This presentation advocates the need for extractive companies to commit to operating with integrity and recommends a more data driven and locally specific approach to identifying and mitigating social risk, including supply chain risk. The talk also frames social risk issues for an audience comprised mostly of attorneys.

1. Implementing Integrity
The Business Case for Forging an Ethical Company and Supply Chain
And a Toolkit for Tempering the Links
Sean Cumberlege

2. 2
Extractive companies devote considerable effort to conducting their business ethically as
well as legally, consistent with principles of corporate responsibility.
SOME ARE SUCCEEDING
OTHERS ARE NOT

3. Entrepreneur
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3
Minimizing social
conflict and supply
chain risk starts
with companies
looking in, not out.
Operating with
integrity is not a
luxury to aspire to,
but a financial
imperative.
Social risk and supply
chain risk cannot be
solved by a one size
fits all approach.
Legal remedies and
strategies solve legal
problems. Not social
problems.
WHAT ARE OUR PRIMARY OBJECTIVES
TODAY?
$

4. Entrepreneur
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Operating with integrity
Putting into practice the
business ethics and corporate
responsibility principles that a
company preaches and that
ensure it has a social license to
operate
LETS GET SOME KEY TERMS OUT OF THE WAY
Social conflict
Physical protests, legal
challenges, formal opposition,
NGO and media advocacy,
political opposition, allegations
of human rights violations,
industrial/labor strikes, and
forced project cancellations by
host governments.
Social license to operate
Refers to the acceptance or
approval continually granted to
an organization's operations or
project by local community and
other stakeholders. It reflects a
perception of legitimacy.

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5
Conflicts as of May 1, 2016
805 WHEN
What date and what phase
of operation?
WHERE
What exact geo-location did
the social conflict occur?
WHO
Which stakeholders
mobilized against the
company?
WHY
What are the proximate
issues underlying the social
conflict?
THE DATA
Social Conflict Dataset
The dataset tracks and maps enterprise related social conflicts around the world. Enterprise related social conflicts are
typically disputes between an enterprise and one or more of its stakeholders.
Extractive company conflicts
455
Conflicts as of July 1, 2016
950
HOW
How did the social conflict
manifest itself?
WHAT
What were the consequences
of the social conflict?

6. 6
All Conflicts To Date

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7
Social conflicts and supply
chains risks do not typically
originate in vacuums.
Social risk is typically a result
of a number of issues that are
interrelated.
POINT 1: The Business
Case
Minimizing social conflict and supply chain risk starts with companies looking in, not
out:

8. Entrepreneur
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8
Social risk and supply chain risks are
often a direct consequence of policy
decisions that erode trust and
cooperation between projects and
stakeholders.
The triggers of social risk and supply chain
problems are increasingly predictable, yet very
few companies use root cause analysis or
similar processes to evaluate these incidents
and learn relevant lessons.

9. 9
All Conflicts To Date

10. 10
Access to/Competition Over Land

11. 11
Health & Safety

12. 12
Distribution of Benefits

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Extractive companies should be doing
more to gather information regarding
project environments to determine which
issues dominate, how this is likely to affect
stakeholders, and what consequences are
likely as a result of any conflict.
Companies can use insights discerned from
this information to develop and implement
social risk and supply chain risk-management
strategies which are tailored for the local
environment.
POINT 2: Data-Driven Discernment
Social risk and supply chain risk cannot be solved by a one size fits all approach:

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Understanding your local environment,
makes it easier to minimize social and
environmental impact, avoid human
rights risks, and target CSR efforts
towards meaningful, sustainable and
impactful programs that simultaneously
lower social risk.
Understanding your environment allows you to
focus at the grassroots and community level
early in the planning and feasibility stage of
operations in an effort to create genuine and
lasting value to local stakeholders.

15. Entrepreneur
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USA 120
Environmental
Degradation – 61%
Community Health &
Safety – 21%
PERU 34
Environmental
Degradation – 65%
Access to /
competition over
land – 21%
KENYA 27
Access to /
competition over land
– 40%
Environmental
Degradation – 37%
INDIA 38
Environmental
Degradation – 42%
Access to /
competition over land
– 34%
SOUTH AFRICA 53
Distribution of
Benefits – 26%
Environmental
Degradation – 19%
A large element of ‘acting with integrity’ means being responsive to the needs and concerns of project stakeholders.
What it means to ‘act with integrity’ changes depending on who you ask.

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53 conflicts
SOUTH AFRICA
H
I
G
H
Neighbors/local community
Local NGOs
International NGOs
Indigenous groups
Activists
Farmers/Fisherman
Job seekers
Informal workers
Local government
Organized labor
MOBILIZING STAKEHOLDERS
=
=
=
=
=
=
=
=
=
=
31
7
2
7
1
0
5
6
3
18
E
X
T
R
E
M
E
I
N
S
I
G
N
I
F
I
C
A
N
T
L
O
W
M
E
D
I
U
M
0 0 7 10 3
53
CONSEQUENCES: PEOPLE & PROPERTY
NTDs: 22
16 = less than 1 week
4 = 1-4 weeks
1 = 1-3 months

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38 conflicts
INDIA
H
I
G
H
Neighbors/local community
Local NGOs
International NGOs
Indigenous groups
Activists
Farmers/Fisherman
Job seekers
Informal workers
Local government
Organized labor
MOBILIZING STAKEHOLDERS
=
=
=
=
=
=
=
=
=
=
19
5
3
3
5
12
4
0
7
1
E
X
T
R
E
M
E
I
N
S
I
G
N
I
F
I
C
A
N
T
L
O
W
M
E
D
I
U
M
0 0 0 1 0
53
CONSEQUENCES: PEOPLE & PROPERTY
NTDs: 10
38
8 = less than 1 week
2 = 3-6 months

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40 conflicts
AUSTRALIA
H
I
G
H
Neighbors/local community
Local NGOs
International NGOs
Indigenous groups
Activists
Farmers/Fisherman
Job seekers
Informal workers
Local government
Organized labor
MOBILIZING STAKEHOLDERS
=
=
=
=
=
=
=
=
=
=
18
17
2
6
10
9
0
1
7
0
E
X
T
R
E
M
E
I
N
S
I
G
N
I
F
I
C
A
N
T
L
O
W
M
E
D
I
U
M
0 0 1 0 0
53
CONSEQUENCES: PEOPLE & PROPERTY
NTDs: 9
40
8 = less than 1 week
1 = 1-3 months

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Legal compliance in terms of good
corporate behavior is a minimum
standard.
It’s not the gold standard.
Legal compliance-based strategies are only
effective when combined with a nuanced
understanding of a project environment, its
stakeholders, their concerns, and conflict
trigger points.
POINT 3: Implementing Integrity
Legal remedies and strategies solve legal problems. Not social problems:

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Lawyers who understand this, can add
significant value to their clients and to
their companies. How?
• Maintain control over voluntary compliance.
• Even with the most robust contractual
protections and legal compliance
mechanisms, MNCs still face the risk of
reputational and value erosion.
• Multidisciplinary nature and complexity of
regulatory and public expectations within the
field of sustainability, CSR, ethics, human
rights, environmentalism and community
consent

21. Entrepreneur
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In March 2016 alone, 69 social conflicts
tracked in the dataset had quantifiable
total costs of US$9.3 billion.
In April 2016, 75 conflicts tracked had
quantifiable total costs of US$5.5 billion.
Operating with integrity is not a luxury to aspire to, but a financial imperative:

22. Entrepreneur
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Large-scale mining project suffers
approximately $20 million per week
in losses resulting from delay.
Investors are willing to pay significantly more
when it is unlikely that a mine will encounter
development obstacles due to lack of
stakeholder cooperation or uncertain political
support
Henisz, et al., Spinning gold: The
financial returns to stakeholder
engagement, Strategic Management
Journal (2013)
Davis, Rachel and Daniel M. Franks,
Costs of Company-Community Conflict in
the Extractive Sector, Corporate
Social Responsibility Initiative,
Report No. 66. Cambridge, MA:
Harvard Kennedy School

23. Entrepreneur
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After every strategy
meeting, Kevin Planks
of Under Armour asks
that his employees
answer 3 simple
questions:
CONCLUSION
What did I hear?
What do I think?
What am I going to do?

24. THANK YOU