Mining is an industry

that more than any sector of the

economy reflects

and is directly impacted by the

political and social

conditions in a country or a region

Socio-political

factors are the single defining complex of

issues that

determine the success or failure of

a mining operation

Mining companies

need to acquire sufficient

understanding of the

social and political situation at national

and local levels

2

3

Highly networked society with instant access to information and news means that local action can

result in global attention

73 % of delays to capital projects relate to ‘non-technical’ risk – delays in permitting and

community protests

Stakeholder acceptance is key to successful project delivery

“Management Systems for Social Performance – The Shell Journey,” presented by Shell at the Regional Stakeholder Consultation on the Post-2015 Development Agenda in Nusa Dua – Bali, December 14, 2012

Natural disasters Community relations

Community development Ethnic conflict

4

Land compensation issues (resolved &

unresolved)

Environmental issues Industrial action Illegal mining

Infrastructure use Technical failure Poor governance/ethics

Divestment of shares

5

Intercommunity rivalry & jealousy

Intra-community rivalry & jealousy Employment Demands of local

government

PRE-

OPERATIONS OPERATIONS POST-

OPERATIONS

Social Impact Assessment

Stakeholder Management

Mine Closure

• Stakeholder Analysis and Engagement

• Community Needs Assessment

• Mine Closure Planning

• Community Development

• Capacity Building

• Good Governance

• Mine Closure Refinement and Adjustment

• Infrastructure

• Local Economy

• Good Governance

• Mine Closure Finalization and Monitoring

Priorities relating to different social, environmental and economic goals determined through participatory process.

Relationship with stakeholders based on collaboration, trust and respect.

No one to be made worse of.

Ensuring the rights of marginalized individuals and groups.

Economic benefits by mining to be shared equitably.

Investment in trust funds, skills training, or social infrastructure.

No unacceptable environmental and other negative legacies.

Capacity to be developed at local level to manage revenues for development needs through public-private partnership.

“Breaking New Ground: The Report of the Mining, Minerals and Sustainable Development Project,” – MMSD, 2002 7

Livelihood of region and communities

secured

Strong social institutions in place

No “ghost towns” left behind

No serious reputational issues

“Mining culture” firmly established

8

9

Good corporate community relations, stakeholder engagement

and consultation and efforts to meet particular community

demands are means by which companies seek to improve

reputation among those with the ability to impact operations,

and thereby obtain a social license to operate

“Earth Matters: Indigenous Peoples, The Extractive Industries and Corporate Social Responsibility,” Ciaran O’Faircheallaigh & Saleem Ali, 2008

Any group or individual

who can affect or is

affected by the

achievement of the

organization objectives

“Strategic Management: A Stakeholder Approach,” R. Edward Freeman, 1984 10

“The Pyramid of Corporate Social Responsibility – Toward the Moral Management of Organizational Stakeholders,” - Carroll, A. B., Business

Horizons No. 34, 1991

Stakeholder Identification

Who are our stakeholders?

Stakeholder Analysis

What are their stakes?

What opportunities and

challenges are presented by our

stakeholders?

Stakeholder Engagement

What corporate social

responsibilities do we have to our stakeholders?

What strategies, actions, or

decisions should we take to best deal

with these responsibilities?

11

To whom does the organization have legal obligations?

Who might be positively or negatively be affected by the organizations activities or decisions?

Who manifested concern about the issues or impacts?

Who has been involved in the past when similar concerns need to be addressed?

Who can help the organization address specific impacts?

Who can adversely affect the organization’s ability to meet its important objectives?

Who would be disadvantaged if they were excluded from the engagement?

Who in the value chain is affected?

Who may have an impact on the reputation of an organization?

Who may influence the policy and regulatory environment in which the organization operates?

Who may impact on the value of the organization?

(Adapted from “ISO 26000: Guidance on social responsibility, 2010 )

“The Primordial Stakeholder: Advancing the Conceptual Consideration of Stakeholder Status for Natural Environment,” - Driscoll, C. and Starik, M.

Journal of Business Ethics, Vol. 49, 2004

“The Natural Environment as a Primary Stakeholder: the Case of Climate Change,” - Haigh, N. and Griffiths, A. Business Strategy and the

Environment, Aug 2007

3 3

3 3

4 2 2

2

2

1 1

1 1

0 = Non-Stakeholder

1 = Latent Stakeholder

2 = Expectant Stakeholder

3 = Definitive Stakeholder

4 = Primary Stakeholder

13

Stakeholder Cate-gory Power Legiti-

macy Urgen-

cy Proxi-mity

Main Score (/20)

Vulnera-bility

Real Impact

V+R Score (/10)

Bupati (Regent) pr 5 5 5 5 20 3 5 8

Regency Planning Bureau

(BAPPEDA) pr 4 5 5 5 19 2 2 4

Land Admin. Agency (BPN) pr 4 5 5 5 19 3 5 8

Provincial EPA pr 3 5 5 5 18 3 5 8

Gunung Village de 2 4 5 3 14 5 5 10

Wira (informal leader) de 5 5 2 3 15 3 1 4

Clan-based organization

(Jakarta) la 1 1 1 2 5 1 1 2

Village youth organization de 4 5 1 5 15 0 1 1

14 Adapted from study conducted by Kiroyan Partners for a mining company to prepare a stakeholder engagement strategy

15 “Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets,” International Finance Corporation, 2007

Level of Engagement Methods of Engagement

Consult Limited two-way engagement: organization

ask questions, stakeholders answer

Surveys

Focus groups

Meetings with selected stakeholder/s

Public meetings

Workshops

Online feedback mechanisms

Advisory committees

Negotiate Collective bargaining with workers through their unions

Involve Two-way or multi-way engagement:

learning on all sides but stakeholders and

organization act independently

Multi-stakeholder forums

Advisory panels

Consensus building process

Participatory decision making process

Focus groups

Online feedback schemes

Collaborate Two-way or multi-way engagement : joint-

learning, decision making and actions

Joint projects

Joint ventures

Partnerships

Multi-stakeholder initiatives

Empower New forms of accountability; decisions

delegated to stakeholders; stakeholders

play a role in governance

Integration of stakeholders into governance, strategy and

operations management

(“AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft,” – AccountAbility, 2011) 16

Participatory/ interactive

decision-making

Stakeholder engagement

Two-way communication

One-way communication

Ad hoc communication

Greater sharing of

information leading to

knowledge

Better understanding

of stakeholders and

their issues

High stakeholder involvement

Hig

h i

nfo

rmati

on

exch

an

ge

“Unfolding Stakeholder Thinking: Theory, Responsibility and Engagement” – Jörg Andriof, Sandra Waddock, Bryan Husted, Sandra Sutherland Rahman, 2002 17

18

Negative public

opinion due to environ-mental and

social concerns

Targeted by local and

inter-national pressure groups

Challenge of

maintaining ‘local

license to operate’ in the face of resistance

by local com-

munities

Mining companies generally operate in

remote areas that

are economic-ally under-developed and lack

social welfare

“Corporate Social Responsibility in the Mining Industries,” Natalia Yakovleva, 2005

Annex: Examples of voluntary initiatives and tools for social responsibility

Su

stainab

le develo

pm

ent

Recognizing social

responsibility

Stakeholder identification

and engagement

Organizational governance

Related actions and expectations

Human

rights

Labor

practices

The Environ-

ment

Fair operating practices

Consumer

issues

Community involvement/development

Practices for

integrating social

responsibility

throughout an

organization

The relationship of

an organization’s

characteristics to SR

Understanding the

social responsibility

of the organization

Reviewing and improving an

organization’s actions and

practices related to SR

Enhancing

credibility

regarding SR

Voluntary initiatives

for social

responsibility

Communication

on social

responsibility

Scope Clause 1 Guidance to all types of organization regardless of their size or location

Definition Clause 2 Terms, abbreviations and abbrev. Terms

Understanding Social Clause 3 Responsibility History, Characterist-ics, Relationship between SR and Sustnble. Developmnt..

Principles of Social Clause 4 Responsibility • Accountability • Transparency • Ethical Behavior • Respect for

stakeholder interests • Respect for rule of

law • Respect for

international norms of behavior

• Respect for human rights

Two fundamental practices of social responsibility

Social resp.

core subjects

Integrating social responsibility throughout an organization

Clause 5

Clause 6

Clause 7

(Adapted from “ISO 26000: Guidance on social responsibility,” November 2010 ) 19

Bibliography: Authoritative sources and additional guidance

Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that

Contributes to sustainable development, health and the welfare of society;

Takes into account the expectations of stakeholders;

Is in compliance with applicable law and consistent with international norms of behavior; and

Is integrated throughout the organization and practiced in its relationships.

20 (Adapted from “ISO 26000: Guidance on social responsibility ,” 2010 )

Maximizing

contribution to

sustainable

development

ISO 26000

(expected

behaviour)

• Interviews with key stakeholders

• Information relating to Collahuasi’s management

system was reviewed along with the recommendations established

in Clause 7 of ISO 26000 (integrating SR throughout an organisation

“Collahuasi and ISO 26000: Towards excellence in sustainability” – Regina Massai C. & Bernardita Fernandez B., presented at SR Mining 2011, October 2011 in Santiago, Chile

Practices

in force at

Collahuasi

Collahuasi’s

policies,

principles

and values

21

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Jl. HR Rasuna Said Blok X-5 Kav. 1-2

Jakarta 12950 – INDONESIA

T: +6221 5794 4694

F: +6221 5794 4696

info@kiroyan-partners.com

www.kiroyan-partners.com