Greenland’s corporate sector is embracing responsible business to help ensure that potential oil and mineral development is more sustainable
With a population of 57,000 spread around the edges of a country the size of western Europe, most of which is north of the Arctic Circle, Greenland has always been a country of unique challenges. And right now, there is a lot at stake.
Having gained home rule from Denmark in 1979, and then further autonomy in 2009, Greenland still receives an annual block grant of 3bn Danish kroner (£330m) from Copenhagen, which accounts for about half the government’s income.
The barrier to full independence – the goal of Greenland’s government under prime minister Kuupik Kleist – is simple economics. The country simply does not have the revenue to finance itself. The ambitious solution, albeit a long way off, is to generate sufficient revenues developing the mineral and hydrocarbon resources that geologists believe are lurking under the icecap or under surrounding Arctic waters.
Over the past few years, the Greenland government’s allocation of concessions to explore for oil and mineral resources has inevitably drawn the attention of international environmental NGOs. Greenpeace had a well-documented clash with UK oil company Cairn Energy while it was test drilling west of Greenland in early 2011, for example, over concerns about oil spill contingency plans.
Meanwhile, Greenlandic companies have faced not only concerns for the environment, but also the prospect of suddenly having to engage with large multinationals – to the benefit of their businesses if they get it right, of course. Their response: embrace sustainability and develop a local culture of responsible business.
Corporate leaders
And some of the country’s biggest companies have been leading the way. From his office in Nuuk, Greenland’s capital, Michael Binzer, chief executive of Air Greenland – the country’s national carrier – knows better than many who is coming and going and he sees the changes that are coming.
Greenland’s towns and settlements have no connecting ground transportation. Air Greenland provides an essential public service where distances by sea are too great, operating 43 routes internally and two internationally, including the main link with Copenhagen.
While he accepts that an airline is necessarily carbon-intensive, Binzer says Air Greenland is committed to as small an environmental footprint as possible. “We have sourced the most efficient aircraft we can operate, and have worked hard on flight plans and routing to keep our fuel use as low as possible,” Binzer says. In addition, the airline has redesigned its hangars and maintenance sheds to be as well insulated and cheap to run as possible. “It’s good economic sense, and engages our employees, as well as being the right thing to do,” Binzer says.
As his company provides an essential service, he recognises that its principal stakeholders are his fellow Greenlanders. But Binzer is in no doubt where the growth in his business could come from: chartering aircraft to service the new oil and mineral exploration projects that are springing up all over Greenland.
There’s no doubt the mining and oil companies need Air Greenland’s expertise. Operating aircraft in a distinctly challenging high Arctic environment is no easy matter. “Companies are keen to use our services rather than bring in their own helicopters. It’s not just the aircraft but the backup required in such extreme temperatures,” Binzer says.
Air Greenland’s turnover in 2011 was DKK1.22bn (£135m) with profits of DKK51m (£5.6m), and is the country’s only company signed up to the Global Compact. Most other domestic companies are much smaller and so not as ready to be potential partners for the major international companies that are increasingly interested in doing business in Greenland.
Binzer and other Greenland business leaders have recognised this, and in 2010 established CSR Greenland, which is now actively promoting the benefits of responsible business and sustainable development in the local business community.
Binzer says: “The idea behind CSR Greenland came from a concern about the potential negative impact of the oil and mining companies. As a business community we were not ready to engage with them, but need to be.”
Transparent business
Anne Mette Christiansen, head of CSR Greenland’s secretariat, argues that the country’s companies have maintained wide-ranging responsibilities towards their employees and communities for generations – in such a small country they have had to act sustainably in order to survive. Embracing a more strategic, responsible business approach is taking off now as the companies see the potential investment from foreign companies and the dangers this could bring.
“Oil, mining and public works construction are the most corrupt global industry sectors. While there is no tradition of high-level corruption in Greenland, when suddenly there is a lot of money involved you become more vulnerable,” Christiansen says.
There are major challenges ahead. To help meet them, local businesses, alongside CSR Greenland, have been working with Transparency International since mid-2011 to establish a local chapter. Transparency Greenland is, for now, a contact point, and it will take three years to gain full Transparency International status.
Nuuk-based lawyer Anders Meilvang, a partner in legal firm Ina:Nuna, heads Transparency Greenland. He is enthusiastic about the benefits Transparency International can bring. “We want to have the right structures and procedures, and a structure for corporate transparency, in place for local companies to prevent [corruption] problems before they happen,” he says.
Time is short. While successful oil exploration might be some way off, Meilvang is in no doubt that the development of Greenland’s mineral resources is going to ramp up relatively quickly – witness a London Mining iron ore plant well on the way to development 150km north of Nuuk.
Local supply chains
With development getting under way, there will be more opportunities for local companies to widen their businesses.
Susanne Christensen is chief executive of Brugseni, Greenland’s leading independent retailer with 13 outlets in seven towns. In 2011 Brugseni had a turnover of DKK650m (£72m) with a profit of DKK25m. The company is structured as a co-op, and it is widely popular – of Greenland’s 57,000 population, 33,000 are members of Brugseni.
Christensen highlights the challenges of transportation as one of Brugseni’s major concerns. “As we have no connecting roads and our towns are far apart, it is a massive logistical exercise. We have to transport everything by ship or plane to our stores,” she says.
The majority of the products sold in Brugseni’s stores – some 90% by turnover – come from Denmark. There are weekly deliveries by sea to the company’s stores, with some fresh fruit, vegetables and dairy products transported by air. These imported goods are premium products in Greenland.
Christensen stresses her desire to develop local supply chains. The 10% of Brugseni’s products that come from local sources includes meat from farmers in southern Greenland and, increasingly, vegetables.
Brugseni works with the farmers to develop their businesses. Christensen says: “We want to help as much as we can and develop Greenland suppliers. But our complicated logistics mean that we need to help the farmers have their produce ready at the right time when our supply ship arrives at their local harbour and ensure that it is packed correctly for easy delivery to our outlets.”
The extreme climate means that the prospects for Greenland’s vegetable growers remain limited. Christensen reckons that while 30% of Greenland’s potato requirement can be grown in the country, for the rest of the vegetable menu the figure is about 5%. That said, an increasing number of farmers are exploring the use of polytunnels to extend the growing season.
Brugseni has worked with other Greenland retailers – both in the private and public sectors – to help local suppliers develop their products.
Skills shortage
A common concern of Greenland’s business leaders is a skills shortage among the local workforce. Christensen says: “We still have to import expertise from Denmark. But we are working to develop skills so that local people will be equipped to fill all available positions, including management.”
Given that Greenland has small communities, retail outlets are a focal point and there is potential for some resentment if an unknown incomer is appointed as the local shopkeeper. It’s good business to employ a local face, and Christensen stresses the importance of encouraging a willingness among local employees to take responsibility for their own development, to empower them.
Air Greenland’s Binzer agrees that lack of technical skills is a problem. “We need employees that are as highly skilled as any other airline. As we want to employ locals we have had to develop on-the-job training programmes.”
Local education standards need improving – they are a focus for the Greenland government. Brugseni’s Christensen says: “At the moment Greenland’s schools still lag way behind Denmark’s, and our northern neighbours in Iceland and Canada.”
But there is an increasing sense that entrepreneurism can flourish in Greenland, with the right help.
Martin Kviesgaard, head of Bank of Greenland, says there have not been the necessary incentives for people to develop their own businesses, but there are definite gaps for entrepreneurs to exploit. He believes this is an area where the Greenland government can really help. “Our role is to advise the government how to make the incentives right for local businesses,” he says.
Bank of Greenland is the only bank domiciled in Greenland, though it remains part of the Danish financial sector. With retail and commercial operations, and branches in five towns on Greenland’s southern and western coasts, the bank has a positive balance sheet of DKK4.5bn (£497m). Echoing Air Greenland's Binzer, Kviesgaard stresses the responsibility the bank feels to the local people. “We’re named after the country so we need to make sure we get out into smaller communities and provide our services wherever possible.”
Headquartered in Nuuk, the bank is the local partner in financing deals for many Greenland-based projects, especially those for construction or other investments in Greenland’s domestic economy. “We want to bring in foreign banks to invest in Greenland, and these banks want to partner with us as we have the local expertise. They are mutually beneficial arrangements,” Kviesgaard says.
Bank of Greenland is not able to directly finance the large oil and mining projects that are now being developed in the country. Rather the bank sees its role as helping local suppliers so they can work with the incoming oil and mining majors.
This is why setting up CSR Greenland was such a priority for Kviesgaard and other local business leaders. He says: “Companies coming into Greenland will expect and require local partners that are aware of responsible business issues, that have written codes of conduct that they stick to.”
Learn on the job
CSR Greenland’s Christiansen agrees that this is a big challenge. “There is lack of awareness here in terms of proper documenting and reporting procedures, for example,” she says. “But we have recently launched a corporate responsibility reporting platform to help address this.” Of course, local companies will also be able to learn much from international inward investors.
A central concern for CSR Greenland is that the development proceeds at a pace steady enough for Greenlanders to gain the benefits. “The nightmare scenario would be rapid development that left Greenland behind,” Christiansen says.
On the political situation, she is clear, saying: “Greenland has a right to self-determination and it’s not for others to say we can’t, especially when they are using the oil or minerals that may be produced here.”
And Christiansen welcomes the scrutiny her country is coming under from international activists. She says: “We need the critical voices as they keep the focus on the potential negative environmental consequences from development. Come and help us develop in a sustainable way: we need all the skills we can get.”
Greenland’s progressive business leaders agree not only that these skills need to be in place before there is a mining or oil boom in Greenland, but also that there is no rush. Michael Binzer concludes: “If we can’t develop sustainably then we should wait until we can.”
Ian Welsh was in Greenland as a guest of Branding Greenland.
This is the first in a series of reports from Greenland. Later this year we will examine in detail the potential for oil and mineral development, and the reaction of international NGOs.
Greenland facts
- Population: 57,500
- Capital: Nuuk (15,000)
- Head of government: Kuupik Kleist, prime minister
- A self-governing overseas administrative division of Denmark since 1979. Following a 2008 referendum, increased self rule established in 2009.
- Area: 2.17m square kilometres, 12th largest country by area in the world, 81% ice capped
- GDP 2011: £1.30bn
- Main industries: fish processing and mining