Weak global commodity prices translated into poor financial results for Sherritt in 2015. The price of nickel and oil declined by 40% and 30%, respectively. Offsetting this price environment was our 14% increase in nickel production, reductions in operating costs, and capital preservation activities. Given long-term price assumptions, we wrote down Ambatovy assets, primarily consisting of property, plant and equipment, by $1.6 billion. As a result, our net earnings for the year ended December 31, 2015 were negative $2.1 billion. Our cash position was $435 million. In 2016, we are focused on weathering what will likely be another difficult year for commodities and positioning ourselves for long-term success by:
- Upholding global operational leadership in finished nickel laterite production
- Extending the life of our Cuban energy business
- Preserving liquidity and building balance sheet strength
Please refer to our 2015 Annual Report for detailed information on our economic performance last year and an overview of how we plan on executing against our 2016 strategy.
Our business conduct is a reflection of the values that are the foundation of our company. Our Purpose and Our Promises describe our guiding principles and how we expect them to be lived every day as we carry out our business. Our Business Ethics Code provides clear guidance to our workforce on what it means to act with integrity. It covers conflicts of interest, fraud and corruption, fair dealings, protection and proper use of the company’s assets, compliance with regulatory requirements, disclosure, confidentiality, and reporting mechanisms available to employees and contractors. Sherritt’s Policy Committee, made up of senior executives from various key functions, is responsible for reviewing and approving new or revised policies.
Globally, there has been recent focus on eliminating corruption within companies, and between businesses and all levels of government officials. Many countries have passed anti-corruption legislation, imposing significant monetary and incarceration penalties for corrupt practices. Investigative activities by law enforcement agencies have also increased significantly, bringing effect to legislation.
As a Canadian company, we are subject to the Canadian Corruption of Foreign Public Officials Act (CFPOA), as well as anti-corruption laws in Madagascar and Cuba. The CFPOA prohibits Canadian business interests from making or offering improper payment of any kind to a foreign public official – or anyone acting on his or her behalf – where the ultimate purpose is to obtain or retain a business advantage.
Our Anti-Corruption Policy prohibits the violation of the CFPOA and other applicable anti-corruption laws. All divisions and offices must undergo anti-corruption training and log all government meetings and payments. In Madagascar, governmental and commercial corruption presents a significant risk, whereas in Canada and Cuba, it does not. As such, we provide additional training, awareness-building and controls at Ambatovy, where all suppliers with standard contracts must also sign our Anti-Corruption Policy.
Sherritt is very supportive of the transparent reporting of payments to governments. We are a Supporting Company of the Extractive Industries Transparency Initiative (EITI), to which we report in Madagascar. Visit this website to review EITI Madagascar’s latest report, which was published in 2015. We have also developed a process for meeting the public reporting obligations of Canada’s Extractive Sector Transparency Measures Act (ESTMA), the requirements of which are very similar to those of EITI. Additional commentary on transparency reporting can be found under Community Development.
In 2015, seven reportable concerns were investigated and closed. Of those, two investigations were completed by independent professional service firms while the other five were investigated internally by Internal Audit or management. These concerns mainly related to allegations of fraud within the company, such as inappropriate business relationships with vendors.
Upon starting employment with Sherritt, all employees are required to review and sign off on their understanding and acceptance of our Business Ethics Code. In 2016, the implementation of administrative requirements to ensure this practice is carried out by employees on an annual or semi-annual basis will be considered.
We updated our Anti-Corruption Policy in 2015 and held training sessions across the company to familiarize employees with the requirements and to address questions. The training provides a valuable opportunity to clarify what constitutes corruption and conflict of interest. We emphasize that the most important action an employee can take if faced with an uncomfortable situation is to ask for assistance from the person responsible for overseeing the anti-corruption program in their workplace.
A total of 1,864 employees were trained by the end of 2015, representing 54% of our total workforce that is eligible for this training. As part of the training, employees had to sign the policy to demonstrate their understanding and commitment to the principles. Training in 2016 is planned for the remaining 46% of eligible workers.
In Cuba, only expatriate employees and a handful of Cubans who work directly for Sherritt were required to take the training, given the nature of our joint venture relationships and our agreement with the state-run agency that provides our operations with workers.
Ambatovy began rolling out anti-corruption training to all eligible employees in October 2015; and by the end of 2015, 48% had completed the training, with the rest expected to be trained by March 2016. This training will be included in the onboarding process for new employees, starting in 2016. Over the last few years, Ambatovy also rolled out a “train the trainer” program for suppliers to increase their awareness of the requirements of the Anti-Corruption Policy. Ambatovy trained 274 contract workers from more than 100 suppliers as part of the program. These “trainers” have gone on to train more than 8,600 contract workers on our policy. Refer to this case study for further information.
Performance commentary on transparency reporting can be found under Community Development.
Understanding and expectations related to human rights in the mining and energy sectors began to evolve 15 to 20 years ago as companies increasingly turned their attention to countries that are less developed. Many of these countries were – and continue to be – characterized by weak governance and respect for the rule of law, extreme poverty, low-cost labour, a lack of business regulations, and less-than-ideal mechanisms to protect the human rights of their citizens. These and other factors would contribute to instances of conflict in natural resource development – often involving communities, companies, governments and security officers – as a means of resolving the grievances of local residents.
The work of Professor John Ruggie, on behalf of the United Nations, defined a practical human rights framework, known as the United Nations Guiding Principles on Business and Human Rights, that outlines the roles for state and business actors in the protection of human rights. It also identifies “access to remedy” for anyone with a human rights complaint as the single most important element for business to maintain its social license.
Currently, human rights issues do not represent a top risk at our operations. To ensure this trend continues, we are aligning with international best practices and expectations regarding human rights. We developed an enterprise-wide policy that commits to upholding the Universal Declaration of Human Rights, along with other international principles.
The primary human rights–related considerations for Sherritt include access to remedy; the interaction between security personnel and communities near our operations in Madagascar (addressed under Site Security); labour rights (addressed under Labour Relations); and children’s rights in Madagascar.
At Sherritt, remedy for complaints, up to and including potential human rights violations, is provided through the community grievance mechanisms in place at the divisional level. Grievance mechanisms are processes to receive, acknowledge, investigate and respond to community complaints. These are valuable early-warning systems that can resolve sources of friction between stakeholders and companies, and can, over time, build trust. We are incorporating best-practice guidance from a number of sources as we develop a grievance mechanism standard, to ensure it is both practical and credible.
Currently, we have a formal community grievance mechanism in place at Ambatovy. It includes an external grievance committee, comprising respected members of local communities, that meets quarterly to review the grievance management process and resolutions, and to provide feedback and suggestions for improvement to management.
At our site in Fort Saskatchewan, we have a long-established informal process for responding to complaints from external parties. In Cuba, there is a state-run system where citizens can file complaints against an entity, organization or enterprise whose activities they feel are adversely affecting their well-being. Commissions are set up to investigate grievances and develop action plans to address them. Sherritt’s management team, or that of our Cuban partners, is in involved in the process to address any grievances related to our operations.
Our Human Rights Policy also articulates our commitment to the Convention on the Rights of the Child. Violation of children’s rights is a fairly low risk in Canada and Cuba, but in Madagascar this risk is more significant. At Ambatovy, we have a zero-tolerance policy for child exploitation that the entire workforce must sign. This policy was drafted with the support of UNICEF, in response to an incident that occurred at Ambatovy several years ago. Refer to this blog posting for more information. We also support youth-led peer awareness campaigns on child exploitation issues and HIV/AIDS in Madagascar. All contracts or agreements awarded to local suppliers include clauses requiring the strict respect of international rules towards child labour. Ambatovy’s Local Business Initiative regularly verifies that these requirements are upheld.
Human Rights Grievances
In 2015, we introduced special considerations for children’s rights into our risk assessment process for security and human rights, as well as into our security procedure for the apprehension and transfer of suspects to public custody.
In Madagascar, 20 of our suppliers underwent an Ambatovy-led audit, which included criteria to assess their respect for rules and laws concerning child labour. We also provided assistance to child-protection networks in Moramanga and Toamasina to develop and finalize proposals for funding from international donors. See this case study for more on our work to support children and youth in Madagascar.