42 countries commit to new, tougher standards of corporate behavior

New OECD Guidelines for Multinational Enterprises

The update of the OECD Guidelines for Multinational Enterprises began early in May 2010. The 42 governments adhering to the Guidelines engaged in an intensive consultation process with a wide range of stakeholders. The Guidelines are recommendations by governments covering all major areas of business ethics, including corporate steps to obey the law, observe internationally-recognised standards and respond to other societal expectations.

the OECD’s press release noted that at the OECDs 50 anniversary meeting in Paris, Ministers from OECD and developing economies agreed new guidelines to promote more responsible business conduct by multinational enterprises, and a second set of guidance to limit the use of conflict minerals.

Forty-two countries will commit to new, tougher standards of corporate behaviour in the updated Guidelines for Multinational Enterprises: the 34 OECD countries plus Argentina, Brazil, Egypt, Latvia, Lithuania, Morocco, Peru and Romania. The updated Guidelines include new recommendations on human rights abuse and company responsibility for their supply chains, making them the first inter-governmental agreement in this area.

The Guidelines establish that firms should respect human rights in every country in which they operate. Companies should also respect environmental and labour standards, for example, and have appropriate due diligence processes in place to ensure this happens. These include issues such as paying decent wages, combating bribe solicitation and extortion, and the promotion of sustainable consumption.

The Guidelines are a comprehensive, non-binding code of conduct that OECD member countries and others have agreed to promote among the business sector. A new, tougher process for complaints and mediation has also been put in place.

The business community shares responsibility for restoring growth and trust in markets, said OECD Secretary-General Angel Gurra. These guidelines will help the private sector grow their businesses responsibly by promoting human rights and boosting social development around the world.

Ministers from adhering countries will also agree to a Recommendation designed to combat the illicit trade in minerals that finance armed conflict.

Illegal exploitation of natural resources in fragile African states has been fueling conflict across the region for decades. While data is scarce, it is estimated that up to 80% of minerals in some of the worst-affected zones may be smuggled out. The illegal trade stokes conflict, boosts crime and corruption, finances international terrorism and blocks economic and social development.

The Recommendation clarifies how companies can identify and better manage risks throughout the supply chain, from local exporters and mineral processors to the manufacturing and brand-name companies that use these minerals in their products.

The OECD and emerging economies worked closely with business, trade unions and non-governmental organisations to produce both sets of guidelines.

Posted 05/26/2011

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US Securities & Exchange Commission Starts to Write the Rules

( see story below on US landmark law )

(also see Awards — as Publish What You Pay is lauded for its work in this area)

Revenue Watch Institute reported on December 15, 2010:

In releasing draft rules for enforcing transparency provisions mandated by U.S. financial reforms, the Securities and Exchange Commission (SEC) today outlined important initial steps for oil, gas and mining companies to make public the payments made to the U.S. or foreign governments, the Revenue Watch Institute said.

The commission has important work ahead to define the full scope of the activities covered by the rules, the payments that are covered and how they will be reported, said Karin Lissakers, director of Revenue Watch.

The Dodd-Frank Wall Street Reform and Consumer Protection Act gives the SEC a deadline of April 15, 2011 for finalizing the rules for resource extraction transparency. The law requires public disclosure of payments to governments for the development of oil, natural gas or minerals. The requirement applies to international as well as U.S.-based companies listed with the SEC.

We hope the commission will keep exceptions to the disclosure required to a minimum, Lissakers said. The SEC will be helping to create a new international transparency standard, as other countries are likely to follow the U.S. lead on these disclosures.

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REVENUE TRANSPARENCY — US LAW

The law will apply to hundreds of companies, including 90% of the worlds largest internationally operating oil and gas companies, as well as eight of the worlds ten largest mining companies.

The new law is a major success for Publish What You Pay (PWYP), a global coalition of 600 development, environmental, faith-based and human rights organizations operating in over 50 countries.

The key provision of the new law was sponsored in the US Senate by Republican Senator Richard Lugar and Democratic Senator Benjamin Cardin who noted, The Cardin-Lugar Energy Security Through Transparency (ESTT) provision will add stability to markets through greater information and predictability and help protect investors from undue risks associated with corrupt or unstable governments in oil-rich or mineral-wealthy countries. The provision requires extractive companies listed on U.S. stock exchanges to disclose, in their SEC filings, payments made to governments for oil, gas and mining.

Senator Cardin added, This provision is a critical part of the increased transparency and corporate responsibility that we are striving to achieve in the financial industry. Given the catastrophic events in the Gulf of Mexico, oil companies, in particular, should well understand that secrecy fosters instability, corruption and greater risk. Revenue transparency increases energy security and creates U.S. jobs by reducing the operating risk U.S. companies face in inherently unstable markets. We now have the tools to help people in resource-rich countries hold their leaders accountable for the money made from their oil, gas and minerals.

Radhika Sarin, Coordinator of PWYP International. noted that, With this far-reaching new law, citizens now have a reliable tool to ensure the wealth created by natural resource extraction is used for essential social services such as health and education, and economic development opportunities.

Global Witness. which has played key roles in the campaign for extractive industries revenue transparency, said the new US law, Will help to lift the curse of corruption and conflict from poor countries that are rich in oil and minerals by promoting greater public oversight and responsible trading practices.

Radhika Sarin added that PWYP is calling for strict implementation of the U.S. law and for continued momentum in revenue transparency around the world. Coverage needs to be expanded to all companies using similar measures in other capital markets and through adoption of this standard by global bodies. This would produce a universal standard in corporate transparency and a level playing field.

PWYP said the Hong Kong stock exchange, which carries a number of Asian majors, Has enacted similar rules this year and the International Accounting Standards Board (IASB) is considering a rule change to make disclosure of payments to governments standard in the 110 countries which use IASB rules.

Global Witness noted that the US law will also require companies whose products contain cassiterite (tin ore), coltan, wolframite and gold to disclose to the SEC whether they are sourcing these minerals from the Democratic Republic of Congo (DRC) or adjoining countries. Companies will have to detail the measures they have taken to avoid sourcing these minerals from DRC armed groups, which are guilty of massacres and other atrocities. Further, all information disclosed must be independently audited.

These provisions are a huge victory for corporate accountability in the oil, gas and mining industries, and we commend the leadership of Members of Congress who have steadfastly championed them, said Corinna Gifillan of Global Witness. She added, Now is the time for the United Kingdom and other major economies to follow the example of the U.S. so that these crucial reforms can become global standards, said Gilfillan.

Posted 07/20/2010

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The Global Reporting Initiative — GRI — Looks to the Future

GRI announces its 2015 and 2020 goals

Amsterdam Global Conference on Sustainability and Transparency 2010

Key Goals and Challenges Highlighted by Global reporting Initiative (GRI) Chief Executive Ernst Ligteringen —

excerpts for the GRI conference presentation

I would like to point out where we think sustainability reporting is — or Environmental, Social, and Governance reporting or ESG reporting as we now call it — and where it should be heading. And why .

A transition to a sustainable mode of production and consumption is evidently necessary and urgent So here is our rethinking challenge: how do we square the following equation:

How to share our planet with 2.5 billion people more by 2050? While factoring in that the way each of us. each of our companies. and each of our countries use natural resources will. affect the air, rainfall, land, and energy available to others.

And considering that today nearly a third of all children in developing countries are underweight and that 80 percent of the worlds population lives in countries where income differentials are widening?

How will we rethink the economic fundamentals of our markets and rebuild a sustainable economy, using our enormous ingenuity for example our ability to grow organisms with synthetic DNA as was just in the news to manage the worlds environmental, social and financial scarcities? How do we get there? And what role can reporting play?

GRI believes that reporting can be a valuable compass in our pursuit of a sustainable economy. The reason we believe this, is simple: if we want to move to a sustainable world, we must know how sustainable our economic activities are. We need to measure the environmental and social impact of our companies operations, our government policies, of basically any human activity. And we must be able to report on them. We must do this in a way that makes these data internationally understandable and comparable. This is why it is so important to have an international standard.

To underscore the logic of rethinking our reporting framework now. history offers us a few interesting clues. Accounting and reporting have been surprisingly inter-connected with economic and technological developmentsA sustainable world cant exist without accurate information on the environmental and social impact of our modes of production and consumption.

This brings me to the first of three concrete goals, that GRI is proposing, which we would like to hear your opinion on over the coming days:

The GRI proposes that ALL large and medium-sized companies should publicly report on their material environmental, social, and governance performance issues by 2015 or explain why, if they dont.

This ambitious goal is in first instance proposed for companies in OECD countries and fast-growing emerging economies, covering up to 80,000 Multinational Enterprises and many more medium-sized companies. This proposition is a departure from GRIs initial position, and it therefore merits a clear explanation. The reason for the proposition is that we need ESG information to be generally available to build a green economy. The proposition is in the interest of business. markets and society at large.

Considering the market and public interest, it is clear that if a company chooses not to measure and disclose to fly blind as it were — it does not only take a risk with its own business. It also deprives the market and society of important information. It potentially undermines solid and responsible decision-making, it creates an uneven playing field for companies, and it withdraws from an essential public debate on sustainability.

Yet, more ESG reporting alone isnt enough. ESG reporting should not remain a parallel track, it doesnt make sense in a sustainable economy that needs to connect financial, environmental and social capital. The two forms of reporting need to converge; equipping companies, investors and stakeholders with a complete picture of the relationship between the companies’ financial and ESG results.

The second goal the GRI would like to set today is, therefore, to promote integrated reporting: In 2020 we should have a widely accepted standard for integrated financial and ESG reporting.

Mainstreaming integrated reporting is a big step. It means that traditional financial reporting rules, such as IFRS, must be combined with an ESG reporting framework. That presents a challenging puzzle. Getting there requires cooperation between sustainability experts, financial specialists, large corporations, investment institutions, regulators and governments.

And then finally, in closing, a most important question: What role should GRI guidance play in the development of Integrated Reporting? The GRI will be active in the International Integrated Reporting Committee to promote convergence between financial and ESG reporting. The GRI believes we should have a widely accepted standard for integrated reporting by 2020. Interest is growing. Pioneering companies are experimenting and more companies are keen to learn from, and contribute to, the development of this practice. The worldwide communities of users of the GRI Guidelines expect us to give guidance on new developments in ESG reporting and in developments around it, such as the convergence between ESG reporting and financial reporting.

This presents GRI with a most significant question, one we would like to hear your views on.

Is it time for the G4?

Should GRI start to work on the next iteration of the Guidelines? Could a G4 version help to disseminate the significantly expanded ESG reporting experience to make it more robust, help streamline and focus reporting more while also introducing guidance on the emerging experience with the integration of ESG reporting and financial reporting? Connecting it to strategy? If published in say two years, that is 6 years after the release of the G3, could the G4 Guidelines offer a useful stepping stone, helping more companies and information users to gain experience and prepare for an international integrated reporting standard?

Posted 04/06/2010

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EITI Reports on 2009 Progress — Announces that Afghanistan and Iraq Join

Afghanistan and Iraq Join EITI Afghanistan and Iraq have become Candidate countries within the Extractive Industries Transparency Initiative (EITI), the global standard for improved transparency in the oil, gas and mining sector. The EITI International Board announced the decisions after its Oslo, Norway meeting on February 10, 2010. In following the EITI standard, the governments commit to publish all payments of taxes, royalties and fees it has received from its nascent extractive sector. Equally, extractive companies operating in Afghanistan will publish what they have paid to the government.

Overseen by a multi-stakeholder group with representatives from national government, companies and civil society, these figures will then be reconciled and published in an EITI Report. Afghanistan and Iraq now have two years to implement the EITI standard and undergo an EITI Validation in order to become EITI Compliant countries.

The EITI Secretariat first presented its report for 2009 at the recent EITI Board meeting in Oslo.

The report provides an account of the EITI International Secretariats activities in 2009. Highlights from 2009 include:

The Global EITI Conference in Doha had over 500 participants from 80 different countries, including Heads of State, CEOs, and civil society leaders. This event marked a progression of the initiative into a global standard for the governance of the extractive industries.

Azerbaijan and Liberia became the first two EITI Compliant countries.

In 2009 six new countries became EITI Candidate countries: Albania, Burkina Faso, Mozambique, Norway, Tanzania and Zambia. As a result, 30 countries are currently implementing the EITI.

Several other countries declared their intention to implement the EITI including Afghanistan, Ethiopia, Indonesia, Iraq and Ukraine.

Several new publications, including the EITI Progress Report, EITI Rule Book, EITI Communications Guide, EITI Parliamentary Guide, Advancing the EITI in the Mining Sector, Good Practice Notes, an EITI Video, and EITI Case Studies, were launched in 2009. Many of these have been translated to one or more languages.

A total of 19 Validation seminars and EITI workshops were held in EITI implementing countries during the year.

Of the 22 countries facing a Validation deadline in March 2010, two are now EITI Compliant, 15 have initiated the Validation process by end 2009 and one voluntarily suspended their Candidacy. The two countries with deadlines later in 2010 have also initiated Validation.

Posted 02/14/2010

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Ernesto Zedillo Named to Lead Natural Resources Charter Oversight Board

Consultations Open at least to January 2010, says Revenue Watch

The administration of the Natural Resource Charter will be carried out by the Technical Board on behalf of the Oversight Board. The Technical Board will be headed by Michael Spence, Nobel Laureate in Economics.

Ernesto Zedillo, President of Mexico between 1994 and 2000, has been named as the Chair of the board overseeing the Natural Resource Charter. The Natural Resource Charter is a set of twelve principles for governments and societies on how to effectively harness the opportunities created by natural resources.

The other members of the Oversight Board are Yegor Gaidar, former Acting Russian Prime Minister and Charles Soludo. Charles Soludo was the Central Bank Governor of Nigeria until May 2009. The Board responsibilities will include championing the Natural Resource Charter internationally and overseeing the consultation process.

The announcement of composition of the Oversight Board coincided with the launch of the formal consultation process on the Natural Resource Charter on October 4, 2009 during the annual IMF/World Bank meeting in Istanbul.

The consultation process will continue until at least January 2010. Comments can be made online at www.naturalresourcecharter.org or at the regional stakeholder workshops. The first of the regional workshops will be held in Africa. The Natural Resource Charter has the support of the UK government, UNIDO, the African Development Bank, and the African Economic Research Consortium.

Gareth Thomas, UK Minister of State for International Development, Department for International Development (DFID) reiterated the UK government support for the Natural Resource Charter: The UK, through DFID, is supporting this important initiative which will help to harness the wealth from natural resources for all citizens of resource-rich countriesbringing growth, reducing the risk of conflict, and ultimately reducing the reliance on aid.

Professor Paul Collier, Director of the Centre for the Study of African Economies at Oxford University, and one of co-authors of the Natural Resource Charter said: For many of the poorest countries, natural resources can be a lifeline to prosperity. But harnessing their potential is both technically and politically challenging. The Charter aims to furnish governments and societies with the key information they need.

Posted 10/09/2009

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Corporate Social Responsibility Rises Rapidly as a Top Priority

Excerpts from a presentation by Georg Kell, Executive Director of the United Nations Global Compact, to the Dow Jones Private Equity Analyst Conference in New York, September 16, 2009.

What started as an experiment, with only 47 companies present at its launch in July 2000, has grown into the worlds largest voluntary corporate sustainability initiative with over 6,000 business participants and stakeholders from more than 130 countries.

The companies represent almost every conceivable industry and sector, and hail from both developed economies and emerging markets. Moreover, while the Global Compact includes some of the biggest public companies in the world, more than half of business participants are privately held, and include both large and small enterprises. Your firms no doubt have ownership interests in many of these.

Why are management teams joining the Global Compact at the present rate of nearly 100 companies per month?

Certainly, the ethical imperative of addressing ESG issues remains as important today as it did ten years ago some say more so given the recent crisis in markets and the related erosion of trust in business.

But questions of risk management, improving productivity, reducing costs and sizing new opportunities by making the Compact and its principles part of business strategy and operations have established themselves as additional and arguably far more potent drivers of the agenda.

Indeed, the business case for what we call corporate sustainability that is, the management of ESG issues is increasingly clear. As the authors of a major article on corporate sustainability argue in this months Harvard Business Review: In the future, only companies that make sustainability a goal will achieve competitive advantage.

The Principles for Responsible Investment

With respect to investors, our work has centered on the Principles for Responsible Investment, co-launched by the Global Compact and our sister agency, UNEP FI, just over three years ago in partnership with institutional investors. Indeed, the PRI is today led and governed largely by institutional investors, all of whom are Limited Partners.

The rationale for launching the PRI included the following key observations:

• ESG issues can be material to investors, especially over the long term. Investors who do not take these issues into account are putting the interests and returns of their beneficiaries at risk.
• Institutional investors, especially when working together, can have significant influence as owners and clients over companies, fund managers, consultants and brokers and can use this influence to encourage improvements in ESG performance by companies.
• Three years ago there was no global framework in place to point investors in the right direction or to define this new era of Responsible Investment based on materiality, as compared to traditional SRI approaches.

Negotiated and drafted by a group of institutional investors and other experts, the Principles for Responsible Investment were launched in April 2006 at a special event at the New York Stock Exchange. Covering areas such as investment policy, active ownership practices, collaboration and disclosure, the six core Principles are designed to place ESG considerations into the heart of investment analysis and decision-making.

Let me be clear that the PRI is not an SRI initiative in the sense of employing negative screens or taking value judgments on companies or industries. Likewise, the focus is not on narrow clean-tech or other such specialized social funds. Rather, PRI recognizes that incorporating ESG issues into investment analysis, and improving the management of ESG issues within all companies and assets in the portfolio, can help maximize long-term investment objectives while, at the same time, aligning the investment community with larger societal goals. In other words: a double dividend.

As with the growth of the Global Compact, the PRI has surpassed our wildest expectations. The more than 550 signatories are divided roughly in half between asset owners and asset managers, with a third category of service providers.

Signatories to the PRI are demonstrating an unprecedented level of collaboration and partnership as they work together to encourage investee companies or potential investments to improve their ESG performance for instance, by joining and implementing the Global Compact.

From its inception the PRI was designed to be relevant to all asset classes, which ultimately led to the discussions with the Private Equity community.

Why Should Private Equity Care?

Clearly, the Private Equity industry be it related to buyout, mid-stage, or venture capital is a major force in international finance and in driving business innovation.

In addition to being investors, you are also business managers and employers with a vital stake, I would argue, with respect to the role of business in society. In many aspects, you are much closer to the fabric of economies and communities than your publicly traded peers.

For these and related reasons, I would suggest, societys expectations with respect to Private Equity will only increase.

And frankly, I believe Private Equity has an enormous opportunity to get out in front of the trends and demonstrate a new level of leadership leadership that contributes both to your success as investor-managers, as well as to aligning your objectives with broader social goals thereby building public trust in the industry.

Fixing firms, and creating long-term value, is your business. Yet, up until now, ESG considerations especially with respect to environmental and social issues have arguably not figured very prominently in your investment and management decisions. This is the prevailing view held by many Limited Partners in the PRI who feel that Private Equity managers give less regard to ESG risks and opportunities than public-equity fund managers.

Rather than reacting to trends and negative headlines, why not begin to seize a leadership position?

Allow me, please, to suggest the following:

• As investment firms, embrace the new-era of Responsible Investment, sign the PRI, and actively incorporate ESG issues into investment analysis and decision-making. [The recent launch by the PRI of Responsible Investment in Private Equity: A Guide for Limited Partners. While this resource is focused on Limited Partners, it was developed by both LPs and GPs and indirectly offers guidance for GPs.]
• As investor-managers, sign your portfolio companies to the Global Compact. As a voluntary initiative with a straightforward disclosure component, the Compact offers your firms a learning platform to develop, implement and report on sustainability policies and practices. And encourage your portfolio company managers to look at the list of companies that are already engaged in the Global Compact and ask them whether they might be missing anything.

Embrace more transparency. Opaque industries and companies become lightning rods for criticism deserved and undeserved. The reporting dimension of the Global Compact offers one way of demonstrating transparency, but there are other avenues, including taking part in more public policy discussions on key ESG issues and becoming a more active member of the corporate responsibility community.

Posted 09/22/2009

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The World Bank ignored its own environmental and social protection standards when it approved nearly $200 million in loan guarantees for palm oil production in Indonesia, a stinging internal audit has found, writes LISA FRIEDMAN of CLIMATEWIRE. as published in The New York Times on August 19, 2009, The Forest Peoples Programme. a U.K.-based nonprofit group that originally brought the complaint, charged that the companies illegally used fire to clear forestland, cleared primary forests, and seized lands belonging to indigenous people without due process.

The World Banks International Finance Corporation Fails to Live Up to Its Environmental Standards on Investing in Indonesia Finding by IFCs Internal Auditors

The IFC is the private sector arm of the World Bank group and a leader in private sector socially responsible investing in developing countries. Its leadership is now questioned by its own Office of the Compliance Advisor/Ombudsman (CAO).

The Executive Summary of the CAO Report (dated June 19, 2009) reads as follows on IFC investments that amounted to some US 200 million. Executive Summary:

Large-scale oil palm cultivation in Indonesia began in 1911. During the early years of the Suharto era (196798), state-owned agricultural enterprises were promoted — including large-scale oil palm plantations. In the 1970s and 1980s, smallholder involvement in oil palm cultivation was strongly promoted and was supported through World Bank/IDA loans that also supported plantations, crude palm oil (CPO) mills and related infrastructure. From the late 1980s, private estates played an increasingly important role in oil palm expansion, with and without associated smallholders.

IFC financed one of its first oil palm projects in 1988 and, between 1990 and 2002, it concluded several investments with various palm oil producers. Between 2003 and 2008, IFC made four different investments in the Wilmar Group: Wilmar Trading (IFC No. 20348); DeltaWilmar CIS (IFC No. 24644); Wilmar WCap (IFC No. 25532); and DeltaWilmar CIS Expansion (IFC No. 26271).

The Wilmar Group is one of the worlds largest processors and merchandisers of palm and lauric oils, and one of the largest plantation companies in Indonesia and Malaysia. IFCs Wilmar Group investments included two investments in a trade facility to facilitate CPO trading and two investments in a refinery within the Group to produce higher value end products.

In July 2007, non-governmental organizations (NGO), smallholders and indigenous peoples organizations living and working in Indonesia, or in support of people in Indonesia, filed a complaint with the CAO. The signatories claimed that the Wilmar Groups activities in Indonesia violated a number of IFC standards and requirements.

For more than twenty years, IFC had information at its disposal on significant governance as well as environmental and social risks inherent in the Indonesian oil palm sector. This came from World Bank experience; from the various IFC projects appraised in the sector and the country from the 1980s and onwards; and from monitoring and reporting on ongoing IFC oil palm investments in Indonesia. Despite awareness of the significant issues facing it, IFC did not develop a strategy for engaging in the oil palm sector. In the absence of a tailored strategy, deal making prevailed.

With regard to its Wilmar Group investments, IFC applied a de minimis approach towards assessing each projects supply chain. For each investment, commercial pressures were allowed to prevail and overly influence the categorization and scope and scale of environmental and social due diligence. As a result, IFCs development mandate and mission were not robustly represented in the decision-making processes. This had the effect of insulating IFC from obtaining key information as to how each project would impact the palm oil supply chain. Because commercial pressures dominated IFCs assessment process, the result was that environmental and social due diligence reviews did not occur as required.

Therefore, the CAO concludes that IFC did not meet the intent or requirements of its own Performance Standards for its assessment of the Wilmar trade facility investment. Incorrect assumptions were made about the impact of certain types of financial products (trade facilities) without proper consideration of the sector and country context of the investment.

As for the Wilmar refinery investment, IFC failed to assess the supply chain plantations or other companies and suppliers linked through the Wilmar Group, as required by its Performance Standards. Finally the CAO concludes that the adoption of a narrow interpretation of the investment impactsin full knowledge of the broader implicationsis inconsistent with IFCs asserted role, mandate of reducing poverty and improving lives, and a commitment to sustainable development.

Posted 08/19/2009

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What Businesses Need to Know and Do

Managing Climate Change and Water

The UN Global Compact and the Pacific Institute today jointly released a white paper which explores the linkages between climate change and water from both the scientific and corporate management perspectives. Entitled Climate Change and the Global Water Crisis: What Businesses Need to Know and Do, the paper covers a number of critical areas, including:

• How climate change is expected to impact water scarcity, water quality, and water demand;
• The ways in which water and energy are interconnected, including trade-off scenarios;
• The business risks of water and climate change;
• How businesses can strategically manage water-climate risks;
• And the linkages between climate and water and the UN Millennium Development Goals.

This paper underscores the importance of viewing the many ways in which different environmental challenges are in fact deeply connected, and the need to approach these issues in an integrated way, said Georg Kell, Executive Director of the UN Global Compact. Climate change needs to be understood in terms of how it will impact a range of other issues such as water, food, energy, and, of course, development and poverty.

Virtually every business decision is also a decision about the use of natural resources. In this paper, we describe how global warming is affecting water and energy resources, and the

challenges and opportunities this presents globally. We summarize the way in which connections among climate, energy, and water are likely to affect business and offer general guidance on how companies can respond to the challenges in an integrated way. The paper highlights how regions of the world that will experience the worst impacts of climate change are those near the equator and overwhelmingly impoverished. And we conclude by focusing on the UN Millennium Development Goals (MDGs) as they relate to climate change and alleviating the global water crisis, and suggest ways that business can partner with the UN to work toward their achievement.

What businesses can do to manage water-climate risks strategically xvii

To evaluate and effectively address water and climate change risks, companies can take the following actions:

1. Measure water and carbon footprint throughout the value chain. Some of the most significant water and climate-related risks can be embedded in a companys value chain, well outside of its direct operations or control. In many cases, such as in agriculture-based industry sectors, a companys direct water use pales in comparison with water embedded in the supply chain. Even should water use or GHG emissions occur outside of a companys sphere of influence, they can still pose financial or reputational risks to the company. Companies can only mange what they measure, so in order to accurately assess risks and opportunities, a first step for companies is to conduct a comprehensive and integrated water and carbon accounting. By aligning measurement of water and carbon/energy, businesses can identify how the three are interlinked, providing key basic information for developing a holistic management strategy.

2. Assess physical, regulatory and reputational water risks associated with climate change. Explicit attention should be paid to understanding energy-related risks posed by water (and vice versa), as well as any potential competing demands the company may have for water and energy. Companies should also seek to align, if not integrate, their water and climate risk assessments. Having a detailed understanding of local water conditions, including hydrological, social, economic, and political factors, can give companies room to anticipate and plan for a wide range of climate change scenarios. Companies should be prepared to provide details on the risks they face from water challenges and to be transparent about the energy trade-offs they may need to make to address them.

3. Integrate water and climate issues into strategic business planning and operational activities. When developing water management plans, companies will need to consider and integrate the potential impacts of climate change on water supplies and water quality. Climate-related impacts on water should also be considered when making a range of business decisions from factory design and siting to new product development. Companies should also consider potential energy/water synergy (or conflict) in business planning and decision making. For instance, integrated approaches to reduce water and energy use simultaneously have allowed companies at a single plant to achieve millions of dollars in savings while increasing output. In addition, such efficiency measures can demonstrate a companys commitment to water management, boost public image, and help build positive relations with the communities where it operates.

4. Engage key stakeholders as a part of water and climate risk assessment, long-term planning and implementation activities. When developing a corporate water and climate

change management plan, managers can benefit from sharing information with employees, investors, customers, local communities, and other key stakeholders in order to gain valuable feedback. Through early and continuous engagement with concerned stakeholders, companies can better understand, anticipate, and respond to emerging issues and expectations. Open dialogue with water providers and local communities may also be helpful in preventing and reducing the risk of future water and climate change related disputes or disruptions. Such discussions may also identify pivotal inputs that help prioritize action steps.

5. Disclose and communicate water and carbon performance and associated risks. Companies should publicly report management activities and key metrics on their water and energy performance. This information can help shareholders and stakeholders assess how companies are addressing their water and climate change risks. Such metrics are also a useful tool for engaging employees across the enterprise.

6. Seek opportunities for collective action. Because water and energy are connected to social, cultural, and environmental issues, companies can rarely achieve the best management outcomes on their own. Most solutions to water supply, quality and sanitation, and climate change issues require co-management approaches involving sound water governance, collective action, and partnerships. By pooling resources and bringing together a wide range of expertise and knowledge through partnerships for a common goal, companies can respond to water and climate change concerns more efficiently and effectively than through individual actions. Collaborative actions are particularly helpful in assessing and addressing climate change impacts, since there are large gaps in knowledge related to climate change and water, especially data and prediction

modeling at the watershed level.

Posted 05/22/2009

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Rio Tinto Provides Tax and Royalty Data for 13 Countries

PublishWhat You Pay Says This Set Extractive Industry Standard

Annual Report statement by Rio Tinto — When we invest in a project, the taxes we pay can have a major impact on the country in which we operate. Although federal governments collect most of these payments, a significant proportion of taxes were paid to local and regional governments.

Our analysis only captures where the tax payments are made, and not the internal redistribution of revenues that takes place within governments. How these payments are redistributed depends entirely on the fiscal and administrative structure of the host countries. For this reason, the ultimate effect of these payments at the local level is likely to be underestimated.

In 2008, our total tax and royalty payments were US$6,658 million. Of this, US$6,201 million was borne by the Group. In addition, tax payments of US$457 million were made to governments for employee taxes and other liabilities net of refunds of indirect taxes paid to suppliers.

Taxes and Royalty Payments 2008