Social Licence to Operate Ethics, law and project risk NELA State Conference, 1 September 2017 Sally Audeyev 33735301_1

1 2 3 The nature of Social Licence to Operate Aligned with the law and business objectives Conundrums

The nature of “Social Licence to Operate”

MCA the ‘social licence to operate’ is an unwritten social contract. Unless a company earns that licence, and maintains it on the basis of good performance on the ground, and community trust, there will undoubtedly be negative implications.” Minerals Council of Australia (2006)

Ethics in Community Engagement

Ethics in Community Engagement Courage Inclusiveness Commitment Respect and honesty Flexibility Practicability Mutual obligation Transparency

“It is good business for us to make sure the communities, markets and ecologies in which we operate are strong, open and healthy.” -- Chief Executive BHP (The Australian, 4/7/2017)

“The mining industry needs to build better relationships with the communities it operates in if it is to combat rising shareholder activism, more frequent government intervention and higher community expectations, South32 chief executive Graham Kerr says.” -- Financial Review, 8/6/2017

Aligned with business and the law

“Today, the business community is coming to understand that principles and profits are two sides of the same coin” H.E. Ban Ki-moon UN Secretary-General 2007-2016

Commercial objectives Reputation Insurance Investors Finance Project risk

Aligned with the law Native title agreements: authorisation, FPIC, benefits Anti-bribery Environmental Protection legislation Modern Slavery Directors duties ASX disclosure rules

Approvals processes require broader consultation and evaluation of wider range of factors

A new approach? Using publicity and reputational risk to drive a change in corporate behaviour?

Due Diligence Due Diligence is key for prevention and compliance And regulators are now requiring you to demonstrate it

Conundrums

Risk management… Documents Reasonable- ness Demonstrate how you have met regulator polices. Be prepared for regulator to rely on documents and plans you provide Documents Reasonable- ness Ensure you have provided sufficient information for the regulator’s decision to be considered reasonable 12199818_1

Risk management… Consultation Legal process Engage stakeholders to ensure there are no surprises Engage with stakeholders to prevent procedural challenges Consultation Legal process Follow the process as per law Regulators give advice only 12199818_1

Board Directors’ Duties – Edelman J: “harm” to the interests of the company is not limited to financial interests of the company, but extends to any interest of the company, which could include reputation and ability to comply with the law. Reporting Obligations

A new approach to law Governments are adopting UNGP HR Principles and using publicity and reputational risk to drive a change in corporate behaviour A light handed approach to regulation (and government resources) can drive significant change to business practices The focus is on requiring and demonstrating due diligence Absence of government enforcement, fines and penalties does not necessarily mean low risk Statements can be used as evidence of (lack of) due diligence in offence proceedings elsewhere (eg Australia) Australia UK Modern Slavery Act French Vigilance Plans

A key role for legal advisors Due diligence before entering business relationships Exercise leverage to require compliance contractually Monitor and review throughout course of business relationship – management and prevention systems Meet public reporting legal and non-legal standards, with careful verification before release Treat this as you would a legal compliance issue

Wrap up Ethical engagement results in good business outcomes and puts you on track to comply with the law Diligence… diligence… diligence

Thank you Sally Audeyev Partner Perth T +61 8 9269 7242 M +61 411 152 916 Sally.Audeyev@au.kwm.com