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 2015

Bayanihan Center, Pasig City

CSR

As 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.

CSR

In 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.”

CSR

SDMP• The 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.

SDMP

• To 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.

SDMP

• In the case of an operating mine, the permit holder is required to submit to the MGB Regional Office a sworn statement of its previous year’s 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 Expenditures• Credited activities for the development of host and neighboring

communities:

1. Human resource devt. and institutional building; 2. Enterprise devt. and networking;3. Assistance to infrastructure devt. and support services;4. Access to education and educt’l support programs.5. Access to health services, facilities and health

professionals;6. Protection and respect of socio-cultural values, use of

facilities and services within the mine camp or plant site

SDMP- Credited activities for Social Expenditures

• Credited activities for development of mining technology and geosciences

1. Basic and applied research on mining technology, geosciences, and advanced studies related to mining, to be conducted by qualified researchers

2. Expenditures for scholars, fellows and trainees, including grants for dissertations, on mining technology and geoscience and related subjects;

3. 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 geosciences1. Establishment, enhancement, and maintenance of

information and publicity centers where stakeholders can access information on the performance of a mining project;

2. Publication of information, educ, and communication (IEC) materials on social, envt’l, and other issues relative to mineral resources devt and responsible mining operations;

3. Expenditures for continuing public awareness and education campaigns;

4. 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 OF

TOTAL SDMP COST(1.5% of Operating

Costs)[10% of EWP Budget,

for CDP]

Development of Host and Neighboring Community

75%

Development of Mining Technology and Geosciences

10%

Information, Education and Communication Program

15%

SDMP• In computing the SDMP cost, the expenditures for

the mining companies’ employees and their• families are not included.281 Neither are these

social expenditures creditable as royalty payment• for IPs or ICCs. 282 For holders of exploration

permits, mineral agreement and Financial and• Technical Assistance Agreements (FTAA) at the

exploration stage, 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.283

SDMPExpenditures NOT allowed in the SDMP:• For the mining companies’ employees and their families• For 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 consultations

• Neither are these social expenditures creditable as royalty payment for IPs or ICCs

SDMP Process

SDMP- Penalties & Sanctions• A mining company’s 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

SDMP

SDMP

MSG Recommendations (Government)

SDMP Monitoring needs improvement

Capacitate MGB regional offices andMultipartite monitoring teams

Include EITI related information in themonitoring checklist that the MGB iscurrently doing

A standardized SDMPMonitoring checklist thatincludes EITI-relatedinformation

MGB 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 electronically

A centralizeddatabase forall EITI relatedinformationfrom MGBthat may beaccessedElectronically

MSG Recommendations (Civil Society)

Lack of monitoring ofSDMP and other fundscreated by law

The government should have a clear mechanism on monitoring social expenditures and thedifferent funds created under the Mining Act.

Process of monitoringSocial expenditure and funds

MSG Recommendations (Mining Industry)

Findings Recommendations

The 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 figures

SDMP 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 departments

MSG 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.

TVIRD’s SDMP

Coverage of Impact Areas• The 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 TVIRD’s 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 TVIRD’s activities unhampered. These are areas which do not necessarily benefit from major SDMP activities but may access community assistance component of the SDMP.

TVIRD’s Goal:• For TVIRD partner communities to enjoy sustainable

community development.• Objectives1. Secure and sustain social license (both conceptual and

legal) for TVIRD activities;2. Enhance existing and develop knowledge, values, and

skills in support of sustainable community devt3. Build infrastructures relevant to community needs in

partnership with the community;4. Increase awareness of human rights in TVIRD business

practice for social acceptance; and5. Stimulate entrepreneurial culture in TVIRD communities.

The Process and Phases Phase 1: Basic IEC activities among stakeholders Phase 2: Integrated IEC-SDMP activities• Basically, it was conducted to:

– Provide the stakeholders with information about the project;– Present and discuss the benefits and impacts of the project;– Gather responses, issues, and concerns from the communities vis-

à-vis the Project implementation;– Orient the stakeholders about the SDMP;– Plan and prioritize development projects for the 5-Year SDMP;– Administer the Perception Survey among the CADT beneficiaries;

and– Orient the CADT beneficiaries about the Final Mine and

Rehabilitation Plan

TVIRD’s framework of development

The Multi-Party Implementing and Monitoring Team (also known as Technical Working Group) is a mechanism to ensure that the SDMP programs are implemented and monitored with adequate participation of the stakeholders. This is to ensure that the responsibility is shared.

Data source of this presentation: PH-EITI First country report

Maraming Salamat!