In this article, I describe how an S.A. acted to recover its corporate reputation after an environmental disaster. The case under analysis is that of mining company Vale S.A., in the disaster in the municipality of Brumadinho, which occurred in 2019. I briefly consider the company’s responses to repair the damage and recover its reputation. I argue that Vale’s response involved rethinking its purpose, substantive reparations and the communication of such actions.
Case description
The case of Vale S.A. consists of the crisis arising from the environmental disaster in Brumadinho, in the state of Minas Gerais. One of its many iron ore waste storage dams collapsed on January 25, 2019. This was not the only accident Vale has faced. In 2015, the dam in another municipality, Mariana, MG, also had a major socio-environmental impact. However, the magnitude of the disaster in Brumadinho was enormous: more than 270 people died and the environmental tragedy killed fauna, flora and the life of a river in the region. Among the dead are employees of the company and the local community, including children and pregnant women (BBC News Brasil, 2019).
Today, when we look at the company’s website, we find the following statement of purpose: “We exist to improve lives and transform the future. Together.” It goes on to detail that: “We believe that mining is essential for the development of the world and that we only serve society by generating prosperity for all and taking care of the planet” (https://www.vale.com/pt/home). However, it is necessary to analyze this purpose based on the company’s history, especially how it reacts to such a crisis (on purpose, see the article Organizational purpose and the common good ).
In general, Brazilians have always valued Companhia Vale do Rio Doce as a Brazilian “jewel”. Today’s Vale S.A. emerged as a state-owned company, which underwent a privatization process in 1994. Curiously, this privatization did not completely privatize Vale, as other public companies and pension funds (for example, Previ of Banco do Brasil) bought part of the company, and other slices were acquired by international companies (Lazzarini, 2011). Vale thus became an S.A., responding to the expectations of its shareholders. Today, the company operates globally. In Brazil, it is located in the Southeast and in some states in the North.
Repercussion of the case and stakeholders
The environmental disaster has had wide repercussions in public opinion and in the political sphere (the Bruma CPI was opened in this regard), with conflicting discourses on the problem. While the company framed the situation as an “accident”, representatives of non-governmental organizations and other actors described the situation as a “tragedy”, an “environmental disaster”, a “mining disaster”, a “crisis” and an “environmental crime”. In the corporate responsibility analysis, the issue was described as a crime (Alves, 2023).
In addition to the actors involved in discussing the problem, many stakeholders were impacted, both internal and external to the organization. Days after the accident, the company’s directors were the first to speak out. In the wake of the accident, there was much discussion about the technical viability of the dams, which were approved by technical reports from German engineers in the 70s and 80s. It is important to note that, before Vale operated in Brumadinho, it was the company Ferteco Mineração, controlled by ThyssenKrupp Stahl AG (TKS), which extracted iron ore.
Faced with the damage and the number of victims, the social commotion was great. Many families were waiting to locate the deceased in the trail of destruction left by the dam collapse. This search mobilized teams from Civil Defence and the Military Fire Brigade, who worked for months in the region. Figure 1 shows the actors involved.
Figure 1. Actors involved in the Brumadinho disaster. Source: Ames, Beltrani and Mamud (2023), in a paper for the Ethics and Social Order course.
These include Vale’s important stakeholders: employees, shareholders, customers, suppliers, the government, the press (TVs, newspapers), environmental protection organizations, among others. An immediate reflection is seen in the value of the company’s shares, which fell sharply in the days following the tragedy. Shortly afterwards, it continued to fluctuate within a certain regularity.
Substantive responses from Vale
Faced with major socio-environmental impacts, the company has tried to respond to public opinion and cooperate in the work to support and compensate the victims’ families. Despite its efforts to compensate the victims(https://www.vale.com/pt/indenizacoes), the company took a high risk by working with the waste containment dam at maximum capacity. In addition, there is the issue of the technical approval of such dams being the same as it has been since the 70s and 80s.
The company’s substantive response (Truong, Mazloomi, & Berrone, 2021) came in February 2021, when it signed a Recovery Agreement, together with the Government of Minas Gerais, the Public Prosecutor’s Office of MG, the Federal Public Prosecutor’s Office and the Public Defender’s Office of MG. In practice, this agreement meant that Vale assumed all the costs of socio-environmental reparation.
This front consists of socio-economic reparations, with Vale acting in two possible ways: (1) the company pays for the projects and the government carries them out or (2) the company pays and carries them out. There is also a second front called Rapid Responses, which is aimed at municipal development. Finally, a third part covers socio-environmental reparation, for which funding is allowed without financial limits. The aim is to restore the environmental situation prior to the disaster, which will be done through environmental compensation. The wide dissemination of these response fronts contributes to the recovery of corporate reputation. However, stakeholders have different views on whether the company has been sufficiently responsible.
Corporate communication aimed at stakeholders
In addition to these substantive actions, the disaster has contributed to a change in the company’s position regarding its social and environmental responsibility. Apparently, the iron ore mining company, which is itself an extractive industry with a high environmental impact, has tried to carry out its core business in a more sustainable way. In addition, it is seeking to repair socio-environmental damage on an ongoing basis over time.
For example, for institutional communication, the company’s website reports on reparation processes, compensation data and figures. In addition, there is a specific space to communicate everything related to the 2021 Reparations Agreement(https://vale.com/reparation). (On corporate communication, see the article How to ensure corporate reputation? ).
Another response was to make an explanatory manual on the Comprehensive Reparations Agreement available digitally, in accessible language. Finally, a less publicized action is the company’s investment in 100% electric locomotives in the region affected by the disaster. They promise to reduce gas emissions and noise in the surrounding communities. These communication efforts contribute directly to restoring the company’s reputation.
Conclusion
Vale has responded to urgent and reparatory demands in the face of the Brumadinho disaster through substantive actions. In addition, communication plays a key role in its reputation and stakeholder relations. Although it appears to have recovered its reputation, society has become more aware of the risks that business activities can represent, which has obviously affected the trust that is placed in Vale and in companies in general. The lesson learned is that preventive management and good communication are fundamental if reputation is to portray the company’s real commitment.
References
Alves, E. B. (2023). Speech Space Management and Analysis of the Conditions of Production of Versions about a Corporate Crime: The Case of the Rupture of Dam B1 of Vale S/A in Brumadinho (MG). Organizations & Society, 30, 104, 145-178.
BBC News Brasil (2019). Brumadinho: the BBC documentary(part 1). Retrieved from: https://www.youtube.com/watch?v=YIN02W40UTE&t=208s.
Lazzarini, S. (2011). Capitalism of ties: the owners of Brazil and their connections. Rio de Janeiro: Elsevier.
Truong, Y., Mazloomi, H., & Berrone, P. (2021). Understanding the impact of symbolic and substantive environmental actions on organizational reputation. Industrial Marketing Management, 92, 307-320. https://doi.org/10.1016/j.indmarman.2020.05.006