Sustainability and CSR

Karen Clarke-Whistler and Leon Botham

Golder Associates Limited

Agenda

• Environmental and Social Risks• Equator Principles and International

Standards of Good Practice• Practical Advice

Definition of Sustainable Development“…development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”UN Brundtland Commission Report (1987)

Key Concepts

• Basic human needs are met with a fair distribution of resources

• Natural resources are replenished at the same rate as they are consumed

• Wastes production is prevented and wastes broken down at the same rate they are produced

• Biodiversity is maintained… many interpretations

Environmental management

Emissions, effluent

Tailings/waste

Contamination/ Liability

Energy usage

Raw materials

Water usage

Transportation

Land use & biodiversity

Health and safety

Engaging local communities

Workforce/labour relations

Social impact/social investment

Business ethics

Product impact

Supply chain

Media/NGOs

Governance

Profit/Growth

Investor relations

Transparency & Reporting

Compliance

Innovation

Royalties & Taxes

Government Relations

Financial/Economic Social Environmental

Sustainability Issues

Social Acceptability

Practical Definition of Sustainable DevelopmentPractical Definition of Sustainable Development

Ecologicalintegrity

Ecologicalintegrity

Social equitySocial equity

Economic growthEconomic growth

SustainabilitySustainability

Economic

EnvironmentalSocial

Corporate Social ResponsibilityCorporate Social Responsibility: : corporate response to sustainable developmentcorporate response to sustainable development

Environmental issues

• Environmental footprint• Biodiversity• Emissions to land, air and water• Acid generation and legacy issues• Health and safety• Stakeholder engagement• Community quality of life

Value to the

Business

Unrelated to operational impacts

Related to operational impacts

Business and societal value

Philanthropy SocialInvestment

Strategic socialinvestment

Social performancemanagement

Consultation , Engagement

Integration in the business

Social Contribution

Conclusion• Sustainable development is themost important issue of the 21st century

• Like it or not, our society will have to deal with this issue during the century

Business Case

Compliance

Eco-Efficiency

Eco-Effectiveness

Social Responsibility

License to OperateOperational Efficiency

Access to Capital

Competitive Advantage

New Alliances

Cost / Risk Reduction

Reputation Enhancement

Innovation

Customer Loyalty

New Markets

Recruitment & Retention

Sustainability

©2005 BRIDGES to Sustainability

• 54 financial institutions• Banks, export credit agencies, development

agencies• Includes all top project finance banks (in

terms of debt underwritten)• Represents >95% of global cross-border

finance

Equator Principle Banks

• Europe: Barclays, HBOS, HSBC, Royal Bank of Scotland, Standard Chartered; BBVA, Banco Galicia

• Canada: Scotiabank Royal Bank, BMO Financial, CIBC

Preparation

• Guidelines for managing environmental and social risks

• Links project financing with sustainable development

• Applies to lending and advisory services

Preparation

• Capital costs > $10 million• Non-OECD or Low- and Middle-Income

OECD Countries • Main focus on extractive sector,

chemicals, forestry, energy• Increasingly applied to corporate finance

• 10 Equator Principles, based in IFC Performance Standards and EHS Guidelines

• Policy-based

• Not strict guidance

• Subject to interpretation between banks

Understanding the Equator PrinciplesEQUATOR

PRINCIPLES

REGULATIONS IFC PERFORMANCE

STANDARDS

EHS General and Sector Guidelines

Other World BankGuidelines

• Voluntary initiatives

Performance Standards on Social & Environmental Sustainability (2006)

• Replace Safeguard Policies:

• New:1. Social and environmental assessment and management

systems2. Labour and working conditions3. Pollution prevention and abatement4. Community health, safety and security5. Land acquisition and involuntary resettlement6. Biodiversity and natural resource management7. Indigenous peoples8. Cultural heritage

(www.ifc.org/enviro)

Environment, Health and Safety Guidelines (2007)

• Replace– Pollution Prevention and Abatement Handbook– General Environmental Guidelines, Hazardous

Materials, Life and Fire Safety, Occupational Health and Safety, PCBs, Wastewater Re-use, Wildlife Management

• New– General EHS Guidelines (Q2 2007)

(www.ifc.org/enviro)

Environment, Health and Safety Guidelines (2007)

• Replace– Mining and Milling – underground and

open pit, draft Precious Minerals, Coal Mining, Coke Manufacturing, Copper Smelting, Aluminum, Base Metals and Iron Ore, Iron and Steel, Lead and Zinc, Nickel

• New– Mining (Q4 2007)– Smelting and Refining (inc. aluminum) (Q4

2007)

(www.ifc.org/enviro)

Industry Codes & Standards

• Extractive Industries Transparency Initiative• ICMM Principles of Sustainability (requirements

recently updated)• ‘Towards Sustainable Mining’ (MAC)• ‘Enduring Value’ (MCA)• International Cyanide Management Code• Etc.

• Sustainable development issues go beyond compliance

• Consideration of environmental and social issues at an earlier stage of project development (Pre-EIA)

• More formal approach to stakeholder relations

Risks to Extractive Sector

• Community relations and stakeholder engagement initiated at exploration

• Additional up-front costs• Large companies do not want to inherit

legacy of poor social (and environmental) management

Risks to Extractive Sector

What should you do?– Got a geologist? Now hire community

relations resource

– Be strategic in identifying social development issues

• Link to Project impacts and priorities• Tie into community needs• Harmonize with government initiatives,

policies and programs

Dealing with Financial InstitutionsBe prepared:

– different interpretations – limited internal capacity– highly sensitive to NGOs– application to projects in developing

and developed world– application to corporate finance– carbon risk will become a key issue –

trading opportunities

Summary

• Bank will be come involved in Projects at an early stage (e.g., advisory services)

• Borrowers subject to detailed assessment

• Annual reporting requirements for borrowers and lendors