Social Development and Management Program (SDMP) and Corporate Social Responsibility (CSR) Bantay Kita National CSO Conference on Transparency and Accountability

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Social Development and Management Program (SDMP)and Corporate Social Responsibility (CSR) Bantay KitaNational CSO Conference on Transparency and Accountability Initiatives in the Extractive Industry 4-5 February 2015Bayanihan Center, Pasig City

CSRAs part of good corporate governance, mining, oil, and gas companies also have corporate social responsibility or CSR activities that go beyond compliance with the law. Rooted in philanthropy, and earlier perceived as a peripheral, an add-on or an almost apologetic activity or tactical response to potential crises, CSR is now adopted as a best practice absorbed into the core functions and value of systems of businesses.CSRIn its CSR Guidebook, the Chamber of Mines spells out a clear definition of CSR that is acceptable to all mining stakeholders, as:

commitment of business to contribute to sustainable economic development, working with employees, their families, local community and society at large to improve the quality of life, in ways that are both good for business and good for development.CSRSDMPThe primary objective of the SDMP is to help create responsible and self-reliant communities capable of developing, implementing and managing:community development programs, projects and activities in a manner consistent with the principles of sustainable development. SDMPTo this end, mining companies are required to allot 1.5% of their operating cost to assist government, particularly the LGUs in the development of the host and neighboring communities to promote the general welfare of the inhabitants living therein.

SDMP- DAO 2010-21, Sec. 134

Operating cost-specific costs of producing a saleable product on a commercial scale incurred in the calculation of the net income before tax. This includes all costs and expenditures related to mining/extraction and treatment/processing (inclusive of depreciation, depletion and amortization), exploration activities during operation stage, power, maintenance, administration, excise tax, royalties, transport and marketing, and annual progressive/environmental management. SDMPIn the case of an operating mine, the permit holder is required to submit to the MGB Regional Office a sworn statement of its previous years operating costs within 60 days after the end of each calendar year as basis for the SDMP.In the case of new mining operations, the basis for the initial SDMP implementation shall be the operating costs estimates contained in the approved Mining Project Feasibility Study. SDMP- Credited activities for Social ExpendituresCredited activities for the development of host and neighboring communities:

Human resource devt. and institutional building; Enterprise devt. and networking;Assistance to infrastructure devt. and support services;Access to education and eductl support programs.Access to health services, facilities and health professionals;Protection and respect of socio-cultural values, use of facilities and services within the mine camp or plant siteSDMP- Credited activities for Social ExpendituresCredited activities for development of mining technology and geosciencesBasic and applied research on mining technology, geosciences, and advanced studies related to mining, to be conducted by qualified researchersExpenditures for scholars, fellows and trainees, including grants for dissertations, on mining technology and geoscience and related subjects;Expenditures on equipment and capital outlay as assistance for research and educational institutions.SDMP- Credited activities for Social ExpendituresCredited activities for the promotion of publicawareness and education on mining technology and geosciencesEstablishment, enhancement, and maintenance of information and publicity centers where stakeholders can access information on the performance of a mining project;Publication of information, educ, and communication (IEC) materials on social, envtl, and other issues relative to mineral resources devt and responsible mining operations;Expenditures for continuing public awareness and education campaigns;Expenditures on equipment and capital outlay as assistance to the institutionalizing public awareness and education on mining technology and geosciences.SDMPSDMP[CDP, if at exploration stage]ALLOCATION OUT OFTOTAL SDMP COST(1.5% of Operating Costs)[10% of EWP Budget, for CDP]Development of Host and Neighboring Community75%Development of Mining Technology and Geosciences10%Information, Education and Communication Program15%SDMPIn computing the SDMP cost, the expenditures for the mining companies employees and theirfamilies are not included.281 Neither are these social expenditures creditable as royalty paymentfor IPs or ICCs. 282 For holders of exploration permits, mineral agreement and Financial andTechnical Assistance Agreements (FTAA) at the exploration stage, the CDP must be supported bya fund equivalent to a minimum of 10% of the budget of the approved two-year Exploration WorkProgram.283SDMPExpenditures NOT allowed in the SDMP:For the mining companies employees and their familiesFor holders of permits at the exploration stage (MPSA, FTAA)Instead the CDP must be supported by a fund equivalent to a minimum of 10% of the budget of the approved two-year Exploration Work Program.Unspent amount of SDMP for any given year, will be added to the succeeding year & may be re-programmed after consultationsNeither are these social expenditures creditable as royalty payment for IPs or ICCsSDMP Process

SDMP- Penalties & SanctionsA mining companys failure to implement its approved SDMP and Programs on Mining Technology and IEC, is penalized by a fine:Not exceeding PhP5,000.00 at the first offense. A succeeding offense is a ground to suspend its mining or milling operations in the mining areas, in addition to a fine not exceeding PhP5,000.00.SDMP- significant payments by mining companies

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MSG Recommendations (Government)SDMP Monitoring needs improvementCapacitate MGB regional offices andMultipartite monitoring teams

Include EITI related information in themonitoring checklist that the MGB iscurrently doingA standardized SDMPMonitoring checklist thatincludes EITI-relatedinformationMGB should implement a web-based submission of documents from regional to central office;MGB should develop a program /IT system to compile SDMP for analysis-MGB should require companies to submit SDMP electronicallyA centralizeddatabase forall EITI relatedinformationfrom MGBthat may beaccessedElectronicallyMSG Recommendations (Civil Society)Lack of monitoring ofSDMP and other fundscreated by lawThe government should have a clear mechanism on monitoring social expenditures and thedifferent funds created under the Mining Act.Process of monitoringSocial expenditure and fundsMSG Recommendations (Mining Industry)FindingsRecommendationsThe IA Reconciliation Report also indicates that the monitoring and reporting of social and environmental funds are inconsistent and incomplete. (Some companies report contributingto some SDMP and CLRF funds but not in others.)Standardize the entries for SDMP vs. SDMPcomponents (Some companies report only lump-sum SDMP expenditure; others break down their SDMP expenditure into host & neighboring communities, IEC, and mining technologies)Environmental funds should be discussed separately from SDMP.Separate reporting of all SDMP fundsCompanies and MGB should reconcile figuresSDMP funds as budgeted by the companies through a Social Development Management Plan reviewed and approved by the Director of Mines can be monitored in terms of project expenditures and programs managed at the site by the community relations officers and COMREL departmentsMSG Recommendations (Mining Industry)IA must highlight the fact that the SDMP is a community-based process that has a 5-year plan. The community is asked to identify development projects that they deemnecessary in their community (aligned with their local development plans, where available), and these are built and funded through a 5-year management plan. The EITI Report for any given year is thus a snapshot ofthe five-year plan and may be larger (or smaller) than previous years, depending on where the stakeholders are in the plan. There may also be a need for a separatereconciliation once the 5-year plan is completed to validate the total expenditure and assess the accomplishments of the plan.TVIRDs SDMP

Coverage of Impact AreasThe mine impact communities is defined as those areas directly or indirectly affected by mining operations in terms of social, economic, political and environmental aspects.There are three levels of TVIRDs impact communities defined as follows:Primary Impact Communities are the eighteen (18) sitios included in the CADT. The CADT hosts the mine site. Secondary Impact Communities are sitios in barangays that are along the route of transport of TVIRDs product from Canatuan site to Sta. Maria Port.Other Impact Areas are sitios that are considered by TVI as communities crucial to maintaining TVIRDs activities unhampered. These are areas which do not necessarily benefit from major SDMP activities but may access community assistance component of the SDMP.TVIRDs Goal:For TVIRD partner communities to enjoy sustainable community development.ObjectivesSecure and sustain social license (both conceptual and legal) for TVIRD activities;Enhance existing and develop knowledge, values, and skills in support of sustainable community devtBuild infrastructures relevant to community needs in partnership with the community;Increase awareness of human rights in TVIRD business practice for social acceptance; andStimulate entrepreneurial culture in TVIRD communities.The Process and PhasesPhase 1: Basic IEC activities among stakeholdersPhase 2: Integrated IEC-SDMP activitiesBasically, it was conducted to:Provide the stakeholders with information about the project;