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April 2017
Social Performance: Can we get it right?GasTech Japan
We have created a paradoxPeople want investment in their communities. However, there is uncertainty around long-term environmental and social effects
Investment VS Environmental &Social Concerns
Uncertainty can stop a project in its tracks
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
The changing meaning of success
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
What is social performance?
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
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
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 (%)
Type
of D
elay
Rep
orte
d
73% of sample Top 190
63% of sample Top 190
21% of sample Top 190
Reacting to Risk
ProjectDevelopment
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
Community tension and conflict can be costly…
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
Source: www.csrm.uq.edu.au/conflict-costs
The cost of conflict in the extractive sector can result in up to…
$10,000/dayduring initial exploration
$50,000 / dayduring advanced exploration
$20m/weekduring operations
Getting it right
All the components of an ESIA have the opportunity for interaction with communities
It’s not just a tick in the box
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
Shared Value
Shared ValueCreating 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.
Shared ValueShared 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 VIEWBusiness 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
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
Why isn’t this Business as Usual?
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
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
ProjectDevelopment Value Creation
Approvals Driven Process
It often all starts with a handshake and a willingness to put yourself in someone else’s shoes
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FOR MORE INFORMATION CONTACT
Mary Lou Lauria | Vice President, Environment, Society & Geosciences – Americas