Face-to-Face with Civil Society

Face-to-Face with Civil Society

WWF, Natural Resource Governance Institute, and Fund for Peace offer reflections on how to succeed in sharing the gains of oil, gas, and mining investments
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© Tedd Pollett

Advisory Services Head, Infrastructure & Natural Resources,
IFC

President, Natural Resource Governance Institute (NRGI)

Head of Water Stewardship, WWF

Executive Director, Fund for Peace

Executive Director, Quality Supplier Development Center

Amid serious concerns over the distribution of economic benefits and the environmental and social impacts associated with oil, gas, and mining operations, leading NGOs provide advice on how extractive companies can share the benefits generated by their activities and how to best engage with key stakeholders. 

NRGI’s Kaufmann:  It is not in a company’s longer-term interest to see citizens denied benefits from oil, gas, or mining extraction.  Enlightened companies know it does not pay off to secure a lopsided deal from a government. Companies may derive short-term rents pleasing some shareholders, but the likelihood of the deal unraveling over time is high, eventually harming the company’s bottom line. There are multiple instances of deal renegotiation or cancellation.

Transparency at the contracting stage promotes deals that are more balanced. Contract transparency helps manage local expectations regarding the flow of benefits. Without transparency, expectations can become inflated, undermining commitments made by government officials and companies. Being proactive in communicating benefits, especially with today’s lower commodity prices, is in a company’s interest.

But transparency alone will not suffice; we risk having “zombie” transparency—transparency that exists only on paper. Translating disclosure into accountability requires an enabling environment in which civil society can operate, including freedom of expression. An autocratic regime releasing information on oil revenues while censoring the media and civic leaders cannot be made accountable. When there is no rule of law, there are no sanctions for mismanagement and corruption.

WWF’s Orr:  A lot of the benefit sharing discussion has focused on how a company protects its social license to operate, without considering the company’s long-run business strategy. It is easy to dig wells for communities. But if we are to look at long-term risks in terms of scarcity of resources—especially water—then we need to reframe this into a broader debate about what is good for everybody.

Companies are getting better at identifying environmental risks. More are disclosing such risks through CDP (formerly named the Carbon Disclosure Project) and the Global Reporting Initiative. This kind of reporting increasingly affects how investors are viewing assets, enabling responsible, forward-thinking companies to reap some competitive advantage.

But within many companies, risk discussions are still limited. They realize that resource risk is one of their biggest problems but are focusing on driving efficiency only. The shift in mind-set needed to view risk reduction and benefit sharing in more strategic terms is still lacking.

Many NGOs are nervous about working with companies and have legitimate concerns about the access and power companies wield. Meanwhile, governments have simply not kept pace with the debates on business risk, often because they do not know how to engage companies. Some of the most exciting new opportunities involve aligning these agendas and seeking more pragmatic approaches to environmental management.

FFP’s Messner:  In order to be truly successful over the long-term, companies implementing large-scale extractive and infrastructure programs need to behave as responsible citizens. Recognizing local conflicts affects operating costs, there is a clear business case for approaching human and economic development challenges holistically, going beyond ”check the box” community engagement efforts.

The extractive industries must operate where minerals are located, which presents challenges to the company (both operational and reputational) as well as to the host communities affected by mining activities. In conflict-affected areas, a benefit-sharing approach is all the more critical. Some companies are investing in multi-stakeholder coalitions, such as the Partnership Initiative in the Niger Delta, an independent foundation funded by Chevron. This initiative has been instrumental in facilitating the work of organizations like the Fund for Peace to catalyze the creation of locally-owned peacebuilding networks that bring together traditional rulers, state and local government, youth leaders, women’s leaders, local businesses, and civil society.

All stakeholders must have ownership, from security services contributing to the design of their own human rights training to women empowered to participate in peace and reconciliation practices. Benefit sharing cannot be implemented through a top-down approach—all voices must be included to ensure comprehensive buy-in and long-term effectiveness.

Tuguldur Baavai: While exploration and mining projects offer some opportunities for jobs, the key to economic growth tied to the industry is with the mining supply chain.  Significant opportunities for job creation and benefit sharing come with the development of a robust local supplier industry developed around mining. To accomplish this, host governments must set up an enabling environment for the private sector. And the industry must commit to procure and purchase locally – and to invest in strengthening local capacity, in knowledge transfer and/or in quality improvements that allow increased participation in the supply chain.

The industry can facilitate local participation in the supply chain through a demand-driven approach. This approach aims to link large buyers with local producers that are committed to improve their capacity, capability, and competence. The buyer-led approach is a result-oriented approach in which: (i) the assistance is aimed to facilitate only those transactions that have sufficient demand; (ii) the focus is placed on resolving the specific problems of the supplier that are identified in collaboration with both the buyer and the supplier, rather than providing pre-packaged solutions that shall suit every supplier; (iii) act as an honest broker and facilitate effective buyer and supplier relationships. Hence, the assistance may range from the simple matching of the interested parties to technical and financial assistance required in resolving the bottlenecks for the transactions with proven demand.

Heydi Isales“Successful engagement depends on respect and authentic community representation combined with a focus on evidence, not rumors.”

Heydi Isales,
Regional Association for Environmental Monitoring and Protection, Guatemala

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