iesc monitoring review report - vedanta resourcesmetals and mining company. it is involved in mining...

47059086.STG4

Vedanta Resources plc and Lanjigarh Alumina Refinery

IESC Monitoring

Review Report

Review of Progress on

Recommendations

Final Report

March 2013

Prepared for:

Standard Chartered Bank as Agent to the Lenders

Vedanta Resources plc

REVIEW OF PROGRESS ON RECOMMENDATIONS

IESC MONITORING REVIEW REPORT

March 2013 47059086.STG4

i

URS Infrastructure and Environment UK Ltd

6-8 Greencoat Place

London

SW1P 1PL

United Kingdom

Tel +44 (0) 20 7798 5000

Fax +44 (0) 20 7798 5001

www.urs.com




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Limitations

The conclusions and recommendations contained in this Report are based upon information provided by others and upon the assumption that all relevant information has been provided by those parties from whom it has been requested and that such information is accurate. Information obtained by URS Infrastructure & Environment UK Limited (“URS”) has not been independently verified by URS

1, unless otherwise stated in the Report.

The methodology adopted and the sources of information used by URS in providing its services are outlined in this Report. The work described in this Report was undertaken before, during and after the site visits in Lanjigarh and Delhi during March 2013 and is based on the information available during the said period of time. The scope of this Report and the services are accordingly factually limited by these circumstances.

Where assessments of works or costs identified in this Report are made, such assessments are based upon the information available at the time and where appropriate are subject to further investigations or information which may become available.

URS disclaim any undertaking or obligation to advise any person of any change in any matter affecting the Report, which may come or be brought to URS’s attention after the date of the Report.

Certain statements made in the Report that are not historical facts may constitute estimates, projections or other forward-looking statements and even though they are based on reasonable assumptions as of the date of the Report, such forward-looking statements by their nature involve risks and uncertainties that could cause actual results to differ materially from the results predicted. URS specifically does not guarantee or warrant any estimate or projections contained in this Report.

1. Note that following its acquisition by URS and consequent integration into the main Group, the ‘Scott Wilson / URS Scott Wilson’ brands have now been discontinued and the company that undertook the original Sustainability Review is now named URS Infrastructure and Environment UK Ltd.

Copyright

© This Report is the copyright of URS Infrastructure & Environment UK Limited. Any unauthorised reproduction or usage by any person other than the addressee is strictly prohibited.




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TABLE OF CONTENTS 1 EXECUTIVE SUMMARY ................................................... 1

2 INTRODUCTION AND BACKGROUND ........................... 3

2.1 Vedanta Resources.......................................................... 3

2.2 Terms of Reference ......................................................... 3

2.2.1 Review of Vedanta’s Implementation Progress Report 4 .. 3

2.2.2 Site Visit ............................................................................. 3

2.2.3 Monitoring Review Report ................................................. 4

2.3 Approach .......................................................................... 4

2.4 This Monitoring Review Report ...................................... 4

3 CORPORATE RECOMMENDATIONS ............................. 6

3.1 Recommendation 2.5.7 Sustainability Committee ....... 6

3.2 Recommendation 2.5.8 Sustainability Officer .............. 7

3.3 Recommendation 2.5.4 Value Statement....................... 7

3.4 Recommendation 2.5.2 Code of Business Ethics ........ 8

3.5 Recommendation 2.5.6 Policies ..................................... 8

3.6 Recommendation 2.5.3 Stakeholder engagement ........ 9

3.7 Recommendation 2.5.13 Reporting .............................. 10

3.8 Recommendation 2.5.8bis Sustainability oversight ... 10

3.9 Recommendation 2.5.9 Professional competencies .. 11

3.10 Recommendation 2.5.16 Human rights policy ............ 12

3.11 Recommendation 2.5.24 External audit ....................... 12

4 COMPANY LEVEL RECOMMENDATIONS ................... 14

4.1 Recommendation 2.5.15 International best practice .. 14

4.2 Recommendation 2.5.11 Land management ............... 15

4.3 Recommendation 2.5.23 Incident register................... 16

4.4 Recommendation 2.5.12 Environmental communications ............................................................ 16

4.5 Recommendation 2.5.17 Consultation for new sites . 17

4.6 Recommendation 2.5.20 Vulnerable social groups .... 18

4.7 Recommendation 2.5.22 Cultural heritage .................. 18

5 LANJIGARH RECOMMENDATIONS ............................. 19

5.1 Recommendation 3.3.20 Environmental management19

5.2 Recommendation 4.5.8 Grievance mechanism .......... 20




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Tables Table 6.1 CORPORATE LEVEL ........................................................................................ 28

Table 6.2 COMPANY LEVEL ............................................................................................. 29

Table 6.3 LANJIGARH ....................................................................................................... 30

Table 8-1: Summary of Incidents for Group Incidents Q1-Q3 ............................................ 33

5.3 Recommendation 3.3.3 Housekeeping ........................ 21

5.4 Recommendation 3.4.3 Proposed expansion ............. 21

5.5 3.3.79 Disaster management plan ................................ 22

5.6 Recommendation 3.3.32 Retrenchment plans ............ 22

5.7 Recommendation 3.3.48 Contractor accommodation 22

5.8 Recommendation 4.5.5 Dust emissions ...................... 23

5.9 Recommendation 4.6.8 Livelihood support ................ 23

5.10 Recommendation 4.6.12 Integrated development ...... 23

5.11 Recommendation 3.3.63 Health and safety management ......................................................................................... 24

6 OVERVIEW OF PROGRESS AND REMEDIAL ACTIONS ......................................................................... 25

6.1 Group Level Recommendations ................................... 25

6.2 Company Level Recommendations ............................. 25

6.3 Lanjigarh Refinery Recommendations ........................ 26

7 THE WAY FORWARD..................................................... 31

7.1 Audit scope and criteria ................................................ 31

7.2 Audit methodology ........................................................ 32

8 SOCIAL, ENVIRONMENTAL AND H&S INCIDENCES ................................................................... 33




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1 EXECUTIVE SUMMARY This IESC Monitoring Review Report was commissioned as the fourth 6-monthly update on Vedanta’s progress in implementing the Recommendations from the original independent strategic sustainability review that Scott Wilson (now URS) undertook in September 2010. It should be noted however that these six monthly reviews have not taken place at precisely six monthly intervals, as some visits were slightly delayed from the original schedule. The first review of progress was undertaken in July 2011 and involved visits to the Vedanta Aluminium Limited (VAL) alumina refinery at Lanjigarh, the Sustainable Development department at its former location at Udaipur, and the Hindustan Zinc Limited (HZL) plant at Chanderiya. The second review in February 2012 included visits to the VAL Lanjigarh, Bharat Aluminium Co. Ltd (BALCO) and Sesa Goa operations and the Sustainable Development office now located in Delhi. The third review in October 2012 involved site visits to the Skorpion Zinc Mine (SZ) in Namibia and Konkola Copper Mines (KCM) in Zambia. For this fourth review of progress undertaken in March 2013, URS visited Lanjigarh, where production activity has been suspended since December 2012 due to a lack of bauxite feedstock, and the Group’s Sustainability Team in Delhi. As per previous reviews, Vedanta submitted their Fourth Progress Report, which was used as a basis for discussion during our site visits to the Lanjigarh Alumina Refinery and to the Sustainability Office in Delhi. It was confirmed that arrangements for governance and centralised day-to-day management of sustainability issues generally remain in place and are functioning well. However, we note that the Chief Sustainability Officer is leaving Vedanta’s employment and an early appointment of a suitable replacement will be needed to maintain programme momentum. The continued lack of a social development expert in the central Sustainability Team is also of potential concern, although this may be partly offset by the imminent arrival of a Group CSR manager. The range of policies, management and technical standards that form the new Sustainability Framework is now complete with the issue of the delayed Technical Standard on Indigenous Peoples / Vulnerable Tribal Groups and work continues on developing the supporting Guidance Notes. An extensive training programme has been rolled out across the Group to support the implementation of the Sustainability Framework, which is also subject to a combination of self-assessment / internal audit and an assurance process and extensive action plans to drive consistent and correct application. There is still scope for improvement and a number of issues require attention. In particular, in order to ensure credibility, management needs to make timely interventions to address – as a minimum - the Group’s mean overall score as recorded by Vedanta’s sustainability self-assessment / assurance scheme, through targeting the ‘Unacceptable’ and lower range ‘Unsatisfactory’ scores at a number of individual business units. Further improvements can also be made in stakeholder engagement practices, especially in relation to periodic disclosures of performance information to affected communities throughout project life cycles, and in the effectiveness of livelihood restoration / enhancement programmes. The outstanding Recommendation dealing with the Lanjigarh Expansion Project is still ‘pending’ and cannot be tested until the situation there is resolved. There is currently some optimism that this will occur soon, in which case it may be possible to check how the refinery




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will apply the Sustainability Framework’s requirements to the proposed development. In a similar fashion, those requirements should also be applied as appropriate to any of the alternative solutions being proposed to guarantee feedstock supplies to the refinery Although the implementation process is incomplete and somewhat patchy in places (some elements are still to be fully completed while others require minor adjustments), overall – as shown in Section 6 of the Report - we consider that sufficient progress has been demonstrated on each of the other Recommendations at each level to conclude that Vedanta can undergo the final close-out audit in June 2013 in accordance with 2.5.24 External audit as planned. However, it should be stressed that "closed out" or “suitable for closure” here is indicative of sufficient progress to warrant going forward to a full audit, but not that all actions required to fully address recommendations have been completed yet. It is important that Vedanta does not underestimate the scale of the work needed to secure a successful conclusion following the site audit next June. This is especially true when considering that the final audit will take a different, more robust approach from this series of progress reviews. Indeed, an audit is a systematic evaluation process that is directed at verifying an organization’s status in regard to specific, predetermined criteria. The audit’s objectives, site selection procedure and methodology are developed in Section 7 of this report.

Vedanta’s momentum in current programmes needs to be maintained – despite the enforced change in the Sustainability Team personnel. Further effort is needed to identify the shortcomings identified in this review so that suitable and sufficient objective evidence of compliance to the Lenders’ requirements can be demonstrated at Group, Company and individual Site levels. Finally, as has been the case throughout the independent review process, we are pleased to acknowledge the full cooperation of all managers and staff involved and their helpful and comprehensive responses to requests for information.




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2 INTRODUCTION AND BACKGROUND

2.1 Vedanta Resources Vedanta Resources (Vedanta) is listed on the London Stock Exchange and is a FTSE 100 metals and mining company. It is involved in mining and processing copper, zinc, aluminium and iron ore, in power generation and in oil.

The Group is characterised by a spread of operations and plants, rapid growth and a complex ownership structure which has been undergoing a process of reorganisation. It experienced significant growth in recent years through expansion projects of its core copper, iron, zinc and aluminium businesses in India, Australia and Zambia and its 2011 acquisitions of Bellary Steel & Alloys Ltd in India, Lisheen Mine in Ireland, the Skorpion mine in Namibia and the Black Mountain Mines in South Africa. In 2011, Sesa Goa acquired Bellary Steel & Alloys Ltd and, following the granting of official approval, the Group acquired a significant stake in Cairn India Limited, which includes India's biggest onshore oilfield in Rajasthan and 9 other properties in India, plus one in Sri Lanka.

At the time of writing, operations at Sesa Goa and VAL-Lanjigarh were affected by State- imposed suspension of mining activities. All mining activities had ceased in Goa and a stop to bauxite mining in Odisha meant that the Lanjigarh refinery had closed on December 5

th 2012

to a lack of feedstock and is still to re-open.

2.2 Terms of Reference Scott Wilson Ltd was originally appointed as the Lenders’ Independent Environmental and Social Consultant (IESC) by Standard Chartered in September 2010 to review Vedanta’s strategic approach to sustainable development and to assess the social and environmental issues in relation to Vedanta Aluminium Limited’s (VAL) Lanjigarh (India) alum ina refinery and its proposed expansion. Following that strategic sustainability review, the Lenders require Vedanta to provide them with Implementation Progress Reports every 6 months until the IESC determines that “the implementation of all the recommendations in the Independent Review Report is materially complete and all the issues highlighted in the Independent Review Report have been suitably and substantially mitigated” (the “E&S Consultant Opinion”). URS Scott Wilson Ltd, now URS Corporation (Scott Wilson was acquired by URS in September 2010 and that brand name is now discontinued), was re-appointed as the Lenders’ Independent Environmental and Social Consultant to undertake the 6-monthly review of Vedanta’s progress. The scope of work had three major components and a series of sub-components as follows:

2.2.1 Review of Vedanta’s Implementation Progress Report 4

Review the preliminary Implementation Progress Report 4 and supporting documentation and provide a list of queries and/or requests for additional information prior to the Site Visit.

2.2.2 Site Visit

Conduct a short site visit to the Lanjigarh alumina refinery (VAL) with the aim of reviewing both local progress and checking how Corporate and Company recommendations are being implemented at an operational level. Lanjigarh site was the main focus point for




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implementation of recommendations, especially regarding social and Indigenous People issues. Production had been suspended in December due to insufficient bauxite supplies so clarification was needed on how the Sustainability Framework would be applied to the various proposed solutions to provide the refinery with raw materials.

Meet Vedanta’s Sustainability Team in Delhi in charge of addressing the recommendations of the 2010 Independent Review and discuss both overall progress to date and the future actions needed for the final close-out audit in June 2013.

2.2.3 Monitoring Review Report

Provide a summary of Vedanta’s progress and commitment to implementing the recommendations of the 2010 Independent Review Report, identifying those which have not been materially completed or satisfactorily addressed and why progress is not in line with expectations.

Comment on the adequacy and timescale of any remedial actions proposed by Vedanta, particularly in regard to material failings, and recommend appropriate remedial action plans and timelines accordingly.

In regard to Recommendation 2.5.23, review the register of social, environmental and H&S incidences and report on Vedanta’s approach and response to any material incident(s) and report on whether any changes to Vedanta’s processes or procedures were recommended and / or implemented as a result of any investigations into significant incidents. Compare the incident register to media coverage of Vedanta and any allegations made against Vedanta and investigate any discrepancies.

For all other recommendations, comment on the progress made to-date, investigate any off-schedule situations and comment upon the adequacy and timescale of any remedial actions proposed by Vedanta, including its capacity to achieve any recommendation within the agreed timeline.

2.3 Approach The URS team that undertook this 6-monthly review of progress study comprised two consultants, one of whom was involved in the original review in 2010 and has participated in each 6-monthly review to date. The team members visited Delhi and the Lanjigarh Alumina Refinery. A summary of our findings was presented to and discussed with the Chief Financial Officer, the Chief Sustainability Officer (CSO) and senior management / staff during a tele-presence meeting in Delhi at the end of the visit.

2.4 This Monitoring Review Report This Monitoring Review Report is presented in several sections.

Part 3 relates to our findings on the progress Vedanta has made in addressing the recommendations regarding its strategic approach to sustainable development at the corporate level;

Part 4 considers Vedanta’s progress on the recommendations which are applicable to the Group’s subsidiary companies including the Lanjigarh site which was visited;




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Part 5 deals with URS’s review of the recommendations for the Lanjigarh alumina refinery;

Part 6 is a tabular representation of progress against recommendations for Group, Company and Lanjigarh levels. The tables included in part 6 present an overview of our assessment of Vedanta’s current progress in implementing our recommendations, together with brief details of any outstanding issues due to be checked in the final audit and our appraisal of the outlook for successful close-out; and

Part 7 deals with the specific Lenders’ concerns in regard to incident reporting and investigation across the group.

Each recommendation is considered in turn and comprises our original recommendation and its timescale, commentary on what progress or otherwise has been made thus far, our judgement on what has been achieved, and our recommendations or suggestions for any further actions and/or revised timings. As appropriate, we have made additional comments to help guide Vedanta’s preparations for the final audit. We discussed the degree of progress against each recommendation with Vedanta’s CSO and, where appropriate, indicated what corrections and refinements we believe will be needed to achieve full closure in June 2013. Implementation of the various actions was confirmed as being substantially on schedule and, providing the policies, standards and guidelines are implemented, or that at least procedures for implementation at both Company and Site levels are specified with sufficient detail, we now expect a satisfactory conclusion can be reached by the final close-out audit scheduled for June 2013. There is also one outstanding recommendation which remains dependent upon external actions and is outside of management control; if resolved by June 2013, this will be subject to full consideration at the final audit to the extent possible at that time:

3.4.3 Proposed expansion: Closure of the Recommendation is at least partially

dependent upon external decisions, namely a Court decision regarding Lanjigarh’s

acquisition and compensation of the village forest areas located within the refinery’s

perimeter, and a decision on the alternative proposals currently under evaluation by Orissa

State and the Orissa Mining Company (OMC) for plans to ensure the refinery has access

to sufficient bauxite feedstock.




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3 CORPORATE RECOMMENDATIONS This section comprises the Recommendations proposed for the establishment of an over-arching corporate level sustainability function, including development of a governance structure and management systems, with the aim of improving coordination across the Group in regard to new projects and their associated environmental and social impacts. Our commentary is summarised in section 6.1 below which comprises a table showing overall progress in addressing the Corporate Recommendations.

3.1 Recommendation 2.5.7 Sustainability Committee

The title of the HSE Committee should be changed to the Sustainable Development Committee and its terms of reference expanded to reflect the breadth of its role covering all aspects of the environmental and social sustainability of the Group (Original target = May 2011).

This item was considered ‘closed’ in our second progress review report. We confirmed that the Committee’s original Mandate remains valid and that there have been no changes in the designated members of the Sustainability Committee. Since the last progress review, a further Sustainability Committee meeting was convened, as planned, on 28

th November 2012. Agenda, presentation materials and meeting minutes were

provided for review and, again, it was confirmed that they demonstrate a consistent, on-going approach to the management of environmental and social sustainability for the Group and that improving safety performance is a key priority. In particular, the meeting minutes demonstrate that issues such as Human Rights and Stakeholder Engagement are central to discussions of the Committee. It was confirmed that there were no other changes to the Sustainability departmental structure or its responsibilities. The team comprises Heads of: Safety and Crisis Preparation; Environment and Conservation; Sustainability Data, Reporting and Analysis; Sustainability Assurance; a Sustainability Manager and administrative support. However, we note that the position of the CR and Human Rights Head is still vacant and that, from a broader perspective, there is no specific resource within the Sustainability Team to deal effectively with social issues, particularly in regard to development projects. Although the social aspects are being partly covered by existing staff to the best of their abilities, they may lack the depth of training and practical experience that is needed to ensure full and correct roll-out of all elements of the Sustainability Framework. This could for example affect efforts to design an appropriate, coherent strategy on social responsibility and human rights for the Group, and to support and monitor its implementation at Company, Site and individual project levels. We also note that Vedanta is currently in the process of recruiting a manager at Group level to oversee Corporate Social Responsibility but that this new position will not be a member of the Sustainability Team. We have some reservations about whether the skill set for this position will adequately address the absence of a CR and Human Rights specialist in the Sustainability Team, as the requirements for managing CSR programmes for existing businesses and supporting the continuing stakeholder engagement process for new projects are different. We will therefore need to understand the CSR manager’s role and responsibilities and review the proposed organisational structure and relationship between the respective CSR and Sustainability departments at the final close-out audit.




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Overall, we are satisfied that the Sustainability Team remains in place and that it plays an active role across the range of issues covered by our original report. However, the lack of a bona fide social role in the team constrains the global understanding of and responsiveness to social issues that may arise at different Group levels, especially when dealing with implementation issues. Provided that the Committee’s composition and remit to direct implementation of the Sustainability Framework across all Group companies remains fully in place and is consistent with the original objective of this recommendation, this Recommendation is confirmed as closed out.

3.2 Recommendation 2.5.8 Sustainability Officer

Appoint an appropriately qualified Chief Sustainability Officer (CSO) with international experience to direct and coordinate the HSE, CSR and related functions. The CSO will act through single points of contact in each subsidiary company (Original target = November 2011).

This item was considered ‘closed’ in our second progress review report. In our last review we noted that some subsidiary businesses were adopting a similar model and appointing their own Sustainability Officers/VPs to drive local agendas and coordinate implementation. The final close-out audit should review what progress is being made on the ground by one of these appointees (probably the Konkola Copper Mines, where Sustainability Framework implementation was still at an early stage during our visit there in 2012). At the time of writing, we understand that the incumbent CSO is leaving Vedanta’s employment voluntarily (to take up another position) at the end of March 2013 and we have not yet been informed as to what short and long term measures the Company proposes to appoint a replacement and maintain the implementation programme. Although changes in key personnel are normal occurrences in business, the timing is unfortunate and this may have some implications for the close-out audit in June. Although an internal or external replacement could be appointed quickly, we have concerns about any potential loss in momentum at this critical juncture particularly in regard to implementation of the Framework documentation dealing with Indigenous Peoples (see Recommendation 2.5.20; Vulnerable Social Groups below). We confirm that this Recommendation remains closed, subject to a timely appointment of a replacement CSO with equivalent skills and experience, or other potentially acceptable solution. We may need to assess this prior to the close-out audit in June 2013, so it might be useful to arrange an early meeting with the replacement CSO so that we can articulate our perspectives and the Lenders’ expectations for the final audit.

3.3 Recommendation 2.5.4 Value Statement

Revise the wording of the Value statement on Sustainability to state: “We aim to contribute to the social and economic welfare of the communities where we work and to protect and conserve the environment” (Original target = February 2011).

This item was considered ‘closed’ in our second progress review report. We confirmed that the revised Value Statement remains publicly available on the corporate web site, at:




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http://www.vedantaresources.com/sustainability/our_policies.html http://www.vedantaresources.com/mission-values.aspx

We confirm that this Recommendation remains closed.

3.4 Recommendation 2.5.2 Code of Business Ethics

The preamble to the Code, “How We Do Business”, should include reference to local communities as a key element affecting Vedanta’s reputation along with customers, shareholders, competitors and suppliers (Original target = February 2011).

This item was considered ‘closed’ in our second progress review report. The revised Code remains published on the corporate web site at: http://www.vedantaresources.com/sustainability/our_policies.html http://www.vedantaresources.com/corporate%20governance.aspx We confirm that this Recommendation remains closed.

3.5 Recommendation 2.5.6 Policies

Develop a series of policies to realise the aims stated for each of the four sustainability areas (environmental stewardship, nurturing people, health and safety, and empowering communities). The policy statements should be succinct, should reflect best international practice and reflect a commitment to continuous improvement. Annual targets for progress and reporting should be considered wherever possible. Noise should be included as a policy issue (original target = 2011 Annual Report and Sustainability Report).

Vedanta has now largely completed the process of developing its Sustainability Framework, which consists of Group level Policies, supported by a suite of Management and Technical Standards as described on page 8 of Vedanta’s Fourth Progress Report. The policy statements are published on the corporate web site (and can be downloaded at http://sustainability.vedantaresources.com/responsible_stewardship/policies). They have also been adopted at each of the subsidiary companies. The Technical Standards have now been completed by TS 22 which sets out the Sustainability Framework requirements for dealing with Indigenous Peoples / Vulnerable Tribal Groups (previously referred to as “Vulnerable Social Groups”). A copy was reviewed and, following adoption of some amendments, is deemed to be fit-for-purpose - see comments in regard to Company Level Recommendation 2.5.20 below. Work also continues on the series of Guidance Notes in tandem with additional training materials to support implementation of the Sustainability Framework. Draft copies of Guidance Note GN20 Lock-Out Tag-Out (LOTO) and Guidance Note GN04 Biodiversity Management were provided for review; some suggested refinements to GN04 were proposed. Further documents are at various stages of preparation: according to the presentation made at the meeting in Delhi, 21 are ‘in the pipeline’ and a further 18 are still to be developed. Overall, the vast majority of the Sustainability Framework’s content is deemed to be of a very good standard, but there is still scope for improvements or amendments to ensure that the full range of potential issues that may arise in future ESIAs and on-going sustainability

http://www.vedantaresources.com/sustainability/our_policies.html

http://www.vedantaresources.com/mission-values.aspx


http://www.vedantaresources.com/corporate%20governance.aspx

http://sustainability.vedantaresources.com/responsible_stewardship/policies




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management. Nevertheless, the final audit will need to re-assess all the Sustainability Framework documents against the Lenders’ requirements (partly to ensure that all the changes to the IFC Performance Standards have been identified and actioned appropriately, and partly to assess progress with the remaining body of Guidance Notes).

In particular, in order to avoid any scope for misunderstanding, there is a need to affirm at Group level that each subsidiary Company must comply with national legislation and meet the applicable requirements of the international standards. Accordingly, the documentation should ensure that Vedanta benchmarks host country laws against the IFC Performance Standards and that it provides suitable guidelines for implementation when additional measures are needed to ensure that international standards are met. The three key Company responsibilities we would like to see clearly addressed in the documentation are in relation to:

a) Government managed programmes such as stakeholder consultation, relocation and

compensation, etc.; b) “Associated facilities” and their risks and impacts (i.e. ancillary facilities such as

transport or energy infrastructure that are constructed by a third party to support a project rather than by Vedanta and without which the project would not be viable); and

c) Supply Chain issues, with specific regard to Lanjigarh where there is a need to ensure the application of the Sustainability Framework to any raw material supplies. When Government actors are likely to be involved in a raw material supplies, the Company’s documentation should describe how coordination with Government authorities is to be managed in compliance with the Sustainability Framework and relevant international standards.

Although the core Sustainability Framework documentation has now been completed, Vedanta will need to demonstrate that a suitable and sufficient level of implementation is achieved by the time of the final audit in June 2013. Accordingly, Vedanta’s focus should be placed upon implementation, including refresher training in new or amended procedures to ensure understanding of Group requirements at Company and Site levels in order to be considered fully on track for the final close-out in June 2013.

3.6 Recommendation 2.5.3 Stakeholder engagement

Adopt internal procedures to ensure that all requests for information from stakeholders (including investors, NGOs, international organisations and the press) are dealt with in a timely manner. We see this as an important part of a wider programme to inform and communicate with all stakeholders. To assist with transparency Vedanta should maintain a register of enquiries and responses and provide a summary in their Annual Sustainability Report/website (Original target = May 2011).

This item was considered ‘closed’ in our previous reviews and we note the inclusion of an analysis of received emails in the published 2011-2012 Sustainability Report and the updated analysis accompanying the Fourth Progress Report. We can confirm that the enquiries mainly related to possible collaborations in CSR programmes, sustainability surveys, specific data and personal information requests. We also note Vedanta’s response to Amnesty International’s recent campaign through both individual answers to stakeholder letters, and its public report, “The Lanjigarh Story; The Vedanta Perspective.” Vedanta is also making increased use of various social media platforms to communicate with its stakeholders. However, we noted the need for improvements at the local level in terms of stakeholder engagement and on-going disclosure of information.. For example, although Gram Sabhas




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(meetings with the elected members of local village institutions) were organised at Lanjigarh one year ago for the resettlement and rehabilitation of three communities/villages located in the Expansion Project area, no further information has been provided since then to these communities regarding the status of the Project. We confirm that this Recommendation remains closed, but wish to point out the potential need for improvements in stakeholder communications at the local level.

3.7 Recommendation 2.5.13 Reporting

Report, where possible, on Group environmental and social performance as a whole, seek to benchmark performance against industry best practice, and seek assurance from appropriate bodies with industry and sustainability expertise (Original target = April 2012).

This item was considered ‘closed’ in our third progress review report. It was confirmed that Vedanta’s arrangements, as set out in our last report, remain in place to ensure that suitable data are collected and analysed to facilitate full reporting in due course. The 2011-2012 Sustainable Development report can still be accessed via the corporate web site at: http://sustainability.vedantaresources.com/our_performance/sd_report

We confirm that this Recommendation remains closed. The 2012-2013 report will be considered during the final close-out audit.

3.8 Recommendation 2.5.8bis Sustainability oversight

The corporate Sustainability Development Committee should continue to ensure that subsidiary companies take a consistent approach to promoting sustainable development in accord with international best practice by monitoring performance, lesson learning and dissemination of best practice (Original target = November 2011).

This item was considered ‘closed’ in our third progress review report. As per 2.5.7 above, further to restructuring of the Company at Group level, we confirmed that the original Mandate remains valid and that there have been no changes in the designated participants of the EXCO Committee. As previously noted, a further Committee meeting was convened as planned on 28

th

November 2012. Agenda and meeting minutes were provided for review and it was confirmed that they continue to demonstrate a consistent, on-going approach to the management of environmental and social sustainability for the Group. The internal assurance process is the key tool for monitoring sustainability performance across all the subsidiary companies. As before, the process has three phases: a self-assessment questionnaire; an annual verification visit from the corporate Sustainability Team; and an improvement plan to detail key actions and implementation status.

All sites have now responded to the self-assessment questionnaire more than once, the results have been tabulated and action plans have been developed and are being

http://sustainability.vedantaresources.com/our_performance/sd_report




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implemented to address relative weaknesses. The action plans involve setting priorities and defining milestones, specific tasks, responsibilities and target dates against each topic. The first round of follow-up validation audits by the corporate Sustainability Team has also been completed as per programme and the updated results – dated February 2013 - of the assurance process demonstrate a small improvement in the mean overall performance rating since our last review (the mean performance ratings are skewed by the lowest score in each Subsidiary Company). However, according to Vedanta’s own grading system, the Group’s mean performance rating remains ‘Unsatisfactory’ and we have concerns about the lower scores still being attributed to inter alia the specific topics of New Projects and Stakeholder Engagement. Several individual sites still score ‘Unacceptable’ performance on one or more subjects and may warrant a more urgent management intervention than the standard action plan approach. We suggest that an updated self-score summary table for all sites is transmitted prior to the audit and that those sites showing the lower scores be selected in priority for a site visit. In this regard, we note that the KCM Sustainability Implementation Plan dated 15

th January

2013 was the only full example provided for our review and that, at the time it was prepared - whilst there was a good level of detail throughout and it recognised that some programmes would take 12 months or more to complete - the status of every action was ‘Not started’. (Due to concentration on TS 22 and related issues at Lanjigarh, we did not have time to examine its sustainability assurance action plans although we note that none of its scores were graded as ‘Unacceptable’). However, the PowerPoint presentation used in the Lanjigarh meetings contained various extracts from other sites’ action plans that demonstrated that good progress is being made elsewhere (e.g. at BALCO, Jharsuguda, Lanjigarh and SIIL) and confirmed that EXCO is overseeing the process. Accordingly, for the final audit, we will need to evaluate the action plans for every site that still has ‘Unacceptable’ performance scores in June 2013 – see also our commentary in respect to Recommendation 2.5.15 International best practice in the following section. The Group and its individual components need to achieve further across-the-board improvements in the Group’s mean overall score by next June, by targeting those plants where performance is still assessed as Unacceptable or Unsatisfactory. We confirm that this Recommendation remains closed, but we shall be looking for significant improvements to the self-assessment results for next June’s final audit. At this time, we propose that the June audit includes a visit to examine progress at KCM but would advise that no definitive decision is taken as to whether other sites need to be visited until the updated assurance results are provided for analysis ahead of the audit.

3.9 Recommendation 2.5.9 Professional competencies

Keep under review the full range of HSE and CSR competencies it requires across its business and consider the need for additional training, as appropriate, in relation to the IFC Performance Standards and Guidelines, human rights, vulnerable groups and the GRI Mining and Metals Sector Supplement (Original target = November 2011).

This item was previously closed but remains subject to on-going examination. Since our last visit, Vedanta has continued to roll out its sustainability training and awareness programme. To date, almost 9000 people across the group have received training / e-leaning in the Sustainability Framework. This process should continue with training on the Sustainability Framework’s documentation on Indigenous Peoples / Vulnerable Tribal Groups; we




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recommend that appropriate training is provided at site level ahead of the final audit, to ensure that any possible misunderstanding of requirements or potential deficiency in implementation is avoided. We also have some concerns about training and competencies that ought to be considered ahead of the final audit. Firstly, if no new appointments are made (see Recommendation 2.5.8 Sustainability management), the somewhat imbalanced skill set of the central Sustainability Team should be addressed, particularly in regards to the management of community interfaces and social issues relating to new projects. Secondly, although extensive training was undertaken in regards to the 2012 IFC Performance Standards, it would have benefitted from wider reference to the respective IFC Guidance Notes (notably in relation to biodiversity where this document set out the detailed requirements for dealing correctly with any potential impacts on critical habitats and/or critically endangered species).

Subject to the above concerns being suitably addressed ahead of the final close-out audit, we consider that sufficient progress has been made and that this Recommendation remains closed.

3.10 Recommendation 2.5.16 Human rights policy

Adopt a specific human rights policy demonstrating its commitment to the UN Declaration of Human Rights and procedures to ensure its implementation. This should be communicated to all stakeholders via its web site (Original target = November 2011).

This item was originally considered ‘closed’ in our second progress review report. We note that the Group’s Human Rights Policy Statement remains on the corporate web site: http://www.vedantaresources.com/sustainability/our_policies.html

However, we see that Vedanta’s proposed Human Rights Guidance Note was shown in the Delhi presentation materials as one “To be developed”; we would prefer to have that document moved up the schedule so that it is available for review in June 2013.

We confirm that this Recommendation remains closed out, subject to satisfactory implementation of the Technical Standard on Indigenous Peoples / Vulnerable Tribal Groups (see also Recommendation 2.5.20 Vulnerable Social Groups below) and preferably the availability of the Guidance Note at the time of the close-out audit.

3.11 Recommendation 2.5.24 External audit

Undertake an independent audit of Group and Company environmental and social performance against international standards (IFC, ICMM and OECD) after 12 months of implementing the recommendations in the Scott Wilson report (i.e. June 2012). Recommendations which are not implemented will be included in a Remedial Action Plan and their compliance reviewed every 6 months. (Original target = as specified within preceding text).

The Sustainability Framework documentation is now considered to be substantially complete and its contents adequately reflect the Lenders’ standards. However, to ensure a successful outcome, Vedanta needs to ensure that implementation roll-out is at a suitable state of maturity to facilitate the proposed final audit in June 2013, especially at Lanjigarh and those





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sites that are currently score ‘unacceptable’ or ‘unsatisfactory’ in the internal assurance scheme. In particular, concerted effort needs to be given to its application at Company and Site levels, especially in regard to the topics of Human Rights, Stakeholder Engagement, Supplier and Contractor Management. Provided that the Sustainability Framework as a whole is supported by proper implementation and training across all subsidiary Companies, we consider that the Company is broadly on track to be able to demonstrate sufficient application of its Sustainability Framework and thus fulfil its obligations.




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4 COMPANY LEVEL RECOMMENDATIONS

This section comprises the Recommendations needed to ensure that the Group’s sustainability policies and procedures are implemented across the organisation’s structure, both in India and worldwide, with particular regard to new projects, their environmental and social impact and appropriate mitigation. In addition to Lanjigarh, we have previously been to plants and mines operated by HZL (Chanderiya zinc refinery), BALCO (Korba aluminium complex) and Sesa Goa (the Amona pig iron and coke plant, and the Sanquelim mine) in India. During the third review, we visited African businesses, namely Skorpion Zinc (SZ) in southwest Namibia, comprised of a mine and refinery producing Special High Grade zinc for export, and Konkola Copper Mines in Zambia (Konkola copper mine and satellite mining project, Nchanga copper mines and ore concentrator, Nampundwe pyrites mine, Nchanga and Nkana smelters and Nkana refinery). The aim of this fourth review was to check overall progress with the Sustainability Team in Delhi and then go to Lanjigarh to verify how implementation is proceeding there. Our commentary from this review is summarised in Section 6.2 below which includes a table showing overall progress in addressing the Recommendations for the Group’s subsidiary companies.

4.1 Recommendation 2.5.15 International best practice

Produce and test EIAs and EMPs against the IFC Performance Standards and ICMM best practice and define clear links between the EIAs, EMPs and Environmental Management Systems. Specifically EIAs should be expanded in relation to biodiversity and habitat identification, the identification of cultural heritage (scheduled and non-scheduled sites) and social and human rights impacts. Vedanta should commission independent reviews of one or more major EIAs each year in order to ensure compliance with IFC Standards (Original target = to be implemented for all new projects and major extensions requiring EIA).

The ESIA Status sheet identifies projects that are currently undergoing or will be subject to an impact assessment process, their current status and their associated risks, impacts and opportunities. The most recent list includes those previously notified (i.e. the HZL Zawar and Kayar underground mines, the ongoing BALCO Taraimar coal block project, the Sesa Goa Western Cluster Project in Liberia, the Black Mountain Gamsberg zinc mine in northern Bushmanland in South Africa and Skorpion Zinc’s Gergarub mine in Namibia) and adds the HZL Maton Rock Phosphate Mines (expansion of open cast mines), the Satellite Mining Project in Chililabombwe, the reopening of the Mimbula pit and slag retreatment in Nkana in Zambia. In terms of the current status of those studies, the ESIA for the BALCO Coal Block will be completed and submitted in March 2013. Studies for Sesa Goa, Zawar and Kayar Mines, the Maton Rock Phosphate Mines and the Gamsberg Mine are in progress and expected to be submitted between April and August 2013; definitive ESIA studies (as opposed to scoping / screening studies) are still to be initiated for the others. No examples of independent reviews of one or more major EIAs in order to ensure compliance with IFC Standards have been provided since our first progress review in July 2011 (that looked at the BALCO EIA for the Durgapur II / Taraimar Coal Block proposal), although – to a certain extent – that is conditioned by the development status/progress of ESIA studies across




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the Group and is also partially covered by screening checklists and the internal assurance process.

For each of the new Projects, a screening checklist is submitted to the Corporate Sustainability Team to evaluate Project risks and opportunities at an early stage. This evaluation focuses on issues such as resettlement, Indigenous Peoples, and any significant loss of cultural heritage or biodiversity. No new screening examples or information was provided for this review but it appeared to be functioning well when we examined it last time during our visit to Skorpion Zinc, Namibia. In regard to the self-assessment assurance sustainability scheme, our commentary in regards to Recommendation 2.5.8bis Sustainability oversight above identified some problems that require urgent attention at Group, Company and site levels and are also relevant here. We expect to see appropriate action plans being implemented and significant improvements in sites showing several ‘Unacceptable’ or ‘Unsatisfactory’ scores by June. We can confirm that a good system has been conceived to address this Recommendation and that further progress has been made since our last review, so we are prepared to consider that this Recommendation can be closed now - albeit with some reservations – so that the final audit can go ahead as planned. However, we would like to see the commissioning of more independent reviews of ESIAs. Vedanta should not underestimate the work needed to ensure a successful conclusion. We will also need to see significant improvement in the self-assessment/assurance process including the results of the action plans to be able to definitively close this Recommendation out in the final audit.

4.2 Recommendation 2.5.11 Land management

Develop a policy and implementation practices to more proactively manage land in their ownership in order to maximise environmental gains and to promote biodiversity. This would include the development of environmental management plans for all non-operational land and the carrying out of habitat surveys for all new sites prior to development (Original target = in time for the 2011 Annual report and Sustainability Report, i.e. now June 2012).

At our last progress review, this recommendation was considered to be “on track” for possible closure in the coming visit. We note the new Guidance Notes, modifications to the biodiversity risk assessment process and the plans to have a full suite of BAPs in place across the Group by 2015. Our discussions with the team revealed an incomplete understanding of the IFC’s requirements on biodiversity which was manifested in somewhat over-ambitious Framework requirements. The IFC approach had been fully taken on board in the documentation but not fully understood in regards to the necessary steps to address ‘Critical habitat’ issues - due in part to the lack of a biodiversity / ecology specialist in the core Sustainability Team and a lack of in-depth appreciation of the detailed guidance on issues like critical habitat determination set out in the IFC’s Guidance Note on PS 6. We made a number of suggestions that should focus the approach more clearly on issues surrounding ‘critical habitat’ and IUCN-classed Critically Endangered / Endangered species.

Good progress is thus being made in terms of land management although some further improvements may be needed to ensure full compliance with current best practice. For example, the potential impacts upon eco-system services and, more pertinently, their linkages




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with social aspects need to be fully addressed in the Framework documents to ensure compliant ESIAs. We intend to look at the oversight of biodiversity management, especially in regard to compensatory afforestation and wildlife management programmes, during the final audit in the context of the IFC principles on:

No net reduction in global and/or national/regional population of any Critically Endangered or Endangered species over a reasonable period of time; and/or

No conversion of critical habitat / no significant degradation of natural habitat.

The specific changes we requested to the Technical Standard on Biodiversity Management and/or to the Guidance Note(s) during our last review have been actioned and, although some further refinements were identified this time, we believe that the programme is sufficiently advanced to permit closure and therefore allow the final audit to proceed as planned in June.

4.3 Recommendation 2.5.23 Incident register

Maintain a register of major environmental, social and labour incidents at their plants and report to Vedanta Resources (Original target = April 2011).

This item was considered ‘closed’ in our third progress review report, although we continued in the context of the review to scrutinise the register. The Group-wide incident register has been in operation since April 1

st 2011 and health, social,

environment, labour and ‘other’ events are recorded on a monthly basis. Section 8 of this Report contains an appraisal of the social, environmental, labour and H&S incidents that were registered during the third quarter of Vedanta’s reporting year (i.e. between September and December 2012). A single fatality was recorded in Q3.

We recommend that public demonstrations either against or in favour of Vedanta should be included in the Social Incidents Register. In particular, the periodic on-going demonstrations in front of Vedanta offices in London and/or New York (e.g. at the time of the AGM in July 2012 and again in January 2013) should be included. Likewise, demonstrations by local workers – Company employees, contractor labour and down-stream workers - in reaction to the suspension of production at the Lanjigarh refinery should also be included in the register. We understand that the Register has been updated accordingly although we have yet to receive a copy. We confirm that this Recommendation remains closed. However, for the final audit, we would like to see an analysis of recorded incidents from initial launch in April 2011 through to the 1

st Quarter of 2013-2014 and if appropriate Vedanta’s proposals for

addressing root causes.

4.4 Recommendation 2.5.12 Environmental communications

Communicate environmental monitoring regime at plants and regularly report to stakeholders, including local communities, on their environmental and social performance, benchmarking this against international standards (e.g. IFC Guidelines) and reporting in their 2012 Sustainability Report (Original target = November 2011).




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Having previously issued its Technical Standard for Stakeholder Engagement, Vedanta is still in the process of developing Stakeholder Engagement Plans (SEPs) across each of the Group companies / sites as appropriate. The Company had anticipated that this process would be completed by June 2012. At our last progress review, this recommendation was considered to be on track for closure by December 2012. We were provided with two examples of SEPs that have been produced to date – for BALCO and Lanjigarh; although generally acceptable, both have some weaknesses:

The BALCO SEP does not deal clearly with the IFC requirement for the routine / annual disclosures of information throughout a development’s life cycle (see IFC PS 1, paragraph 29) and lacks details in regard to the grievance procedure and SEP performance indicators. The BALCO SEP does not state what specific information will be disclosed, in what format, at what frequency, and what methods will be used to communicate this information effectively to each stakeholder group.

The Lanjigarh SEP is in two parts – the applicable SEP principles and the various outputs, which are presented in the form of tables in Appendices (i.e. results from the grievance mechanism, description of recent stakeholder meetings, mechanisms for community engagement, etc…). This SEP also fails to deal with routine / annual disclosures, although we note that an indication of frequency and timelines for preparation and implementation of each described component has been added to Appendix II: “Community Engagement Plan”. This should also be done for Appendix I: “Stakeholder Identification and Engagement Framework” before the final audit.

As a general comment, we would recommend that the all SEP Appendices contain more detailed descriptions of the stakeholder identification, consultation and participation processes (e.g. define the content and ruling procedures for each type of community meeting, discussion or interview; specify the procedures of the grievance mechanism, etc…). In line with current best practice, we would also like to see the development of verifiable SEP indicators to facilitate effective monitoring, follow-up and on-going improvement. Note that for the final audit, we will want to see an analysis of Company-wide SEP development (i.e. similar to the overview of the status of Biodiversity Action Plans).

(Vedanta’s 2012 Sustainability report is discussed in regards to Recommendation 2.5.13 Reporting at paragraph 3.7 above). We can confirm that Vedanta has made further progress since our previous visit and, assuming that momentum continues, we consider that this Recommendation is suitable for closure now. The final audit in June 2013 will however need to verify that all Companies have developed/are developing SEPs offering a satisfactory level of detail regarding the nature, content and modalities of the stakeholder engagement process.

4.5 Recommendation 2.5.17 Consultation for new sites

Develop a standardised approach to community consultation for new developments which responds to IFC guidelines and communicate this to all stakeholders via its web site (Original target = November 2011).

Vedanta’s intention was to address this recommendation through their Social policy statement, the new Management Standard for the Project Planning and Site Closure Process and the Technical Standard for Stakeholder Engagement, which together introduced standardised




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requirements for public consultations based upon the IFC standards and the Company’s own experience in this field. The item was considered closed in our second progress review report. We confirm that this Recommendation remains closed, but there are lessons to be learned from the Lanjigarh experience and its lack of follow-up to initial consultation activities – see Recommendation 3.3.20 Environmental management in the next Section.

4.6 Recommendation 2.5.20 Vulnerable social groups

Adopt a specific policy in relation to engagement with and assistance for social groups that may be vulnerable to change and communicate this to all stakeholders via its web site (Original target = November 2011).

Technical Standard 22 on Indigenous Peoples / Vulnerable Tribal Groups has been updated and re-issued following our input to make sure that it adequately reflects the Lenders’ requirements on evolving issues (such as the potential need to obtain assurance in regard to feedstock supplied by non-captive mines; benchmarking between international standards and national legislation; etc.). Although we are satisfied with the content of TS 22, we note that currently there are no plans to produce any supporting Guidance Notes (i.e. nothing identified as being either ‘In the pipeline’ or ‘To be developed’ in the PowerPoint presentation used in the Delhi meetings). Given the complexity of this subject (as demonstrated by the time taken to finalise TS 22), further internal guidance could help with training and guarantee consistent application. The main issue now is whether Vedanta can provide sufficient evidence of implementation of this Standard at Company and Site levels for a successful conclusion at the final audit in June 2013 – none of the ESIA studies currently under consideration or in hand have identified any indigenous peoples issues in their screening forms. Accordingly, we have recommended that Vedanta undertake a desk-top exercise to consider: a) whether any indigenous peoples / vulnerable tribal groups might be affected by any of the non-captive mine bauxite supply options that may be activated at Lanjigarh; and b) if so, how TS 22 and other Sustainability Framework requirements would need to be applied.

Following final issue TS 22 on Indigenous Peoples / Vulnerable Tribal Groups, we consider that this Recommendation is suitable for close-out now. However, we also consider that Vedanta will have to be able to demonstrate effective communication and training and satisfactory implementation to achieve a successful conclusion in the June 2013 audit.

4.7 Recommendation 2.5.22 Cultural heritage

In developing new sites adopt a standardised approach to the identification of sites of cultural heritage value involving formal documentary sources, site surveys and community consultation (Original target = November 2011).

This item was considered ‘closed’ in our second progress review report. We confirm that this Recommendation remains closed.




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5 LANJIGARH RECOMMENDATIONS This section deals with the specific recommendations for the Lanjigarh refinery. We are pleased to confirm the improvements during the second progress review remain in place and commend the enthusiastic involvement of those responsible for implementing the Sustainability Framework and other initiatives. Our commentary is summarised in section 6.3 below which includes a table showing overall progress in addressing the Corporate Recommendations.

Our site visit was conducted in a context of some uncertainty around the activities of the refinery, which suspended operations in December 2012 due to a lack of bauxite supply following cessation of all bauxite mining in Odisha pending a State review of the industry.

While any decision on clearance for bauxite mining in the surrounding Niyamgiri hills remains with the Supreme Court, there is some optimism that the issues holding up the Expansion Project can be resolved soon.

5.1 Recommendation 3.3.20 Environmental management

Undertake a systematic gap analysis of its EMS against the Industry Best Practice Criteria and update it accordingly (Original target = April 2011).

At our last progress review in February 2012, this recommendation was considered to be “on track to be able to demonstrate sufficient progress to achieve close-out by the proposed final assurance audit in June 2013”. We note that, following our recommendations as well as those formulated in the ERM gap analysis report, good progress has been made in developing a consolidated Environmental and Social Management Plan and its supplementary plans. A copy of the ESMP report as of December 2012 was provided to us, with copies of the Stakeholder Engagement Plan (SEP) (March 2013 version), the Tribal Development Plan (2012) and the Rehabilitation and Resettlement Status Report (February 2012 version). Environmental and health and safety matters are generally well provided for, third party certifications have been retained and a number of practical improvements are evident since our last visit (e.g. energy conservation, greenhouse gas inventory, safety initiatives, etc.). However, further improvements can be achieved in regards to the ESMP in relation to the management of social issues, viz: a) There is no clear link between the ESMP and the SEP (no reference is made to the SEP in

the ESMP). We recommend that a clear reference and a description of the SEP is provided in the Social Management Plan section of the ESMP; and

b) The SEP should be explicitly linked with the other action plans presented in the ESMP, principally the Tribal Development Plan, the Resettlement Action Plan, and the Grievance Mechanism. In particular, it should demonstrate how the engagement and consultation process with communities affected by development and/or resettlement action plans is to be conducted on a continuing basis.

We noted during our site visit that there are significant discrepancies between the information disclosed during the consultation process initiated by the Company and the perceptions and concerns of those communities regarding the current status of Project activities, their impacts and of development and/or resettlement activities to be conducted. This comment stems from the lack of any company communications to keep the communities informed following the




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Gram Sabha which took place a year ago, but the lack of a social expert in the central Sustainability Team may also be a factor. In regard to the Rehabilitation and Resettlement Action Plan developed for the three villages to be displaced around the red mud pond area (Rengopalli, Bandhugada and Kothaduar), we note that the approach proposed in the document makes no reference to international standards or to any specific Vedanta Sustainability Framework documentation, but only cites Orissa legislation – namely the 2006 Orissa Rehabilitation and Resettlement Policy. As noted above, following issue of the delayed TS 22 on Indigenous Peoples / Vulnerable Tribal Groups, management should ensure that any potential gaps between legislation and TS 22 are addressed as appropriate. In this case, the focus is on compensation for loss of land and assets, but there is no explicit consideration of livelihood restoration or enhancement issues, which should be addressed for displaced families and potentially other affected communities. This may require some amendments to the Rehabilitation and Resettlement Action Plan. Fundamentally, the ESMP document should clearly address how compliance with applicable international standards is to be achieved at Lanjigarh. Our interactions with the communities to be displaced, members of the CSR and Legal Departments indicated a need for a more integrated approach between social/resettlement impact assessments and livelihood support programmes. Although many initiatives were launched on both topics, a combined strategic approach would be best practice and commensurate with international standards.

The amendments to the ESMP indicated above can be made quickly and there is sufficient confidence that the consequent practical actions will be taken so that we can consider this Recommendation as suitable for closure now so that the final audit can proceed in June 2013. Provided an improved, integrated approach can be demonstrated by then, we expect Lanjigarh to achieve full close-out then.

5.2 Recommendation 4.5.8 Grievance mechanism

Establish and strengthen a simple and accessible grievance mechanism by which villagers can identify any concerns about the operation of the refinery by using the village coordinators already deployed by VAL (Original Target = May 2011).

This item was considered ‘closed’ in our second progress review report. It was confirmed that the grievance mechanism is still functioning, well monitored and, having re-located the grievance cell office to the refinery’s main gate, made easily accessible to surrounding communities. However we identified some additional minor adjustments to improve the grievance mechanism, including the following: a) All grievances are classified into two categories: Open/Closed. However, some grievances

are not fully settled and cannot be resolved by Vedanta due to external circumstances or outstanding decisions (i.e. employment issues related to the current suspension of production, land compensation issues that are decided by the authorities, etc.) yet are classified as “Closed”. This does not reflect the actual status of these grievances so we recommend a new category of “Pending” which should be clearly defined in the grievance procedure;

b) Interactions with some local communities revealed that complaints raised via the grievance mechanism, even though properly registered and addressed directly or transferred to the relevant agencies, can mask deeper concerns or needs that warrant further investigation. For example, complaints related to inadequate compensation for the loss of land experienced by individuals at the time of the refinery’s construction actually




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point to insufficient consideration of livelihood enhancement for communities whose primary income sources were originally land-based (e.g. those who received cash were not capable of managing it properly and complain once the money has run out). We therefore recommend that the grievance mechanism is strengthened through a more systematic analysis of the causes of complaints.

Although we identified some further opportunities to improve the efficiency and transparency of the grievance mechanism, we confirm that this Recommendation remains closed out.

5.3 Recommendation 3.3.3 Housekeeping

Notwithstanding the current problems arising from equipment storage, VAL seek to improve site housekeeping with particular regard to ensuring the correct segregation, collection and disposal of waste materials and the fitness for purpose of the refinery’s storm water drainage systems (Original target = immediate).

This recommendation was closed out during our previous progress reviews. As production activities were suspended during our visit, no housekeeping issues were evident this time; no further actions are considered necessary other than a brief check during the final visit to the plant. We confirm that this Recommendation remains closed out.

5.4 Recommendation 3.4.3 Proposed expansion

If the expansion of the refinery is to proceed, a supplementary report be prepared to augment and update the existing EIA, thus meeting international best practice. This report would be used to guide further development and would be made available to key stakeholders (No defined target date = dependent upon court approval to proceed).

The refinery’s Expansion Project currently remains ‘on hold’ and, despite management optimism for early resolution and possible resumption in July / August, there is still no certainty as to when the situation will be finally resolved. All the required actions needed to resolve the specific conditions appertaining to the villagers’ forest areas (the ‘green pockets’) located within the refinery’s perimeter were carried out in 2012 but the authorities have yet to approve the process. Due to a lack of bauxite supply, the refinery has been shut down since December 5

th 2012,

and its reopening is dependent on the decision of the Supreme Court regarding the exploitation permit at the Niyamgiri bauxite mine and/or on the availability of alternative bauxite sources. If a decision to allow the project to proceed is forthcoming before the final audit, confirmation of the Sustainability Framework application to the Expansion Project and to any bauxite supply plan for the expanded refinery should be established through relevant documentation (supplementary reports, evolving Environmental and Social Management Plan, corporate due diligence of the ESIA, etc.). We are satisfied that VAL-Lanjigarh is committed to applying the requirements of both the corporate Sustainability Framework and the relevant IFC standards and guidelines as applicable to the proposed solution.




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This recommendation remains ‘open’ pending resolution of the Expansion Project’s approval to proceed. See also the concluding paragraph in 4.6 Recommendation 2.5.20 Vulnerable social groups above.

5.5 3.3.79 Disaster management plan

Review the Disaster Management Plan against recognised industry guidance (such as the ICMM / UNEP publication “Good practice in emergency preparedness and response”, 2005) and upgrade its emergency prevention and response arrangements including improved drill and simulation exercises (Original target = April 2011).

This item was considered ‘closed’ in our second progress review report. We note that a number of emergency rescue drills have been carried out on site and that there have been no incidents that might have triggered the refinery’s disaster plans. We confirm that this Recommendation remains closed out and we will verify its continuing application at our final visit to the site.

5.6 Recommendation 3.3.32 Retrenchment plans

Develop suitable and sufficient retrenchment plans to mitigate the adverse impacts of future suspension or closure of the refinery on both direct and indirect employees (Original target = November 2011).

The revised Retrenchment Policy adequately covers “Communication and Consultation on Retrenchment with Local Community on plausible retrenchment”. As a result of the site visit, we can confirm that in the context of the refinery’s closure since December 2012, actions implemented by VAL are compliant with that Policy:

Efficient and timely communication about the plant closure, its causes and its implications has been established with employees and contractors;

There has been no layoff among the direct employees. As they are mainly working in support functions such as the Production Department, Safety Department, HR Department, HSE Department, they are still active at VAL until a further decision is to be taken regarding the future of the refinery activity; and

Among the contractors, about 50% have been provided with job transfer plans in the local area, while others are now working in rotation mainly for maintenance work or have received a one-time settlement as per the requirements provided in the Policy.

Implementation of this Policy was also confirmed during our interactions with local communities. We can therefore confirm that the revised Retrenchment Policy permits the close-out of this Recommendation.

5.7 Recommendation 3.3.48 Contractor accommodation

Undertake a gap analysis for contractors’ labour accommodation against IFC / EBRD guidance and address any serious deficiencies. VAL should therefore amend its contractual documentation to specify minimum expectations for contractors in regard to




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labour accommodation, and then enforce contractors’ adherence to its specified requirements (Original target = November 2011)

This item was considered ‘closed’ in our second progress review report and we note that arrangements are in hand to apply suitable standards to the Expansion Project contractors once approval to proceed is obtained. We confirm that this Recommendation remains closed out and we will verify its continuing application at our next visit to site.

5.8 Recommendation 4.5.5 Dust emissions

Review the issue of sporadic dust nuisance, seek to reduce such pollution and monitor both dust emissions and incidence of respiratory infections in the immediate locality of the refinery (Original target = within 12 months)

This item was considered ‘closed’ in our second progress review report. The suspension of production meant that there were no bulk bauxite movements during the time we were on site. Time constraints and a necessary focus on other issues during the visit precluded the anticipated check on the Health Impact Assessment as indicated in our previous report. We confirm that this Recommendation remains closed out subject to a further check in June 2013 when we shall evaluate the outstanding actions to address the update of the Health Impact Assessment in relation to Recommendations 3.3.20 and 3.3.63.

5.9 Recommendation 4.6.8 Livelihood support

Give further consideration to accelerating livelihood training programmes for villagers via self-help and business start-up support, especially in those villages close to the refinery, and monitor local employment creation in these villages and the Lanjigarh block (Original target = November 2011).

This item was considered ‘closed’ in our second progress review report and we note Lanjigarh’s continuing support for the LPADF and others. No further actions are considered necessary at this time. We confirm that this Recommendation remains closed out subject to a further check in June 2013.

5.10 Recommendation 4.6.12 Integrated development

Work together with local government to develop and publicise an integrated rural development strategy for the area (Original target = November 2012).

This item was considered ‘closed’ in our second progress review report and we note Lanjigarh’s continuing support for the LPADF and others. No further actions are considered necessary at this time. We confirm that this Recommendation remains closed out subject to a further check in June 2013.




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5.11 Recommendation 3.3.63 Health and safety management

Undertake a gap analysis against the occupational and community health and safety requirements set out in the Lender’s Industry Best Practice criteria (specifically the IFC’s General and applicable sector EHS Guidelines) and take appropriate measures to address any outstanding gaps (Original Target = November 2011).

This recommendation is intrinsically linked to 3.2.20 Environmental Management above. Given the robust management system and on-going safety improvement programme at Lanjigarh, we can consider this Recommendation as suitable for closure at this time so that the final audit can proceed in June 2013.




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6 OVERVIEW OF PROGRESS AND REMEDIAL ACTIONS

6.1 Group Level Recommendations There were 11 Recommendations set for the corporate level that required varying degrees of effort from Vedanta to address successfully and complete. An overview of our assessment of progress for these Recommendations can be seen in Table 6.1 below. Two (2.5.4 Value Statement and 2.5.2 Code of Conduct) were closed out following our first Monitoring Review and a further five were considered as suitable for closure - 2.5.7 Sustainability Committee (SDC); 2.5.8 Sustainability Officer (CSO); 2.5.3 Stakeholder engagement; 2.5.9 Sustainability oversight; and 2.5.16 Human Rights policy – during our second review. Significant progress has been made across all the other Recommendations and, despite some reservations, we are pleased to confirm their closure at this time, allowing the final audit of Group Level arrangements to proceed in June 2013. Vedanta will however need to address those reservations to ensure a successful conclusion to that audit:

Sustainability Team: An early decision is needed as to a replacement for the CSO, who leaves Vedanta at the end of March, and management need to ensure that momentum in implementing the Sustainability Framework is maintained if not accelerated in the run up to the final close-out audit. The Sustainability Team still lacks a social expert to ensure that social issues are duly identified and addressed in an efficient and comprehensive way throughout the Group. The roles and relationships between the CSO’s department and the new Group CSR manager need to be defined;

Policies and Standards: The delay in issuing the Technical Standard 22 on Indigenous Peoples / Vulnerable Tribal Groups may result in a lack of suitable evidence to demonstrate correct implementation. Further consideration should be given to developing Guidance Notes for TS 22 to define corporate requirements in regards to Government managed programmes, “associated facilities" and supply chains. The Sustainability Team should continue to develop the documentation as appropriate, although the Guidance Note development programme may need to be re-prioritised;

Sustainability Oversight: EXCO and/or the CSO need to ensure that suitable and timely interventions are initiated with the business units to improve the mean overall score for the Group which is currently rated as ‘Unsatisfactory’; and

Training and Competencies: Training needs to be undertaken to support implementation of TS 22. In addition, further consideration needs to be given to ensuring that key sustainability staff gain an improved understanding of the IFC Performance Standards through incorporation of the more detailed interpretations contained in the IFC’s Guidance Notes.

6.2 Company Level Recommendations Seven Recommendations were initially set for implementation across the Group’s subsidiary companies in India and overseas. An overview of our assessment of progress for these Recommendations can be seen in Table 6.2 below. The four remaining Recommendations have been progressed and, despite some reservations, we are pleased to confirm their closure at this time, allowing the final audit of Group Level




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arrangements to proceed in June 2013. Each subsidiary Company will however need to address those reservations to ensure a successful conclusion to that audit:

Self-assessment assurance sustainability scheme: Significant improvements in the self-assessment/assurance process are required to all scores graded as ‘Unacceptable’ and all lower range (<60) ‘Unsatisfactory’ scores to definitively close this Recommendation out in the final audit. This may necessitate management interventions over and above the defined action plans, which will all be closely scrutinised in the June audit;

Stakeholder Disclosures: Neither of the example SEPs provided for review adequately deal with the IFC requirement for providing affected communities with access to relevant information. Prior to project approval, this should include: the purpose, nature, scale and duration of a proposed project; any potential risks / impacts on those communities and the associated mitigation measures, including planned stakeholder engagement / consultation and a grievance mechanism. Thereafter, affected communities and other stakeholders should be informed about material issues relating to project performance on a regular basis (minimum is annually); and

Indigenous Peoples / Vulnerable Tribal Groups: Due to the delay in issuing the Technical Standard on this topic, each subsidiary company needs to consider what actions can be taken to demonstrate effective communication and training in its requirements and satisfactory implementation to the extent possible to achieve a successful conclusion in the June 2013 audit.

6.3 Lanjigarh Refinery Recommendations Eleven Recommendations were originally identified for the Lanjigarh refinery and an overview of our assessment of progress for these Recommendations can be seen in Table 6.3 below. Resolution of Recommendation 3.4.3 Proposed expansion remains dependent upon an external decision which, despite current management optimism for speedy resolution, is not yet certain. Accordingly, this item remains open although we will assess Lanjigarh’s progress and any Sustainability Team due diligence during the final audit should the plant receive the official sanction in the meantime. Eight Recommendations had been closed out during previous reviews and we now are able to close out both items 3.3.20 Environmental management and 3.3.63 H&S management, albeit with some minor reservations. Closure of these Recommendations allows the final audit of Group Level arrangements to proceed in June 2013 as planned. Lanjigarh management will however need to address those reservations to ensure a successful conclusion to that audit:

Documentation: The ESMP and SEP documents need to reference and, where appropriate, integrate other documentation such as the Tribal Development Plan, the Resettlement Action Plan and the Grievance Mechanism.

Livelihoods: More consideration needs to be given to ensuring that livelihood restoration and/or enhancement initiatives are subject to a risk / impact evaluation and are truly sustainable in the long term in order to avoid disappointment and dissatisfaction amongst the target groups. For example, several programmes have failed to meet expectations and were discontinued (e.g. the high mortality rate in the duckling initiative, moribund self-help groups, etc.), suggesting inadequacies in concept, design and or implementation;

Stakeholder Engagement: A more systematic, continuous approach is needed to ensure that affected communities remain informed about any material issues – particularly where actions or decisions come under the responsibility of the public sector or its agencies -




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and do not have to rely upon rumours or uninformed sources which may distort the true situation;

Grievances: A ‘Pending’ classification should be introduced for use in situations where complaints have to be referred onto third parties for resolution; and

Bauxite Supplies: The Sustainability Framework’s requirements should be applied as appropriate to any of the alternative solutions put in place to guarantee adequate feedstock supplies to the refinery.




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Recommendation Vedanta status Jul 2012

URS-SW status Jul 2012

Vedanta status CURRENT

URS-SW status CURRENT

COMMENTS

Table 6.1 CORPORATE LEVEL

2.5.7 Sustainability Committee (SDC) Closed-out

Closed Previously closed Confirmed as closed

No post reorganisation changes affecting membership, meetings continue

2.5.8 Sustainability Officer (CSO) Closed-out


Incumbent CSO leaving Vedanta, no confirmation yet regarding replacement; lack of social expert in central team?

2.5.4 Value Statement Closed-out

Previously closed

Previously closed Confirmed as closed

Value statement unchanged and still available on-line

2.5.2 Code of Business Ethics Closed-out

Previously closed


Code unchanged and still available on-line

2.5.6 Policies Suitable for Closure

On track for closure in

December 2012

Suitable for full closure

Now suitable for closure

All core policies, management and technical standards now completed – work continues on the Guidance Notes.

2.5.3 Stakeholder engagement Closed-out


Details of requests for information verified –improvements needed in stakeholder communications at the local level

2.5.13 Reporting Anticipate full closure by June

2012

On track for closure in June

2012

Suitable for closure

Confirmed as closed

-

2.5.8 Sustainability oversight Closed-out


However, EXCO Committee still need to drive improvements at sites with ‘Unacceptable’ low in self-assessment / assurance scores

2.5.9 Professional competencies Anticipate full closure by June

2012


2012

Confirmed as closed

Confirmed as closed

Training is on-going and significant progress made at all subsidiary companies

2.5.16 Human rights policy Closed-out


-

2.5.24 External audit Anticipate full closure by June

2013

Uncertain that Framework will be suitably developed

Anticipate full closure by June

2013


2013

_




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COMMENTS

Table 6.2 COMPANY LEVEL

2.5.15 International best practice Anticipate full closure by Aug

2012

On track for closure in Dec

2012



EXCO Committee to drive improvements in self-assessment / assurance scores relating to ESIA implementation

2.5.11 Land management Anticipate full closure by June

2012


2012



Documentation improved, although some minor amendments to be actioned

2.5.23 Incident register Closed-out

Closed Previously closed Confirmed as

closed URS still monitoring incident registers for the Lenders. A single workplace fatality in Q3

2.5.12 Environmental communications Anticipate full closure by Dec

2012

On track for closure in Dec

2012



Adequate evidence of communications and stakeholder reports to facilitate closure at the current time, although some sites still need to fully address requirements for disclosures to affected communities

2.5.17 Consultation for new sites Closed-out


closed -

2.5.20 Vulnerable social groups Anticipate full closure by June

2012


2012



Indigenous Peoples TS issued, but Guidance Notes should be considered. Delay to documentation may affect availability of evidence of implementation for the final audit (?)

2.5.22 Cultural heritage Closed-out


closed

-




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COMMENTS

Table 6.3 LANJIGARH 3.3.20 Environmental management Anticipate full

closure by December 2012


2013


2013

Confirmed as closed

New documentation is broadly acceptable; some amendments needed to plans dealing with social issues

4.5.8 Grievance mechanism Closed-out Closed Previously closed Confirmed as closed Grievance mechanism functioning and

well monitored, although could be

improved through introduction of a

‘Pending’ classification, and more

systematic analysis of root causes

3.3.3 Housekeeping Closed-out

Previously closed

Previously closed

Confirmed as closed

-

3.4.3 Proposed expansion Pending Pending

Pending Pending

Awaiting Supreme Court decision

3.3.79 Disaster management plan Closed-out


closed -

3.3.32 Retrenchment plans Closed-out

Anticipate full closure by

December 2012


-

3.3.48 Contractor accommodation Closed-out


-

4.5.5 Dust emissions Closed-out


closed Health Impact Assessment update to be checked in final audit

4.6.8 Livelihood support Closed-out


closed -

4.6.12 Integrated development Closed-out


-

3.3.63 H&S management Anticipate full closure by

December 2012


2012


2013

Confirmed as closed

As per 3.3.20 above




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7 THE WAY FORWARD In the final audit planned to be conducted in June 2013, Vedanta will need to demonstrate that implementation of the Sustainability Framework is effective or that at least implementation systems are in place at Company and Site levels. Overall, the vast majority of the Sustainability Framework’s content is considered to be of a very good standard and now satisfactory to meet Lenders standards, but some additional areas were identified where improvements and adjustments are needed to address the full range of potential issues that may arise in future ESIAs and sustainability management. In particular, the application of the Sustainability Framework to any local/national context and to any supply chain option needs to be ensured through appropriate implementation and monitoring procedures, especially in regards to social issues, human rights and indigenous peoples. We understand that a number of Guidance Notes are still in the pipeline or to be developed; we would recommend their prompt development and dissemination across the Group prior to the final audit, as well as additional training, awareness and monitoring programmes if required. For the full and final assessment to be successful, Vedanta should ensure that the right organisational responsibilities and consistent competencies are in place, as well efficient guidelines and support for implementation of the Sustainability Framework at Company and site levels.

7.1 Audit scope and criteria The final audit will take a different, more robust approach from this series of progress reviews. An audit is a systematic evaluation process that is directed at verifying an organization’s status in regard to specific, predetermined criteria. The audit criteria are explicit measures or requirements, such as regulations, standards, guidelines and corporate directions, used to evaluate the information collected during the audit process. More specifically, the final audit will look into the effectiveness of implemented sustainability programs and actions, measured against host country regulations, permits and approvals and Lenders’ standards in regards to “International Standards” and Vedanta Resources’ Sustainability Framework where: a. “International Standards” refers to the International Council on Mining and Metals’

Principles, the Equator Principles including the supporting IFC Performance Standards

2012 and applicable EHS Guidelines, and the OECD Guidelines for Multinational

Enterprises; and

b. The Sustainability Framework consists of the various polices, management standards,

technical standards and guidance notes (plus other management system documentation

referenced therein) being developed and applied by Vedanta to implement Industry Best

Practice.

With these criteria in mind, the audit will focus on achieving the following: a) Validation of the actions taken by Vedanta to close-out each of the Recommendations as

reported in Vedanta's various Progress Reports and supporting evidence; b) Determination of the degree to which Vedanta's Sustainability Framework documentation

addresses the full range of the Lenders' standards; c) Evaluation of the effectiveness of Vedanta's implementation of its Sustainability Framework

across the Group, current status of new projects;




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d) Verification of Vedanta's conformance with all environmental and social conditions appertaining to the debt funding contract with the Lenders; and

e) Formulation of an audit conclusion, including any further recommendations, with specified responsibilities and timescales, which may be needed to correct identified deficiencies.

7.2 Audit methodology A representative selection of sites to be visited will be made prior to the audit. Selection criteria will include considerations such as:

The results of the previous monitoring reviews for sites already visited;

The size and associated significance of influence and impacts of the site on its surrounding environment;

The maturity of the sites and/or their recent evolution (i.e. potential focus on new sites or extension projects);

The geographical dispersion of the sites; and

The existence of any significant environmental and social concerns, in terms of potential impacts or of sensitivity of the receptor environment.

The internal sustainability self-audits especially where these have indicated some under-performance.

A minimum of three sites will be selected for the final audit. The site audits should be completed within a within a four-week time period. Reporting on the results should be finalised four months from commencement of audit activities. It should be noted that compliance with the above-mentioned criteria will be checked through an evidence-based approach. Verifiable documentation and management systems should be made available to demonstrate implementation at Company and site levels. Non-compliances or lack of implementation found in the audit conclusion will bring about the need for preparing remedial Environmental and Social Action Plans (ESAP). With that in mind, it is important that Vedanta does not underestimate the scale of the work needed to secure a successful conclusion in June. Momentum in current programmes needs to be maintained – despite the enforced change in the Sustainability Team personnel. Further effort is needed to identify the shortcomings identified in this review so that suitable and sufficient objective evidence of compliance to the Lenders’ requirements can be demonstrated at Group, Company and individual Site levels.




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8 SOCIAL, ENVIRONMENTAL AND H&S INCIDENCES All Group companies are required to implement an incident register and report health, social, environment, labour and safety event categories. Our previous review examined incidents during the first two Quarters of Vedanta’s 2012-2013 reporting year (i.e. Q1: April and June and Q2: July to September). Table 8-1 below summarises the 2012-2013 Q1-3 results for Group operations. Table 8-1: Summary of Incidents for Group Incidents Q1-Q3

Period Incident Category

Envir. Health Social Labour Safety

TOTAL

Q1 1308 1 3 3 11 1326

Q2 655 0 0 0 7 662

Q3 434 1 2 4 1 442

2012 YTD 2399 2 5 7 19 2430

Note that, as before, Vedanta uses a 5-tier classification for recording incidents and that all Environmental, Health, Social (community) and Labour events are recorded, but only Tier 5 events are recorded for the safety category. This approach tends to skew results considerably towards a potential over-exaggeration of poor environmental performance, but Vedanta views this is as part of the implementation process and expects that any over-reporting of minor environmental problems will gradually decline as the individual companies become more attuned to the corporate procedure. We are pleased to note the generally improving trend through the 3 Quarters, The improvement has been substantially underpinned by a sustained campaign driven by EXCO that has featured:

Group CEO-led programme to eliminate unsafe conditions across all units;

Rectification of more than 11,000 items of equipment and machinery;

Introduction of further structured programmes on equipment safety, Standard Operating Procedure, Permit-to-work systems, traffic management and electrical safety; and

Immediate corrective and preventive action to minimize environmental incidents.

However, it should be noted that the suspension of operations at both Lanjigarh and Sesa Goa may be a significant contributory factor to this improvement. Incidences of particular note in the registers during the third quarter of 2012 included:

Environment: Most of the recorded events still involve minor (tier 1 or 2) spillages or other situations within industrial sites that are quickly resolved by direct interventions or small improvements to facilities or procedures. However, there were some notable events, including:




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In November, SEL had a Category 3 Ash Slurry Discharge in Kurebaga Village from Ash Lines of IPP to the Interim Ash Pond which was stopped and cleaned up.

In December, HZL suffered a Category 3 gas leak from the roaster unit, another Category 3 when there was a breach of sulphur dioxide emission limit when converter temperature was set too high in order to achieve high conversion levels and a third Category 3 event involving fugitive / elevated SO2 emissions from a faulty SKS furnace.

In October, KCM had a Category 3 event when there was an overspill from a cooling tower during shut-down of the East Mill which took silt to areas along the wall fence and onto part of the Kitwe road.

There was another Category 3 incident in November when a pipe ruptured and jetted slurry onto an adjacent lorry parking lot, damaging 2 vehicles.

Black Mountain had a Category 4 storm water pollution incident resulting from elevated zinc levels in run-off from the storage yard. The drainage system has since been upgraded. This was followed by a Category 3 event when a lorry overturned, spilling fuel and lead concentrate onto the road and adjoining land (incident report still awaited).

Health:

There was only one recorded incident during the Quarter 3; it involved 4 employees who contracted malaria at Val-Jharsuguda in December 2012.

Social (community):

There was a single incident at KCM when 12 houses were flooded with sewer effluent from the Kapisha Storm Drainage in Nchanga North which is jointly maintained by KCM and the local council. The incident was caused by a build-up of vegetation and rubbish in the drain and the flood damage was successfully cleared up.

Labour:

At Lanjigarh in December, workmen of contractor M/s KHFM (housekeeping work) stopped work in protest at wage levels. The Matter was referred to District Labor Officer, Bawanipatna, and was resolved amicably on 8th December 2012.

Between 80 and 100 workers staged a series of monthly protests during union meetings in October- December in response to stoppage of production in plant by management. It is not known whether the situation has been resolved.

Safety:

The single reported incident involved a worker at BALCO who died of injuries, the cause of which had not been established and apparently suffered when returning home at the end of his shift. Although the cause of the incident remains unsure – the Police have declared it murder, actions have been taken to improve lighting and surveillance as well as enforce the use of reflective PPE.

As noted above in regard to Recommendation 2.5.23 Incident register above, further safety information is collated on a monthly basis and presented at Safety Meetings and complements that included in the Combined Incident Register, whilst a summary is publicised in the relevant section in Vedanta’s annual Sustainability Report. The present objective of the Group is to reinforce incident investigation, in order to understand more precisely and classify root causes of accidents, whether they are related to procedure, planning, behaviour or equipment problems. In particular, the idea is to systematically address non-routine work accidents, and to develop the range of corrective action plans.




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Performance information includes an analysis of monthly lost time injury frequency rate (LTIFR

*) for both own staff and contractor workers for each operation and other relevant safety

performance information. Data is also collated on injuries that do not result in lost time (i.e. victim receives medical attention of first aid but can continue working) and near misses, unsafe acts / conditions. We are pleased to confirm that we did not find any significant discrepancies between what Vedanta recorded and what appeared in newspapers and on the internet in regard to non HSE issues, although, as per previous reviews, there have been examples of ‘running stories’ on activist web sites. In summary, based upon the information made available and our discussions with Vedanta management, we have no significant concerns at this time regarding the Group’s handling of social, environmental and H&S incidences.

* A lost-time injury is defined as an occurrence that resulted in a fatality, permanent disability or other injury that results in time being lost

from work of one day/shift or more. LTIFR is calculated as number of lost-time injuries per million hours for the total hours worked in the accounting period.

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