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Responsible governance

Responsible governance

We consider our material issues within four themes, in line with our Business Principles shown below: governance, people, environment, society.

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Responsible Governance

#1

We manage risk and seek to continually improve.

#2

We behave honestly, fairly and with integrity.

Behaving responsibly to people

#3

We develop the potential of our people.

#4

We foster a workplace that respects personal dignity and rights, is non-discriminatory and provides fair rewards.

#5

We provide a healthy, safe and secure work environment.

Behaving responsibly towards the environment

#6

We take a precautionary approach to our effect on the environment.

#7

We strive to prevent and minimise our impact on the environment.

Behaving responsibly to society

#8

We seek to make a positive social impact in every area where we work.

#9

We respect the rights and acknowledge the aspirations and concerns of the communities in which we work.

#1 We manage risk and seek to continually improve

Management of Material Issues

Every year, we conduct a thorough materiality assessment to better understand issues that are material to both the business and to our stakeholders, and that we need to manage on an ongoing basis. In doing so, we ensure we are well placed to manage our risk efficiently and to operate with the support of our many stakeholders.

Investment

Increasingly, investors around the world are asking us to demonstrate our responsible working culture and practices before they make investment decisions.

Funding

The cash flow from our production assets funds our exploration and development activity. This self-funding business model enables us to deliver our strategic objectives.

Joint Venture Partners and Funding

We recognise the increasing pressure on our industry to improve performance within a challenging business environment. Volatile oil prices continue to be a principal risk, so working closely with our joint venture partners to allocate capital efficiently is vital.

Global Energy Transition

This continues to be a high-profile issue for Cairn and its stakeholders, and the Board has actively considered climate action related risk during the year.

Cairn’s ABC Practices

Our zero-tolerance position on bribery, fraud and corruption continues to protect our reputation, our ability to access funding and our impact on people and communities. We have continued to provide training throughout the company with 199 employees trained in Cairn’s anti-corruption policies and procedures in 2019.

Operations in Sensitive and Complex Locations

We operate in a number of different jurisdictions around the world, each of which presents a unique set of physical and regulatory considerations such as logistics, environment, national legislation and local community context. As part of our new ventures work, understanding often increasingly complex country environments is paramount to operating to best practice standards and managing associated risk accordingly. Wherever we work, we are committed to not operating in UNESCO World Heritage sites.

#2 We behave honestly, fairly and with integrity

Business Partner Alignment on Corporate Responsibility Issues

Working ethically requires our business partners, as well as our employees, to align on CR issues, such as adhering to our Code of Ethics. In 2019, we revised and reissued the Code to all personnel.

Climate Change Policy and Planning

Given the importance of climate change policy and planning to both Cairn and its stakeholders – especially investors – we have assessed our reporting against the Task Force on Climate-Related Financial Disclosures (TCFD). We are building on our recent climate portfolio resilience review by using more challenging scenarios, and developing a dashboard to monitor trends in climate action indicators. A workshop on managing energy transition risk was held at our Board meeting in November 2019.

Governments’, Authorities’, Contractors’ and Suppliers’ ABC Practices

Maintaining transparent relationships free from bribery and corruption with governments, authorities, contractors and suppliers in the locations where we operate is a high priority for Cairn.

Tax and Payments to Governments Including Fines and Prosecution

We are committed to transparent compliance in the UK, EU and other jurisdictions where we work, many of which are increasingly complex and uncertain from a legislative perspective. We also comply with a number of voluntary standards. We supported the adoption of the new 2019 EITI standard, approved at the EITI Global Conference 2019, which requires implementing countries to publish all extractive contracts, licences and payments to and from governments from 2021, and share any information about fines and prosecutions, as and when relevant.

#3 We develop the potential of our people

People Management

We work with key sourcing organisations across the UK to help us find the best people to match our needs and aspirations. We have attracted them to live and work in Edinburgh from across the UK, as well as from Europe and the United States.

Enabling and empowering people to work at their best is the key to being a highperforming organisation, so proactively managing our workforce is critical for us. We have people across all levels of our business with the competency and potential to deliver our strategy. We are working with several partners to build a flexible assessment tool that identifies any skills gaps so that we can implement focused, accelerated development.

Learning and Development

Through our ongoing commitment to professional development, managers work with team members to support their career aspirations and help them to deliver greater value to the business. We offer opportunities through e-learning modules, traditional classroom training, workshops, conferences and field trips, and we regularly have people on overseas secondments as part of their development.

In 2019, we launched the Cairn Academy. This online tool enables colleagues to undertake both mandatory compliance and self-help refresher training, to improve their understanding of important governance, regulatory and security topics as well as our processes and procedures. We plan to give all staff access to relevant learning and development opportunities through this platform, helping to maintain the high levels of competency we demand.

Management Training

Empowering our managers to support and motivate their teams, our bespoke modules – covering Performance-Enhancing Discussions; Conscious Management; Enhanced Team Performance and Engagement; and Effective Coaching Skills – were included in our long-established Management Bootcamp programme in 2019.

All people managers will have completed them by the end of 2020. To maintain a strong line of succession, places are also open to staff interested in becoming managers in the future.

To support young people, we also:

  • supported and sponsored local events that promote STEM subjects;
  • held a summer intern programme for seven university students; and
  • supported work experience opportunities for a number of schoolchildren throughout the year.
#4 We foster a workplace that respects personal dignity and rights, is non-discriminatory and provides fair rewards

Diversity and Inclusion

Our organisation’s future success depends on a diverse range of talented people with the necessary skills, competencies and passion. For us, diversity is about recognising and respecting our differences, and inclusion is about getting the best from those differences.

We continue to develop our diversity metrics to promote equality of opportunity, pay and reward on a non-discriminatory basis.

Employee Engagement

Our people are the foundation on which our success is built, and we aim to create positive, collaborative work environments that enable them to fulfil their potential. We respect personal dignity and rights, and want everyone to feel involved, heard and valued by colleagues and managers.

We engage with our people through a number of channels, including regular staff meetings, monthly ‘pulse’ surveys, biannual Employee Voice Forum meetings, AGMs, staff focus groups and our intranet. Such engagement has led to greater clarity about our strategy, a fresh approach to entering new countries, a revised model for internal communications and team workshops about collaboration.

Employee Voice Forum

In May 2019, we launched our Employee Voice Forum, which gives our people direct access to the Board. Biannual meetings, chaired by Non-Executive Director Nicoletta Giadrossi, put colleagues’ concerns, ideas and suggestions forward for the Board to consider during their decision-making discussions. The eight members of the forum utilise the outputs from our employee pulse surveys to identify common themes and to stimulate debate and discussion.

Rewards and Benefits

Every year, we benchmark salaries and benefits against other oil and gas companies. This helps us to continue to offer a competitive package as a way to attract and retain employees. We provide employees with an annual Total Reward Statement (TRS) to demonstrate the total value of their compensation and rewards, as well as an online Rewards and Benefits Guide for UK-based staff, giving them immediate access to relevant information and resources.

#5 We provide a healthy, safe and secure work environment

Workplace Safety

Providing a safe working environment is a core corporate responsibility, and minimising risks to people and the environment is of paramount importance to us. Managing safety hazards involves several safe working procedures, including management visits, audits, a permit-to-work system, toolbox talks and safety drills. We actively engage with contractors to ensure they have effective systems in place. Although we have limited direct exposure to potentially hazardous materials, we still have robust requirements for chemical and waste management in our CRMS, to protect human health and the environment.

We ensure compatible arrangements from our contractors. In the UK, for example, we conducted on-board training and used other awareness-raising communications to manage the risks associated with drilling wells using oil-based mud.

We support all staff who may be exposed to health risks such as infectious diseases, where we have assets or during visits to new locations. We perform risk assessments to identify and reduce health risks and other risks before travel and have improved our Traveller Health and Security intranet site.

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#6 We take a precautionary approach to our effect on the environment

Greenhouse Gas (GHG) Emissions

GHG emissions from our activities arise mainly from the combustion of fuels such as marine diesel by rigs and transport vessels and form a relatively modest part of our operational footprint. We monitor and manage the emissions from our assets on an ‘operational control’ basis and disclose them in accordance with industry requirements and standards. Some of the locations we work in, such as the UK, are heavily regulated so complying with national regulators’ requirements is an important aspect.

Around 95% of the GHG emissions associated with our operations occur in the supply chain, which means our influence over carbon management and reporting is limited largely to the selection of contractors, efficient operations and the use of modern equipment. For example, one vessel contracted for our marine operations in Norway was powered by liquified natural gas (LNG), although the availability of such alternative fuels varies with location.

In absolute terms, our annual GHG emissions vary with the duration and nature of the projects during the year, but most arise from exploration and appraisal activities. The selection of major equipment and contractors is influenced by safety considerations, technical well requirements, the distance between operations and support bases, and local environmental and meteorological conditions.

2019 was a year of high activity for Cairn. We had three concurrent drilling campaigns during the year, with one operated well in the UK, two in Norway and two in Mexico, in addition to three non-operated wells. By contrast, in 2018, our operations involved only one well using a rig with relatively low energy demand.

In line with the increase in activities in 2019 our total GHG emissions increased to 43,496 tonnes CO2e. Normalised emissions also increased to 42.74 tonnes CO2e per 1,000 hours worked.

Higher than expected emissions and normalised emissions occurred overall due to the need to drill an unplanned side-track as a result of geological challenges, while maintaining safe operations in our Bitol-1 Well in Mexico. In addition, normalised emissions increased due to weather delays affecting access to our operational supply and aviation bases in Mexico causing greater standby time than anticipated.

Acknowledging the importance placed on climate change risks by our investors, we have assessed our reporting against the Task Force on Climate-Related Financial Disclosures (TCFD).

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#7 We strive to prevent and minimise our impact on the environment

Protecting Biodiversity and the Environment

Global awareness of the threat to biodiversity has increased dramatically in recent years. We have always recognised the risks to the habitats, ecosystems and species that sustain our planet, and their importance to communities relying on them. We remain committed to protecting them in the locations where we work and we do not operate in World Heritage sites.

Where our current or potential activities might affect critical habitats, protected areas or the welfare of communities relying on ecosystem services, such as Suriname and Mexico, we undertake environmental and social assessments of their potential biodiversity impacts. We then work with technical specialists, government departments, NGOs and other local stakeholders on any mitigation activities required.

Our approach to this complex and critical work is set out in our CRMS and all our commitments related to preserving biodiversity are covered by our Business Principles and our Environment Policy, which was reviewed and reissued globally in October 2019. We also require biodiversity aspects to be included in investment proposals to identify critical risks before any work commences.

Understanding Biodiversity Risks Offshore Mexico

We are working hard to understand the biodiversity risks associated with both operated and non-operated new ventures opportunities, such as the potential environmental impacts offshore Mexico.

We carried out a Critical Habitat Assessment (CHA) and a residual Biodiversity Impact Assessment (BIA) for Block 9, one of our operated licences offshore Mexico, which identified possible impacts on marine turtles arising from our planned activities. One of the species is the critically endangered Kemp’s Ridley sea turtle, the rarest species of marine turtle.

Taking into account the mitigation measures already underway through our Environmental and Social Impact Assessment (ESIA), we have proposed additional monitoring and recording of all sea turtles and marine mammals by an observer for our offshore drilling unit and any support vessels, which were restricted to speeds below 10 knots.

Environmental Baseline Surveys

Environmental baseline (EBL) surveys help us to define existing biodiversity, environmental and other conditions near our activities, using techniques including photography, seabed sampling and physicochemical analysis. We conducted several EBL surveys in 2019 in preparation for activities in the UK, Norway and Mexico. We also undertook a number of environmental desk studies in support of our new ventures team when looking at new opportunities.

As well as providing data for assessing our potential impacts on habitats and developing mitigation measures, EBL surveys also help to determine the extent of existing damage arising from the previous activities of others. Repeating these surveys on entering and exiting a location helps to delineate our impact and avoids liability for impacts caused by others.

#8 We seek to make a positive social impact in every area in which we work

We seek to share the value generated by oil and gas discoveries through our activities. We promote good practice, support a wide range of international agreements and standards, and develop programmes designed to support capacity building, local participation and the mobilisation of communities.

Social and Economic Impacts and Opportunities

Our CRMS requires us to evaluate the potential social risks and impacts of any major activity we undertake using a Social Impact Assessment (SIA), the scope and nature of which depends on the local context and regulations. SIAs are often performed as part of a combined Environmental and Social Impact Assessment (ESIA).

We also use the UN Sustainable Development Goals as an additional framework for understanding environmental, social and governance risks and opportunities, and developing Impact Benefit Plans.

We develop a social management plan for each project to mitigate any negative impacts and enhance the positive benefits identified. In this way, we can assess and track the benefits and impacts together, with the aim of providing a positive overall benefit.

#9 We respect the rights and acknowledge the aspirations and concerns of the communities in which we work

Local Community Stakeholders

Understanding the concerns of the communities in which we work, and meeting their needs and aspirations, are key to mitigating the possible impacts and enhancing the benefits of our activities. For each project, we develop a stakeholder engagement plan, which details how we will access information and community feedback to inform our understanding. This includes monitoring media and civil society commentary, stakeholder enquiries, community engagement, government and local authority engagement, and the use of grievance mechanisms.

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