Everybody’s business: the nexus between Peace-Profit-Prosperity
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Everybody’s business: the nexus between Peace-Profit-Prosperity
July 14th, 2009The Commonwealth Club
Diana Klein
Presentation overview
Why is this link important? Role of business in conflict? Policy options for improving business
conduct in conflict
The nexus
Peace
ProfitProsperity
The nexus of evil
Conflict
LossesPoverty
Conflict:
•Armed conflict (civil unrest, war)
•Community level violence
Costs of conflict
SecurityHigher payments to state/private security firms; staff time spent on security management
Risk managementInsurance, loss of coverage, specialist training for staff, reduced mobility and higher transport costs
Material Destruction of property or infrastructure
OpportunityDisruption of production, delays on imports
CapitalIncreased cost of raising capital
PersonnelKidnapping, killing and injury; stress; recruitment difficulties; higher wages to offset risk; cost of management time spent protecting staff
ReputationConsumer campaigns, risk-rating, share price, competitive loss
Litigation Expensive and damaging law suits
Costs of conflict
• US$ 25 million + lost opportunities
• Esquel Gold Project (Argentina) – losses of US$ 379 million (reserves $ 1.33 billion)
• Samut Prakarn Wastewater Management Project (Thailand) losses of US$ 650 million
• Minera Yanacocha Gold Mine(Peru) –US$ 1.7 billion (lost opportunity after production costs)
• Middle East:US$ 12 trillion since 1991 (opportunity costs)
• Bosnia: US$ 60 billion to the country + $ 53.68 billion to the international community
• Rwanda :US$ 4.5 billion (humanitarian and peacekeeping costs)
• The Gulf War: over US$ 100 billion to the international community
Costs of peace
Conflict prevention- countries• Macedonia: $ US 255 million(potential conflict costs: $ US 15-
143 billion military & humanitarian expenditures)
• Slovakia: less than US $ 1 billion (during a 7 year period)
(potential conflict costs: US $ 1.2 billion per year- military & humanitarian expenditures)
Conflict prevention-companiesShell – Malampaya project
(Philippines) estimated at approximately US$ 6 million on a total project cost of US$ 4.5 billion (0.13% of total costs).10-15 days delay estimated costs: US$ 50-72 million
Compliance
What can business do?
Extractive Industry Transparency Initiative
Voluntary Principles on Security & Human Rights
Kimberley Process
Global Compact
Publish What You Pay
Equator Principles
Pay as You Go
Walk like an Egyptian
What can business do?
Example: There is inadequate provision of training and education for local youth. They cannot access local jobs and feel marginalised.Companies recruit trained and skilled staff from elsewhere, instead of training local youth. As a result young people feel further marginalised, resort to violence.
Example: Community members feel physically insecure, and there is inadequate security provision by authorities.Companies work with vigilante groups to provide security for their business, ignore wider community’s needs. Vigilante groups turn violent and become part of the problem
Conflict Sensitive Business Practice
Risks
Impacts
Create positive value
Social Investment Public policy dialogue
Core business
Create positive value
Conflict sensitive business practice
Compliance
Company engagement at 3 levels
Policy options?
Dear Policy Maker…
• Accountability – Consider a company’s record on social responsibility as one criterion for
evaluation in the awarding of government contracts – Require companies to perform conflict impact assessments, undertake due
diligence with regard to brokers, intermediaries and middle-men • Norm creation & Implementation
– Enhance public sector engagement with and support for the full implementation of ongoing private sector initiatives (VPs, KP,etc)
– Expand the adoption of the Equator Principles on project finance to include public agencies and institutions
• Adoption of conflict sensitivity– Deepen and extend conflict sensitive business initiatives to sectors beyond the
multinational extractive industry, to suppliers and subcontractors, and state-owned enterprises
– Create conflict-sensitive standards for government procurement, lending, official development assistance, export credit, insurance and investment promotion programs
• Review & revise:– Aid, trade and investment support policies to provide incentives for businesses
who can act in a conflict-sensitive manner or support peacebuilding(from: Global Compact: Enabling Economies of Peace)
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