Business Principles Business Principles 1
1.1. Introduction As one of Europe s leading independent oil and gas companies, Cairn Energy PLC ( Cairn or the Company ) aims to discover, develop and deliver value from our assets and people for the benefit of all our stakeholders. Founded in 1988, we have a proven track record of creating value and providing an essential source of energy while, at the same time, safeguarding people and the environment, and respecting and contributing to the communities we are a part of. Everything we do is guided by our core values of building respect, nurturing relationships and acting responsibly (the 3Rs ): BUILDING RESPECT: We act with respect for people, their communities, the environment, human rights and the law. NURTURING RELATIONSHIPS: We act honestly, transparently and with integrity to develop strong and lasting relationships with all our stakeholders. ACTING RESPONSIBLY: We behave fairly, ethically and are accountable for our actions. We believe in, and act on, our responsibility to care for people, society and the environment. All our stakeholders - investors, shareholders, employees and the governments and citizens of our host countries - have expectations that we will work in a safe, responsible and ethical manner considering both the immediate needs and those of future generations. Based on our core values, our 10 Business Principles shown pictorially in Figure 1, set out our goals and the expected behaviours in the management of our business. We are committed to working in accordance with our policies and upholding high standards wherever we operate. We are a signatory to the UN Global Compact and are a Participating Company in the Extractive Industry Transparency Initiative. These Business Principles must be implemented by all directors, officers and employees of Cairn and its subsidiary companies (the Group ), and others that work on the Company s behalf. They are relevant across all our business operations, and are promoted to contractors, suppliers, agents and joint venture partners. They underpin our Business Management System which consists of the Cairn Corporate Responsibility Management System (CRMS), Cairn Operating Standards (COS) and Cairn Internal Control and Assurance Framework (ICAF). The Business Management System defines what we stand for, our Standards describing how the business works and our Procedures explaining how we deliver to the Standards. Compliance with the Business Principles is overseen by the Senior Leadership Team and Management Team. Employees are encouraged to report actual or potential infringements of the Business Principles through their line manager or through the Whistle-blowing Procedure. 2
Figure Error! No text of specified style in document.-1 Cairn s Business Principles 1.2. Business Principles 1.2.1. Core Principle - We behave honestly, fairly and with integrity. Behaving honestly, fairly and with integrity is central to all of Cairn s interactions. We comply with applicable legal, regulatory and licence requirements and strive to respect international norms of behaviour. Our Group Code of Business Ethics ( the Code ) establishes the standards of business ethics and conduct imposed on everyone who carries out work for or on behalf of, or provides services to Cairn. We have a zero tolerance approach to bribery and corruption which is vital to protect and maintain our reputation for doing business ethically. Our Anti-Bribery & Corruption (ABC) Procedures guide our behaviours and clarifies our expectations of employees, partners and suppliers. As part of our efforts to build on our ethical culture and embed 3
our zero tolerance approach to bribery and corruption, we provide regular training and communications to all staff to ensure they are aware of their ethical responsibilities and that they know when and how to seek advice. We seek to demonstrate leadership throughout our business and in our relationships with others. Our Corporate Responsibility (CR) Management System (CRMS), sets out Standards, defines responsibilities and provides Procedures and Guidance on how environmental, social, health, safety and security risks and impacts are identified, assessed and mitigated. CR risks and issues are identified through our engagement with stakeholders and also influence our assessment of which is material to our stakeholders. We are committed to communicating regularly and transparently on material CR issues that may affect stakeholders and discussing issues affecting our business with government at appropriate levels. Cairn does not engage in party politics or make donations to political parties, candidates or lobbyists. Cairn operates in various different territories with diverse tax obligations and requirements. As a Group, Cairn ensures that in each territory it complies with local tax rules and regulations and has adopted a policy to ensure the company does not enter into artificial tax avoidance schemes. 1.2.2. Overarching Principle We manage risk and seek to continually improve Our approach to risk is set out in our Group Business Risk Management Policy and supported by our risk management standards and procedures. We continually review our approach and our assessment of risks acceptable and not acceptable to the Company. For risks within our acceptability criteria we also employ a gated Project Delivery Process (PDP) on projects, which is designed to reduce risks in line with the As Low as Reasonably Practicable (ALARP) principle. We set annual objectives and targets and measure and report our performance against these. We regularly review the risks associated with the delivery of our business objectives and the efficacy of our internal controls and we seek to continually improve our performance in all areas. We report and investigate all health, safety, security, environmental and community related incidents. We have formal grievance procedures for our staff and communities affected by our activities, implement appropriate corrective actions and monitor the outcome to confirm satisfactory closure. We carry out regular management reviews and audits and share lessons learned. 1.3. Behaving Responsibly to People In Cairn we utilise the skills and knowledge of our people to give us our competitive advantage. We aim to develop and enhance the capabilities of our people by creating a culture which aims to expand all employees capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured and where people are continually learning. In our daily interactions with colleagues and external stakeholders we seek to give and earn respect, empower our people and challenge conventional thinking. The atmosphere is one of collaboration, empowerment and openness. We provide a lively and productive environment where people can add value and are given opportunities to develop to their full potential. 1.3.1. Principle We foster a workplace that respects personal dignity and rights, is nondiscriminatory and provides fair rewards Our global policy on equality of opportunity and diversity sets the standard for fostering a positive working environment which respects an individual s personal dignity and rights, and which is free from less favourable treatment on the grounds of gender (or gender re-assignment), disability, race (including colour, ethnic or national 4
origin, creed), marital status, age, sexual orientation, responsibility for dependants, religion or beliefs or any other inappropriate distinction. We value diversity and we recruit and promote employees on merit. We provide fair and just rewards for all our workers. We do not tolerate harassment or bullying of any kind. We recognise the need to develop effective communication and consultation with employees and recognise that all employees have the right to freedom of assembly, association and collective bargaining. We do not employ forced, bonded or child labour and take steps to ensure that this does not exist in our supply chain. Through implementation of our Contractor Management Procedure and Strategic Contractors Engagement Plan we also look to use our influence and leverage to ensure workplace rights are respected in the supply chain. 1.3.2. Principle We provide a healthy, safe and secure working environment. Throughout the Group our aim is to promote health and welfare and eliminate all work related injuries and illnesses. The Group aims to understand, prevent and manage major accidents hazards and risks to people and the environment. We are committed to protecting the health, safety and security of employees and contractors working on our sites and the people who come into contact with our operations, and to protecting and enhancing the sustainability of the environments in which we operate. Before entering new locations or commencing a new activity we conduct risk assessments and will not proceed where the health, safety and security of our people and operations cannot be assured or where we cannot operate to our or equivalent standards for both normal and emergency situations. We seek to demonstrate leadership in all aspects of health, safety and environmental matters and work to build and maintain a strong culture guided by our HSE Culture Framework. Our Health, Safety and Security and Environmental Policies spell out the requirements for employees and contractors and we endeavour to work with other business partners who have equally high requirements. Additionally, we aim to develop supportive relationships with our local communities which are important to assist in the protection of our people and assets. 1.4. Behaving Responsibly to Society 1.4.1. Principle We seek to make a positive social impact in every area that we work. Our operations can affect the social and economic environment of the communities where we operate. As set out in our Corporate Social Responsibility (CSR) Policy, we engage with local communities, government, business partners and other stakeholders to understand the issues and concerns of the communities in which we work and we seek to make a positive contribution. Tools such as Environmental and Social Impact Assessments (ESIA) and Social Baseline Studies are used to understand risks and impacts and develop appropriate mitigation strategies. We contribute to community and social development through carrying out our business activities, paying tax and providing employment, skills development and through trading with local enterprises. We seek to encourage the development of local skills and promote the use of cost effective local goods and services by our suppliers and contractors, providing standards can be met and maintained. We also add to the benefits generated by our operations through focused and appropriate social investment. 5
1.4.2. Principle We respect human rights and acknowledge the aspirations and concerns of the communities in which we work Cairn is committed to respecting internationally recognised principles on human rights and seeks to ensure noncomplicity in human rights abuses. We support the principles contained within the Universal Declaration of Human Rights through an approach guided by and aligned with the Guiding Principles on Business and Human Rights. Our human rights policy is integrated in our Corporate Social Responsibility (CSR) Policy and our Corporate Responsibility Standard Operating Procedures clarify requirements across the business. We have established Group Security Procedures which address the steps to be taken to mitigate security risks in our operations. These also seek to ensure that standards of operations, equipment and training of personnel meet the requirements of the Voluntary Principles on Security and Human Rights and reflect the requirements of key UN human rights guidelines. This includes Basic Principles on the Use of Force and Firearms by Law Enforcement Officials and the Code of Conduct for Law Enforcement Officials. We recognise that our activities might be carried out on or affect the territories of indigenous and tribal peoples and that we must work towards achieving free, prior and informed consultation and, where appropriate, consent, on the use and management of natural resources. We take appropriate action to prevent or mitigate any adverse impacts where land is acquired or used. Through our assessments of social and environmental risk and impact we seek to understand any impacts our operations may have on cultural heritage. We strive to protect and support cultural heritage by undertaking internationally recognized practices for its protection. 1.5. Behaving Responsibly towards the Environment 1.5.1. Principle We take a precautionary approach and avoid, wherever possible, negative impacts on the environment and biodiversity We recognise that oil and gas exploration, development and production activities have an impact on the environment, biodiversity and ecosystem services. Our Environment Policy is reviewed regularly and establishes our commitment to taking a precautionary approach, avoiding and mitigating negative impacts on the environment and biodiversity. We will cooperate with others to encourage the development and sharing of environmental knowledge and technologies. We seek to ensure the promotion of the sustainable use of biological resources is in line with the Convention on Biological Diversity. We are committed to not operating in UNESCO designated World Heritage Sites, and will only undertake operations that affect other protected areas and recognised sites (such as Ramsar sites, IUCN category I-IV areas) after due diligence of potential biodiversity impacts. The presumption that Cairn operates under is that we will not undertake activities in such areas in the event that significant impacts are likely. We assess, manage and monitor our environmental risks in a manner consistent with the principles of the International Environmental Management Standard ISO14001 and require our business partners and contractors to do the same. Environmental Impact Assessments ( ESIAs ) are the principal tool used to identify potential impacts. 6
1.5.2. Principle We seek to minimise our use of resources. Exploring for, developing and producing oil and gas is resource intensive and we recognise that we have a responsibility to minimise the use of energy, water and materials. Our climate change strategy seeks to ensure we are able to adapt to current and future climate risks and opportunities. We promote efficient use of energy in our activities and integrate climate change considerations and potential costs into investment decisions. We identify and evaluate opportunities for energy efficiency, setting objectives and targets for reducing our carbon footprint where possible. Minimising energy is cost effective and reduces carbon emissions providing safety is not compromised. We are committed to measuring, verifying and reporting on greenhouse gas emissions in line with the Greenhouse Gas (GHG) Protocol methods and oil and gas sector disclosure initiatives. We are committed to monitoring and assessing our fresh water extraction and use, and potential impacts on fresh water resources of our operations. We investigate ways to improve our fresh water management processes, including identifying, evaluating and implementing improvement measures to reduce impacts on fresh water. 1.5.3. Principle We will prevent or, where that is not practicable, minimise discharges to the air, land and water. Our activities have the potential for a negative environmental impact and as set out in our Environment Policy we apply a hierarchy of controls to manage this. Firstly, we seek to prevent emissions from our operations and, where this is not practicable, we seek to minimise any emissions and discharges to air, water or land including the generation and disposal of waste. Secondly, we use practical effective mitigation measures or in specific circumstances, remediate impacts through fair and appropriate compensation. The safe use of chemicals is vital within all our operations, often to ensure safe operations, and we adopt a clear and stringent system whereby chemicals are pre-screened and ranked according to international guidelines. Wherever possible, we will use those which Pose Little or No Risk ( PLONOR ) first and we will substitute chemicals with less hazardous or non-hazardous chemicals, if available. Where substitution is not possible we will look at possibilities to reduce use and control discharge. We monitor and quantify our emissions, discharges and waste. We set measurable objectives and, where appropriate, targets for improved environmental performance and resource utilisation. We will be prepared to respond to process upset, accidental and emergency situations. We will work closely with authorities to develop robust and thorough emergency response and oil spill prevention and contingency plans ( OSPCP ) based on detailed risk identification and assessment. External References: Convention on Biological Diversity Extractive Industry Transparency Initiative Guiding Principles on Business and Human Rights: Implementing the United Nations Protect, Respect and Remedy Framework International Finance Corporation Performance Standards International Labour Organisation Declaration on Fundamental Rights at Work ISO 26000 Guidance for Social Responsibility 7
ISO 14001 Standard for Environmental Management IOGP (International Association of Oil and Gas Producers) Standards & Best Practice Guidance Oil and Gas UK Guidelines Universal Declaration of Human Rights Voluntary Principles on Security and Human Rights UK Bribery Act 2010 & Guidance United Nations Global Compact Principles UNESCO World Heritage List 8