How environmental permitting uncertainty in large-scale mining could influence subcontractors: The underlying chicken-and-egg problem

Abstract

This paper addresses the link between the environmental permitting of mining operations and economic development in mineral-rich regions. The purpose is to investigate how uncertainty about the permitting outcomes facing a mining company could affect its subcontractors. A key conceptual point of departure is that this influence can be related to both withheld investments and a lower demand for key inputs, including labor, but also to a reduced overall attractiveness of the community, in turn making it difficult to recruit skilled labor. These issues are illustrated in the empirical context of a Swedish iron ore producer, which for over two years faced the risk of having its existing environmental permit revoked. The results suggest that in this specific case, the main challenge for the affected subcontractors was increased difficulties in recruiting skilled personnel. At a general level, the findings indicate the need to devote increased research attention to the link between government regulation on the one hand, and business growth and regional development on the other, including reputational effects. The paper also discusses the implications for the reform of existing environmental permitting process, nevertheless arguing against the incorporation of additional dimensions of sustainability in this process.