[PDF] Community Development Toolkit - CommDev

CASE STUDY continuedFinancial Valuation (FV) Tool for sustainability investmentsThe case of Newmont Ghanasocial responsibility teams and led to a growing appreciation among Newmont staff of therelationship between social responsibility investments and risk management and the abilityof the ESR staff to communicate from a risk and finance perspective.Value-creation perspectiveA cost-benefit analysis for each sustainability investment was conducted by finance and ESRstaff to identify “value drivers” or productivity gains/savings to Ahafo. Where evidence tosupport value drivers was not available, conservative assumptions were developed and keyperformance indicators identified for future monitoring and evaluation. Finance was criticalto this process by supporting the ESR team to express the value of their programs in termsof cost (operating expenditure and capital expenditure), benefits (e.g. cost savings andproductivity leading to financial gains) and operational risk mitigation. For example, a costbenefitanalysis of Newmont Ahafo’s malaria control program revealed several key valuedrivers. In 2006, the average monthly workforce malaria incidence rate was about 8%, costingthe Ahafo mine nearly 76,680 hours of lost productivity due to employee and contractorabsenteeism, translating into an operating cost of nearly US$400,000. Without the malariacontrol program, the projection of the direct costs to the company over a five-year period(2006–2010) due to absenteeism alone would have been about US$2 million. The cost formedication and medical consultation (average US$30 per case) for that five-year periodwould have stood at about US$500,000 and indirect costs (e.g. workforce morale, candidaterefusals to accept posting to Ahafo, cost of family members contracting malaria, etc. atUS$30 per case) contributing to another loss of US$500,000. Thus, the total cost of malariato the company without a malaria control program over the five-year period would have beenaround US$3 million, minimum. 33 In comparison, Newmont Ghana invested US$1.5 million inthe malaria control program over the same five-year period. This achievement made bythe company in the fight against malaria has received global recognition by the GlobalBusiness Coalition in 2010. The project team recognizes some limitations to fully integratethe financial outputs of the FV Tool due to accounting principles but observes an improvedunderstanding of shared value by non-sustainability business functions.PLANNING TOOLSBusiness process integrationThe real test of the FV Tool will be determined by Ahafo’s ability to formally integrate theFV Tool process into the business process and planning cycle. In the past, ESR staff haverelied on Newmont’s social responsibility standards, intuition around benefits and moralarguments to defend budget requests rather than value, NPV and risk language. Over thepast year, there has been a considerable improvement in the ESR staff’s ability to evaluatetheir sustainability investments using principles of value creation and protection. Ongoingtraining efforts are being conducted to expose ESR and finance staff to the types of inputsrequired and analysis of outputs generated by the FV Tool and use of the budgeting templates.Lessons learnedA key learning from using the FV Tool is not how much sustainability investment cost butrather how dispersed pieces of information limited the company from having moreinformed discussions based around the value of sustainability investments in a languagethe business understood. That is, the outcome is an ongoing process for evaluatingsustainability investments rather than a point-in-time prioritization or go/no-gorecommendation. The enhancement of communications within the company and withstakeholders has helped create common understanding of how defining value should beat the core of all the company’s resource allocation going forward.33 Private Sector Integrated Malaria Control in Ghana: Methods, Impact and Business Case for ProtectingEmployees – Godwin Fuseini, Peter Ebsworth, Dave Knight, Paul Caiger, Chuck Burns, Michael J. Bangs.Community Development Toolkit121