Thursday, April 26, 2012
I want to make four simple points regarding corporate and mineral extraction in Colombia. I presented these ideas several weeks ago at a Harvard Law School seminar sponsored by the Colombian government. We had senior officials present along with a great many Colombian graduate students studying at Boston-area schools. I think these prescriptions apply globally, but they are especially relevant in Latin America.
Corporate (CS) provides a new point of entry for those concerned about the social and environmental impacts of mineral extraction.
Corporations around the world are being pressed by their shareholders to do a better job of taking local concerns into account when they initiate mineral extraction projects. Indeed, both stkholders and risk managers are demanding this. assess the concerns of a wide range of stakeholders and demonstrate (in annual reports to their shareholders) that they are taking their responsibilities seriously. A great many mineral extraction disputes occur because multinational and national companies purchase concessions or apply for mining permits, but make little or no contact with relevant local governments civil society groups before they begin work. Development impacts surprise and upset local interests. More up-front interaction with these groups -- and a genuine effort to understand and respond to their concerns -- could minimize much of the damage that triggers demonstrations and concerted campaigns against mineral extraction projects in Latin America.
Many countries (and international law) now require “Free, Prior Informed Consent (FPIC) by communities likely to be affected by proposed . mining companies (and their investors) responsibilities – including FPIC -- must be taken seriously greater traction for local groups who are usually put in a position of having to oppose whatever is happening (without their consent) because they are were not given a chance to make constructive suggestions or stipulate their concerns beforehand.
Global (and stockholder) pressure on major companies to take their responsibilities seriously can provide a new source of leverage for governments and communities. Both should be able to engage mining project developers and investors in a dialogue before concessions are granted and infrastructure investment decisions are made. Governments can insist on seeing evidence of genuine offers to collaborate with local interests before allowing concessions or licenses to be activated. Certainly, multilateral lending institutions ought to demand evidence of such efforts before funding mineral extraction projects. National governments should support the involvement of professional mediators to help facilitate such local conversations in an even-handed way. They can cover the cost out of the royalties that mining are required to pay for permission to mine or drill.
All sides benefit when joint fact-finding and Community Benefit Agreements are put in place.
There is great value to joint factfinding social and environmental impacts, both before projects have begun and after they are underway. Such should be seen as value-creating moves. That is, they should be used to in measurable ways what the impacts of development are likely to be, how adverse effects will be minimized and mitigated and benchmarks that local stakeholders can use to gauge the performance of the mining companies involved.
Being explicit in this way will help companies that mining operations all the problems in the region. Joint fact-finding can also provide a basis for national and regional governments to insist that companies take appropriate action to hold the impacts of their mining operations to an absolute minimum. Regardless of how many jobs are created or how much tax revenue is generated, there should be a “cap” on the social and environmental impacts that mining or mineral extraction projects are allowed to have. Contingent obligations to mitigate and compensate, if caps are exceeded, should be spelled out before hand.
Environmental Impact Assessments (EIAs) are required in most countries in Latin America. The preparation of EIAs can provide a context for the kind of joint fact finding I am talking about.
, mining companies can offer to work with representative local, regional and national stakeholder groups, with the assistance of a neutral mediator, to negotiate what might be called “Community Benefit Agreements." These should take the form of contracts that meet pre-specified impact mitigation and compensation requirements (based on agreed upon data and forecasts generated jointly with federal, regional and local officials and the heads of civil society groups).
Right now, most produce nothing more than justifications for what industry already has in mind. There are ways, though, in which can be used to inform site-specific community benefit agreements that governments could then enforce.
The missing ingredient in too many disputes is trust.
It is important for mining ies to build trust with local governments and communities before they begin work. If good working relationships are developed and maintained, whatever problems emerge can be handled expeditiously. In the absence of trust, however, it is quite common for all sides to assume the worst about everyone. This causes conflict to escalate. When there is no trust, even reasonable offers to make amends or put things right are likely to be rejected.
There are two keys to building trust. The first is to "say what you mean.” If you have bad news to deliver, don't try to sugar-coat it. If there are organizational, legal, financial or other limits on what a company can offer, it should make those clear. The second key is to “mean what you say.” Whenever anyone, whether motivated by a desire to "help" or not, makes promises they can't keep, that undermines trust. Once it becomes clear the a promise was not genuine, trust is lost. It is extremely difficult to reestablish trust once it has been lost.
Companies make things worse when they do not ensure alignment between their community engagement team in the field is saying and what corporate headquarters is ultimately willing to do. Often, companies will hire locals to represent them. These new staff members are likely to be sympathetic to the neighbors with whom they now have to deal in a new role. When they promise to make best effort to get headquarters to be responsive, however, and then fail, local attitudes toward the parent company are likely to sour immediately. Companies must make sure that staff representing them in the field understand exactly what they can and can't commit.
Grievance-handling mechanisms, while important inside most major companies, are . Before any and all mineral extraction projects begin, local grievance-handling mechanisms should be in place. Ideally, these should be part of an overall spelling out who the point of contact is, what the company's promises are with regard to minimizing social and environmental impacts and what penalties they are prepared to have enforced if they violate the terms of their agreements. These should be signed off on by officials who are to make sure they are enforced.
Collaborative adaptive management is now Best Practice.
Wherever possible, joint implementation of mineral extraction projects (however large or small) should be the goal. All mining operations are likely to have unintended effects. Close monitoring of social and environmental impacts, by joint teams of company staff, public officials and non-governmental representatives should be par for the course. This will allow adjustments in scheduling, operations and mitigation in response to timely and trusted information. Small scale experiments are also desirable. When stakeholders are not really sure what the full effects of a certain mining procedure will be, a small scale (controlled) experiment, monitored jointly, can be extremely valuable.
Collaborative adaptive management requires neutral assistance. That is, all the relevant parties should help to choose someone to facilitate the kinds of joint monitoring and adjustment efforts I have described. Management by non-partisan professionals makes it easier to build and maintain trust.
Conflicts surrounding mineral extraction in Colombia are substantial and growing, especially as project scale increases. For the foreseeable future, oil, gas, coal and other mining activities will constitute a substantial portion of the national economy. That does not mean, though, that better ways cannot be found of making site specific decisions about particular mining operations. New international corporate provide a foothold for the national government, indigenous communities and environmental advocates to hold extraction companies accountable.
Joint fact finding requirements, overlaid on top of existing laws regarding the allocation of mining rights and responsibilities could help to build trust and engage local governments and other affected communities in conversations before mining operations begin. These could lead to the negotiation of formal Community Benefit Agreements with clear caps on allowable levels of impact along with contingent mitigation and compensation requirements if negotiated caps are violated. Trust building will be enhanced if companies commit to collaborative adaptive management, or CAM. CAM assumes that project impacts will change over time in unexpected ways. And, unexpected interactions with other land management, economic development and conservation efforts will need to be addressed. Putting monitoring and dispute handling arrangements in place beforehand is the best way to proceed.
Nothing that I have suggested requires laws to be changed or new laws to be enacted. Companies and communities can proceed in the ways I have described on a voluntary basis.
Posted by Lawrence Susskind at 7:44 AM