Community Development Delivering bottom line results

1. Community Development Delivering bottom line results

2. What is CommDev? • The World Bank/IFC Oil, Gas & Mining Sustainable Community Development Fund • $12 million fund focused onhelping communities receive sustainable benefits from Extractive Industry (EI) projects; • Supports IFC/World Bank clients who want to collaborate to go above and beyond social and environmental safeguards; • Provides public goods for all stakeholders on community development in extractive communities; • Offers capacity building, technical assistance, tool development and information sharing through on-line Clearinghouse (www.commdev.org); • Global, but emphasizes Africa (60 – 70%)

3. Mining Projects Are Often Seen As “Controversial”… Increased pressure by governments and communities for a larger share of profits Social benefits often underestimated Environmental degradation often more feared than real Unrelenting civil society attention Amplified brand and reputational risk …and yet no sector is more important to development than ours. 3 Industry context

4. Sustainable Approach to Mining No Longer anAltruistic Endeavour: It is a Business Imperative • Mining companies are guests in remote, impoverished areas • Increased NGO activism and reputational risk • A “Social License to Operate” does affect the bottom-line • A condition of finance/investment – Equator Principles, World Bank Standards • To ensure long-term success, mining operations must be strategic, • transparent & equipped with qualified • human resources Government (local, provincial, national) Uninterrupted operations Investors Community Mining Company Non- governmental organizations Localbusiness Effective local stakeholder management happens by design

5. Evolution of how to acquire a social license to operate • Old Approach • Environmental Mitigation “Do No Harm” • Unilateral decisions • Cash Contributions “Handouts” • Ad hoc philanthropy programs • No results measurement • Examples: Building Schools, Clinics Thinking About Development • Community investment strategy • Conduct social baseline study • Participative methodology (consultation) • Identify metrics for monitoring results • Communicate development results • to stakeholders • New International • Best Practice

6. What Companies say about Community Investment Challenges We spend lots of money on CI but relations with communities don’t improve (and sometimes even deteriorate)… Our CI program itself becomes a source of conflict Local stakeholders become dependent on us Infrastructure projects we build lie abandoned and unused In the end, we have little to show for all the resources spent Endless requests from communities – difficult to say “no” We get pulled in a hundred different directions We end up having to take over the government’s role Our CI program has little to do with our core business 6

7. What Causes these Problems? • Limited understanding of often complex local context • Ad hoc approach – reactive to community requests • Notion of “giving” rather than “investing” (grants & donations) • No exit strategy • Focus on bricks & mortar /short-term projects • CI isolated from operational side of business • Lack of participation & ownership of local stakeholders • Failure to measure impact (no baseline /focus on outputs ) • Lack of transparency and clear criteria • Lack of alignment with business objectives/core competencies

8. By offering…A package of advice and tools designed to assist companies adopt a more strategic and sustainable approach to investing in community development; The main deliverable is company-specific community investment framework that is (i) Strategic; (ii) Aligned; (iii) Measurable; (iv) Sustainable; and (iv) is designed and should be implemented in partnership with other local stakeholders. Community Investment Strategy: How Can IFC Help?

9. Stakeholder Engagement and Capacity Building Implementation and Partnering Diagnostic and Scoping Monitoring and Evaluation Define the Business Case Strategy design Community Investment Strategy A Six Stage Process IFC/Client Engagement process on CI Strategic Planning • End result = COMMUNITY INVESTMENT ACTION PLAN • Company & its stakeholders agree general criteria, structure, and parameters within which the company will support local communities and government in defining and meeting their own development needs and aspirations. IFC

10. WHAT IFC CAN OFFER? Provide Capacity Building: Tailoring Ghana Workshop for Vale • Provide capacity building for clients, multi-stakeholder teams and local civil society • Setting clear objectives and a clear exit strategy • Making the business case – cost-benefit rationale • Stakeholder analysis • Engagement with communities and local government • Participatory processes • Capacity building plan • Quantitative and qualitative indicators/strong M&E framework • Communications strategy

11. Stakeholder Engagement Handbook Community development results can be maximized through Partnerships between companies, government and communities

12. Focusing on Monitoring & Evaluation (M&E) for Planned Results Impacts Outcomes Outputs Inputs In determining your CI program objectives, it is helpful to think through the sequence of events and changes that will yield the desired outcomes. Indicators The opportunity to demonstrate a company's value in the community

13. Indicators for Community Investment...Education ex:

14. NEW CommDev Tool: Financial Valuation of Sustainability • Methodology, enhanced by Monte Carlo simulations • Shows how results change as key assumptions change • Process brings together multiple functional lines in companies • Help companies make strategic decisions about WHICH sustainability investments to make WHEN Value Creation (productivity increases) • Project specific issue mapping to identify high and low risk issues. • Cost-benefit analysis • Estimation of value generated by specific sustainability investments Value Protection (mitigating delays) • Aggregate estimates of the extent to which sustainability investments mitigate project-specific risks. 14

15. Social Advice Example: Improving the effectiveness of Sadiola Gold Mine’s Community Foundation IFC social specialists helped Sadiola create a long term plan which would guide the work of its community foundation past the life of the mine. Working directly with the local population, government authorities and NGOs, the Sadiola Foundation is now implementing development initiatives focusing on three main areas: • Development Training and Capacity Building • Agricultural Assistance • Enterprise Development Peanut Butter Producers Trained by Sadiola Foundation

16. On the ground support for local businesses inside the supply chain of IFC clients Creating and identifying financing solutions for local entrepreneurs Establishing and operating local “enterprise centers” to train local businesses Local Supplier Linkages – Business Rationale Using local suppliers allows clients to: • Reduce delivery times • Control inventories • Increase number of local jobs created by project • Spreads projects’ positive impacts among members of host communities Leads to: • Lower operating costs • Mutually beneficial business relationships between IFC clients and local suppliers • Social license to operate and mitigation of social risks • Stronger local support for project Our advice and assistance includes:

17. Mozal: Mozambique IFC investment of $133M Issues Weak SME capacity to win and execute local contracts Linkages Program Advisory services and mentorship program to the smelter’s SME suppliers Identification of SME supplier contracts Pre-selection of SMEs and training on tendering Training of SMEs that won the supply contracts SME mentoring/coaching Access to working capital Results Increased local spend from US$5M to US$15M 33 SMEs trained in tendering procedures Working Capital loans for 2 SMEs Supplier Development Example : Mozal Aluminum Smelter

18. How • SME Development Centre • Sharing Best Practice • Benchmarking Supplier Development: Mozal Aluminum Smelter Evolution of the Mozal Linkages Program Programs • The goal is to: • Develop SME Competitiveness • Transfer knowledge and business to Mozambique, involving other large companies SMEELP (Mozal construction phase) 15 SMEs $5M in contracts Mozlink Phase 1 (Mozal operations phase) 25 SMEs $15M in contracts Mozlink Phase 2 (Extended linkages – inclusion of other companies) 50 SMEs $20M plus in contracts 2006 2007 2003 2004 2001 • Knowledge Sharing Project • Mozambique Business Network • Mozlink website Supply Analysis - New products and services to be supplied locally

19. CommDev.org • Over 2,000resources available • A “go to” resource for information and knowledge on community development around extractive industries, • Tripled user base to over 900visitors every day in January 2009. • Over 50% of users come from developing countries.

20. Thank you! IFC Contact Information Arjun Bhalla IFC, Oil, Gas, Mining and Chemicals Department Phone: 1 (202) 458-0984 Email: abhalla@ifc.org Fax: 1 (202) 473-3839 Veronica Nyhan Jones IFC, Oil, Gas, Mining and Chemicals Department Phone: 1 (202) 473-7940 Email: VNyhanjones@ifc.org Fax: 1 (202) 473-3839