Table Of Content

Environmental Social Governance Environmental Social Governance Managing Risk and Expectations Karlheinz Spitz, John Trudinger, and Matthew Orr Book layout and design: Diky Halim & Wynne Taletha (www.did-design.com) Cover photo: GermanL/Shutterstock First published 2022 by CRC Press/Balkema Schipholweg 107C, 2316 XC Leiden, The Netherlands e-mail: [email protected] www.routledge.com – www.taylorandfrancis.com CRC Press/Balkema is an imprint of the Taylor & Francis Group, an informa business © 2022 Karlheinz Spitz, John Trudinger, and Matthew Orr The right of Karlheinz Spitz, John Trudinger, and Matthew Orr to be identified as authors of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Although all care is taken to ensure integrity and the quality of this publication and the information herein, no responsibility is assumed by the publishers nor the author for any damage to the property or persons as a result of operation or use of this publication and/or the information contained herein. Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-68055-8 (hbk) ISBN: 978-0-367-68056-5 (pbk) ISBN: 978-1-003-13400-8 (ebk) DOI: 10.1201/9781003134008 Typeset in Times New Roman by codeMantra Contents Foreword xi About the authors xv Acknowledgements xvii 01 Environmental and social aspects of governance in a changing environment: the Board’s role 1 ESG considerations no longer “Nice to Have” but a must 3 ESG enters the boardroom 4 Boards that adapt will prosper 6 Board composition 7 The coming impact of ESG on strategy 8 Directors’ dilemma: ESG obligations or overkill in the boardroom 9 Looking ahead: identifying key trends in ESG 11 02 Yes, sustainability can be a strategy 15 Concept of sustainable development 15 Profit, People, and Planet 17 What makes our business sustainable? 18 Sustainability: cost that pays for itself 22 Role of Government regulation and leadership in increasing sustainability 22 Sustainability and its connotations 24 Green accounting and sustainability performance reporting 29 Shaping a more sustainable future for our companies 32 vi Contents 03 How do ESG values change Company culture? 35 Values, principles, and policies 37 Mission Statements 38 Codes of Conduct 39 Cultural awareness 40 Grievance management 42 Job descriptions 43 Use of expatriates 43 Your environmental team 44 Organisation and reporting relationships 45 Use of consultants 47 Embedding ESG values in the Company 48 04 ESG factors in project finance and M&A transactions 51 Pros and cons of international project finance 52 Working with equator principles financial institutions 54 Importance of risk management in our business 56 Project screening and categorisation 56 Role of lenders’ environmental and social consultants in environmental and social due diligence 58 Equator principles as example of private code of conduct 59 Covenants in financial agreements 60 The bigger picture 61 Key takeaways 63 05 Environmental and social planning and management: what’s measured improves 65 Key elements of proactive environmental and social management 67 Environmental and social business aspects 69 Proactive management means prevention 69 Plan for the unexpected 72 Documentation 73 Environmental and social management as continuous interlinked effort 74 Contents vii Need for adaptive environmental and social management 74 Environmental and social management as bureaucratic approach to sustainability 75 06 Safety governance inside the boardroom 77 Directors and prison 77 Safety and environment 79 How mature is safety governance at your Company? 81 Policeman or doctor 82 Safety and systems 84 Preventing fatalities 85 The problem with LTIFR 86 The safety pyramid fallacy 86 Fatality prevention models 87 Golden rules 91 Work stress and corporate response 94 What you can do as a Board member 96 07 Impacts of development on communities: sharing benefits 99 Social impact assessment 100 Gender considerations 102 Indigenous peoples 103 Community concerns 105 Community aspirations and expectations 106 Conflicts 107 Community development 108 Selecting the social team 110 08 Access to land as a human rights issue 113 Land and human rights 114 Resettlement principles 115 Minimising need for resettlement 116 Attention to livelihood restoration 116 Managing resettlement 117 Allocating resettlement budget 119 Involvement of communities in land acquisition and r esettlement 120 viii Contents Cut-off date 120 Willing buyer/willing seller 121 Host communities 121 Land management solutions 122 Questions to ask 122 09 Water resources in the future: problems and solutions 125 Water scarcity 125 Water resource planning requires baseline data 127 Saving water 127 Smart water management 129 Protecting water 130 Standards and regulations 132 Offsets 134 Emerging contaminants 134 Source, save, and protect 135 10 Industry and biodiversity 139 Critical habitats and biodiversity impacts 142 Mitigation hierarchy to avoid and minimise biodiversity loss 145 Biodiversity offsets to achieve no net loss 147 Additional Conservation Actions 148 Alien invasive species 149 Biotechnology and genetic resources 152 11 Enterprise risk management: putting ESG risks into a business context 155 Political risk 159 Risk events 162 Risk scenarios 165 Scenario A – Cyanide Truck Collision 165 Scenario B – Sulphuric Acid Truck Collision 165 Risk assessment 166 Risk acceptability 169 Uses and limitations of risk scores 172 Role of Board in risk management 174 Contents ix 12 Environmental liabilities: risks beyond the balance sheet 177 Tailoring scope of environmental due diligence 179 Evaluating regulatory compliance in acquiring ongoing operations 179 What lies beneath – on-site contamination 180 Offsite contamination on former sites 182 Offsite disposal of hazardous wastes 182 In-migrating contamination 183 Building materials and indoor air quality 183 Emerging issues in environmental due diligence 186 Allocating environmental risks in transaction agreements 187 Environmental insurance policies 188 Environmental risks/liabilities reporting requirements – damned if do and damned if don’t 188 End of lease/tenement clean-up 189 13 Strategies for climate change risk management: stemming the tide 191 Climate change risks to industry sectors 192 Climate change opportunities for industry sectors 194 Energy and GHG emissions management 195 Climate variability in future 196 Climate change risks to operations 197 Company impacts on host communities and climate change 199 How companies commit to climate-proofing 200 14 Crisis management: don’t wait for a crisis to come up with a crisis plan 203 Crisis versus normal operations 204 Crisis management models 206 Scenario-based versus capacity-based model 206 Proactive versus reactive crisis management model 207 Issue and crisis management relational model 208 Incident command system model 208 Crisis management cycle 209