SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass, Acorn International Soledad Milius, Equitable Origin Joanne Howard, Spectra Energy Colby Hafner, Upstream Risk Consultants, LLC

Introduction Slide 2 of 15 SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass

The Paper SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Aims to provide practical insights and recommendations on how to improve social performance integration by drawing comparisons with health, safety and environment (HSE) performance management Explores (i) risk-based approaches and (ii) cultural transformation as means for improved social performance integration and management Slide 3 of 15

Definition SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Social performance management is: the systematic identification, assessment and management of social (including human rights) risks and impacts, stakeholder engagement and community investment opportunities along with assigned roles and responsibilities, performance indicators and ongoing monitoring and review. Slide 4 of 15

Background on HSE Integration and Management and Comparisons with Social Performance Slide 5 of 15 SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass

HSE Risk-Based Approaches SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Costly HSE incidents led to Industry adopting HSE risk-based approaches Regulators establishing HSE requirements Slide 6 of 15

SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass HSE and Social Incidents and Milestones Slide 7 of 15

HSE Culture SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Hearts and Minds Concept explains how companies can better integrate HSE into company culture – through the culture ladder – and provides tools for facilitating behavioral change. Note: the diagram is a re-creation of the International Association of Oil and Gas Producers’ (OGP) adaptation of the Energy Institute’s diagram. Source: OGP, A guide to selecting appropriate tools to improve HSE culture, March 2010: 1, Slide 8 of 15

Social Performance Integration and Management Slide 9 of 15 SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass

Risk Management: A Social Performance Driver SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Regulatory Risk Risk of Losing Social License to Operate Reputational Risk Financial Risk Losing Access to Finance Losing Investors Slide 10 of 15

Fit-for-Purpose Risk Identification, Assessment and Management SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Starting early Allowing for transition periods Focusing on high social risk locations Planning activities in accordance with project lifecycle Managing mitigation in consideration of the context Integrating into other risk management processes Considering future activities, needs and liabilities Slide 11 of 15

Culture Transformation: Hearts and Minds Concept SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Identify where the company is in the Hearts & Minds Concept Envision where it wants to be Assign resources Communicate internally Motivate employees Incentivize Behaviors: e.g., BBCE observations Incentivize Performance: e.g., zero down days from community unrest Slide 12 of 15

SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Simplify Targets Use behavior-based and performance indicators Allow for flexibility “Internal processes are the biggest obstacles to taking a more strategic approach to community investments,” according to 38 percent of participants at an IFC convened forum on knowledge leadership Leave a legacy Slide 13 of 15 Culture Transformation: Hearts and Minds Concept

Final Thoughts SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass Social performance management is evolving in a similar manner to HSE management. Companies are re-evaluating how they manage risk and performance. There’s a recognized need for improved integration of social performance. Slide 14 of 15

Final Thoughts SPE 13HSSE Integrating Social Performance Management M.B. Snodgrass “The challenges the world faces in growing supplies to meet future [energy] demand are not below ground, they are above ground. They are human, not geological.” (Tony Hayward, CEO of BP, one year prior to Macondo) “You’ve got to penetrate the minds and hearts of people who implement these [HSE] procedures, and that takes time and education and communication.” ( John Hofmeister, former Shell president, post-Macondo) …The same holds true for social performance. Slide 15 of 15

Acknowledgements Paper # Paper Title Presenter Name Thanks to my co-authors: Soledad Milius, Equitable Origin Joanne Howard, Spectra Energy Colby Hafner, Upstream Risk Consultants, LLC Thanks to my colleagues at Acorn International A special thanks to our company’s clients who are working diligently on these issues and enabling us to gain insight into the realities, struggles and progress made managing social risk and performance. The full paper on which this presentation is based is available here.here