Monthly Archives: February 2015

Commentary: The risks that arise from violating CSR norms

By: Mark N. Sills and Jennifer L. Egsgard, Special to The Northern Miner
2015-02-26

Evolving norms of corporate social responsibility (CSR) reflect changing expectations for corporate behaviour, often exceeding the requirements of applicable laws. Companies that violate these expectations could now face serious repercussions, ranging from loss of reputation and market share to risk of litigation.

While CSR once referred primarily to a corporation’s voluntary philanthropic efforts, today the term refers more broadly to the various impacts a company’s operations may have on its stakeholders in the economic, social and environmental spheres, as well as their relationships in the workplace, the marketplace, the supply chain, the community and the public policy realm.

By way of example: CSR spending by a mining company in the past may have involved building a school for a community near a mine site, but would not necessarily have considered the impacts of the actual mining operations on the larger community.

Increasingly however, a comprehensive approach to CSR will take into account all the impacts that the mining operation may have on the community from an environmental, social and financial point of view, and would seek to address negative impacts to the extent possible.

CSR standards are derived from a number of sources, many of which are becoming increasingly uniform, including international treaties, voluntary principles, national legislation, and private contractual requirements and practices. The standards may be general, industry, geographically or issue-specific. Underlying many of them are the concepts established in the UN Guiding Principles on Business and Human Rights (“Guiding Principles”), which are a focus of this article and available at www.ohchr.org. It is important, however, that companies be aware of the many other standards relevant to their operations.

The Guiding Principles were endorsed by the UN Human Rights Council in 2011. The core principle is that businesses have a responsibility to respect all international recognized human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts which may arise out of their operations.

To accomplish this, the Guiding Principles provide that companies should have: policy commitments to respect human rights; human rights due diligence processes to identify, prevent and mitigate adverse human rights impacts; and processes to remediate adverse human rights impacts caused or contributed to by the company.

The Guiding Principles have been widely endorsed, indicating a growing consensus on expectations for corporate behaviour. They have been incorporated into the International Finance Corporation’s (IFC) sustainability framework, the new social responsibility standard adopted by the International Organization for Standardization, ISO 26000 and the OECD Guidelines for Multinational Enterprises. Many governments have indicated their support for the Guiding Principles, including those of Canada, the U.S. and the U.K., plus the Council of Europe. Industry associations such as the Prospectors & Developers Association of Canada and the International Council on Mining and Metals also have expressed support.

Overall, the Guiding Principles have significantly impacted CSR considerations. While they are not themselves binding, their content incorporates certain inherently legal principles of rights and duties, and therefore potentially introduces new legal risks for companies with transnational operations.

The last several years have seen an increase in national legislation in various jurisdictions aimed at encouraging business to act in a socially responsible manner, particularly when operating in countries with a weak or non-existent tradition of the rule of law. It is important to be aware of these laws as non-compliance with these obligations can have serious consequences.

For instance, foreign anti-bribery and corruption laws have proliferated in many jurisdictions, with massive penalties and incarceration possible upon conviction. There are numerous other examples. In the U.S., the so-called conflict mineral laws require companies to conduct extensive due diligence on their supply chains to determine whether certain minerals in their products were sourced from conflict-ridden areas of the Democratic Republic of the Congo or surrounding countries, and to publicly report on the results. The EU has proposed a similar law.

In California, companies of a certain size are required to publish audits respecting ethical supply chain practices, and similar U.S. federal legislation has also been introduced. The U.S. has also required that U.S. companies investing more than $500,000 in Myanmar report publicly on their human rights policies and procedures.

Risks of ignoring CSR standards

Many CSR standards, such as the Guiding Principles, are non-binding in a strictly legal sense yet awareness of them may still be important to a company’s bottom line. Risks of non-compliance include:

Reputational damage — Violation of CSR principles, including by third parties in the supply chain, can result in serious reputational damage and financial harm. Decreased market share can result from consumer boycotts when rights abuses become public, particularly in clothing and consumer goods. An example is the negative publicity for clothing retailers in the wake of the Bangladesh Rana Plaza factory collapse. Loss of reputation with stakeholders can lead to future difficulties in doing business with impacted groups such as employees, shareholders, joint-venture partners and local communities, with adverse consequences for a company’s bottom line.

Loss of business opportunities — Many large corporations are increasingly implementing supplier codes of conduct based on CSR principles, meaning that companies without adequate CSR systems may be disqualified from significant contracts. Wal-Mart, for instance, recently terminated one of its major seafood suppliers after reports of poor working conditions at processing facilities. Similarly, many governments, such as the U.S. government, require proof of adherence to certain CSR standards to be submitted when companies submit bids on government procurement contracts.

Security risks/social unrest from failing to earn social licence — Failing to ensure proper CSR systems are in place can lead to conflict with populations living in the vicinity of a company’s foreign operations. Aside from legal risks and actual harm resulting from these types of conflicts, protests and labour strikes can be extremely expensive. For instance, in Peru a recent suspension of work at Newmont Mining’s Conga gold mega-project stemming from local resident protests about mine-related water pollution led to estimated losses of $2.1 million per day. Ensuring better relationships with local populations through human rights due diligence and monitoring can help prevent these types of disruptions and ensure that the company’s “social licence” to operate in a particular jurisdiction remains intact.

Proof of CSR compliance required for financing — Businesses are increasingly confronted with demands from banks and institutional investors to demonstrate respect for human rights in all aspects of their business activities. These requests frequently occur pursuant to the revision of the International Finance Corp. (IFC)’s sustainability framework to reflect the Guiding Principles, compliance with which is a condition of IFC financing. Similar compliance requirements exist for many export credit agencies, and the 70-odd private sector banks that subscribe to the Equator Principles. As a result, compliance with the Guiding Principles is already a de facto prerequisite for doing business in many countries.

Loss of right to investor actions — Another potential risk of failing to ensure compliance with corporate social responsibility principles is the possible loss in certain circumstances of a company’s rights to investor-state dispute settlement procedures before international arbitral tribunals. These dispute mechanisms are often a company’s primary recourse in the event of expropriation or other investment interference by a foreign government.

Litigation — Companies that have not adequately addressed CSR concerns may face litigation risk. In the past, companies have relied on arguments relating to jurisdiction and corporate structure to protect themselves from liability for harm allegedly caused by foreign subsidiaries in their foreign operations. However, recent decisions by courts in a number of jurisdictions including Canada, the U.S. and the U.K. suggest that these arguments may be weakening.

Most recently in Canada, a court found that there may be a new duty of care owed by a Canadian mining company to plaintiffs that were allegedly harmed by security personnel hired by a foreign subsidiary, such that the Canadian company might be liable to pay damages (Choc v. Hudbay Minerals). Two cases against mining companies have since been filed using similar arguments (Adolfo Garcia v. Tahoe Resources Inc., concerning a claim against a Canadian parent company for mining activities conducted through a foreign subsidiary in Guatemala; and Araya v. Nevsun Resources Ltd., concerning allegations of slave labour used by the Canadian company in its Eritrea operations.)

In another case, Yaiguaje v. Chevron Corporation, the Ontario Court of Appeal also indicated interest in looking beyond corporate structures to consider using a Canadian company’s assets to satisfy an Ecuadorean judgment against a related company.

The Chevron case is being appealed to the Supreme Court of Canada, and the former cases have yet to reach trial, so the law is still unclear. Nevertheless it is significant that courts in a number of common-law jurisdictions appear newly willing to entertain parent company responsibility for actions of related companies overseas.

Risk management and compliance

The emergence of legal risk described above means that CSR strategies can no longer be confined to public relations initiatives or philanthropic endeavours. Rather, prudent practice for corporate counsel would be to develop corporate CSR programs in accordance with emerging legal norms, in order to protect companies from new forms of legal and other risks.

Policy statements — The Guiding Principles provide that companies should establish policy commitments to respect human rights, setting out human rights expectations of employees, business partners and other parties linked to its operations, products or services. More detailed internal policies should deal with issues such as lines of accountability, procedures for raising concerns, monitoring human rights impacts and relationships with third parties. All CSR policies should be integrated into already existing policies the company may have in place.

Due diligence — The Guiding Principles require that companies carry out human rights due diligence in order to identify, prevent, mitigate and account for how they address their adverse human rights impacts. The process should include a review of company operations to assess actual and potential human rights impacts caused, or contributed to by the company through its own operations or business relationships, drawing on human rights expertise and consultations with affected groups. Companies should prioritize areas where the risk of adverse human rights impacts is most significant, and be aware of issues of complicity with or contribution to a harm that may be carried out by an agent or third party, such as a supplier, joint-venture partner or agent. The due diligence process can be incorporated within other risk-assessment processes, for instance environmental and social impact assessments. Where a company finds that it causes or may cause an adverse impact, it should take steps to cease or prevent it, and should exercise leverage to prevent third parties from causing or contributing to abuses.

Remediation — Lastly, the Guiding Principles require businesses to cooperate in legitimate processes, to remedy human rights grievances that they have caused or to which they have contributed. Practically speaking, appropriate measures will vary in each situation.

Legal counsel

The role of legal counsel in developing and implementing a CSR strategy is critical to help understand the definition and scope of possible affected rights, as well as in assessing the causal relationship between the company’s operations and adverse human rights impacts.

The process of defining affected rights is inherently a legal one, and involves the application of specific definitions of rights affected under national and international law, as well as their interpretation through commentary of UN committees, international court cases, and domestic commentary and court decisions. Similarly, familiarity with legal concepts of causation and can be brought to bear by counsel on analysis of human rights impacts of corporate behaviour.

Lawyers can also assist in drafting contracts designed to avert or mitigate any risk to human rights resulting from third parties. For instance, when contracting with a government, a corporation can seek to add identification of human rights risks and management of those risks into investment project contract negotiations. Contracts with employees, third parties and agents can also establish standards of behaviour and allow for termination of the contract by the client, as well as other remedies if such standards are not met.

Finally, and of significant importance, is the fact that information turned up in the due diligence process may be sensitive or highly confidential. The involvement of legal counsel at this stage can allow for protection of the information by virtue of legal privilege.

In conclusion, the new CSR landscape and related emerging legal liability requires an awareness of multiple domestic and international standards in all jurisdictions in which a company is operating.

The considerations are complex, but a comprehensive approach to CSR issues — including anti-bribery and human rights issues — provides companies with an opportunity to take a more measured approach to CSR spending.

It will also help better assess risks and prevent human rights abuses, and improve relationships with a broad range of affected stakeholders, thereby adding shareholder value.

Mark N. Sills and Jennifer L. Egsgard are partners in Sills Egsgard LLP, a Toronto law firm specializing in international trade and investment and related regulatory compliance issues. Visit www.lexmercantile.com for more information, including additional footnotes to this article.

SOURCE: http://www.northernminer.com/news/commentary-the-risks-that-arise-from-violating-csr-norms/1003496172/?&er=NA

India: Chhattisgarh coal mine should not be expanded without genuine consultation

19 February 2015, 03:38PM

A public hearing held on 11th February 2015 in Korba, Chhattisgarh on the nearly four-fold expansion of the Kusmunda coal mine operated by South Eastern Coalfields (SECL) failed to meaningfully consult adivasi and other vulnerable communities who would be affected by the mine’s expansion, Amnesty International India said.

“The public hearing was conducted at an SECL stadium far from many villages that would be affected by the proposed expansion, which led to several people not attending,” said Aruna Chandrasekhar, Business and Human Rights Researcher at Amnesty International India, who was present at the public hearing. “Local communities did not receive adequate information on the project’s potential impacts, undermining their rights to participation and consultation under international law.”

SECL is a subsidiary of the state-owned Coal India Limited, one of the world’s largest coal mining companies. In December 2014, the Ministry of Environment, Forests and Climate Change (MoEF) gave SECL permission to expand production at its open-cast coal mine in Kusmunda from 18.75 mtpa (million tonnes per annum) to 62.5 mtpa. The expansion is expected to lead to the displacement of 9250 families in 17 villages and affect another 5475 families.

The public hearing was held as part of the project’s environmental clearance process, as required under Indian environmental law, and was intended for authorities to consult local people and address their concerns.

According to the Environment Impact Notification, 2009 issued by the MoEF – which prescribes the procedure for conduct of public hearings – hearings must either be held at project sites or in their close proximity. However the public hearing on 11 February was conducted inside an SECL-owned sports stadium in Kusmunda, located between 5 and 12 kilometres away from many of the 17 affected villages. Authorities did not heed requests from residents of Khodri, Pali, Khairbawna and Amgaon villages for a change in venue to facilitate access for communities and open expression of opinions. A large number of security force personnel were present at the hearing, which locals and activists told Amnesty International had an intimidatory effect.

The hearing was conducted on the same day that recently-elected local village representatives from the region were being sworn into office. Kamlabai, a local government official from Pali village, told Amnesty International India, “Why did the district authorities choose to conduct the hearing on a day that village representatives were being sworn in? Many from my village, including me, were not able to participate in the hearing because of this.”

Limited information was made available to communities about the impact of the project ahead of the hearing, and much of what was provided was not accessible. The Environmental Impact Assessment Report, which contains much technical information, was made available only in English, with a summary in Hindi.

Brajesh Shrivas, a local activist, said, “You write your impact assessments in English and a technical language, only sharing with us brief summaries in Hindi. How do you expect people to understand anything?”

Laxmi Chauhan, a local environmental activist, said, “The EIA report prepared provides no information regarding the rehabilitation and resettlement of families living in Khodri, Churail, Khairbhawna or Amgaon, despite being clearly asked to do so by the MoEF.”

The EIA report also did not mention details about the indigenous communities who could be affected by the expansion, and contained insufficient details on impacts on health, data on health monitoring, and how damage from past evictions, pollution and poor waste management would be remediated.

At the hearing, discussion on the impacts of the project was limited to a few minutes. Authorities did not clarify whether affected communities would be eligible for compensation and rehabilitation under the Right to Fair Compensation and Transparency in Land Acquisition Act, 2013, which a recent central government ordinance made applicable to cases of land acquired for coal mining by the state.

Mahesh Mahant, a resident of Khodri village, told Amnesty International India, “We’ve lived next to this mine for almost 30 years, and watched our wells go dry, forests disappear and fields become unproductive. What is the point of this environmental public hearing, except to tell us that we’re not fit to live here anymore?”

“Authorities have a duty to ensure that people’s concerns on pollution and rehabilitation are addressed, and carry out a full assessment of the project’s human rights impact in genuine consultation with affected communities, before approving the mine expansion,” said Aruna Chandrasekhar.

Background Information

On 19 February 2014, SECL received an environmental clearance for expanding its mine’s production capacity from 15 million tonnes to 18.75 mtpa. India’s Ministry of Environment and Forests exempted the project from conducting an environmental public hearing to inform and consult communities on the impacts of the expansion. On 1 December 2014, the Ministry again cleared the expansion of the mine’s production capacity from 18.75 mtpa to 62.5 mtpa.

The last public hearing for the project was conducted in 2008, regarding the expansion of the mine’s capacity from 10 to 15 MTPA. Local residents, activists and lawyers say the issues raised during this public hearing have still not been adequately addressed.

The Korba district is protected under the Indian Constitution as a ‘scheduled area’, where Adivasi communities have special customary rights over land. Under the Panchayats (Extension to the Scheduled Areas) Act, communities in these areas have the right to be consulted before acquisition of any land or resettlement of people for development projects. To date, state authorities have not conducted such consultations with affected communities. A single meeting of the Rehabilitation and Peripheral Development Advisory Committee in December 2010 did not involve village-level representatives or affected communities.

SECL’s plans to expand the 2,382-hectare Kusmunda mine involves the acquisition of an additional 1,127 hectares of land. The project involves a total of 372 hectares of forest land. However, community consent for diversion of this forest land for non-forest purposes, as mandated by India’s Forest Rights Act, has not yet been obtained.

In 2009, India’s Central Pollution Control Board (CPCB) ranked Korba as India’s fifth most critically polluted industrial cluster. The CPCB’s assessment reports, and a subsequent pollution abatement plan developed in 2011, stated that dust from the transportation of coal from SECL’s mines is a major contributor to air pollution and laid out steps for SECL to take by end-2011, including proper reclamation of existing mine sites. It is still unclear whether this has been achieved.

India is obligated under international law to ensure that both the Chhattisgarh state authorities and the central government take all necessary measures to safeguard people from human rights abuses, including by third parties such as companies. This requires enforcing laws against pollution and preventing the contamination of water, air or soil.

All pics: Aruna Chandrasekhar / Amnesty International India

SOURCE: http://www.amnesty.org.in/show/news/chhattisgarh-coal-mine-should-not-be-expanded-without-genuine-consultation/

Kyrgyzstan: Dam Spill Threats at a Gold Mine in Kyrgyzstan

Posted by on Feb 17, 2015

In light of the Mount Polley tailings dam spill in British Columbia, Canada, environmental activists in Kyrgyzstan are ringing alarm bells over a possible scenario of a similar outburst at Petrov Lake near the Kumtor gold mine project. At Mount Polley, the tailings dam at a copper and gold mine burst in August last year, spilling 25 million cubic meters of toxic waste into nearby lakes. The British Columbia provincial government appointed a commission to probe into the disaster. The commission has concluded that a “dominant factor in the breach of the Mount Polley tailings dam was a failure in the dam’s foundation”. All the while in Kyrgyzstan, the main concern has been and still is the Kumtor project’s chemical waste tailings pond, managed by Centerra Gold. Coincidentally, the very same engineering firm of record for the Mount Polley dam, AMEC, was hired to investigate the Centerra Gold’s environmental record at Kumtor mine in 2013.

Kumtor mine

The most worrisome issue at Kumtor has been evolving with the stability of the glacial Petrov Lake, which is situated in direct proximity (7 km) above the tailings pond. The northwestern perimeter of Petrov Lake, where the dam is the narrowest, has become a major cause for concern in the Kyrgyz environmentalist community. The length of this particular section is approximately 30 meters. A Petrov Lake outburst could be expected to wash away the Kumtor tailings. where 60 million tons of cyanide liquid waste has been collected and stored so far. Just as in the case with the design of the Mount Polley dam, Kumtor tailings pond’s flawed feasibility has led to the instability of the dam and to seepage of toxic substances into the groundwater. The first report of the movement of the Kumtor tailings dam was recorded in 1999. And it was found that in the initial stages of the construction, the active layer of relatively unstable alluvial deposits had not been removed from the base of the tailings pond. That has made the remaining loamy interlayers (at depths of 4 to 6 meters) alsovulnerable to instability. The Prague-based group CEE Bankwatch has indicated that “in spite of measures to stabilize the dam in 2003 and 2006 (so-called shear keys and toe berm), the dam is still continuing to move.”

As this statement suggest, the company’s plans have not solved the issue of the tailings dam stability. An underlying issue is that the plans to store and manage the tailings from Kumtor did not include a hydrogeological study of the chosen location. The storage pond was built on the riverbed of the Arabel creek. It was later discovered that an old bed aquifer remained at a depth of 6.85 meters.  This active bottom (underflow) is contributing to the instability of the tailings dam. Dr. Robert Moran, a hydro-geologist who visited the Kumtor mine in 2012,  said that the tailings dam instability was “enhanced by the relatively high temperatures of the tailings when they come from the process plant (a highly contaminated mix of about 50% solids, 50% liquids), which would increase permafrost melting [in this high-elevation location]. Such deformation and movement of the tailings structure, combined with the partial melting of the permafrost raises concerns about a catastrophic failure of the tailings impoundment — especially if a severe earthquake were to occur [in this seismically-active region].”

Expansion of tailings pond from 1977 to 2014 (source: William CoOlgan)

Dr. William T. Colgan, a researcher with Geological Survey of Denmark and Greenland, believes that Petrov Lake presents an “additional geotechnical hazard confronting the Kumtor tailings pond”. According to Colgan’s analysis, “glacial moraine and till is often a poorly consolidated material, outburst floods from proglacial lakes due to berm breaches present a non-trivial hazard. Petrov Lake is one of approximately fifteen proglacial lakes in Kyrgyzstan for which the moraine dam has been classified as ‘at risk of rupture’ by previous researchers. The stability of the lake is important for the stability of the Kumtor tailings pond, as an outburst flood could result in failure by over topping of the downstream Kumtor tailings pond. The lake has grown in size from an area of 1.8 to 3.4 km² between 1977 and 2014. In 1957 it was just 0.96 km2 in area. This growth is due to climate change, which has enhanced both the retreat and melt of Petrov Glacier. This multi-decadal growth indicates that the volume of Petrov Lake is not in steady-state (whereby lake inflow is balanced by lake outflow), and thus the forces being exerted on moraine and till berms are likely changing over time.”

Kumtor tailings pond (source: Flickr/anonymous)

The threat of the environmental disaster over Kumtor tailings pond was highlighted at the United States House of Representatives Committee on Foreign Affairs Subcommittee hearing by Dr. Amanda Wooden (Associate Professor of Environmental Politics & Policy, Bucknell University) in November 2014. Wooden’s testimony has indicated that the “changes in the permafrost underneath this extensive tailing pit at the headwaters to the Naryn River and breach threats to Petrov Lake above the tailing pond are concerns that should be monitored”. Moran believes that in the scenario with Kumtor tailings dam failure, it would rapidly release “masses of contaminated water and sediments (the tailings) into the Kumtor river, endangering downstream people, facilities, downstream rivers, and would likely kill much of the mountain trout population and other aquatic organisms. Such a collapse could negatively-impact waters throughout much of the Naryn River basin, which flows into Uzbekistan.”

In sum, the tailings pond at Petrov Lake, with large quantities of toxic substances in an unstable glacial environment, represents a serious threat to the ecosystems and human populations in two countries. The efforts of environmental activists may serve to bring this serious risk to attention within these countries and beyond, pressing for tighter and more effective regulations.

For other stories on mining risks in glacier regions, look here and here.

Author information:

Dinara Kutmanova: PhD in Environmental Law from Kyrgyz State Law Academy; leading environmental expert and member of the Kyrgyz State Commission probe into Kumtor mine operations in 2012-2013: co-chairman of the Green Party of the Kyrgyz Republic.
 
Ryskeldi Satke: contributing writer with research institutions and news organizations in Central Asia, Turkey and the U.S. Contact e-mail address: rsatke at gmail dot com

SOURCE: http://glacierhub.org/2015/02/17/a-risk-of-a-dam-spill-threatens-a-large-gold-mine-in-the-mountains-of-kyrgyzstan/