Acorn Ideas

Issue No. 39, October 2015

The Colombian Social Responsibility Framework: An Evolving Model

As Corporate Social Responsibility (CSR) evolves worldwide, many countries seek a balance between descriptive and prescriptive CSR frameworks that both promote international investment and create shared value for local communities. Colombia provides great example of this regulatory evolution and quest for balance.

In Colombia, as in many other developing countries, the hydrocarbon industry represents a significant portion of total GDP. As a country with limited - but growing - industrial development, the exploitation of primary products is fundamental for its financial sustainability. From 1975 until 2004, the Colombian national oil company (NOC), Ecopetrol, was also the regulator of the fast growing O&G industry. The O&G industry was firmly controlled by the NOC, limiting foreign companies to association partners, which meant that the Colombian government needed to create more incentives to attract foreign investors, often to the detriment of local communities.

In 2003, the National Hydrocarbon Agency (ANH for its name in Spanish) was created to manage and regulate the national hydrocarbons resources, and continue the efforts to turn Colombia into an attractive prospective location for foreign and domestic investors. Even though the restructuring of the hydrocarbon sector was able to reverse decline in production, increasing social unrest, including terrorist attacks on O&G operations and infrastructure, evidenced there was still need for additional modifications.

With Law Decree 1760 of 2003, the Colombian government established the legal basis for the CSR framework and, since then, it has progressively evolved to meet social issues and social concerns from O&G operations:

Text Box: 2003  •	ANH is legally enabled to require Programs in Benefit of the Communities (PBCs) within areas of direct influence, as a part of Operator’s social responsibility   2004 - 2008  •	Production fields required to develop PBCs   2008 - 2011  •	PBCs required during exploration, as well as production  •	Technical Evaluation Contract (TEA) requires that Execution Plan of the Exploratory Program include a chapter on PBCs and must be approved by ANH

Despite efforts dedicated to creating a more descriptive Social Responsibility framework, progress in delivering benefit to communities remained very limited. In order to address this issue, the ANH issued Annex F to all TEA and E&P Contracts in Colombia. As of 2012, Annex F provides operators with qualitative and quantitative criteria regarding the design and implementation of impactful and sustainable social investments.

Annex F requires operators to invest 1% of operation costs in social programs that benefit the communities, ensuring pertinence, feasibility, efficiency, positive impact and sustainability. These elements are meant to be achieved by:

  • Assessing local conditions: Carrying out a social baseline of the area of direct and indirect influence (ADI and AII, respectively)
  • Defining Area of Impact: Based on the results of the Social Baseline, Operators must define the social, economic and environmental area that will be impacted by operations
  • Aligning with local development plans: Highlighting local development goals and leveraging national social investment
  • Conducting participatory planning with local stakeholders: Creating an open dialog and seeking commitment from all stakeholders
  • Establishing information and communication plans: Defining engagement strategies and ensuring a grievance mechanism is in place
  • Focusing on Human Development: Creating social, environmental, human and economic capital
  • External Auditing of Planning and Implementation: External verification of the process to provide compliance assurance

Although Annex F is significantly more prescriptive than the ANH’s earlier provisions, the instrument has improved the social performance of operators by requiring best international practices.

ANNEX F: IMPLICATIONS OF REQUIREMENTS

PROs

CONs

Participatory engagement practices promote positive implementation environments, open dialogue with local and regional authorities

Areas of operation are often in places with significant basic unmet needs, which may displace ability to invest in longer term, sustainable development focused social investments

Requirements of feasibility and sustainability improves community perception of Operators

Limited social, economic, cultural and environmental information in areas of operation to complete Social Baseline requirement

Alignment with regional and local development plans and coordination with local administrations promotes a shared commitment towards the implementation of PBCs

Social investments are limited to the duration of the operation phases which often limit the capacity of Operators to ensure sustainability of PBCs

Defined lines of investment facilitate the positive impact expected by PBCs

Social investments in exploration phases may raise the visibility of operators and the expectations of stakeholders

Provides methodological and practical guidance to Operators to comply with the terms of the Annex F1

Limited local capacities to implement PBCs according to Annex F requirements and corporate guidelines from Operators

Colombia’s CSR framework continues to be revised and modified to address evolving production goals and social environments and stakeholder concerns. These changes, and the challenging local development requirements of the Annex F, represent a demanding context for O&G operators to pursue effective and efficient regulatory compliance and social license to operate.

In Colombia and around the world, Acorn International works with a large network of local partners to successfully navigate evolving environmental and social risk. Contact us to learn more about our experience managing PBCs, implementing Annex F, and maintaining positive and productive stakeholder relationships in Colombia.

Acorn International LLC delivers social and environmental risk management consulting services to the extractive industries and investors worldwide. We work with local partners in over 80 countries worldwide. Use of these local specialists is paramount, particularly in developing countries, where information is often scarce, second-hand, and unreliable. We look forward to engaging in continuous improvement for the industry and building capacity with our partners.

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Issue 38 -Social Network
Issue 37 -A Community Look-back on Ebola
Issue 36 -Ghana and the Voluntary Principles: Implementing the Human Rights Protection Framework
Issue 35 -Inundation
Issue 34 -Colombia: Local Hiring Requirement for O&G Industry
Issue 33 -Mature and Frontier Mining Geographies: Where does Greater Risk (and Reward) Reside?
Issue 32 -Local Content in Mining: Increasing Expectations and Potential Solutions
Issue 31 -Fast Money Beware: Non-Technical Risk Due Diligence
Issue 30 -Social and Environmental Performance - Considerations for Difficult Commodity Price Environments
Issue 29 -A Window into the Opposing View - Stakeholder Concerns about Oil and Gas in Mexico
Issue 28 -Why Non-Technical Risks Matter to the Mexican Apertura
Issue 27 -Equator Principles:Drivers of Sustainability in the Oil and Gas Industry?
Issue 26 -The Transparency Tightrope: Examining UNEP’s New Access to Information Policy
Issue 25 -July 2014: Bouston
Issue 24 - July 2014: Land Tenure and Property Rights - Where Legal Compliance May Not Be Enough
Issue 23 - May 2014: 3 Things I Learned in Mexico - Non-technical Risks in the Oil Industry
Issue 22 - April 2014: Capacity Building on Stakeholder Engagement
Issue 21 - March 2014: Above-ground Facilities and Stakeholder Engagement: Deploying the 'CAC'
Issue 20 - March 2014: A Starting Point for Shared Equity
Issue 19 - March 2014: What It Takes to Run a Great Consulting Firm
Issue 18 - February 2014: Considering Human Rights - Trends and Lessons in Oil and Gas Impact Assessments
Issue 17 - June 2013: Managing Environmental Health in International Development Projects
Issue 16 - January 2013: Integrating Environmental and Social Performance throughout the Project Lifecycle
Issue 15 - January 2013: The State of Shale Play in 2013
Issue 14 - August 2012: Building Environmental and Social Governance in Host Countries
Issue 13 - May 2012: Human Rights and Business: A New Era
Issue 12 - February 2012: Extractive Industries Confront Pressure for Greater Transparency
Issue 11 - January 2012: Key Updates to the IFC Sustainability Policy and Performance Standards
Issue 10 - June 2011: Oil & Gas and NGOs: New Rules of Engagement?
Issue 9 - February 2010: Annual Study of Sustainable Development Priorities
Issue 8 - January 2009: Annual Study of Sustainable Development Priorities
Issue 7 - May 2008: Top Ten Lessons Learned About Health Impact Assessment
Issue 6 - January 2008: Annual Study of Sustainable Development Priorities
Issue 5 - September 2007: Results of web forum with our International Partners
Issue 4 - January 2007: Annual Study of Sustainable Development Priorities
Issue 3 - May 2006: Suggestions and tips for safe international travel
Issue 2 - January 2006: Annual Study of Sustainable Development Priorities
Issue 1 - November 2005: The Top 10 “unspoken" criteria for determining the success of EIAs

 

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