Stakeholder Engagement

Management Approach

Stakeholder engagement is critical for establishing a mutual understanding of one another’s needs, interests, aspirations and concerns. That perspective is a key input for making decisions to support business objectives related to growth, risk management and operational excellence, and for collaborating to address local stakeholder priorities. Simply put, constructive stakeholder relationships are essential to securing and maintaining our social license to operate and creating mutually beneficial outcomes.

Our approach to stakeholder engagement is to systematically identify our stakeholders and engage with them through ongoing dialogue to share information about our business, respond to questions, listen to their observations and act on their concerns, as appropriate.

In general, we prioritize our level of engagement with different stakeholder groups based on their proximity to – and interest in – our activities and their ability to influence our business. At the operational level, the practical outcome of this prioritization is that our workforce, business partners, local communities and host governments tend to be our most important stakeholder groups. The diagram below shows our key stakeholder groups at both the corporate and operational levels.

Sherritt’s Key
Stakeholder Groups
Employees and their representatives Communities Government
Financial community Business partners

Customers and suppliers
NGOs/Civil Society Media

Industry peers and associations

Our engagement tactics vary based on the nature of the interaction and the stakeholder groups involved. For instance:

  • We engage regularly with local communities and employees through formal meetings and town halls, small-group and one-on-one interactions, surveys and grievance mechanisms.
  • We work closely with our business partners through governance bodies and ongoing discussions to address material issues and opportunities.
  • Our procurement and marketing teams are in constant communication with our suppliers and customers, to ensure smooth operations and customer satisfaction.
  • Our investor relations department manages proactive and reactive interactions with investors, analysts and media, always in accordance with securities requirements.
  • We meet with government officials in all our operating jurisdictions to build relationships, manage regulatory affairs and advocate on policy issues of importance.
  • We manage partnerships with developmental non-governmental organizations and respond to advocacy groups, as needed.
  • We take an active role in various industry associations, to advance sector-wide concerns, align with broader expectations and contribute to innovation.

Corporate Standards to Support Stakeholder Engagement

We have policies and standards on engaging investors, media, government and employees; however, to ensure a consistent approach to stakeholder engagement, we established a stakeholder engagement standard in 2015 that applies across the company. It describes our expectations for stakeholder identification and mapping, annual engagement planning, engagement processes and practices, how to record dialogue, and how to respond to feedback and views received from stakeholders. We also have a complementary indigenous relations standard that sets out our commitment to building mutually beneficial relationships with indigenous peoples affected by our activities in a way that recognizes and respects their unique rights and cultural attributes.

An important aspect of engaging with our stakeholders and building social license is listening and responding to community concerns and incidents. Our ongoing community relations activities are designed to capture and resolve most of these issues before they escalate. But for those issues that do, it is important to have a credible community grievance mechanism in place. As described under Human Rights, all sites have some type of mechanism in place. We also plan to develop a company-wide grievance management standard in 2016 to provide clear expectations on how we collect, classify, investigate, respond to and close out operational-level community grievances.

Diverse Operating Environments

Although we see the value of taking a structured and consistent approach to stakeholder engagement at all of our sites, the breadth and depth of engagement activities will vary greatly, given the disparate nature of each of our operating environments. Our Fort Saskatchewan refinery has been in operation since 1954 and is located within the city limits of a well-developed urban area near Alberta’s capital. The refinery is located within an industrial zone with several other heavy-industry businesses. Local residents are familiar with the nature of industrial activities, including their benefits and potential risks. Because of this level of awareness and understanding, and our mature relationships in the community, we can take a practical and targeted approach to our engagement activities with the community, government and industry. Watch this video to learn more about life in Fort Saskatchewan.

In Cuba, we have two longstanding joint ventures with state-owned entities. As such, our engagement is focused on our partners and the central government. For community investment initiatives, we work closely with provincial and municipal governments and with non-governmental organizations that have a presence on the island. We see opportunities to build on our good relations with the government to ensure our evolving approach to engagement aligns with the operating context in Cuba.

Our most robust stakeholder engagement program takes place at Ambatovy, given its size and location in the biodiverse and impoverished country of Madagascar. Ongoing dialogue through several channels with local residents, the host government and a variety of civil society organizations has been, and continues to be, important in building mutual understanding, managing expectations and earning our social license.

Performance

Community Relations

Ambatovy Fort Site Moa Site Oil & Gas and Power Total
Number of community meetings 364 43 8 24 439

We continue to engage regularly with the communities that surround our operations in all of our jurisdictions. We took part in 439 community meetings in 2015, and are pleased to report that there were no significant community incidents or disruptions during the year.

Ambatovy held a total of 364 community meetings during the year. Significant themes included Ambatovy’s operations, impacts and benefits to Madagascar; local governance; royalty payments; the commodity pricing environment; rumours and misinformation; public health and safety concerns; community-based environmental conservation; and security awareness.

Fort Saskatchewan participated in a total of 43 community meetings in 2015. This participation included direct engagements with municipal authorities, educational institutions, charitable organizations and industry, open houses, and multi-stakeholder meetings such as those led by the Northeast Capital Industrial Association. These interactions provide us with insights into the cultural, social, political and industrial fabric of the community, as its aspirations and concerns evolve. We also make special efforts to stay connected with former employees. As the refinery has been operating for more than 60 years, there are many multi-generational families of workers – as well as “alumni” – living in the area who remain interested in the company and who serve as our informal ambassadors.

In Cuba, we participated in 32 meetings involving municipal and provincial authorities in Moa and the communities near our Oil & Gas and Power facilities. Meetings primarily related to the planning, execution and review of community development projects.

Community Grievances

In 2015, Ambatovy received 236 community grievances, 229 of which were addressed while seven were rejected for not meeting the credibility requirements outlined in the grievance management process. A total of 316 grievances were resolved in 2015 (including those that had accumulated from previous years).

Of the 236 grievances received last year, 231 related to impacts on society, predominantly impacted rice fields from construction activities, and a few were linked to other livelihood impacts, land acquisition and other issues. In response to the key issue of impacted rice fields, Ambatovy worked to restore rice paddies, where possible, and compensate farmers for their losses. Five grievances were environmental in nature, relating to water contamination by elevated levels of manganese (described under Water Quality), and odour resulting from gas released at the plant.

We recorded a 62% year-over-year decrease in the number of grievances received compared to 2014. We attribute this decline to the success of face-to-face consultations, significant progress on the completion of rice field restoration (which was a considerable issue during construction), as well as the increasing maturity and stability of our operations.

Two complaints relating to damaged infrastructure were received at Moa, but, after investigation, they were not addressed as grievances as they did not meet the requirements of the Cuban mechanism. No other community-related grievances were reported across the organization.

Government Relations

In 2015, we continued our government relations activities to build key relationships and address regulatory and political risks and opportunities in the jurisdictions where we operate. Throughout the year, we met regularly with high-ranking representatives of national, provincial, regional and local governments, diplomatic missions and multilateral organizations. Priorities included:

  • Building relationships with the new Alberta and Canadian governments
  • Securing approvals for permits and capital projects in Cuba, and ensuring they move forward in a timely manner
  • Supporting the priorities of the Cuban government for national development and foreign investment
  • Addressing governance challenges in Madagascar to ensure national laws and regulations are respected by all parties and remain stable and predictable
  • Contributing to consultations on climate change and emissions-related policy in Alberta
  • Encouraging stronger Canada–Cuba and Canada–Madagascar relations
  • Building support for our concerns with U.S. sanctions on Cuba that affect us, as relations between those two countries begin to normalize

In 2015, we drafted an important agreement with the Government of Madagascar relating to the payment of several millions of dollars in value-added tax (VAT) that is owed to Ambatovy. The agreement, which covers these arrears as well as go-forward VAT payments, is expected to be signed in early 2016.

Additional information on our political and regulatory risks can be found in our 2015 Annual Information Form, including an overview of how we are affected by the U.S.’s Cuba embargo and the Helms–Burton Act, which, among other things, prohibit us from doing business in the U.S. or with American entities.

Partnerships

Partnerships with non-governmental organizations (NGOs) and other civil society organizations continue to play a key role in our approach to addressing stakeholder issues and opportunities. Over the years, we have enjoyed mutually beneficial relationships with NGOs in Madagascar, Canada and Cuba. In 2015, we had more than 40 active partnerships with local, national and international NGOs and civil society organizations. The vast majority of these partnerships involved our work at Ambatovy in Madagascar, in particular to support environmental conservation and management. For a complete list of Ambatovy’s active partnerships, visit the Partnerships page on Ambatovy’s website.

In 2015, Ambatovy entered into three significant partnerships with international NGOs. Two involved Conservation International and Asity Madagascar (which is associated with BirdLife International) in conservation work in biodiversity offset areas that Ambatovy is responsible for (refer to Biodiversity and Land Management for more information). A third partnership was established with Search for Common Ground (SFCG), a well-respected peacebuilding and conflict transformation NGO. The partnership agreement is centred on accomplishing two primary objectives:

  • To enhance the capacity of Ambatovy staff and local community members to engage in constructive, solution-oriented dialogue, in order to build trust and improve mutual comprehension among both groups so they can work through issues of concern more effectively, and
  • To strengthen stakeholder understanding of the role of local authorities and communities in advancing good governance, and the role of government and other actors (NGOs, industry, etc.) in building sustainable communities and supporting participatory development, with the aim of enhancing the broader capacity for achieving community development aspirations.

Community Development

Management Approach

Now more than ever, stakeholders – from local communities to host country governments and civil society organizations – expect to experience tangible benefits and increases in their standard of living from natural resource extraction and processing. This is particularly true in jurisdictions where economic development has lagged, infrastructure is lacking and human development indices are low.

Within the industry, there is recognition that mining and energy companies have a role that extends beyond the simple provision of returns to shareholders. For a company to be truly sustainable, it must build broad social license and demonstrate that it delivers a net-positive benefit to local communities and to society as a whole. That is why benefitting people and helping catalyze the development of sustainable communities is so important to us.

Managing the expectations of local stakeholders, particularly in less-developed jurisdictions, is paramount, especially as we struggle with the low commodity pricing environment. When a large business enters an undeveloped jurisdiction, there are often expectations that it will solve many, if not all, of the area’s inherent socio-economic challenges. We are committed to helping improve the lives of people in and around our operations, but we rely on host country governments to discharge their obligations regarding basic services, particularly in the areas of health, education and infrastructure.

Because of the diverse operating contexts of our sites, the range of community development priorities varies dramatically. Community needs differ significantly from Canada to Cuba to Madagascar. As such, we have adopted a flexible approach to community development, while at the same time establishing company-wide guidance that ensures our values and expectations are preserved. In each jurisdiction, our investment decisions strive to support:

  • Socio-economic development
  • Public health and safety
  • Natural and cultural heritage

In addition, our community investment standard, which we revised in 2015, aligns with evolving good practice to maximize the value of our contributions, both to the recipients and to our business. (The standard was assessed by London Benchmarking Group (LBG) Canada as part of the design process.) It requires that we establish employee-led community investment review committees (CIRCs) at divisional and corporate levels to provide governance and oversight of decision-making. We take great care to avoid real or perceived conflicts of interest and to ensure spending complies with our business ethics and anti-corruption policies. All community investment reporting is now assured by LBG Canada on an annual basis.

Performance

Economic Benefit Footprint

When evaluating the overall financial impact that our presence delivers at local and national levels, we measure our economic benefit footprint, which includes payment of taxes, royalties and other monies to governments, the procurement of goods and services at the local and national levels, payment of local salaries, wages and employment benefits, and community investment spending. In 2015, we contributed more than C$1 billion in economic benefits to local communities and host governments at our operations around the world. The following table presents a breakdown of our economic benefit footprint for the year.

(C$)

Approximately three-quarters of our benefit footprint results from the purchase of goods and services from local- and national-level suppliers serving our operations. Given that Madagascar did not have a large-scale mining industry in place prior to our arrival, the Ambatovy Joint Venture has invested great effort in developing a local supply chain. The Ambatovy Local Business Initiative (ALBI) provides support to local businesses and entrepreneurs through training, mentoring and capacity-building programs. ALBI was created to fulfill Ambatovy’s “buy locally, hire locally” policy. To this end, ALBI is fully integrated within Ambatovy’s Supply Chain Management Department to identify local businesses capable of responding to company and market needs. By maximizing local procurement, Ambatovy provides a much-needed impetus to the Malagasy economy and to entrepreneurs. Read about ALBI’s work in 2015 in this case study and go here to learn about a small but promising ALBI-funded project involving wood recycling.

Local salaries and wages account for our second-most-significant contribution, reflecting the importance of our sector in raising the standard of living and creating wealth in communities adjacent to operations – in both developed and developing jurisdictions – through well-paying jobs.

Our payments to governments in 2015 also represented a significant contribution to host countries and communities. We strive to ensure that these payments are openly and transparently reported so that our contributions to national, regional and local governments are recognized, and to encourage accountability for the spending of those funds, which should go towards building essential infrastructure and increasing access to education and healthcare, especially for populations near our operations. As a Supporting Company of the Extractive Industries Transparency Initiative (EITI), we are committed to transparent reporting of payments to governments. Ambatovy has actively encouraged and supported the Government of Madagascar’s EITI candidacy and reporting efforts over the last several years and is an active member of the National EITI Committee. Visit this website to review EITI Madagascar’s latest report, which was published in 2015. Sherritt also developed a process to meet the reporting requirements of the Government of Canada’s Extractive Sector Transparency Measures Act (ESTMA), which requires companies in the sector to publish payments to governments in all jurisdictions. ESTMA came into force in mid-2015.

In Madagascar, Ambatovy has undertaken a collaborative approach to developing a mechanism to distribute royalty payments to local communities. Read this case study to learn more.

Community Investment

Community investment expenditures represent a little less than 1% of our total economic benefit footprint. Not surprisingly, Ambatovy is responsible for allocating the most significant portion of Sherritt’s community investment budget, reflecting the significant community development needs in Madagascar. Ambatovy’s central mechanism for investing in communities is the Social Investment Fund (SIF), a one-time $25 million allocation established in 2012 in partnership with the Government of Madagascar. The SIF supports several projects, such as improving access to sanitation, strengthening youth development and education, and enhancing civil protection. In order to be approved, projects require support from beneficiary communities, the government and Ambatovy. By the end of 2015, the entire SIF amount was allocated to 17 approved projects.

The table and graph below show the relative focus areas of our community investment, with the vast majority of investment contributing to socio-economic development.

In Cuba, we have been providing about half a million dollars in annual funding for important projects relating to public health and safety, transportation, sanitation, education and culture in communities adjacent to our operations for 10 years, as part of our longstanding commitment to sharing prosperity with the Cuban people. Every project we fund is directly linked to Cuba’s national, provincial and local development priorities. We believe that Cuba provides a model in development planning for other jurisdictions to emulate, and we are proud to support the country’s efforts. Refer to this case study for additional information on our contributions to Cuba in 2015.

In Fort Saskatchewan and in Calgary and Toronto, where we have administrative offices, community investment is much less significant and is used to support employee engagement, philanthropy and meeting the needs of the less fortunate. Our head office in Toronto also makes strategic investments to support divisional priorities, such as conservation programs in Madagascar and community health in Fort Saskatchewan. In 2015, the corporate office had initial conversations with international development organizations and non-governmental organizations on establishing a significant partnership for a flagship community investment program in one or more of our operating jurisdictions, to help strengthen our reputation as the partner of choice, who is truly committed to “shared prosperity”.

For 2016, we will uphold our longstanding community investment commitments and continue to pursue strategic opportunities that allow us to leverage partnerships, establish a flagship project and build our reputation and social license, while being conscious of the financial challenges that affect our ability to make such investments.