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Social Performance: Can you get it right?


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Social Performance: Can you get it right?

  1. 1. www.advisian.com April 2017 Social Performance: Can we get it right? Gastech Japan
  2. 2. We have created a paradox People want investment in their communities. However, there is uncertainty around long- term environmental and social effects Investment VS Environmental & Social Concerns
  3. 3. Uncertainty can stop a project in its tracks
  4. 4. LNG in Canada Aboriginal Rights are collective rights which stem from Aboriginal peoples’ continued use and occupation of the land. Rights have been practiced since before European contact, and in general include: • Rights to the land • Rights to subsistence resources and activities • Right to self-determination and self-government • Right to practice one’s own culture and customs including language and religion Approx. 4.6mPeople in BC, Canada Approx. 200kFirst Nations people
  5. 5. The changing meaning of success
  6. 6. How did we get here? • Historically successful projects were those with an economic benefit to corporations • Corporations have struggled to balance economic pressures with the strengthening pushback from communities Re-defining the definition of success Success = mutual symbiosis between project and community • Communities are demanding more than the promise of short-term jobs • Companies link societal outcomes to business success
  7. 7. What is social performance?
  8. 8. Definitions A good measure of social performance allows companies to step above their competition. Leading to a Social Licence. An ongoing approval from the local community and stakeholders; an acceptance. Corporate Social Responsibility Social Performance Refers to actions and activities that improve or protect communities at a local or global scale Refers to a company’s strategy, programs and investments in responsibility and is measured through stakeholder’s assessment
  9. 9. Common Themes of Poor Social Performance Competition for resources and prevention of traditional lifeways Consent and Land Access Distribution of benefits Breakdown in the communication and consultation process Environmental and community health and safety
  10. 10. A study of the Top 190 oil and gas projects around the world revealed there was an average delay of 12 months for non-producing fields. Source: From Shell presentation “Managing Non-Technical Risk at the Project Level” at Social and Environmental Risk Management Conference, 2011; adapted from Goldman Sachs Investment Research “The Top 190 Projects to Change the World”, 2008. Non-technical (e.g. political or stakeholder related) Commercial (e.g. cost or contract related) Technical Reporting frequency by Type of Delay (%) TypeofDelayReported 73% of sample Top 190 63% of sample Top 190 21% of sample Top 190
  11. 11. Reacting to Risk Project Development Approvals Driven Process Possible Pitfalls Commission MonitoringConstruction Detailed Design Pre-FEED/ FEED Concept Management Plans Impact Assessment Scoping and Baseline Studies Approval Rejected Major Change Market Shift Community Conflict
  12. 12. Community tension and conflict can be costly…
  13. 13. Types of Cost Types of cost that that may be experienced by extractive companies as a result of conflict with local communities (Davis & Frank, 2014) Project Modification Risk Management Personnel Reputation RedressMaterial Damage Lost Productivity Capital Security Type of Costs
  14. 14. Source: www.csrm.uq.edu.au/conflict-costs The cost of conflict in the extractive sector can result in up to… $10,000/day during initial exploration $50,000 / day during advanced exploration $20m/week during operations
  15. 15. Getting it right
  16. 16. All the components of an ESIA have the opportunity for interaction with communities
  17. 17. It’s not just a tick in the box
  18. 18. Are Formal Processes Enough? Formal Processes • Environmental Impact Assessment • Permitting Process Building Relationships • Deep communication • Mutual respect • Long-lasting trust • Understanding priorities • Incorporating in project development • Sustain through project delivery and operation
  19. 19. Shared Value
  20. 20. Shared Value Creating economic value in a way that ALSO creates value for society. Communities are more likely to support projects if there is a solid base of trust.
  21. 21. Shared Value Shared Value is defined as policies and activities that measurably improve socio-economic outcomes and improve related core business performance (Kramer and Porter, Harvard Business Review 2011). OLD VIEW EMERGING VIEW Business makes profits Supports employment Provides wages / income Taxes / royalties Enhance business competitiveness Simultaneously advance socio-economic conditions Establish enablers for the project that will last
  22. 22. Shared Value Reference:: FSG Shared Value Initiative: Extracting with Purpose Redefine Productivity in Value Chain → Improve workforce capabilities → Strengthen suppliers in the value chain → Increase local disaster & emergency preparedness, response/ rehab capabilities → Improve utilization of water & energy used in operations → Build local markets for intermediate products created by extractive activity (e.g. drinking or irrigation water, electricity) Reconceive Products and Markets Create Enabling Local Environment → Develop a local cluster to support project → Invest in shared infrastructure and logistics networks → Partner with other local clusters & government in community infrastructure → Play an active role in economic and community development → Improve local & national governance capacity
  23. 23. Project Examples
  24. 24. Colombia – Water Treatment & Reuse Pacific Exploration & Production Corp • Created a local company - Agrocascada • Established a Water treatment and reuse system - providing irrigation water and reduction in water reinjection costs by 20 percent • Opportunity to scale this initiative and deliver benefits to other communities Shared Value Initiative - Case Study Reconceive products and markets
  25. 25. Ghana – Health Benefits • High incidence of Malaria resulting in absenteeism for AngloGold Ashanti • Set up an integrated control program • Primary aim to reduce worker absenteeism by 50 % over two years • Only two years into the program, the disease burden in the local community had decreased by 72 % • By 2012 the number of person-shifts lost each month had fallen from 7,500 to around 90 Redefine Productivity Shared Value Initiative - Case Study
  26. 26. Canada - Steelhead LNG • Early consultation – before the regulatory process • Identifying the right site with the First Nation – Brownfield • Supported the Malahat during their land acquisitions and entered into a mutual benefits agreement • Significant economic benefits - training and employment opportunities • Malahat participation to improve the quality of life for their people and bring Nation members back to the community Create an enabling environment
  27. 27. Mozambique - Anadarko (AMA1) Shared Value Initiative - Case Study • In 2011, Anadarko with PYXERA Global established an early training and advisory package for small and medium-sized enterprises (SMEs) to meet multinational company procurement • Expected to have 1,600 registered suppliers in its database at the end of four years • Training programs established to focus project needs • Upfront investment earned valuable trust among the Mozambican government, suppliers, and community
  28. 28. Why isn’t this Business as Usual?
  29. 29. Inadequate Organizational Structures and Behaviors: • Organizational designs prevent the identification of shared value opportunities. Incomplete Measurement of Cost and Benefit: • Companies cannot accurately measure shared value opportunities. Low Motivation for Collaboration: • Collaboration often is seen as a hindrance and at odds with reputational objectives. Lack of Alignment with Government: • Companies can strengthen their own ability to create shared value by helping to build local, regional, and national capacity for effective governance. Challenges Shared Value Initiative demonstrates that four interrelated and entrenched challenges inhibit creation of shared value
  30. 30. Resilient Community Avoidance or mitigation through design Commission MonitoringConstruction Detailed Design Pre-FEED/FEED Concept Management Plans Impact Assessment Scoping and Baseline Studies Map local specialists/ capacity building Early identification of societal needs Reconceive products Local workforce ready The future – not too distant Project DevelopmentValue Creation Approvals Driven Process
  31. 31. It often all starts with a handshake and a willingness to put yourself in someone else’s shoes THANK YOU
  32. 32. DISCLAIMER This presentation has been prepared by a representative of Advisian. The presentation contains the professional and personal opinions of the presenter, which are given in good faith. As such, opinions presented herein may not always necessarily reflect the position of Advisian as a whole, its officers or executive. Any forward-looking statements included in this presentation will involve subjective judgment and analysis and are subject to uncertainties, risks and contingencies—many of which are outside the control of, and may be unknown to, Advisian. Advisian and all associated entities and representatives make no representation or warranty as to the accuracy, reliability or completeness of information in this document and do not take responsibility for updating any information or correcting any error or omission that may become apparent after this document has been issued. To the extent permitted by law, Advisian and its officers, employees, related bodies and agents disclaim all liability—direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of Advisian and/or any of its agents)—for any loss or damage suffered by a recipient or other persons arising out of, or in connection with, any use or reliance on this presentation or information.