1. GHANA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (GHEITI) Extractive Companies and Corporate Social responsibility Presented by Mr. Sulemanu Koney (Director, Analysis, Research and Finance) Ghana Chamber of Mines, Accra, Ghana June 19th, 2010

2. What is the raison d'être of business? 2  To maximise profits  To maximise shareholder value?  To be accountable to stakeholders?  To contribute to a better World?

3. What is CSR? 3  The definition of CSR varies amongst countries and companies, in much the same manner that it has different names.  Corporate Citizenship, Corporate Sustainability, Corporate Social Investment refer essentially to the same phenomenon.  The World Business Council defines CSR as follows: The commitment of business to contribute to sustainable development, working with employees, their families, the local community and society at large to improve their quality of life.

4. Types of CSR  There are 2 distinct models of CSR. These are the American and the European Model.  The American way is philanthropic; in that a company makes profit and donates a share of it to charitable causes.  In the European model, also known as the business way, businesses operate their core activities in a socially responsible way, complemented by investment in communities for solid business case reasons.  The hierarchy of CSR thought and implementation is as follows:  1 st Generation - Low level business case;  Philanthropy; Short term Risk Management and implementing industry standards.  2 nd Generation -Strategic Corporate Responsibility  Product and process innovation, new business and corporate governance models and long term sustainability.  3 rd Generation -Remoulding Competitive Advantage  Multi-stakeholder standards, Global commodity chain thinking and partnerships; institution building, corporate responsibility oriented advocacy and public policy. The 2 nd and 3 rd generation levels of CSR take an outward view of business responsibility. Presentation by Mr. Sulemanu Koney, Ghana Chamber of Mines at the GHEITI workshop 18 th -19 th June 2010 in Takoradi.

5. Why CSR is critical to Extractive Companies Presentation by Ms. Joyce Aryee at the 8th ICARD Meeting in Sweden from 23rd to 26th June 2009 5  Perception that Extractive Companies reap their host countries and communities off.  Negative Connotation of Industry’s name  Exacerbated by media and anti-extractive NGOs  Transnational Enterprises tend to have majority shares.  Operations take place in-situ usually in remote parts of country where there is relatively high infrastructure deficit.  Companies are seen as surrogate governments  Uncertainty about expectations of communities may be risky and could deter investment  Disquiet and tension in host communities.

6. THE WELFARE PENTAGON 6

7. Extractive Companies’ Challenges with CSR(cont’d) 7 Laws Regulate Economic & Environmental issues but not the same depth on social matters.  IRS, CEPS,LTU,VAT etc – Profit  EPA- Planet and to some extent People issues These regulations require formal reports to be presented to regulators. Regulators also conduct audits. Whilst in the past social issues appeared orphaned, there have been major strides to regulate social concerns in the last few years. o Public hearings o ISO Standards and several voluntary initiatives

8. Introduction(contd) Presentation by Mr. Sulemanu Koney, Ghana Chamber of Mines at the GHEITI workshop 18 th -19 th June 2010 in Takoradi. 2 Equator Principle – Project Finance  The most coherent set of guidelines for assessing projects to ensure that they meet sound environmental and social practices. It requires beneficiaries of project loans to identify, mitigate, manage and monitor impacts.  It covers all major projects of value US$50 million or more  It is based on World Bank and IFC policies and standards  The policy is currently adopted by 65 financial institutions (@ 2009)  The financial institutions will not provide loans if borrower does not conform to the principle.

9. Introduction(contd) Presentation by Mr. Sulemanu Koney, Ghana Chamber of Mines at the GHEITI workshop 18 th -19 th June 2010 in Takoradi. 2  Equator Principle – Project Finance (contd)  Projects are categorized according to level of environmental and social impact. These are as follows:  Category A: High Risk* Significant adverse impact * Irreversible * Affect area broader than actual project site * Example: Transcontinental pipeline  Category B: Medium Risk* Potentially adverse impact * Not irreversible * Site specific * Example: Coal mine or exploration  Category C: Low Risk* Minimal or no adverse impact * Example: A city office tower  Typically, Category A projects would require a full and rigorous environmental impact assessment.  The equator principle was initiated by the ABN AMRO Bank with the collaboration of City Bank of the U.S. 

10. Some CSR initiatives 2  The OECD Guidelines - Code of conduct covering employment, environment and consumers  UN Global compact - Ten principles covering Human Rights, Labour, Environment and Corruption  Global Sullivan Principles of Social Responsibility -Supports universal human rights, equal opportunities, freedom of association, fair compensation, improvement opportunities (competences) safety, health, fair competition, cooperation with government and communities to improve quality of life.

11. Some CSR Initiatives 2  Social Accountability – SA 8000  Making the workplace more humane i.e. working conditions for the workforce  A mix of ILO Conventions and ISO 14000  Assurance of respect for workers’ rights; child and forced labour, health and safety, freedom of association and right to collective bargaining, disciplinary practices, working hours, remuneration and auditable management system.  AA 1000 – Accountability  The AA Framework is designed to improve accountability and performance by learning through stakeholder engagement. It seeks to achieve continuous improvement in accountability through stakeholder dialogue  The AA1000 Series builds on the core principle of inclusivity and is based on three propositions:  Stakeholder engagement remains at the core of the accountability processes of accounting, embedding, assurance and reporting  Accountability is about ‘organisational responsiveness’, or the extent to which an organisation takes action on the basis of stakeholder engagement.  This responsiveness requires the organisational capacities to learn and innovate effectively on the basis of stakeholder engagement.

12. How do mining companies implement CSR? 7  Consider community issues as a critical success factor  A GM of a mining company recently stated that 80% of his time is spent on community issues.  Therefore engage high level persons with focus on community issues  Community relations officer reporting to GM  Dedicated budget for community issues  Trust Funds, Foundations or similar funds set up to finance community projects.  of community i.e. Nananom, opinion leaders e.g. M.Ps and company reps.  These are not determined by companies.  Trust Funds /Foundations are funded through a % of pretax profits + 1 USD for each ounce mined.  Projects funded or embarked upon are determined by Trustees made up of reps  Company : Community interaction is usually through Community Consultative Committees

13. Priority Areas for CSR 13 EDUCATION Priority, Public Good, Social Equalizer, ladder to surmount poverty EMPLOYEE RECRUITMENT Use best endeavours to recruit from community (OECD) COMMUNITY RELATIONS Institute and recruit Community Relations Manager who would report directly to the General Manager. Community Relations Managers should appreciate and understand the culture of the community. SUPPLY CHAINS Optimize Supply Chains Opportunities Locally

14. Typical CSR Programmes of Mining Industry  Sustainable Economic Empowerment Development (SEED) by Gold Fields.  Livelihood Enhancement and Economic Empowerment Programme ( LEEP) by Newmont.  Ahafo Agric Linkages Programme  Golden Star Oil Palm Plantation Programme (Award winning- Nedbank)  Obuasi Malaria Control Programme  Newmont Ghana’s Workplace voted best by 2010 Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria.  In 2009 producing member companies of the Chamber spent US$11 million on voluntary initiatives. 4

15. Socio-economic Empowerment 15  Work with government, private sector, host communities, and other stakeholders to create and distribute wealth.  sustainable alternative income generating activities for host communities.  Sustainable Community Empowerment and Economic Development Programme (SEED) – 1.5 million dollars per year 5-year community development program by Gold Fields Ghana improve the livelihoods and the quality of life for 16 primary stakeholder communities in Tarkwa and Damang. implemented by the Opportunities Industrialization Centers International (OICI) and other local partners. The program is in its third year of implementation.  Livelihood Enhancement and Economic Empowerment Programme ( LEEP) by Newmont.  Ahafo Business Forum by Newmont

16. Benefits of implementing CSR in organisation 6  Sustainable development in operative business i.e. doing good could be good for business  Better reputation.  Sharper anticipation and management of risk.  Preventive approach is more enhanced.  Operational cost savings.  Increased ability to recruit, develop and retain staff.  Better relations with government and civil society.

17. Is Company CSR adequate to develop mining communities ?  No! In fact CSR requires c omplementary support of Government.  Although the 9% of the Mineral Royalty ploughed back to host community is inadequate for meaningful infrastructural development, the utilization of the meager amount leaves much to be desired.  In effect is there tangible evidence of what the share of royalty ploughed back to MMDAs in host communities has been used for?  Amount ploughed back in the period 2000 to 2009 is GH¢16.9 Million

18. Conclusion  What has happened to the Guidelines for the utilisation of royalties ploughed back to communities?  How long ago promised in the budget?  More critical now given that theoretically, amounts returned to the communities will increase by 67% unless government decides to ring- fence difference for specific projects.

19. 8 Thank You For Your Attention