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Enhancing Extractive Companies’ Respect for the Human Rights of Affected Communities Extractive Industries Executive Training Program, Columbia University,

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Presentation on theme: "Enhancing Extractive Companies’ Respect for the Human Rights of Affected Communities Extractive Industries Executive Training Program, Columbia University,"— Presentation transcript:

1 Enhancing Extractive Companies’ Respect for the Human Rights of Affected Communities Extractive Industries Executive Training Program, Columbia University, 18 June, 2014 Rachel Davis, Managing Director Copyright (c) Shift Project Ltd, All rights reserved.

2 2 Overview 1.Understanding extractive sector impacts on local communities - and their costs to companies 2.Introduction to the UN Guiding Principles on Business and Human Rights 3.Responsibilities of extractive companies 4.Implications for governments

3 3 Costs of company-community conflict in extractive sector Research by Harvard Kennedy School, University of Queensland and Shift Looked at 50 publicly available cases of company-community conflict across all regions Conducted >45 global interviews with mining company staff, financial, legal, academic experts Field work to test findings in Peru with 5 mines

4 4 Costs to companies Our research shows that costs can include: Most frequent costs: delay and interruption, eg USD$3-5 billion capex mining project can lose $20 million per week in Net Present Value (NPV) terms due to delays and lost sales Most often overlooked costs: staff time spent managing conflict Greatest costs: opportunity costs, eg, loss of ability to start new projects, or to expand Impacts on share price Access to capital

5 5 Causes and results of conflict Our research into individual cases of conflict found: 40% of cases involve a fatality; 50% involve physical blockade Environmental/community health & safety issues are the most common “proximate cause” or trigger Most common “underlying issues” are economic and social – distribution of benefits, communication and consultation processes Underlying issues directly affect the absorptive capacity of the relationship: when something goes wrong, it is more likely to escalate into conflict

6 6 “Putting Ourselves in their Shoes” Video Harvard Kennedy School project 3 films about energy projects in Nigeria, Peru, Philippines – all publicly available on Shift website Today’s video looks at Tintaya mine in Espinar province, Peru Formerly owned by BHP Billiton, now Xstrata/Glencore Creation of Tintaya “Dialogue Table” to hear and address community concerns

7 7 “Putting Ourselves in their Shoes” – Discussion questions 1.Does this resonate with extractive sector impacts on local communities in your country? Why/not? 1.Does this resonate with company efforts in your country to prevent and address such impacts? Why/why not?

8 8 Pre-2005: Increasing public concern about business and human rights but substantial polarization 2011: UN Guiding Principles unanimously endorsed by UN Human Rights Council 2008: UN ‘Protect, Respect, Remedy’ Framework 2005: Prof John Ruggie appointed as Special Representative of the UN Secretary-General 2012: Implementation and global convergence Timeline of UN developments

9 9 UN “Protect, Respect and Remedy” Framework Protect State duty to protect against human rights abuses by third parties, including business Respect Corporate responsibility to respect human rights, which means to avoid infringing and address negative impacts with which a business may be involved Remedy Greater access to effective remedy for victims, both judicial and non-judicial

10 10 Converging standards

11 11 Corporate responsibility to respect: Foundations Based on a company’s impact not its influence Focus is on risk to people not risk to the company Applies to a company’s own operations and to its business relationships Covers all “internationally-recognized” human rights (International Bill of Human Rights and ILO Declaration) Not philanthropy or “CSR as usual”; no human rights off-sets Beyond compliance with national law Move from “name and shame” to “know and show”

12 12 Corporate responsibility to respect: Key elements 1.Policy Commitment and Embedding Respect 1.Human Rights Due Diligence a)Assessing impacts b)Integrating and acting on findings to reduce risk c)Tracking responses d)Communicating about responses 2.Remediation of actual impacts the company causes or contributes to, including through operational-level grievance mechanisms

13 13 Putting the focus on people “Meaningful” engagement with potentially affected stakeholders is part of due diligence and remediation Engagement with affected stakeholders or their representatives Where direct engagement is not feasible, look for credible “proxies” with insight into their views Growing examples of company-community collaboration in monitoring impacts and identifying solutions Importance of underlying relationship – beyond transactional

14 14 Grievance mechanisms Part of respecting human rights – if a company causes or contributes to a negative impact, then must cooperate in effective remediation Enable grievances to be addressed early and directly before they escalate Trends and patterns can show systemic problems Can support impact assessment and tracking processes Can help build and reinforce relationships with affected stakeholders Unless potential users trust the mechanism, it’s worthless

15 15 Implications of UN Guiding Principles for governments? Provide/promote guidance for extractive companies, eg, European Commission Oil & Gas Sector Guide; ICMM Human Rights Due Diligence Guidance Review regulation governing consultation/consent processes with local communities Consider incentives – and disincentives (eg, limit access to government procurement) Integrate consideration of human rights into state-investor contracts (see Responsible Contracting Principles) Participate in collaborative efforts, eg Voluntary Principles on Security and Human Rights

16 16 Work with the Peruvian SBS Costs of conflict have implications for individual banks, Peru’s financial system and reputation SBS wants to incentivize better management of social conflict by extractive and other large footprint companies through regulating the financial sector Regulations will require banks, insurers and pension funds to assess company management systems in practice not just on paper Independent expert evaluation of quality (“absorptive capacity”) of company-community relationships in high-risk projects

17 17 Key Take-Aways Company-community conflict has costs – for communities, companies and states Value of strong company-community relationships in generating “absorptive capacity” when things go wrong Companies need effective policies and processes to manage their human rights impacts in line with UN Guiding Principles on Business and Human Rights Governments have a duty to protect against such harms and key innovations are happening in countries that face the biggest challenges

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