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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

For a PDF of this blog click here

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PROSPECT LAW SUCCESSFULLY DEFENDS PLANNING PERMISSION FOR DERBY WASTE INCINERATOR

R (HILL) v. DERBY CITY COUNCIL [2018] EWHC 768 (ADMIN.)

In R (Hill) v Derby City Council, Mr Justice Supperstone considered a claim by a local resident that sought to quash the decision of Derby City Council to grant planning permission for an incinerator to Envirofusion Ltd (represented by Prospect Law).

Background:

Envirofusion is based on the former Hanson Concrete Works, off Alfreton Road, and applied to Derby City Council for permission to test its waste disposal system, which involves heating waste to a temperature of 1,000°C for 18 months.

The plant would process up to 2.75 tonnes of waste per hour, based on a maximum operational running time of up to 100 hours a week. Gases from the process would escape into the outside air up a 22-metre stack, after passing through a filtration system. The waste would then be oxidised to produce molten ash.

The proposals were controversial and attracted more than 450 letters of objection.

Ground of Challenge and Judgment:

Mrs Hill challenged the decision on three grounds:

  • the planning committee report was not made available online,
  • the planning committee report was misleading,
  • the Council did not have regard to material considerations.

Dr Ashley Bowes represented Envirofusion at the High Court hearing. Mr Justice Supperstone accepted his submissions and refused Mrs Hill permission to challenge the Council’s decision. In particular, it was held that:

  • There is no duty to publish a planning committee report online. The obligation within the Local Authorities (Executive Arrangements) (Meetings and Access to Information) (England) Regulations 2012 only applies to decisions of a Council’s executive (see paragraph 4 of the judgment).
  • Health and safety matters, such as the risk of fire and explosion, were considered in the grant of the environmental permit. Accordingly, the Committee was entitled to leave those matters for the regulation of the permit (see paragraphs 14 & 15 of the judgment). This issue arises from time-to-time when planning committees determine new or experimental technologies such as fracking.

It is worth remembering the observations of Mr Justice Gilbart in R (Frack Free Balcombe Residents Association) v West Sussex County Council [2014] EWHC 4108 (Admin.) at [100] that “the Planning Authority may in the exercise of its discretion consider that matters of regulatory control could be left to the statutory regulatory authorities to consider”

Entitlement to Costs:

Mrs Hill disputed that Envirofusion were entitled to its costs. Notwithstanding the common practice of the High Court to award the costs of preparing and filing its acknowledgment of service, Mrs Hill argued that Bolton MDC v Secretary of State for the Environment [1995] 1 WLR 1176 is authority for the proposition that only one set of costs would normally be ordered and that further costs would only be granted in exceptional circumstances.

Mr Justice Supperstone rejected that submission, holding in a further judgment that the Bolton rule does not apply to costs incurred preparing an acknowledgment of service. The Judge rejected the submission that the judgment of the House of Lords costs officers in Berkley v Secretary of State for the Environment (21 January 2003), in which it was held that two sets of costs could not be recovered by respondents to applications for permission to appeal, compelled a different conclusion. Mr Justice Supperstone found that an appeal to the House of Lords concerned “a different regime under different circumstances”.

Please click here to see Mr Justice Supperstone’s order on costs

About the Author:

Ashley Bowes is a specialist planning barrister who frequently represents clients in planning inquiries and onto litigation in the courts, including up to the Supreme Court. He is a member of the Attorney General’s C Panel of Junior Counsel to the Crown, in which capacity he represents the UK Government in planning matters.  He is also the General Editor of Sweet & Maxwell’s Journal of Planning & Environment Law and the Author of Oxford University Press’ ‘A Practical Approach to Planning Law’ (14th. Ed.).

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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HIGH COURT GIVES GUIDANCE ON COSTS OF DEFENDING S.289 TOWN AND COUNTRY PLANNING ACT PROCEEDINGS

In Elghanian v Secretary of State for Housing, Communities and Local Government (heard on 18 April 2018) Mrs Justice Lang considered the costs regime for defending challenges to the validity to enforcement notices.

Background:

The London Borough of Brent (represented by Dr Ashley Bowes of Prospect Law) had succeeded in resisting a challenge by Mr Elghanian, under s. 174 of the Town and Country Planning Act 1990, against two enforcement notices which had been issued against him by the London Borough of Brent (“Brent”). Those appeals were dismissed by an Inspector following an Inquiry and Mr Elghanian applied to appeal the Inspector’s decision under s. 289. Following an oral hearing on 18 April 2018, Mrs Justice Lang refused permission to appeal.

Brent sought the costs it had incurred preparing and filing a skeleton argument, on the basis that the costs of preparing and filing an acknowledgment of service are recoverable from all parties to a judicial review, and, in the absence of such a procedure in s.289 proceedings, the skeleton argument performs the same function. Brent relied upon R (Mount Cook Land Ltd) v Westminster CC [2017] PTSR 1166.

Costs regime for appeals under s.289 proceedings:

The Appellant opposed this application, relying on the rule derived from Bolton MDC v SSE [1995] 1 WLR 1176 that a second respondent in s. 288 planning appeals would “not normally be entitled to his costs unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the Secretary of State; or unless he has an interest which requires separate representation“. No such issue or interest was identified by Brent.

Mrs Justice Lang held that “the permission and costs regime for appeals under s. 289 is separate and distinct from judicial reviews and other appeals“. The Court ruled that the Mount Cook costs principle does not apply in such cases. In particular, the Judge held that Bolton remains good law in the specific context of a permission hearing for a s. 289 appeal.

As there was no separate issue which required Brent to be represented at the permission hearing, the Appellant was not ordered to pay Brent’s costs of attendance. However, Mrs Justice Lang also held that Brent was not entitled to the costs it had incurred preparing a skeleton argument.

Appeals under s.288 of the 1990 Act:

A similar procedure applies in the case of appeals under s. 288 of the 1990 Act, which are usually concerned with the grant or dismissal of planning permission. There, any person served with the claim form that wishes to take part in the planning statutory review must also file an AoS. This is followed by consideration of permission on the papers and an oral renewal hearing, where it is also rare to award second respondents their costs.

In contrast, in s. 289 appeals there is an obligatory permission hearing which respondents are entitled, but not required, to attend. There is no provision in the rules for a local planning authority or any other person served with the application to file any pleading.

Harmonisation of s.288 and s.289 regimes:

Mrs Justice Lang considered that it would be desirable to harmonise these different regimes, but that the appropriate means of doing so was by way of amendment to the CPR rather than by piecemeal judicial decision-making. She concluded:

A skeleton argument is not analogous to an acknowledgment of service, in my view. It is part of the preparation for an oral hearing. In an application for permission under section 289 TCPA 1990, it is envisaged that respondents and other persons served will attend the permission hearing, and if successful, a costs award will be made in their favour, unless the Bolton principles apply. To that extent, the regime is more favourable to respondents than judicial review or statutory review under section 288 TCPA 1990. I acknowledge that it is less favourable for local planning authorities who are excluded from a costs award in respect of their written response to the application, as well as attendance at the hearing, by the Bolton principles.” (paragraph 20)

A copy of the judgment can be found here.

About the Author:

Ashley Bowes is a specialist planning barrister who frequently represents clients in planning inquiries and onto litigation in the courts, including up to the Supreme Court. He is a member of the Attorney General’s C Panel of Junior Counsel to the Crown, in which capacity he represents the UK Government in planning matters.  He is also the General Editor of Sweet & Maxwell’s Journal of Planning & Environment Law and the Author of Oxford University Press’ ‘A Practical Approach to Planning Law’ (14th. Ed.).

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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FIGHTING THE EFFECTS OF THE CURSE OF RESOURCES

Mark Jenkins, Prospect Energy

In order to mitigate the security risks to my client in the Balkans I recommended that strenuous attempts were made to restore the company’s Social License to Operate by tackling the root causes of the problem: the negative effects of the Curse of Resources.

The first requirement was the correct identification of local stakeholders. This is not always straightforward, especially in former communist bloc countries where traditional sources of authority were often eliminated over the course of the twentieth century.

In Africa the problem is slightly different. In his book “What went Wrong with Africa” Roel van der Veen argued that the decision of various colonial powers to hand power over to urbanised elites, trained and educated in the west, rather than to traditional sources of authority with a reputation for leadership and moral excellence, rooted in the provinces rather than the capital city, and deeply integrated into the local culture, is at the heart of the current leadership crisis in Africa. It is not a coincidence that two of the most respected post colonial African leaders, Nelson Mandela and Julius Nyere, both came from traditional leadership backgrounds. Mandela was of royal ancestry, and Nyere was the son of a tribal chief. Both regarded the village as the backbone of a healthy society.

The point is attempts to build a Social License to Operate can only work if the right kind of people are identified as partners, and it is often the case that such partners come from very traditional backgrounds. The Emir of Kano and the Sultan of Sokoto in Northern Nigeria are examples of two such leaders, and it is interesting to note that the current Emir of Kano established a reputation for fighting corruption during his time at the helm of the Nigerian banking system.

Once the client had worked out who the local stakeholders were, and from that who was most likely to be an effective partner, the next step would be to invest in local business, so that the local community came to see the client as a partner.

  • Investment in Local Business– it was recommended that the client invests in local businesses. Suggestions included the establishment of a scrap metal dealer to deal with the client’s waste, and sustainable local cottage industries including jam and incense factories. The businesses needed to be sustainable ones that would continue to exist long after the oil industry had gone from the area, and which would, ideally, provide the local community with food.
  • Security – security procedures were adapted to reflect CSR concerns. For example, dismounted patrols were introduced in built up areas in order to gather intelligence and win over local hearts and minds. Drivers were ordered to restrict their speed limits to 30mph in built up areas in order to minimise RTAs. Local police chiefs were integrated into planning meetings.
  • Environmental– an audit of all equipment was recommended in order to minimise possible environmental damage as a result of spillages or explosions. This included ensuring that pipes were buried, and robust security measures to prevent bunkering.
  • Rebranding – some kind of re-branding exercise was recommended to deal with public perception that oil was now being extracted by a foreign company for the benefit of foreign shareholders.

LEOPOLD KOHR – “THE BREAKDOWN OF NATIONS”                                                                                                                                                        

29. Leopold Kohr was an economist and political scientist known for his opposition to the “cult of bigness” in social organisation. He said:

“..there seems to be only one cause behind all forms of social misery: bigness. Oversimplified as this may seem, we shall find the idea more easily acceptable if we consider that bigness, or oversize, is really much more than a social problem. It appears to be the one and only problem permeating all creation. Whenever something is wrong, something is too big..(and) if the body of a people becomes diseased with the fever of aggression, brutality, collectivism, or massive idiocy, it is not because it has fallen victim to bad leadership or mental derangement. It is because human beings, so charming as individuals or in small aggregations, have become welded into over-concentrated social units.”

30. Kohr argued:

  • against massive external aid to poorer nations, which he believed stifled local initiatives and participation.
  • for a dissolution of centralised political and economic structures in favour of local control.

31. It is worth noting here that one of Africa’s most respected post-colonial leaders, Julius Nyerere, also understood the value of small, as opposed to large structures and the need for self-reliance. Self-reliance and the value of small-scale as opposed to large scale economic structures were at the heart of his policies in support of villages.

EF SCHUMACHER “SMALL IS BEAUTIFUL – ECONOMICS AS IF PEOPLE MATTERED”

31. EF Schumacher was a well-respected economist who worked with Keynes and Galbraith when he was Chief Economist to the NCB. He was also heavily influenced by Islamic economics which, confusingly, he called Buddhist economics. Schumacher argued for:

  • workplaces that are dignified and meaningful,
  • small, appropriate technologies that empower people,
  • “smallness within bigness,”
  • decentralisation,
  • the unsustainable nature of the modern economy – natural resources are treated as expendable income when they should be treated as capital, since they are not renewable,
  • the principle of sufficiency, and that government efforts should be concentrated on sustainable development,
  • against the notions that growth is good- and that bigger is better,
  • against  the appropriateness of using mass production in developing countries- promoting instead “production by the masses,”
  • against the appropriateness of using GNP to measure human well-being,
  • the view that “the aim ought to be to obtain the maximum amount of well-being with the minimum amount of consumption.”

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

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 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.

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 a PDF of this blog click here

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DIFFERENT APPROACHES TO CORPORATE SOCIAL RESPONSIBILITY (CSR)

Mark Jenkins, Prospect Energy
The philosophy behind western approaches to CSR

Western approaches to the formulation of Corporate Social Responsibility strategy are overwhelmingly secular. They tend to flow out of one of a number of paradigms. We can perhaps categorise these paradigms as follows:

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MITIGATING THE EFFECTS OF THE CURSE OF RESOURCES: CSR STRATEGY

Mark Jenkins, Prospect Energy

In my last blog I looked at some of the security consequences of the Curse of Resources; using the specific examples of Nigeria and Egypt.

In this blog I will look at some of the social consequences of the Curse of Resources, and consider the role that can be played by Corporate Social Responsibility (CSR) in mitigating these consequences.

Undermining the local social fabric

The initial arrival of oil companies in Chad generated significant impact on the country’s social fabric. Eleven primary schools were closed as teachers left their posts to seek employment as middle managers in the oil industry – on infinitely better terms.

There was a sudden growth in prostitution. The clients came from expatriate oil workers, and local farmers who were suddenly extremely rich as a result of compensatory payments given to them by oil companies, for access to their land.

There was an increase in paramilitary activity, both in regard to the protection of oil assets, and also as a result of local “bunkerers” purchasing arms with the profits they had made as a result of selling oil on the black market.

The decline in local agricultural activity generated a sharp rise in the local price of millet and food. Unemployment among locals living in the vicinity of exploration and production activities occurred at the same time as the sharp rise in food prices.

Social License to Operate (SLO)

The term Social License to Operate (SLO) refers to a stakeholder perception of the legitimacy of a project, a company or an industry. Ernst and Young have said that a failure to achieve a SLO represents the fourth biggest risk to the success of commercial operations in the extractive industry.

Corporate Social Responsibility (CSR)

A Social License to Operate is often expressed using terms such as CSR, Community Acceptance and Reputation. Kenya is an example of a country which, keen to avoid the kinds of problems inflicted by the Curse of Resources on countries such as Nigeria and Egypt, has enshrined the principle of public participation in its constitution, under Article 10, (2) and Article 69 (d).

Escalating social and economic problems brought about by globalisation have raised new questions – as well as expectations – about corporate governance and ethical and social responsibilities.

In general CSR is taken to denote corporate activities – beyond profit making – which include issues such as protecting the environment, caring for employees and conducting ethical trade and community investment policies.

The increased interest in CSR that currently exists throughout Europe, especially Scandinavia, reflects a growing discontent with corporate self-interest and self-indulgence.

A role for multi-national corporations in resource rich countries

Multi-national corporations are increasingly encouraged to resolve economic and social problems, especially in frontier/emerging markets, many of which are resource rich.

In such situations multi-national corporations are capable of resolving economic and social problems in a way not possible for national governments, especially if those countries are suffering from the typical effects of “resource curse” such as a rentier mentality, corruption, over-centralisation and a collapse of local industry.

Exploration and production operations of the oil and gas industry tend to take place in remote locations. Consequently, the extractive industry tends to have an especially acute awareness of the issues faced in remote areas where the government’s writ does not apply, and the challenge of acquiring a social licence to operate is significant.

The empowerment of local communities

Renewed contemporary interest in CSR is also due to factors such as growing market pressure for CSR principles to drive commercial activity, increasing regulatory pressure (especially from NGOs concerned about environmental damage and the rights of workers), the prevalence of social media – empowering local communities whose voices previously were not heard, and the increasingly competitive edge given to companies who implement CSR driven policies.

Issues to be addressed by CSR when combating the effects of the Curse of Resources

There is a connection between the Curse of Resources and CSR. Many of the effects of the Curse of Resources are exactly the kinds of issues that CSR policies seek to address. Examples include:

  • The environment. Usually local communities are especially concerned about matters such as air and water pollution, water extraction, impacts on bio diversity and waste management. As we have seen one of the effects of the Curse of Resources is increased pollution of the environment.
  • Business conduct. CSR policies strive for transparency and ethical commercial practice. One of the effects of the Curse of Resources is less transparency and increased levels of corruption.
  • Workers rights and safety. CSR policies strive for better rights and safety conditions for workers. One of the effects of the Curse of Resources is reduced safety measures and rights for workers.
  • Community relationships. CSR policies cover matters such as land access and ownership, equitable sharing of benefits and human rights violations by security forces. We have seen that the features of the Curse of Resources involves violent disputes over land access and ownership, a failure to ensure equitable sharing of benefits, and human rights violations by security forces.

 

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

Prospect Energy is an energy specialist technical consultancy firm based in London and the Midlands of the UK. It is a sister company of Prospect Law. The two firms provide advice on energy development projects and energy related litigation for clients 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

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

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EXAMPLES OF THE CURSE OF RESOURCES AT WORK

Mark Jenkins, Prospect Energy

Nigeria and Egypt are two good examples of countries suffering from the effects of the Curse of Resources.

The Curse of Resources in action – Nigeria
Since Nigeria achieved independence in 1960 it has experienced a civil war resulting in the death of over one million people, military rule for thirty years, and four failed and six successful military coups.

Corruption has been endemic. It has been estimated that Nigeria’s rulers have stolen somewhere between $400 billion USD in the period between 1969 and 2000.

Illegal bunkering has stolen between 5–10% of the country’s oil produce. Bunkering is the process whereby pipelines are illegally tapped in order to fill plastic jerry cans with crude oil, which is then shipped abroad.

In the meantime the country’s economy has shrunk, despite the wealth of the country’s resources. Despite the fact that Nigeria is the world’s seventh biggest producer of oil, 57% of its population live on less than $1 USD a day. In the Niger Delta, the area producing 100% of Nigeria’s on-shore oil, local residents do not have either electricity or running water.

The environmental damage caused by oil production has been massive. More than 1.5 million tons of oil has been spilled in the Niger Delta over the course of fifty years of oil extraction. Combining the effects of this with the toxic effect of gas flaring, it is not surprising to see that the Niger Delta has become one of the most polluted places on the planet.

The situation in the Niger Delta is a classic example of the destabilising security consequences of Dutch Disease.

Destabilising security conditions

The Movement for the Emancipation of the Niger Delta (MEND) is a terrorist grouping which sees itself as fighting on behalf of the Ijaw tribesmen of the Niger Delta. MEND’s leader has said he is fighting for:

“..the economic emancipation of the people of the Niger Delta, who have suffered decades of criminal neglect, brazen theft and damage to their environment by the Nigeria state and the oil majors. The problem in Nigeria has a very simple solution. Let the people of the Niger Delta control their resources. Our enemies comprise anyone, state of corporate body standing in the way of that.”

Let us now turn our attention to another country where the Curse of Resources has caused huge damage – Egypt.

The Curse of Resources in action – Egypt

Egypt’s oil production peaked in 1996 and since then has declined by approximately 26%. Since the 1960s Egypt has moved from complete food self-sufficiency to excessive dependence on imports subsidised by oil revenues. Egypt currently imports 75% of its wheat.

Declining oil revenues have increasingly impacted food and fuel subsidies. Food prices are generally underpinned by high oil prices because energy accounts for over a third of the costs of grain production. This has further contributed to surging global food prices.

Food price hikes have coincided with devastating climate change impacts in the form of extreme weather in key food basket regions.

Since 2010 there have been droughts and heat waves in the US, Russia and China leading to a dramatic fall in wheat yields, on which Egypt is heavily dependent. The subsequent doubling of global wheat prices directly affected millions of Egyptians who already spend approximately 40% of their income on food.

In many ways Egypt is a microcosm of current global challenges. In a time of climate extremes and population growth there will continue to be increases in food prices, particularly when oil prices are not cheap. For the last few years the food price index in Egypt has fluctuated above the critical threshold for probability of civil unrest.

Bearing this in mind it is not unreasonable to assume that the civil unrest that drove the Arab Spring was precipitated by hunger, rather than high-minded philosophical musings about the supposed benefits of western democracy.

Resource rich countries that depend, like Egypt, on imports to maintain their food supplies will suffer, unless they take as many proactive measures as they can to protect their agricultural sector.

Introduction to Prospect Energy, Prospect Law and Mark Jenkins

Prospect Energy is an energy specialist technical consultancy firm based in London and the Midlands of the UK. It is a sister company of Prospect Law. The two firms provide advice on energy development projects and energy related litigation for clients 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

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

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CUADRILLA’S FRACKING APPLICATIONS REFUSED BY LANCASHIRE COUNTY COUNCIL

Ashley Bowes, Prospect Law

For nearly a year and a half Lancashire County Council Development Control Committee heard extensive evidence from its own officers, the public and the applicant at a series of public hearings concerning two planning applications. Cuadrilla had sought permission for the construction and operation of four wells, drilled from a single large well-pad, with each well being subjected to hydraulic fracturing (fracking). The operation was expected to run 24 hours a day with fracking occurring for two months, followed by a three month initial period to test the flow of hydrocarbons (gas) and then 18-24 months of extended flow testing. They represented the largest appraisal of fracking in the UK.

The first site, at Roseacre Wood, was recommended for refusal on the grounds of its transport impact. The second site, at Preston New Road, although initially also recommended for refusal, was subsequently recommended for approval following further noise evidence from the applicant.

The scene was therefore set for a tense development control meeting on 23-24 June. On 24 June a motion to refuse the application was moved and seconded but, following an adjournment, was defeated on the Chairman’s casting vote. It emerged that in the adjournment the Council received telephone advice from David Manley QC to the effect that the Council would be acting unreasonably to refuse the application and would expose itself to costs at appeal. A subsequent motion was passed to make that legal advice public.

In response to which, Friends of the Earth sought advice from Richard Harwood QC and the Preston New Road Action Group sought advice from Ashley Bowes. Both barristers’ advice concluded that there were grounds to refuse the application on the evidence before the Committee.

At its reconvened meeting on 29 June, a motion to refuse the application was passed on Ashley Bowes’ suggested reasons, which read as follows:

“The development would cause an unacceptable adverse impact on the landscape, arising from the drilling equipment, noise mitigation equipment, storage plant, flare stacks and other associated development. The combined effect would result in an adverse urbanising effect on the open and rural character of the landscape and visual amenity of local residents contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP11 Fylde Local Plan.”

“The development would cause an unacceptable noise impact resulting in a detrimental impact on the amenity of local residents which could not be adequately controlled by condition contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP27 Fylde Local Plan.”

Cuadrilla has six months in which to decide whether to appeal. If Cuadrilla does choose to appeal against the refusals a public inquiry is highly likely, at which the Inspector will have to grapple with the competing expert evidence (especially on noise impact).

It is also likely that any appeal will be recovered by the Secretary of State for determination, in order to give a determinative policy steer for future applications.

Reacting to the decision the UK Onshore Oil and Gas urged the Government to take a “strategic review” of how the planning system deals with these applications. However, the Prime Minister appeared not to signal any imminent change to the system, responding at Prime Minister’s Questions on 1 July that: “those decisions must be made by local authorities in the proper way, under the planning regime we have”.

 

Introduction to Prospect Law and Ashley Bowes

Prospect Law Ltd is an energy specialist UK law firm which is based in London and the Midlands. Prospect Energy Ltd is its sister company providing technical expertise. The two firms provide advice on energy development projects and energy related litigation concerning shale gas, nuclear and renewable energy schemes for clients in the UK and internationally.

Ashley Bowes is a barrister who specialises in planning and environmental law matters at planning appeals and in statutory challenges and judicial review cases in the High Court. He is involved in energy related development projects around the UK.

 

For a PDF of this article click here

For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.

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RENEWABLES INDUSTRY NEWS – JUNE 2015

Onshore Wind – Closure of the RO early for Onshore Wind

In a written ministerial statement of 18 June, the Secretary of State for Energy and Climate Change Amber Rudd MP set forth the Government’s intentions to end subsidies for onshore wind. The statement sets out the department’s plans to introduce primary legislation to close the Renewables Obligation to onshore wind projects as of 1 April 2016 (a year earlier than planned), whilst leaving details of how the Contracts for Difference and the Feed-in Tariff schemes will be dealt with for a later announcement. Included in the statement was a mention of grace periods for projects that already have planning consent, an accepted grid connection offer, and evidence of land rights, albeit only for projects that had these in place as of 18 June 2015. This was followed up by debates in both the House of Commons and the House of Lords on 22 June indicating both that support under the Contracts for Difference and the Feed-in Tariff were also under review.

PEL Note: Given the manifesto commitment of the Conservatives in regards to onshore wind this will not have come as a shock to many, although to have an announcement with very little detail, but that sets the deadline for the grace period criteria to that day, is potentially damaging to investor confidence. The lack of detail confirming the FIT and CfD scheme is certainly disappointing, although in the House of Commons on 22 June Amber Rudd MP did say “I said in my statement that, in respect of contracts for difference, we would be implementing the terms of our manifesto.” This appears to be a clear indication that the CfD budget may exclude onshore wind. The fate of onshore wind under the feed-in tariff is still unknown, but the outlook is not good. Many stories are already circulating about possible legal challenges following this announcement.

PLL Note: Whilst Prospect Law does not often directly comment in this update, this announcement has led to a number of rumours of legal challenges appearing in the press, rumoured to being brought by parties ranging from the Scottish Government through to developers. Previous challenges against sudden and/or retrospective changes to the RO/FIT schemes have all been based on changes to be introduced by secondary legislation following the release of a consultation. The difference here is that the Government is proposing using primary legislation, passed directly by Parliament, to achieve its ends, which is likely more difficult to challenge owing to Parliamentary sovereignty. Whilst we have yet to look at this in great detail, given the devastation the statement alone has had on the sector, even before any firm proposals or draft legislation is put forward, the statement itself may be open to legal challenge as a ‘decision’, especially if the final legislation does not cover projects that have been shelved owing to the announcement. The possibility of applying for a declaration of incompatibility and taking the case to the European Court of Human Rights (as a breach of the right to peaceful enjoyment of possessions, contrary to Article 1 of the first protocol, as established in earlier challenges against unlawful changes to the subsidy schemes brought by us) as an arguable route to a claim for damages remains open to consideration, given that a mere declaration of incompatibility cannot be a suitable remedy for any financial losses incurred.

 

Onshore Wind – Changes to Planning Regime

In a further written ministerial statement of 18 June, the Secretary of State for Communities and Local Government Greg Clark MP set out the Government’s intentions to impose new requirements for local planning authorities to consider when determining applications for onshore wind developments. These proposals, which take effect from the date of the statement, require that consent only be given when the development is in an area identified on the local plan as being suitable for wind development and when the planning impacts have been fully addressed and it therefore has the backing of the local community. For applications already in the system only the requirement to have addressed the planning impacts and to have the backing of the community will be required.

PEL Note: This story was somewhat overshadowed by the announcement regarding subsidies, however it could be even more important for onshore wind developers. The details of the updated guidance have not been released, however whilst the requirement for councils to have agreed (and approved) areas for wind development could prove difficult this could give potential investors useful information before money is spent – assuming such areas do materialise on local plans. The real concern seems to be the obligation for the project to have ‘the backing of the local community’ and the uncertainty as to just how easy it may be for a small group of local opposition to torpedo a project. It is not unusual, even when all local concerns have been diligently addressed, for there to be a few people who just do not want the project to go ahead, and if these individuals are allowed to prevent development the industry could have a serious problem.

 

Contracts for Difference – Consultation Response re Negative Pricing Released

On 29 June DECC released the Government response to the 9 March 2015 consultation on updates to the standard CfD contract terms. Alongside this the commissioned report on the likelihood of negative pricing events is also published. Owing to the state aid requirement the proposals regarding negative pricing (i.e. not paying generators if there is a 6+ hour negative pricing period) will be implemented, but with a promise to engage with the industry further. The negative pricing report gives low estimates for the probability of such events, with a conservative estimate of 0.5% of generation given for a ‘high renewables’ scenario.

PEL Note: The main area of interest in this response is likely to be the negative pricing issue, with the rest being small technical changes. The addition of a clause to the CfD contract stating that payments will not be made on generation occurring during a 6+ hour adds a risk to CfD generators that is difficult to quantify and price, however the published report gives relatively good news on the magnitude of this risk. It is worth noting that energy storage, interconnectors between countries and an increase in smart grids (that may also back onto an increase in the number of electric cars on the road) will all have a mitigating effect on the negative pricing risk. Whilst energy storage and interconnector projects are expected to go forward as planned, any curtailment of this type of investment will lead to this risk increasing and so is worth monitoring.

 

Capacity Market – 2015 Auction Parameters Published

On 29 June DECC published the letter to National Grid setting the parameters for the 2016 Capacity Market auction. Derating factors for interconnectors are also given as the scheme opens up to bids from such installations. The letter also sets out the parameters of the first Transitional Arrangement auction, which specifically targets demand-side response bidders.

PEL Note: Aside from the introduction of interconnectors, the December 2015 Capacity Market auction looks as if it is going to be similar to the first carried out at the end of 2014.

 

For a PDF of the June 2015 update, click here

If you would like to find out more about any of the points raised in this newsletter please contact us at updates@prospectenergy.co.uk or call us on +44 (0)20 3427 5955.