Everybody’s business: the nexus between Peace- Profit-Prosperity July 14 th, 2009 The Commonwealth Club Diana Klein

Presentation overview  Why i s this link important?  Role of business in conflict?  Policy options for improving business conduct in conflict

The nexus Peace ProfitProsperity

The nexus of evil Conflict LossesPoverty Conflict: Armed conflict (civil unrest, war) Community level violence

Costs of conflict Security Higher payments to state/private security firms; staff time spent on security management Risk management Insurance, loss of coverage, specialist training for staff, reduced mobility and higher transport costs Material Destruction of property or infrastructure Opportunity Disruption of production, delays on imports Capital Increased cost of raising capital Personnel Kidnapping, killing and injury; stress; recruitment difficulties; higher wages to offset risk; cost of management time spent protecting staff Reputation Consumer campaigns, risk-rating, share price, competitive loss Litigation Expensive and damaging law suits

Costs of conflict US$ 25 million + lost opportunities Esquel Gold Project (Argentina) – losses of US$ 379 million (reserves $ 1.33 billion) Samut Prakarn Wastewater Management Project (Thailand) losses of US$ 650 million Minera Yanacocha Gold Mine (Peru) –US$ 1.7 billion (lost opportunity after production costs) Middle East:US$ 12 trillion since 1991 (opportunity costs) Bosnia: US$ 60 billion to the country + $ billion to the international community Rwanda :US$ 4.5 billion (humanitarian and peacekeeping costs) The Gulf War: over US$ 100 billion to the international community

Costs of peace Conflict prevention- countries Macedonia: $ US 255 million (potential conflict costs: $ US billion military & humanitarian expenditures) Slovakia: less than US $ 1 billion (during a 7 year period) (potential conflict costs: US $ 1.2 billion per year- military & humanitarian expenditures) Conflict prevention-companies Shell – Malampaya project (Philippines) estimated at approximately US$ 6 million on a total project cost of US$ 4.5 billion (0.13% of total costs) days delay estimated costs: US$ million

Compliance What can business do? Extractive Industry Transparency Initiative Voluntary Principles on Security & Human Rights Kimberley Process Global Compact Publish What You Pay Equator Principles Pay as You Go Walk like an Egyptian

What can business do? Example: There is inadequate provision of training and education for local youth. They cannot access local jobs and feel marginalised. Companies recruit trained and skilled staff from elsewhere, instead of training local youth. As a result young people feel further marginalised, resort to violence. Example: Community members feel physically insecure, and there is inadequate security provision by authorities. Companies work with vigilante groups to provide security for their business, ignore wider community’s needs. Vigilante groups turn violent and become part of the problem Conflict Sensitive Business Practice Risks Impacts

Create positive value Social Investment Public policy dialogue Core business

Create positive value Conflict sensitive business practice Compliance Company engagement at 3 levels

Policy options? Dear Policy Maker… Accountability –Consider a company’s record on social responsibility as one criterion for evaluation in the awarding of government contracts –Require companies to perform conflict impact assessments, undertake due diligence with regard to brokers, intermediaries and middle-men Norm creation & Implementation –Enhance public sector engagement with and support for the full implementation of ongoing private sector initiatives (VPs, KP,etc) –Expand the adoption of the Equator Principles on project finance to include public agencies and institutions Adoption of conflict sensitivity –Deepen and extend conflict sensitive business initiatives to sectors beyond the multinational extractive industry, to suppliers and subcontractors, and state- owned enterprises –Create conflict-sensitive standards for government procurement, lending, official development assistance, export credit, insurance and investment promotion programs Review & revise: –Aid, trade and investment support policies to provide incentives for businesses who can act in a conflict-sensitive manner or support peacebuilding (from: Global Compact: Enabling Economies of Peace)