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CREATING SHARED VALUE IN COMPLEX ENVIRONMENTS: PART II

Part II of this series will focus on a company’s internal structures and external relations department, and the impact these can have on a company’s relations with its community stakeholders. There will also be discussion of the promotion and protection of human rights in the context of a social license to operate.

Internal Management Issues and the Acquisition of a Social License to Operate

Attempts to acquire a SLO will succeed to the extent that its core purpose is conducive to the acquisition of a SLO. Initiatives which create Shared Value among relevant stakeholders will succeed to the extent that they are fully integrated into core commercial decision-making policies, designed to deliver sustainable, long term success.

Commercial decisions that resolve societal problems are fundamental to the achievement of an effective SLO.

There is clear evidence that the manner in which the internal departments of a company are structured, and relate to each other, has a direct impact on the success of a company’s relations with its community stakeholders. The way a company conducts its day to day core activities is more important than its community relations programmes in determining how the company is perceived by local stakeholders.

Fundamentally, it is the behaviour of the Company as a whole, not just its external relations department, that drives people’s perceptions of the Company.

It is essential that policies conducive to the acquisition of a SLO are integrated into the decision-making cycles of all departments. For example, the HR Department determines who gets hired, the Contracts Department sets policies that can favour local contractors and suppliers, or make it difficult for local businesses to benefit from the corporate presence. The Accounting Department can facilitate administrative procedures and ensure speedy payment of compensation, or set complicated and delaying administrative requirements.

All the best efforts of an external affairs department can have little impact if the hiring procedures of a company are seen as unfair, security policies are seen to be oppressive or local contractors are not paid on time.

External Engagement – A Concern for All Departments

Safety issues are regarded as the responsibility of everyone on the workforce, regardless of their particular role. Similarly, external relations should be regarded as a responsibility of all, rather than just the External Affairs Department – which should coordinate rather than implement.

When an external relations department is the sole location for community relations experts, this often means that their expertise is required to resolve community problems only after they have already occurred.

It is essential to ensure that ways are found whereby external relations can be transformed from a fire-fighting role, to one of internal service provision. It is also important that ways are found to broaden the ownership for external relations within the organization:

Communities should be approached as partners, rather than as potential risks to be mitigated;

  • Every member of the company should receive training in community affairs skills;
  • Representatives from all departments should be invited to participate in community meetings;
  • The quality of the company’s relationship with local stakeholders should be incorporated into performance reviews for all staff – the number of community related incidents might be linked to the determination of bonuses, or to provide company wide awards for staff of departments that are judged to have made a positive contribution to company-community relations;
  • Ways should be identified to develop in-house capacity in conflict-resolution skills.

Guidelines for the building of a SLO in complex environments

Human Rights (VPSHR)

VPHSRs state that risk assessments are vital to the promotion and protection of human rights. These risk assessments must consider the available human rights records of public security forces, paramilitaries, local and national law enforcement as well as the reputation of private security. Awareness of past abuses and allegations will help companies avoid recurrences as well as promote accountability going forward.

Companies must take care to ensure that their partners are consistent with the protection and promotion of human rights. The following measures will help ensure this:

  • Regular consultation between stakeholders about the impact of security arrangements on those communities, and clear communication between all stakeholders about the need for ethical conduct and respect for human rights by public service providers;
  • The primary role of public security agencies should be to maintain the rule of law, including the safeguarding of human rights, and deterrence of acts which might threaten personnel and facilities;
  • Individuals credibly implicated in human rights abuses must not be allowed to provide security services, and force should only be used when strictly necessary and to an extent proportional to the threat, and the rights of the individual should not be violated while exercising the right to exercise freedom of association and peaceful assembly, the right to engage in collective bargaining or other related rights of employees– as recognised by the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work;
  • Companies should ensure the holding of structured meetings with public security on a regular basis to discuss security, human rights and related work-place safety issues. Support should be given to the host nation governments to provide human rights training and education for public security, as well as in their efforts to strengthen state institutions to ensure accountability and respect for human rights;
  • In respect of allegations of human rights abuses there should be active monitoring of the status of any on-going investigation, and pressure for proper resolution of these issues, in consultation with host nation government and relevant NGOs. The security and safety of sources must be protected and additional or more accurate information that may alter previous allegations must be made available as appropriate to concerned parties;
  • Companies must ensure that private security companies observe company policies in regard to ethical conduct and human rights, the law and professional standards of host nations, emerging best practice developed by the industry, civil society and governments and the promotion of the observance of international humanitarian law. In particular private security contractors must act in a lawful manner, exercising caution and restraint in a manner consistent with international guidelines on the use of force, including the UN Principles on the Use of Force and Firearms by law enforcement officials and the UN Coode of Conduct for Law Enforcement Officials as well as emerging best practice.
  • Furthermore, private security companies must have policies regarding appropriate conduct and the use of force, which are capable of being monitored. Such monitoring should encompass detailed investigations into allegations of abusive or unlawful acts, the availability of disciplinary measures sufficient to prevent and deter, and procedures for reporting allegations to relevant local law enforcement authorities when appropriate. All allegations of human rights abuses by private security must be recorded, and credible allegations investigated. Once those allegations have been forwarded to the relevant law enforcement authorities, companies should actively monitor the status of investigations and press for their proper resolution.

Part 3 of this series will cover corporate engagement with NGOs and the need for formal engagement, at the outset, between NGOs and corporates on various CSR initiatives. There will also be an overview of the indications of a positive NGO-Corporate relationship, as well as discussion of the need to integrate a grievance procedure when consulting local communities.

Prospect Law Ltd, 7th September 2018

About the Author:

Mark Jenkins advises clients on Corporate Social Responsibility (CSR), security and risk management issues affecting the viability of on and off-shore energy, mining and infrastructure sector projects in Europe, the Middle East and Africa. Mark’s experience has been focussed on creating reliable community support for projects through the development of a Social License to Operate (SLO) based on effective CSR initiatives. The success of these initiatives has been based on a thorough understanding of local environmental, commercial, and cultural dynamics, especially Islamic ones.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

For a PDF of this blog click here

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CREATING SHARED VALUE IN COMPLEX ENVIRONMENTS: PART I

Part I of this series will focus on the three categories for understanding and analysing company-community relations – Benefits Distribution, Accountability for Impacts and Appropriate Behaviour. There will be analysis of how these categories combine in the building of the kind of relationships necessary for the building of an effective Social License to Operate (SLO).

I am often asked to share thoughts on how corporates can Create Shared Value in complex environments, thereby reducing the significant risk posed to their operations by loss of a Social License to Operate.

Company – Community Relations

A schematic representation of how the three relationships work is below:

 

 

 

 

 

 

Accountability for Impacts

An effective SLO plan will acknowledge the positive and the negative side effects of mining operations on local, and national communities. When a community sees that a company is concerned by, and accepts responsibility for the unintended and long term side effects of its operations, then they will interpret this as a sign that the company cares about them and their lives.

Acceptance of responsibility for any negative effects of commercial operations, such as the Curse of Resources/Dutch disease, is a good example of such acknowledgement. Crucial to the acceptance of accountability for impacts is the need to discuss a long term vision with communities, listen to their concerns about possible negative impacts and provide long term contracts and training plans.

Fair Benefit Distribution

The right approach to benefits distribution is based on the principle of fairness.

Fairness refers to how people in communities perceive the distribution of benefits and their share of these benefits. Unsurprisingly, the key is to ensure that deserving people get what they deserve, and those who do not deserve rewards do not get them. Furthermore, many communities assign value to immaterial and intangible things such as historical and traditional hierarchies, social relations and spiritual qualities. SLO strategies must ensure that people feel they receive non monetary benefits – as well as payments – as a result of a company’s presence. If communities believe the company is fair, it will be reassured. This will reduce needless competition and fear, as well as reinforcing the long term view over short term gains. Transparency is a key component of fairness. A divider and connector analysis will guide ways in which a SLO plan can emphasize and reinforce common and collective interests, among communities.

Appropriate Behaviour

How a company behaves towards communities sends messages about respect and disrespect, trust and mistrust and whether or not it cares, or does not care about them. The behaviour of a company, including its contracted agencies, has a direct impact on how communities view the company. More messages are communicated to local communities by company behaviour than by words or publications. Getting it right involves the showing of respect, trust and care for the communities affected by a company’s operations – respect, trust and care sets the tone for company community relationships, and mitigates risk.

There are many ways in which a company can display these qualities, including:

  • good social interaction;
  • identification and mapping of culturally important sites;
  • open engagement;
  • minimization of overt displays of security;
  • following through on commitments;
  • responsiveness to community inquiries;
  • acceptance of corporate accountability to local communities.

Creation of Shared Value (CSV)

John Browne, a former CEO of BP, has emphasized the risk posed to corporates by having the wrong relationship with society, of neglecting those aspects of their activity that go beyond narrowly legal requirements. For Browne, activities that make a social contribution should be construed as being part of a company’s central purpose.

Browne argues that companies should engage with society in a radical, rather than a grudging and episodic manner. He says that the “definition of purpose” is changing for many organisations, with an increasing acceptance that shareholder value should be seen as an outcome, rather than the goal of commercial activity. Browne says that the integration of Corporate Social Responsibility (CSR) and sustainability into core business activity is tough, but that there is a clear business imperative for the extractive industry to improve its relations with host communities. Across the world extractive communities lose billions of dollars each year as a result of community strife. In particular Browne advocates:

  • Building a portfolio of strategic programmes with long term economic development strategies, rather than making one-off, reactive investments;
  • Creating processes which integrate social investment staff into core business decision making;
  • For a switch from incentivizing on-time, low cost delivery to incorporating social performance into compensation packages;
  • Measuring investments in communities by dollars spent to measuring investments in communities by societal and business outcomes;
  • Building relationships with governments/NGOs and community leaders to help solve societal problems.

Part II of this series will focus on a company’s internal structures and external relations department, and the impact these can have on a company’s relations with its community stakeholders. There will also be discussion of the promotion and protection of human rights in the context of a social license to operate.

Prospect Law Ltd, 21st August 2018

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART IV

CSR, CSV and their Influence on Corporate Decision Making

In my fourth article I consider ways in which CSR/CSV dynamics can affect corporate decision making in the energy sector, looking in particular at the example of Eni and how it has approached the matter of climate change.

Papua New Guinea is experiencing one of the largest capital investments in its history through the Papua New Guinea Liquified Natural Gas Project. The country must put in place the necessary governance and accountability mechanisms to ensure that the benefits of this investment are captured and fairly distributed among the nation’s stakeholders. At the same time, business needs a working regulatory framework in place.

In addition to making substantial direct investments in local human capital, workforce skills and enterprise development, it is important for the projects success to work with government to strengthen the enabling business environment, improve infrastructure and build capacity on revenue transparency, revenue management and broader development planning and implementation. This is an example of the kind of project that extractives companies are currently involved in across the world. Their project timelines extend over decades, and rely on the communities and countries in which they operate for success.

The sector often operates in isolated, remote areas that lack effective local and national governments and offer few public services. The societal and business imperatives to create shared value are undeniable.

The issue of climate change is of increasing importance for extractives companies, when considering ways in which they can create shared value with society. Otherwise they face the very real possibility of losing their Social License to Operate, as well as revenue as climate change starts to impact on the world. Eni is an example of an energy company which has faced up to the reality of climate change, and the conclusions of the Paris Conference, in order to preserve its viability as a business.

Eni has responded to the climate change challenge with the development of its model for the sustainable development of energy resources, and the company’s new mission: a model able to combine financial solidity and social and environmental sustainability in order to face the dual challenge of maximizing the rising demand for energy and fighting climate change.

This model has focused on cooperation with the countries in which it operates, minimizing risks and the impact of its activities, as well as defining a clear road map towards a low carbon future. Eni has acknowledged the need to limit temperature increases below 2 degrees centigrade, outlining a strategy based on a carbon footprint reduction, low carbon portfolio and a commitment on renewables – while at the same time maximizing access to energy. Development projects for residents in areas of its upstream activity are crucial to the company’s strategy, including economic diversification, health care, access to water, education and infrastructure development.

The old model of CSR is dead. It has been replaced by the idea of the Creation of Shared Value – an idea to drive the very core purpose of companies. The increasing fragility of the nation state is a leitmotif of the twenty first century, as decentralization, devolution, globalization, political deadlock and austerity all combine to reduce the power of national governments to significantly impose their will on development. The opportunities for companies to increase profitability by adopting business models based on the concept of CSV are enormous.

In this blog I have considered the relevance of CSV to governance and accountability issues, and how Eni has responded to the challenges posed to the energy sector in terms of how it creates shared value.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART I

In this first article I look at what is meant by “radical engagement” with society, and also the relevance of Systems Thinking to CSR, and the energy industry.

John Browne, former CEO of BP, estimates the risk for a company having the wrong relationship with society, of neglecting those aspects of their activity that go beyond narrowly legal requirements at about 30 per cent. He advocates a policy of “radical engagement” as the basis for how companies should engage with society, using four main principles:

  • Businesses do well when they have a good understanding of the world around them, and of their place in the world;
  • Businesses need to understand better how to communicate their total contribution to society – activities that make a social contribution should be construed as being part of a company’s central purpose;
  • CSR and sustainability should be “part of the performance contract of a business and evaluated as such”;
  • In an interconnected world it is important not to engage or communicate only when you have to. Business engagement with society should be radical, not grudging and episodic.

One of the issues that has changed in corporate policy making is the notion that profit should be an “outcome”, rather than the goal of commercial life.

The question of “purpose” and “meaning,” and the role of “value” are at the heart of Fritjof Capra’s systems approach. Capra’s work has been heavily influenced by the insights of quantum science, in particular the work of Werner Heisenberg, author of “Physics and Philosophy.” Interviewed about the influence of Heisenberg on his work, Capra said:

“…the exploration of the atomic and subatomic world brought them in contact with a strange and unexpected reality. In their struggle to grasp this new reality, they became painfully aware that their basic concepts and language, indeed their whole way of thinking were inadequate to describe atomic phenomena. The problems were not merely intellectual, but amounted to an intense emotional, and one could even say, existential crisis. It took them a long to overcome this crisis, but in the end they were rewarded with deep insights into the nature of matter and its relation to the human mind.”

Capra’s systems thinking originates in this intellectual crisis of the 1920s. Out of that crisis came the realization that there are no fundamental constituents of matter. Instead everything is a web of connection and interrelationship. Solutions to the world’s current multiple crises cannot be isolated. They must be interconnected.

Capra says:

“The problem of energy cannot be solved by finding cheaper sources of energy. If we had hydrogen fusion right now, or some new energy source that was cheap and safe, all our other problems would only get worse. If you fuel a system that is out of balance, you have just the same system but on steroids. We would damage the rainforests, deplete the ecosphere, pollute the air and increase health problems. In other words, the energy problem is also a health problem and a food problem and a water problem.”

John Browne believes that energy companies must engage radically with society. He believes that profit should be an outcome, rather than the goal of corporate decision making. The systems thinking of Frithjof Capra has much to say in relation to debate about meaning, and purpose. Furthermore, it advocates an approach to strategy that considers energy issues within a wider context than the industry itself.

In my second article I will look at the connection between ecology and systems thinking, and why it is that systems thinkers believe that the illusion of perpetual growth is at the heart of the global crisis of affairs. I will examine the possibility that society needs to transform its understanding about growth from one that is quantitative to one that is qualitative.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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CSR AND CONNECTED LEADERSHIP: THE MASTERS OF THE HUAINAN (PART II)

In his book “Connect – How Companies Succeed by Engaging Radically with Society“, John Browne, formerly CEO of BP, articulates how companies engage with society in a way that goes beyond the normal conceptions of Corporate Social Responsibility (CSR).

Browne believes that “connected leadership” requires the integration of societal and environmental considerations into core business decision making at all levels. He says that “connected leadership” ensures long term viability for a business, and also generates a competitive advantage. Browne states: “crucially, connected leadership is predicated (most of the time) on mutual advantage; society would benefit considerably if it could enable a transition to this new paradigm, regardless of which firms gain the extra edge by engaging particularly well.”

Browne says that there are four tenets of connected leadership which, when applied, can revolutionise a company’s standing in society.

These four tenets are:

  1. Map your world
  2. Define your contribution
  3. Apply world class leadership
  4. Engage radically

Browne believes that any success he achieved in the commercial world came when he engaged effectively, and sustainably, with the external world.

Browne quotes Teddy Roosevelt, who stated in 1903:

We demand that big business give the people a square deal…in return we must insist that when anyone engaged in big business honestly endeavours to do right he shall himself be given a square deal.”

In subsequent blogs I will be looking at the concept of “Connected Leadership”, and its relevance to CSR, in more detail.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.        

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For more information please contact us on 01332 818 785 or by email on: info@prospectenergy.co.uk.

For a PDF of this blog click here

 

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CSR AND CONNECTED LEADERSHIP: THE MASTERS OF THE HUAINAN

Mark Jenkins, CSR Specialist Project Advisor at Prospect Energy

In the second century BCE scholars gathered at the court of the Chinese King to debate philosophy and statecraft. Their conversations were recorded in the text: “The Masters of the Huainan.”

They identified five types of wasteful consumption that are “the source of all disorder” – wood, water, earth, metal and fire. The text railed against miners who “exhaust the riches of the earth:”

“Any one of these five types of wastefulness is sufficient to bring about the loss of the Empire,” they warned.

The nature of the “tragedy of the commons” is such that when companies can externalise the costs they impose on the environment, there is little short term incentive to them to desist.

The environment cannot answer back.

“Connected Leaders”, however, are different. They impose “win win” solutions, rather than “win lose” ones. Nowhere is connected leadership more in evidence than in relation to its attitudes towards the environment.

John Browne, former CEO of BP has said that the ability of “companies to confront issues of long term industry viability without the certainty of short term returns” is critical to the delivery of effective environment policy.

Investment in game changing technologies will be critical for the development of policies that will respect the environment. But – in the short term – these technologies will contradict the need for short and mid term profitability.

There is a need for a “circular economy” – one which makes products that can be recovered, and regenerated at the end of each serviceable life.

In his book “Heart of Darkness” Joseph Conrad spoke of the “sordid buccaneers” who had torn up the African landscape with no regard for the environment, or local communities.

Another Chinese sage wrote in the first century BCE: “Crooks and upstart industrialists exploit the common people with their dishonest practices. They appropriate the bounty of our natural resources as their own rich inheritance. But we will put down the wealthy traders and great merchants. We shall not give the advantage to the over bearing and aggressive.”

Disdain for commerce was engrained in ancient China. The Chinese elite believed that enterprise was dangerous, and immoral. John Browne says that when a list defining seven categories of criminals was published in 97 BCE, in order to explain who would be conscripted for a criminal campaign, the last four categories were as follows: “merchants, former merchants, sons of merchants and grandsons of merchants.”

The Connected Leader understands these fears. His leadership ensures that these fears are not justified.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For more information please contact us on 01332 818 785 or by email on: info@prospectenergy.co.uk.

For a PDF of this blog click here

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THE CURSE OF RESOURCES IN ACTION: THE LOSS OF A SOCIAL LICENSE TO OPERATE

Mark Jenkins, Prospect Energy

A few years ago I travelled to a remote part of the Balkans to deliver risk management support to a client from the extractive industry.

The client’s corporate security officer told me that commercial operations were being hindered by sabotage and theft, reputational attacks in the social media as a consequence of those acts of sabotage and theft.

The client believed that the best way to mitigate its risk was through the delivery of security solutions based around CCTV, armed guards and drones.

I travelled to the remote, mountainous area where the acts of theft and sabotage were occurring.

It immediately became clear that the root cause of the trouble lay in the symptoms of Dutch Disease/the Curse of resources, which had led to a complete collapse of the client’s Social License to Operate.

The SLO exists at different levels. These can be categorized as follows:Untitled

In the case of the client I was supporting it was clear to me that their SLO was at the lowest level, rejection/withdrawal, and they were facing the consequences of that in the form of violence, protests, legal challenges, blockages and sabotage.

It was obvious that the most effective way to mitigate the risk to the client’s commercial operations would be to apply the principles of good CSR in order to mitigate the effects of Dutch Disease, and increase its Social License to Operate to a point where the level of security risk it was facing subsided.

We could have put a security guard on every oil well, but theft would have continued if the community from which those guards came, and the many former employees who lived in the neighbour-hood, had remained antagonistic in their feelings towards the client.

Furthermore, modern social media methods meant that anyone with a grievance about the client had a global audience. It was clear to me that the client needed to engage in a process of self-analysis. As Woody Allen once said: “I’ve seen the enemy. It’s us.”

Symptoms of the loss of the SLO

The most immediate risk posed to the client was severe reputational damage. Acts of theft and sabotage, in the form of the bunkering of gas pipes, had resulted in a series of explosions in the area of a local playground, through which many of the pipes ran. A large banner had been erected across the front of a house which overlooked the playground, photographs of which had appeared on social media sites across the world. The banner described the client as “being the essence of explosion.”

Significant financial loss was being incurred by the client; locals were stealing copper wire from electrical equipment, which had resulted in a loss of production and the expenditure necessary to repair the consequent damage. Furthermore, the damage to equipment exposed the client to reputational damage caused by equipment malfunction.

Locals were bunkering oil and gas pipelines, incurring financial penalties for the client caused by loss of production, as well as possible reputational damage caused by the strong likelihood off damaged pipelines exploding – as referred to above.

The client’s physical infrastructure was also being systematically looted, as locals stole equipment, and pipes to sell for scrap on the black market.

As I looked further into the situation it seed to me that the root causes of the client’s loss of a SLO lay in issues related to the Curse of Resources.

Environmental concerns

First, there were environmental concerns. Locals felt that the oil and gas company had prioritized profit over concern for the environment. For example, the pipes in use were over thirty years old, and in many places had not even been buried, let alone secured. Thus those pipes were very vulnerable to being bunkered.

Lack of partnership

Second there was no real cooperation, or partnership with the local population. Much of the problem for the oil and gas company was that they had not worked out a plan for effective identification of suitable local stakeholders. The decision makers they had established relationships with had little moral authority in their community, and often their interests were national, rather than local.

Non local profit making

Record profit levels had been announced at the same time as mass redundancies; almost all of whom had come from local employees and contractor. Furthermore, and concurrent to the redundancy programme, an extravagant new headquarters had been established in the capital city with a big recruitment drive among urban based young professionals. These factors all combined to make locals feels that the client’s interests were those of an urban based elite, rather than traditional, local stakeholders.

Capitalism versus communism

This issue, the sense that locals were not benefitting from the exploitation of their resources, fuelled a backlash. In the days of communism there had been a big emphasison the importance of “mucking in,” the sense that everyone in the country should benefit –in a limited way – from resources exploited from within the respective regions.

The replacement of communism with free market capitalism meant that a much smaller percentage of the population – the shareholders, many of whom were foreigners, was benefitting from these profits, and to a much greater extent. This meant that the locals were now much more proprietorial about what was now perceived to be “their” wealth, rather than the country’s as a whole.

During my tour of local villages I met an old lady who was filling up her bucket with oil from one of the client’s oil wells in her village. When I asked her why she was doing this she pointed at the water well, and said that when she wanted water she went there, and when she wanted oil she went to the oil well.

Land rights

Similarly, locals had spent a lot of time and money researching land rights issues which had been forgotten during the communist era. Now that huge profits were being made there was serious incentive for people to stake claims to tiny pieces of land, in which there might be an oil well. There were a number of on-going disputes between the client and locals, who had staked a claim to a local piece of land, and set up home around the oil well on that land, refusing to allow the client access to that well.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

Mark Jenkins advises clients on how to achieve commercial resilience in high-risk/non permissive environments. Among Mark’s specialist areas of expertise are the management and motivation of traditional communities such as Bedouin tribesmen in the Sinai Desert, Somali Muslims in NE Kenya and Eastern Orthodox Christians in remote parts of Eastern Europe. He has a particular interest in Islamic culture and has worked on the staff of HRH Prince Ghazi bin Muhammed bin Talal, Special Advisor and Personal Envoy to HM the Hashemite King of Jordan. Other interests of Mark’s include renewable energy, especially solar power, and economic solutions which are based on the principle of sufficiency, rather than consumption.

For a PDF of this blog click here