2012 americas school of mines€¦ · 2012 americas school of mines license to operate – social...
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2012 Americas School ofMines
www.pwc.com
License to operate – socialimpact and return on investment
Speakers:Speakers:
Rob Campbell-Watt, Director, PwC US
Patricia Awad, Manager, PwC Chile
Natalie Siegel, Director, PwC Australia
Agenda
Four topics covered:
1. Social license to operate
2. Conflict minerals update
3. Social impact assessment
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4. Indigenous community investment: outcomes not inputs
Introduction to concept of license to operate
• Success of mining operations is dependent on a license to operate
• What is a “social license to operate” and its significance?
• ICMM: Ties social license to operate to Sustainable developmentprinciples, includes social and economic development
• World Bank: “acquiring free, prior and informed consent fromindigenous peoples, and local communities through mutual
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indigenous peoples, and local communities through mutualagreements”
• US context – why is this important?
• Good vs bad operators
• Industry dealing with reserve access constraints, lost opportunity
• NMA and other representatives looking at leading practice
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US context – Unlock future potential of US mining
Nonfuel Mineral assessment: National Coal Resource Assessment:
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National Coal Resource Assessment 5 highest productionregions:(1) Northern and Central Appalachian Basin(2) Gulf Coast(3) Illinois Basin(4) Colorado plateu(5) Northern Rocky Mountains and Great plains
Developing thinking on leading practiceICMM Sustainable DevelopmentPrinciples
• Implement and maintain ethical business practices andsound systems of corporate governance.
• Integrate sustainable development considerations withincorporate decision-making process.
• Uphold fundamental human rights and respect cultures,customs and values in dealing with employees and otherswho are affected by our activities.
• Implement risk management strategies based on valid data
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Level of stakeholders and assymetriesSource: Boutilier & Thomson, 2011
and sound science.
• Seek continual improvement of our health and safetyperformance.
• Seek continual improvement of our environmentalperformance.
• Contribute to conservation of biodiversity and integratedapproaches to land use planning.
• Facilitate and encourage responsible product design, use, re-use, recycling and disposal of our products.
• Contribute to the social, economic and institutionaldevelopment of the communities in which we operate.
• Implement effective and transparent engagement,communication and independently verified reportingarrangements with our stakeholders
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What are “Conflict Minerals”?
Columbite(Tantalum)
Tungsten
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Cassiterite(Tin)
Gold
Update as of May 2012
Requirements of S1502 of the Dodd-Frank Act
Examine products todetermine whether and towhat extent Section 1502
applies
Develop and conduct dueComply with disclosure
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Develop and conduct duediligence protocol
Acquire private sectoraudit
Comply with disclosurerequirements
Update as of May 2012
The SEC continues to grapple with thecomplexity of conflict minerals
Dec. 2011SEC missesextended deadlinefor final SEC rules
Summer 2011
Dec. 2010OECD releasesDue Diligencefor
July 2011House Committee on FinancialServices submits letter to SECurging to adopt “transitionalimplementation”
March 2012SEC Chairman Shapiroindicates at a HouseSubcommittee meetingthat rules will not bereleased till mid-year
March 2012Maryland legislatureapproves HB 425regarding conflict
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Jul. 21,2010Dodd-FrankAct signedinto law
May 2011EICC / GeSIannounce firstconflict – freesmelters
20112010
Oct. 2011SEC reopensComment Periodand hosts a publicConflict MineralsRoundtable.
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Summer 2011Common reportingtools released byEICC and GeSi
Oct. 2011California passesconflict mineralslaw regarding stateprocurement
forResponsibleSupply Chainsguidelines
Feb. 2012Senator Leahyand otherssend letter toSEC regardingstricterliability anduse of reliablecost studies
regarding conflictminerals
April 2012Hearing heldwith SEC todiscuss costbenefitanalysis ofrules makingmore broadly
SEC comments have provided hints about thepotential direction of the final rules
The SEC has indicated that thefinal rules may:
• Include transition period forcompanies to reportindeterminate origin so that
In addition, the SEC has beenunder further pressure to:
• Incorporate rigorous cost-benefitanalysis for measures proposed
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indeterminate origin so thatdue diligence and upstreamcertifications mechanisms canmature
• Likely not include a deminimis exception
• Adhere to stricter liabilitydefinitions by requiring theconflict minerals report to befiled rather than furnished
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Despite the delay, industry initiatives continue toproceed
• Traceability and certificationmechanisms continue to beimplemented across the DRCcountries
• First gold and tin audits completed
Artisanal or CommercialMine
Wit
hin
DR
CA
djo
inin
gC
ou
ntr
ies
Comptoirs
Négociant
Up
stream
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• The number of Conflict – freetantalum smelters grows to 10
• AIAG and EICC continue to refinequestionnaire tools
• OECD 3T pilot groups to issueinterim findings report in Spring2012
• OECD Gold pilot group tocommence in 2012
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Smelter/Refiner
Component Manufacturer
Product Manufacturer
Original EquipmentManufacturer (OEM)
Ad
join
ing
Co
un
trie
sG
lob
al
Ma
rk
ets
Traders
Risk
Up
stream
Do
wn
stream
Progress is increasing at the upstream levels
• On the ground initiatives are slowly expanding
• Preliminary reports from the OECD’s upstream pilot group indicate
• Awareness of due diligence expectations is increasing
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• Majority of “comptoirs” report that they have adopted a policy
There is slow convergence of on-the ground initiatives
• Smelter have been slow to join the conflict – free smelter program
• Some downstream companies have become aggressive aboutvertically integrating up the supply chain to the mines
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Leading downstream companies have begun toprepare for the final rules
Key steps include:
• Implementing conflict minerals policy
• Leveraging the EICC / GeSI Common Reporting Tool and Dashboard
• Identifying Tier 1 suppliers and products which contain 3T&G
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• Beginning to develop updates to existing supplier/productmanagement platforms to address conflict minerals requirements
• Inserting contractual clauses and terms & conditions to ensurecompliance with disclosure requirements and/or required policies
• Developing process to prioritize supplier engagement and datacollection
• Disclosing potential conflict minerals risks in filings
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Topic 3
Social Impact Assessment and Chileanexperience
How do we say no?
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How do we say no?
Assessing the social impacts of miningprojects and developing a communitystrategy
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What the companies are saying
“We spend lots of money on CI, but relations with communitiesdon’t improve (and sometimes even deteriorate)”
“Our CI program has become a source of conflict among communities”
“Local stakeholders have become dependent on us”
“There are endless requests from communities— how do we say no?”
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“There are endless requests from communities— how do we say no?”
“We get pulled in a hundred different directions”
“We’ve ended up having to take over the government’s role”
“We are doing all these good things for the community, but no one givesus any credit”
“In the end, we have little to show for all the resources we’ve spent”
From: IFC, Community Investment – A Good Practice Guide for Companies doing Business in Emerging Markets
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A simple definition of SIA
The process of assessing or estimating, in advance , the socialconsequences that are likely to follow from specific projectdevelopments.
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From: Social Impact Assessment in the Mining Industry: Current Situation and Future Directions Susan A. Joyce GolderAssociates Ltd., Canada & Magnus MacFarlane Warwick Business School, UK.
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Let’s take a look at the facts…
Mining activity hasimpacts
(+) (-)
Mining companiesspend money
Chile > US$20 Million - 2010
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Yet…risk and conflict prevails
What goes wrong?
What goes wrong?
There is a gapbetween the realimpacts and CIpractices or strategy
Who’s in charge?When?
SIA as an ongoingprocess, throughoutthe life cycle of themine?
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Underestimatingthe risks of the “openchequebook” – thewrong kind ofempowerment
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Exploration Construction Operation Closure
• SocialBaseline
• Assessingthe expectedimpacts and
•Monitoring
• Ongoingstakeholderengagement
•Monitoring
• Ongoingstakeholderengagement
•Monitoring
• Ongoingstakeholderengagement
•Sustainability
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impacts andrisks
• MitigationmeasuresCI plan
• Re-focusingCI efforts
•New socialbaseline forprogrammes
• Re-focusingCI efforts
•Sustainabilityofcommunitiesafter closure
Assessing thecumulativeimpacts of amine expansion+ 6 other
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+ 6 otherdevelopments:a practicalexample
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•Quality of life•Economic development•Employment•Landscape•Transportation•Health•Tourism•Housing•Water
SIA is a dynamic, ongoing process of integrating knowledge
on potential and real social impacts into decision making
and management practices.
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From: Social Impact Assessment in the Mining Industry: Current Situation and Future Directions Susan A.
Joyce Golder Associates Ltd., Canada & Magnus MacFarlane Warwick Business School, UK.
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Topic 4
Bang for your Buck:
Changing how we do business inIndigenous/Local communities so we get
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Changing how we do business inIndigenous/Local communities so we get‘value for money’ – and so do they.
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Why would you invest in the local community?
Is it just to tick a box? Is it just to be nice?
• When you are mandated
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• There are big commercial advantages in doing so
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If you are already spending on the community,what are you getting for it?
If you are about to start spending, how will youdesign your investment so you get something for it
and the community does to?
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and the community does to?
Some Local examples
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So what does this mean?
Key lessons for going forward with local community activityand investment design:
• What is the value to your business of this activity; Does it have adollar value? What are the risks of doing it poorly
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• Determine community need using an evidence base. This meansreally understanding the local community and its context
• This means research plus proper (not tokenistic) consultation
• Can we just pass it off by saying ‘this stuff is the government’sresponsibility’? What is the real risk to our business in saying that?
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