For many communities sitting on top of oil and mineral reserves, the great China slowdown has had a devastating effect.

Only a few years ago, oil, gas and mining companies were promising huge development projects to Governments in producer countries and local communities where minerals were located.

But the collapse in commodity prices has forced companies to scrap many of their plans or to put them on hold. The commitments the companies made have turned to dust, leaving many of these communities and governments high and dry.

The commodities downturn has created a huge challenge for communicators. Oil, gas and mining companies have long battled perceptions that they were were raiders of the earth’s underground treasury, with a poor record for helping communities and known for leaving a trail of pollution behind them. This was exacerbated in November with the Brazilian dam failure, the country’s worst ever environmental disaster when a huge wall of red sludge from a mine run by BHP Billiton and Vale caused environmental devastation across two states and killed 19 people. The mining companies have agreed to pay £800m to help clean up the damage.

This further underlines the dangerous nature of the extractive industries and their potential for environmental devastation. But when prices and profits were booming three or four years ago, the companies could invest in social spending in the communities in which they operated and brought growing revenues to governments. They built schools and health centres and invested in infrastructure. This often helped assuage concerns about their activities.

But today, companies are closing mines, putting projects on hold, selling off assets and cutting jobs. For communicators in the oil, gas and mining industries – if they still have a job – this presents a delicate balancing act. They have to communicate bad news to governments and communities about closures, project delays and job losses, while reassuring investors that they are taking necessary steps to ensure their long term survival.

Sebastian Sahla, an associate at Critical Resource, which consults on political and stakeholder risks in the extractive industries, points to the example of east Africa.

Expectations about the positive impact from the development of oil and gas extraction were “sky high,” he says, and there were great hopes that this would boost revenues and employment. He points to plans for gas extraction off the coasts of Tanzania and Mozambique, and on-shore oil drilling in Kenya and Uganda. In west Africa, Ghana’s government started spending revenue before it had even appeared. Many of the projects that were planned may eventually go ahead, but they will be much slower and could produce far less revenue.

Sahla says companies often fail to communicate clearly and transparently about their plans, “You can’t expect stakeholders to follow or understand global commodity price trends, so you need to really engage to communicate what is going on globally. At the corporate level you need to talk about the financial constraints you are facing and build a mutual understanding of the constraints you are confronted with as a company.” He adds, “Engage with them as an equal partner, be honest and say, ‘Here are the issues we are facing, we can’t do this in the current price environment.’”

Above all, companies need to have consistency in the messages they give out. “One of the big risks is that different people in your company have different incentives in how they engage with stakeholders,” Sahla says. “A community liaison officer’s key function is to manage the company’s relationship at a local level, but they might be telling a different story to the one the chief executive is telling to the country’s president. If you have those inconsistencies in your messaging, that can really come and haunt you down the line. You do see that happening quite a lot.”

He gives the example of resettling communities to make way for mining and drilling operations. “Companies set in motion resettlement processes that are hugely disruptive to the communities affected. You put in a lot of work to build trust then all of a sudden you turn around and you say, ‘Well, actually we are not going to develop this mine right now.’”

No wonder communities are often up in arms about the activities of the extractive industries. But the emphasis for many companies now is on shoring up support and understanding from investors and analysts as profits slide and operations are sold off. The stories for investors are tough – Rio Tinto recently dropped a long-standing promise not to cut its dividend to investors. Anglo American is slashing 60% of its workforce – over 5,000 jobs – selling off a further $6bn of assets and cutting its core assets from 45 to 16.

Robert Court, a former head of external affairs at Rio Tinto, who now runs his own consultancy, says, “I think CEOs right across the mining industry and other sectors are saying the number one area where we have to look out for our reputation is with investors. That’s always important, but now they are paying a lot of attention to markets, to costs and productivity and investment, returns and dividends,” he adds, “I would have thought there is quite a lot of emphasis in the mining industry in the reputation field on investor relations and dialogue with these partners.”

But he believes the current situation is a huge communications task in general, “When investing, your reputation is bound to become more positive because people see you doing exciting things. If you don’t have the investment and are cutting jobs, then the reputation area might need more work.” Court says when pressure is on companies to cut costs and dispose of assets, some areas of expenditure actually become more important. The company may have more legal work when selling assets, merging them or bringing in new partners.

Communications is surely an area that is increasing in importance. These companies need to boost their reputations in producer countries to prepare for the day they need to return and start operations again. They must avoid the perception that they are only interested in short-term relationships when the times are good.

“One of the big risks is that different people in your company have different incentives in how they engage with stakeholders. A community liaison officer’s key function is to manage the company’s relationship at a local level, but they might be telling a different story to the one the chief executive is telling to the country’s president. If you have those inconsistencies in your messaging, that can really come and haunt you down the line. You do see that happening quite a lot.”

The boom and bust nature of the extractives industry has created huge challenges for company communications chiefs. Roma Balwani, president of group communications, CSR and sustainability at mining group Vedanta Resources, says, “It has been a challenging environment for the commodities sector and we have had to take some difficult decisions to adapt to new market conditions. However, we are committed to our business and the communities we operate in, and we are optimistic that the market will improve in the future.”

She says that no industry or business is immune to crisis conditions or challenges, “Our priority is to remain transparent and open in our engagement with stakeholders.” But commitments to corporate social responsibility, social investment and protecting the environment cannot be put on hold because of commodity price fluctuations.

The mining industry believes it is taking steps forward in improving its reputation by creating standards of behaviour and ensuring companies follow ethical guidelines. In 2001, it set up the International Council on Minerals and Metals (ICMM), with a series of standards that participating companies had to sign up to. Today, it brings together the chief executives of 23 of the world’s biggest mining companies to discuss issues of sustainability. Research carried out by ICMM shows that under a third of respondents among government, the media and other stakeholders have a positive image of the mining industry. But the research shows perceptions improving over the years. Aldo Pennini, ICMM communications director, says, “We acknowledge that in terms of public perception we have some way to go. We have seen some improvements in terms of sustainability but it has been from a low base.”

He says the organisation is keen to improve society’s acceptance of mining by improving the performance of ICMM members in adhering to the guiding principles.

“We are making society aware of what we do, who we are and what our products contribute to try and to fill some of that awareness gap,” he adds.

ICMM has worked with stakeholders, both those who understand and support the industry and those who may be antagonistic. It has tried to engage closely with NGOs such as Oxfam and the WWF. “We have a way to go, but we are now organising ourselves to try and engage more effectively with credibility,” Pennini says.

David Simonson, a managing partner at communications consultancy Instinctif Partners says, “This is a very intensive period of change management, both explaining to the outside world why you are restructuring – and to your own troops – and trying to find a balance between those who you are keeping and those who you are having to let go. So you’ve got different stresses and strains in terms of your communications, you’ve got to appear to be treading a tight line down the middle.” He says the communications teams at the big oil, gas and mining firms have been sustaining similar cut backs to the rest of the operational units of these companies, “Banks, brokers, lawyers, PRs and CSR advisers have all taken substantial cuts as a result of the commodity market. We have to achieve the same with fewer resources, personnel and less budget.”

Even so, Simonson points out, this is a large and hungry planet. There is a demand for energy and natural resources, which needs to be met. “We have been going through a major transition from the ’70s onwards in how we react to that to provide those resources on a more sustainable basis.” An essential part of the challenge is taking a long-term approach to resources and recognising the boom and bust nature of the market. The stories companies tell to different stakeholders must be consistent and acknowledge that the world is an unstable place, where situations can quickly change.