Social performance: can we get it right? Mary Lou Lauria outlines how at #GasTech

1. www.advisian.com
April 2017
Social Performance: Can
we get it right?
GasTech Japan

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. Uncertainty can stop
a project in its tracks

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. The changing meaning
of success

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. What is social performance?

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. 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. 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. 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. Community tension and
conflict can be costly…

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. 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. Getting it right

16. All the components of an ESIA
have the opportunity for
interaction with communities

17. It’s not just a tick in the box

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. Shared Value

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. 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. 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. Why isn’t this Business
as Usual?

24. 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

25. 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

26. It often all starts with a
handshake and a
willingness to put yourself
in someone else’s shoes

27. 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
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information.
FOR MORE INFORMATION CONTACT
Mary Lou Lauria | Vice President, Environment, Society & Geosciences – Americas
E marylou.lauria@advisian.com