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Stakeholder views on materiality

Improvements to Cairn’s materiality process have helped us better understand stakeholder perspectives and manage the topics that matter most to both them and the business.

We improved our approach to understanding stakeholder perspectives at the end of 2015 by conducting focused interviews with a cross section of stakeholders. This included representatives from: investors and finance organisations; business partners and peers; contractors and suppliers; communities; employees; industry organisations and agencies; non-governmental organisations; academia; and, government and regulators. Despite inviting several regulators and government representatives, none felt it was appropriate to participate.

The key comments received from the stakeholders taking part, our responses and the resulting change to the materiality matrix are given in the table below.

Issue Comments Response Resulting change
Materiality process

Most agreed that a materiality process is useful, although some would welcome a wider, more comprehensive engagement including increased social representation to improve the process.

Some felt the process to be too top heavy and more suited to oil and gas majors. Others indicated stakeholder prioritisation as important and consideration of change over time and changes in probability as important.

Most considered the risk weighting valuable but importance to Cairn difficult to understand.

We use our internal risk processes from Cairn Operating Standards as the starting point, which are built from both strategic corporate issues and tactical operation risk assessments (including probability and impact).

It is difficult to align issues in all cases and some risks may contribute to more than one issue. This means detail can be lost in the aggregation process but keeping all risks would make the process more complex and very difficult to summarise.

In 2016, we aim to clarify links between risk and issue topics to assist in transparency.

We have started to improve input from stakeholders and hope to continue to improve in that respect.

Aim to streamline and clarify our materiality process in 2016. This has been included in our Corporate Responsibility (CR) objectives for the year.

Tax transparency

Issue most commonly commented upon. Stakeholders felt this was not the top priority for stakeholders on the basis it is being managed.

This is the most significant finding and in general the feeling is that this is less important to the majority of stakeholders.

This remains a material issue and it will be revisited during our routine assessment of risk.

We have reclassified this as ‘significant’ to stakeholders although it remains high in our risk registers.

We have also widened the scope to ‘Transparency’.

Human rights

Issue highlighted regularly; some thought this should be higher in importance to stakeholders, as well as a potential issue in Senegal. Others agreed with Cairn’s assessment.

Senegal human rights are tracked routinely by our asset. The issue in Western Sahara remains and may rise in importance to Cairn if seismic activities are conducted in 2016.

Raised from ‘medium’ to ‘significant’ importance to stakeholders.

Climate change

This issue was also discussed regularly; some thought it should be higher in general and requires boundary definition, although others did not regard it as a corporate concern. In general, there was divergence in opinions on where this should be placed.

At present, we have no production but agree climate change is an issue that will only increase in significance with time. We have been examining impacts of COP 21 in our areas of interest in 2016. In addition, it has risen in importance to Cairn since 2014.

Maintain in current position on matrix as ‘high’ importance to stakeholders and ‘medium’ to Cairn.

Net social and economic benefit

An issue that was raised by several stakeholders; many thought it should be higher on both axis. Some thought within the top issues. It was highlighted as particularly important given Cairn’s increased activity and presence in Senegal following our 2014 success.

This is an area in which interest is rising and we consider this will continue especially in the event of further success in Senegal.

We are looking at how we improve our understanding and demonstration of social and economic benefit in 2016.

Increase importance to stakeholders from ‘medium’ to ‘significant’.

Political uncertainty (host governments)

A few stakeholders considered this should be of higher significance to Cairn (e.g. India) and noted it as an issue of rising significance.

This is a topic we continue to track in all areas of our operation and the Cairn India tax issue was dealt with in tax transparency.

We do understand this is a concern to all parties and it will continue to be an issue to monitor, given elections, response to global security matters and oil price volatility.

We have increased this slightly in the ‘medium’ category as this was not a common concern to stakeholders; however, it remains high on Cairn’s agenda.

Biodiversity

In general, stakeholders understood the location but some thought more reflection was needed.

We cover the biodiversity issues in our Environmental and Social Impact Assessment (ESIA) activities and produce biodiversity action plans if required.

If development progresses we will need to look at how our activities impact both environmentally and socially on a wider ecosystem basis.

We have left this unchanged for now as it is currently assessed highly for stakeholders but we acknowledge there is an argument for increasing this in importance to Cairn.

Corporate governance – business ethics

This was considered important to a few stakeholders and some thought it may cross over with other issues.

Again, useful feedback and we will look at how we classify Corporate governance – business ethics issues going forward, along with crossover with other issues such as transparency.

This will be reviewed in the 2016 review.

On balance, we believe the ‘significant’ assessment on both axis seems to reflect concerns raised and so have left the ratings unchanged.

Workplace health and safety

Operational and process safety

Security of people and operations

Mostly accepted by stakeholders with some comment on increasing security. In addition some increase was suggested for Senegal.

We agree that global security is of increasing significance and we will continue to evaluate this in all our locations.

We have also highlighted the need to ensure travellers are properly safeguarded given recent developments, and improvements are in hand in this respect.

Senegal remains a key focus for operational safety.

On balance, the assessment appears correct and consequently has not been adjusted.

Operational and project performance

Some confusion regarding meaning and one stakeholder suggestion for increasing priority.

This area is one that remains important to ensure we are effective.

We will seek to improve clarity around this issue.

We leave this unadjusted given it was not raised more frequently.

Preventing major accidents

Preventing major spills

Some mention as not being high on the Cairn axis but considered to be generally in the correct location due to the risk weighting.

These issues are assessed on the basis of the risk and probability of major incident remaining low, although the impact would be high, hence the overall assessment.

We recognise that this will remain of highest importance to stakeholders.

Classifications remain unchanged.

Complying with Cairn’s Business Principles in Cap Boujdour

Considered a narrow scope by a few when compared with other topics.

This is a fair comment and was placed on the matrix originally because it had a high profile and may be so again in the event of seismic activities in the region. We will re-evaluate this in our 2016 review.

Other areas in which we operate are evaluated for human rights and performance is tracked.

Classifications remain unchanged.

Product stewardship

Some considered it too low on both axis, increase suggested by one due to Arctic drilling and climate change.

This is a difficult issue to properly assess, especially as we have no operated production.

We recognise that there are facets of both production and demand.

Climate change is dealt with in a separate issue and Arctic drilling is likewise dealt with in other areas. The latter would be reviewed should we recommence active operations in Greenland and Norway.

Classifications remain unchanged.

Other comments were given and considerations taken forward in terms of improvement for 2016. These include:

  • linking some issues, in particular corporate governance and business ethics;
  • safety of people and operation is linked to workplace health and safety as well as preventing major accidents and spills;
  • separation of non-operated joint ventures from overseas investment; and
  • potential for developing position for new issues:
    • public policy and government relations
    • (local) community engagement/local content
    • worldwide oil and gas price volatility
    • natural capital.

Others were also suggested including: low-level pollution, ageing assets, carbon trading and escalating operating costs.

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