Rhetorical advances must be matched by policy implementation

Washington, DC – Oil and mining companies are increasing their stated commitments to human rights, including in some cases adopting policies in favor of securing community approval prior to projects moving forward, according to new research by international relief and development organization Oxfam America.

“Too often, communities have no say in the decision of whether to extract resources from their backyards and receive little information about these projects,” said Raymond C. Offenheiser, president of Oxfam America. “With more than half of the world’s poorest people living in countries rich in natural resources, the increasing trend of companies incorporating human rights in their policies is encouraging.”

The research released today reviews the public policies of 28 oil and mining companies. Five of the companies surveyed (Inmet, Newmont, Talisman Energy, Rio Tinto and Xstrata with total market cap of $180.58 billion) have made explicit public commitments to Free Prior Informed Consent (FPIC), a number which has more than doubled since a 2009 Oxfam America report. Another eight companies (including Anglo American, BP, Repsol, and others) have made somewhat qualified or indirect commitments to FPIC. The report assesses stated policies but does not attempt to measure observance of corporate policies.

FPIC is considered the gold standard of policies since it requires communities to be adequately informed about oil, gas and mining projects in a timely manner and given the opportunity to approve (or reject) a project prior to the commencement of operations. FPIC is a right for indigenous peoples according to international law, and Oxfam America believes that it is also a best practice for sustainable development of any oil, gas, or mining project.

The report also finds that approximately two-thirds of the companies surveyed now have incorporated the concept of community consent or less strong concepts such as community support or social license in their policies regarding development activities, either directly or indirectly through their commitments to other standards. Some companies that only referenced consultation or community engagement in 2009 now have policies more aligned with community support or social license principles, including ExxonMobil, Total, Shell, and Barrick Gold.

With intensified conflicts over land, water and mineral rights, business as usual is simply not going to cut it,” said Offenheiser. “Companies need to work with communities to ensure they have a meaningful voice in the decision-making process and that projects are designed in ways that respect human rights.”

The change within companies in the last three years is likely due in large part to the intensification of controversies and conflicts surrounding oil, gas and mining projects coupled with new international lending standards set by the World Bank’s private sector lending arm – the International Finance Corporation. Total World Bank Group’s commitment to the extractive industries sector has averaged US$910 million per year over the last five fiscal years.

“In order for oil and mining companies to survive in the coming decades, they need to transform themselves from primarily resource extractors to development partners,” said Offenheiser. “Companies that fail to implement the policies will be at a competitive disadvantage.”

Frequently Asked Questions on Free, Prior, and Informed Consent

Q: What is Free, Prior, and Informed Consent?

FPIC is a dynamic process. It ensures communities receive adequate and timely information about oil, mining, and other development projects affecting them and their lands. It also ensures that communities have the opportunity to approve or reject projects. However, some governments and companies fear that FPIC implies a one-off procedure, a simple yes or no vote, but it’s really about giving all sides the opportunity to share their concerns. Within an FPIC process, for example, an oil company could learn that its planned pipeline is located on land considered sacred by the community. With that information, the company can choose to reroute the pipeline to another site, improving its relationship with local communities and in some cases even preventing conflict and revenue losses in the long-term.

Q: Is the right to FPIC protected by international law?

In short, yes. International bodies like the International Labour Organization through its Convention No. 169, Concerning Indigenous and Tribal People in Independent Countries, and the Inter-American Court of Human Rights (IACHR) have recognized the right to FPIC in certain circumstances. For example, in 2007 the IACHR ruled that the government of Suriname had violated the Saramaka peoples’ right to collective property for awarding a timber concession on their lands without prior consultation. The United Nations Declaration on the Rights of Indigenous Peoples also calls on states to secure the FPIC of indigenous peoples for projects that affect their lands or resources.

Q: How does the private sector view FPIC?

Oil, gas and mining companies have started adopting FPIC into their own policies and standards. For the private sector, it’s a bottom-line issue and it also promotes responsible spending. When communities become unhappy and begin protesting a particular project like blocking off roads or shutting down production facilities, projects becomes riskier. That was the case for Newmont’s Yanaocha Mine in northern Peru. When the company decided to expand the mine without consulting the community, thousands of people staged demonstrations and blocked access to the mine for two weeks. During those two weeks, the company’s stock price fell 7 percent, a loss of more than $ 1 billion in shareholder value, according to calculations made by Oxfam.

Because companies in the oil and mining sector are especially vulnerable to financial and reputational risks, many of them such as Newmont, Rio Tinto, Xstrata, Anglo American, BHP Billiton, ConocoPhillips, Pluspetrol and Talisman Energy have made some type of commitment to securing community consent prior to launching projects.

Socially Responsible Investment (SRI) fund managers have also started highlighting the importance of FPIC as a way to ensure that the companies within their client’s portfolios demonstrate a commitment to sustainability and respect for indigenous peoples’ rights. In 2009, mutual fund company Calvert Asset Management Company removed Weyerhaeuser from the Calvert Social Index for failing to recognize FPIC in its relationship with the Indian Tribe Grassy Narrows First Nation of Ontario, Canada.

More recently, international financial institutions are requiring companies to implement FPIC as a condition of financing. In August 2011, the International Finance Corporation – the World Bank Group’s private sector lending arm – released its new sustainability framework. For the first time, companies receiving IFC financing will be required to consult and receive the FPIC of indigenous communities prior to launching development projects that could potentially impact them adversely. This is a significant move by the IFC. The new policy will set a global standard for companies and financial institutions to follow. This includes the 72 export credit agencies and private banks that commit to the Equator Principles— a voluntary set of standards for identifying and managing social and environmental risk in project financing. The Equator Principles are based largely on IFC policies.

Q: Does FPIC work in practice?

The practice of FPIC is relatively new. Increasingly, governments, companies, and international financial institutions are embracing FPIC as a best practice and putting it to the test.

A case study produced by Oxfam describes Bolivia’s Ministry of Hydrocarbons and Energy successfully applying FPIC during a gas exploration project in the indigenous territory of Charagua Norte e Isoso, located in the Santa Cruz region. The Ministry consulted the community about the project and, prior to exploration, indigenous leaders signed an agreement with the Bolivian government documenting consent for exploration activities by the Argentine company Pluspetrol. The consultation process reached a positive outcome thanks largely to the willingness of the government to respect the use of traditional indigenous institutions and systems, provide complete and truthful information to affected communities, and approach the process with good faith.

Contact: Jessica Forres, +1 202 777 2914, and jforres [at] oxfamamerica [dot] org

Keith Slack
Extractive Industries Global Program Manager
Oxfam America
1100 15th St, NW Suite 600
Washington, DC 20005
Tel: 202-496-1308
Cell:202-378-7810
Fax:202-496-1190

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Major Extractives Firms No Longer Ignoring Community Consent

By Carey L. Biron – IPS, http://www.ipsnews.net/2012/09/major-extractives-firms-no-longer-ignorin...

27 September 2012

WASHINGTON – New research from Oxfam, an international aid agency, finds that some of the largest multinational oil and mining companies are increasingly incorporating principles of community consent into their day-to-day operations.

Oxfam’s researchers looked at 28 of the world’s largest extractives companies and combed through their publicly available commitments to addressing the issue of community rights. They used the information to come up with a ranking – the Community Consent Index – that, coupled with a similar report from 2009, can now be used as baseline data.

The report does not rate the implementation of these policies, however, and its selection does not include any companies that have not specifically and publicly set out policies or positions on community engagement. Rather, Oxfam says that the index is supposed to incite and inform dialogue going forward.

“Community consent has been a very slippery concept over the years, and having a (preliminary) framework … is a really important start,” Raymond C. Offenheiser, president of Oxfam America, said in unveiling the new paper here in Washington on Wednesday.

“In order for oil and mining companies to survive in the coming decades, they need to transform themselves from primarily resource extractors to development partners. Companies that fail to implement the policies will be at a competitive disadvantage.”

Over the past three decades, the turnaround in the industry’s view on community engagement – at least insofar as the top players are concerned – has indeed been striking.

It was only in the early 1980s that the World Bank began discussing environmental impact, assessment of which is now required on virtually all foreign- or donor-funded projects in the world. Recent years have also seen international covenants on the rights of indigenous peoples over their traditional lands.

“Where are we today?” Offenheiser asks. “Admittedly, controversies still exist. But now we talk about ‘host communities’ rather than ‘drilling sites’, about a ‘shared-value approach’ that assumes that there is a connection between communities and companies. These would not have been on the agenda 30 years ago.”

In that time, local communities and civil society activists have become increasingly vocal and empowered in asserting their rights. In turn, this has both led to and been backed up by a raft of new international conventions as well as policies within international financial institutions, most notably the International Finance Corporation, the private-sector arm of the World Bank.

In recent weeks, both the United States and the European Union have also moved forward on legislation that will vastly increase transparency regulations in the extractive industries, specifically with an eye to how those industries affect communities on the ground.

“That said, it’s important to recognise that advancing this discussion is more critical than ever – I think we’re living in a moment of urgency,” Offenheiser cautions. “Due to the current explosion in the demand for natural resources … companies are extending their reach into remote and sensitive areas. This issue has to be raised by civil society organisations, business and government in ways that it hasn’t been in the past.”

How dopey?

“Why are companies doing this, and why are investors interested in us doing this?” Chris Anderson, with the mining giant Rio Tinto, one of the companies included in the new report, asked at a panel discussion on Wednesday.

“The simple answer is we’re not going to have any business otherwise. If you don’t adequately consult with a community and they don’t want an aspect of your project, you just don’t have a project and therefore you may not have a business.”

Among upper-level management in the sector, Anderson says that the realisation that communities “can become full, proper partners in the development of these projects” has set in only within the past decade. Now, however, he says “We’ll think back in five or 10 years, on the company side, and think, ‘How dopey could we be?’”

While lauding the new report, he also warns that Oxfam’s selection of companies has “skewed” its findings.

“You’re not looking at the worst actors, and there are plenty still around,” Anderson says. “We need to raise the bar … we’ve come a long way, but we have a long way to go to operationalise the notion of consent.”

Indeed, while Oxfam’s findings highlight optimistic trends overall, even such “skewed” results show that the discussion is still in its early phase.

Of the 28 companies, Oxfam’s researchers found that two-thirds have incorporated provisions of community consent, social license or broad community support into their development activities. Thirteen have either directly or indirectly (by agreeing to comply with various international agreements) said they would operate under the directives of free and prior informed consent (commonly referred to as FPIC).

All but two of the 28 companies reference the Universal Declaration on Human Rights in their public websites and annual reports, and all but five publicly commit to the rights of indigenous people. While about half of the companies commit to minimising involuntary resettlement, fewer have actual policies on resettlement and just two have made those policies publicly available.

“It’s clear that companies are now paying attention to the impact on communities – it’s standard practice now for the vast majority to have a human rights policy,” one of the report’s authors, Marianne Voss, said at the discussion on Wednesday.

Still, she reports, some companies are using “qualifiers that weaken the weight of their commitments”. Others say they will apply the principles of free and informed consent only where local law requires it or where governments have implemented it.

Nonetheless, she and others suggest, the direction of the discussion seems to be moving in one direction.

“Raised marks indicate that international investment can play a vital role in poverty reduction and development and, if done correctly, can be a good partnership between communities and business,” she says.

“While few extractive companies currently go as far as explicitly committing to FPIC, they’re going to be under increasing pressure to adopt them in the future. The growth of the minerals sector in developing countries and the fact that they’re going into more sensitive areas is going to broaden the demand moving forward.”