SUSTAINABILITY REPORTING by NOKE KIROYAN

Special Session by SKK MIGAS INDONESIAN PETROLEUM ASSOCIATION 39TH CONVENTION

Jakarta, May 21, 2015

SUSTAINABLE DEVELOPMENT: THE THREE PILLARS

Economic Growth

Environ-mental

Protection

Social Progress

Sustainable Development

“The Future of Sustainability: Re-thinking Environment and Development in the Twenty-first Century”, IUCN, 2006

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SUSTAINABILITY REPORTING

GLOBAL REPORTING INITIATIVE (GRI) • currently the most comprehensive and influential • de facto standard for Sustainability Reporting • its principles displays profound stakeholder orientation

INCLUSIVITY calls for the organization to

identify its stakeholders and explain how it has responded

to their needs

RELEVANCE AND MATERIALITY

requires coverage in the report of issues and indicators

that would substantively influence the decisions of

stakeholders

COMPLETENESS entails providing information

sufficient to enable stakeholders to assess

economic, environmental and social performance in the

reported period

“The Oxford Handbook of Corporate Social Responsibility”, Andrew Crane et al, 2008

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Pre – 1950 • Personal philanthropy of wealthy business tycoons

1950s • Frank Abrams (Standard Oil of New Jersey): “Management’s Responsibility in a Complex World” (HBR 1951) • Howard R. Bowen:” Social Responsibilities of the Businessman” (1953)

1970s • Morrell Heald: “The Social Responsibility of Business: Company and Community, 1900 – 1960” (1970) • Archie B. Carroll:”The Four-Part Model of Corporate Social Responsibility” (1979)

1984 • R. Edward Freeman: “Strategic Management: A Stakeholder Approach “

1987 • Brundtland Commission: Definition of Sustainable Development

1992 • Earth Summit in Rio de Janeiro

1997/1998 • John Elkington: Triple Bottom Line • Global Reporting Initiative (GRI) established by Ceres and UNEP

1999/2000 • The Global Compact and Millennium Development Goals/GRI Guidelines (G1)

Early 2000s • Ethical conduct of business (post-Enron, Tyco etc.)

2005 onward • Mainstreaming and convergence of various concepts on CSR

2010 • ISO 26000: Guidance on social responsibility launched

2013 • GRI G4 launched

EVOLUTION OF THE CSR CONCEPT

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A study in 2008 concluded that definitions on CSR are many, but most would include

the following 5 overarching topics:

Environmental Dimension

Social Dimension

Economic Dimension

Stakeholder Dimension

Voluntariness Dimension

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“Corporate Responsibility: The American Experience”, Archie B. Carroll et al, 2012

SOCIAL RESPONSIBILITY IN ISO 26000 Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that

• contributes to sustainable development, health and the welfare of society;

• takes into account the expectations of stakeholders;

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

• is integrated throughout the organization and practiced in its relationships.

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Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010

THE UN GLOBAL COMPACT HUMAN RIGHTS

1. Support and respect protection of human rights

2. Avoid being complicit in human rights abuses

LABOR STANDARDS

3. Freedom of association and recognition of collective bargaining

4. Elimination of forced and compulsory labor

5. Abolition of child labor

6. Elimination of discrimination in employment and occupation

ENVIRONMENT

7. Support a precautionary approach to environment

8. Promote greater environmental responsibility

9. Encourage environmentally friendly technologies

ANTI-CORRUPTION

10. Work against all forms of corruption, including extortion and bribery

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United Nations, 1999/2000

SCHEMATIC OVERVIEW OF ISO 26000

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Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010

Annex: Examples of voluntary initiatives and tools for social responsibility

Su

stainab

le develo

pm

ent

Recognizing social responsibility Stakeholder identification and engagement

Organizational governance

Related actions and expectations

Human rights

Labor practices

The Environ-ment

Fair operating practices

Consumer issues

Community involvement/devel

opment

Practices for integrating social responsibility

throughout an organization

The relationship of an organization’s

characteristics to SR

Understanding the social responsibility of the

organization

Reviewing and improving an organization’s actions and practices

related to SR

Enhancing credibility regarding SR

Voluntary initiatives for social responsibility

Communication on social responsibility

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

Definition Clause 2 Terms, abbreviations and abbrev. Terms

Understanding Social Clause 3 Responsibility History & Characteristics; relationship between SR and Sustainable Development Principles of Social Clause 4 Responsibility • Accountability • Transparency • Ethical Behavior • Respect for stakeholder

interests • Respect for rule of law • Respect for international

norms of behavior • Respect for human rights

Two fundamental practices of social responsibility

Social resp. core subjects

Integrating social responsibility throughout an organization

Clause 5

Clause 6

Clause 7

Bibliography: Authoritative sources and additional guidance

SOCIAL LICENSE TO OPERATE

Good corporate community relations, stakeholder engagement and consultation and efforts to meet particular community demands are means by which

companies seek to improve reputation among those with the ability to impact operations, and thereby obtain a social

license to operate

Many companies recognize that their social obligations are no longer

discharged simply by meeting legal duties

Government mandates remain necessary, but alone are insufficient basis

for corporate legitimacy – they need to earn and maintain a social license to

operate

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

NON-TECHNICAL RISK DOMINANT

Stakeholder acceptance is

key to successful

project delivery

73 % of delays to

capital projects relate

to ‘non-technical’ risk

– delays in permitting and

community protests

Highly networked

society with instant access to information

and news means that local action can result in

global attention

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

THE GRI-G4 DEVELOPMENT

WHY GRI-G4?

• It focuses on what matters, thus is more user friendly for beginners and experienced reporters

• It improves technical quality with clearer definition through reporting boundaries

• It leads reports to cover material topics with two options for reporting mechanisms: core and comprehensive

• It aligns with other international reporting standards

All Sustainability Reports referring to GRI Implementation Manuals published after December 31, 2015 must use the G4 to be acknowledged by GRI

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GRI-G1 (2000)

GRI-G2 (2002)

GRI-G3 (2006)

GRI-G3.1 (2010)

GRI-G4 (2012/13)

From G3/G3.1 to G4: WHY THE CHANGE?

• Bulky reports, unnecessary burden to reporters

• Most contents are deemed irrelevant to stakeholders

• The need to harmonize: other standards, integrated reporting

• Aims to encourage reporting organizations to:

Provide critical information for stakeholders and the business Concentrate on sustainability impacts that matter

More strategic, more focused, more credible

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IMPLEMENTING GRI-G4 AT RESOURCE COMPANY

Step 1: Preparation • Scoping Study • Kick-off meeting,

define objectives, and establish Sustainability Reporting Team

Step 2: Initial Review • Identify

sustainability topics • Gather stakeholder

inputs

Step 3: Definition Phase • Analyze key topics

and recommend aspects to report

• Workshop with top management to define material aspects to report

Step 4: Collection Phase • Select indicators to

report and gather data

• Interviews with management on DMA

• Gather relevant policies, commitments, strategies related to DMA

Step 5 Reporting Phase • Define report theme

and design • Write-up and data

processing • Reviewing process • Producing the report

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Internal consolidation

Stakeholder consultation

Internal workshop among relevant department and top management

Data processing, coordination with

relevant departments

Internal and external

consultation and review

Sustainability Report prepared by Kiroyan Partners for a precious metals mining company in Indonesia in 2015

STAKEHOLDER THEORY

Any group or individual who can affect or is affected by the achievement of the organization objectives

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

THE ROLE OF STAKEHOLDERS IN SOCIAL RESPONSIBILITY

Identification of and engagement with stakeholders are

fundamental to social responsibility

An organizations should determine who has an

interest in its decisions and activities, so that it can

understand its impacts and identify how to address them

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Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010

ELEMENTS OF STAKEHOLDER MANAGEMENT

STAKEHOLDER IDENTIFICATION

Who are our stakeholders?

STAKEHOLDER ANALYSIS

What are their stakes?

What opportunities and challenges are presented

by our stakeholders?

STAKEHOLDER ENGAGEMENT

What corporate social responsibilities do we

have to our stakeholders?

What strategies, actions, or decisions should we take to best deal with these responsibilities?

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“The Pyramid of Corporate Social Responsibility – Toward the Moral Management of Organizational Stakeholders”, Carroll, A. B., Business Horizons No. 34, 1991

STAKEHOLDER IDENTIFICATION 1. To whom does the organization have legal obligations?

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

3. Who manifested concern about the issues or impacts?

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

5. Who can help the organization address specific impacts?

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

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

8. Who in the value chain is affected?

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

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

11. Who may impact on the value of the organization?

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Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010

STAKEHOLDER ENGAGEMENT

Stakeholder engagement

involves dialogue between the

organization and one or more of its

stakeholders

Stakeholder engagement can take many forms – it can begin as a

response by an organization to

one or more stakeholders and can take place in

informal or formal settings

Stakeholder engagement

should be interactive and is

intended to provide

opportunities for stakeholders’

views to be heard – its essential

feature is that it involves two-way communication

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Adapted from “ISO 26000: Guidance on Social Responsibility”, International Organization for Standardization, 2010

IN CONCLUSION …

Identify stakeholders

using ISO 26000 as guidance

Prepare CSR Programs based

on ISO 26000

Report on CSR implementation

using GRI G4

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THANK YOU