineral
exploration is the stage when a representative of the mineral
industry makes first contact with the local community
and relations are established (Thomson and Joyce 1997).
If an SLE is not achieved, this may seriously hamper the
development of a potential mining project. Hence, as the
environmental impact of mineral exploration is relatively
limited, and if the budget of a mineral exploration project is
stable, the main challenge will be a social one, that is, earning
and maintaining the SLE (EY 2020). Consequently, it is very
important for the mineral exploration company to correctly
assess and manage local acceptability risk. Knowledge of
the local context, and of the factors shaping local attitudes to
mineral exploration and mining, can help companies make
informed site selections, avoid high risk projects, and manage
existing social acceptability risks in satisfactory ways.
Figure 2 provides a developed illustration of three social
aspects of business risk and their combinations introduced
in Fig. 1. There can be a solely local acceptability, political,
or reputational risk, a combination of two types of risks,
or a situation in which all these risks are simultaneously
present and even reinforce one another. Examples of such
13
328
multiple risk situations can be cited from Finland. The
above-mentioned company Beowulf (see Reputational
risk for businesses in the mineral industry) brought its bad
reputation with it from Sweden, creating a fertile basis for
local opposition movements in the Saimaa Lake area. These
movements generated a national network of mining-sceptical
groups demanding Mining Act reform (Leino and Miettinen
2020; Pulkka 2019), with stricter rules for exploration as
well. This case occupies a central position in Fig. 2, showing
the coexistence of all three risks. Another example of such a
company and situation in Finland is that of Dragon Mining’s
operations (see Eerola 2022; Lyytimäki and Peltonen 2016;
Mauranen et al. 2014; Muhonen and Gröndahl 2019). A
combination of strong local resistance, an unstable political
situation and legislation, and a company with a bad reputation
would be the worst-case scenario for a mineral exploration
company.
As noted, risks concern the future (Beck 1992, 2009) and
are associated with expectations, especially in the mineral
exploration context. Mineral exploration typically generates
both positive and negative expectations, with their management
being among the main challenges for the involved companies
(Beland Lindahl et al. 2021; Olofsson 2020; Suopajärvi et al.
2019b; Thomson and Joyce 1997). It is necessary for the
companies to emphasize the potential of a business proposition
to investors, but if a deposit is described in excessively lucrative
terms, this may create overly optimistic expectation within the
local community of employment and impacts on the local
economy. If very positive economic impacts are expected
locally, but they turn out to be weak, this can be a source of
local resistance. Therefore, exploration companies have a clear
Local Acceptability
Poli cal Risk
Risk - Lack of local trust and
- Conflic ng sectoral policy support
- Unstable poli cal - Divergent environmental/
elite/decision-making cultural values
- Compe ng industries
Reputa onal
Risk
- Illegi y of industry
- Poor company reputa n
Fig. 2  Three types of business risk and their combinations revisited
13
L. Suopajärvi et al.
challenge concerning what, how, and when to communicate
about their activities (see Moffat and Zhang 2014).
Kemp et al. (2016, p. 22–23) claim that “unintentional
generation of social risk may be a function of flawed or sub-
standard processes, lack of skills, experience, motivation
and/or incentives (or disincentives)”. The probability that
social risk turns to business risk (rebound effect) depends
on how well-informed the decisions are that the company
makes and how diligently it operates (Graetz and Franks
2016). Mineral exploration companies are expected to be
“good neighbours” to the local people, but it is also assumed
that they will take responsibility for major global issues such
as climate change (Boutilier and Thomson 2011) and future-
oriented sustainability (Thomson and Joyce 2006). Earning
local acceptance and good reputation as well as respect-
ing the will of elected political bodies are necessities in all
industries, not only in mineral sector. As well, these busi-
ness principles are even more relevant in developing coun-
tries, where due to deep-rooted historical, structural, social,
economic, and political reasons, conflicts related to natural
resources are more common and severe than in highly regu-
lated democracies (Conde 2017; Hilson 2012).
Conclusions
Risks are possible future outcomes resulting from decisions and
operations made in the present. We have argued that business risk
involves three social aspects—political, reputational, and local
acceptability—that mineral exploration companies and the mineral
industry in general may encounter. The political aspect is framed
by the changing socio–political environment mainly at the national
level. The reputational aspect refers to a company’s past and present
image among the public and to the legitimacy of the whole industry.
The local acceptability aspect relates to the denial or withdrawal of
the SLO or, in the case of mineral exploration, the SLE.
The probability of business risk increases if a company
is uninformed or ignorant regarding legislation and the
code of conduct applicable in a certain sociocultural and
political environment. Also, the world is increasingly
interlinked because of rapid news dissemination as well as
interconnectedness via social media. The multi-faceted nature
of business risks is an undeniable reality in the 2020s.
Acknowledgements The authors want to thank colleagues in the pro-
ject, Dirk de Ketelaere, Hannu Panttila, and Anna Spiteri, for their
comments to the earlier draft of the paper.
Author contribution LS is the first writer; others have worked equally,
and hence their names are in alphabetical order.
Funding Open Access funding provided by University of Lapland.
This article was made possible with the funding from the European
Social aspects of business risk in the mineral industry—political, reputational, and local…
Union’s Horizon 2020 research and innovation programme under Grant
Agreement No. 776804, NEXT—New Exploration Technologies.
Data availability Not applicable.
Declarations
Ethics approval and consent to participate OK.
Consent for publication OK.
Conflict of interest The authors declare no competing interests.
Open Access This article is licensed under a Creative Commons Attri-
bution 4.0 International License, which permits use, sharing, adapta-
tion, distribution and reproduction in any medium or format, as long
as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons licence, and indicate if changes
were made. The images or other third party material in this article are
included in the article's Creative Commons licence, unless indicated
otherwise in a credit line to the material. If material is not included in
the article's Creative Commons licence and your intended use is not
permitted by statutory regulation or exceeds the permitted use, you will
need to obtain permission directly from the copyright holder. To view a
copy of this licence, visit http://​creat​iveco​mmons.​org/​licen​ses/​by/4.​0/.
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