Acorn Ideas

Issue No. 41, December 2015

FPIC Is Here To Stay

There was a time, not so long ago, when the phrase ‘human rights’ elicited one of two reactions in the extractive industry:

  • Dismissiveness: People were often indifferent to the topic, saying that it was not relevant to their company’s work (‘We don’t employ children, nor do we abuse our workers.’ Or, if operating in the United States: ‘It does not apply given the high degree of industry regulation’).
  • Stirring the Pot: An assumption that the concept was merely a weapon with which to scrutinize and attack everything a company does.

There is some truth in each. Companies operating in highly regulated and developed economies don’t typically identify with the relevance of a human rights lens, and there are indeed opportunists who manipulate the human rights agenda in less than legitimate terms.

But the extractive industry has now by and large accepted human rights as a framework (one of many) within which to think about relationships at their project site or area of influence. While not perfect, there now exist both practical policy tools for assessing and operationalizing human rights – for example, the UN’s Guiding Principles on Business & Human Rights, and practically-oriented organizations that can tackle issues around due diligence and assurance.

We are now going through a similar trajectory with the notion of ‘Free, Prior & Informed Consent’ or FPIC. It is worth briefly examining the history of this concept, what it means and where we are going with it in the extractive sectors.

In the 1980s there was public and institutional debate and discussion around international norms focusing on the issue of peoples’ ‘right to self-determination.’ 1 In 1989, the International Labour Organization’s Indigenous & Tribal Peoples Convention 169 required signatory governments to undertake consultations with Indigenous and Tribal peoples with the objective of achieving agreement or ‘consent’ around activities that impacted them. Then in 2007, came the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). This document included three articles that mention the requirement for States to obtain FPIC with Indigenous peoples.

The developments received little attention in the private sector as the commitment frameworks referred exclusively to governments. Private sector reaction prior to the millennium change – and this, rarely – was policy level support for ‘indigenous rights to self-determination,’ as this was thought mostly to be up to governments. Prior to about 2000 within mining circles, information flow between communities and an operation or project was mostly ‘push communication’: company announcements, fact sheets, bulletin boards and perhaps advertising.

This all changed when the International Finance Corporation (IFC) – the division of the World Bank that provides finance to companies working in emerging markets – referred in 2006 in its Performance Standards to ‘free, prior and informed consultation’. This – though it was a compromise in itself as NGOs pushed for the harder notion of ‘consent’- caused considerable consternation in the mining sector as they saw this as the ‘thin edge of the wedge’. While we were just getting used to this, in 2012 the IFC revised its Performance Standard #7 about Indigenous Peoples, such that borrowing clients were required to obtain the free, prior and informed consent of project-impacted communities. The Equator Banks followed suit and also now require FPIC for projects affecting Indigenous communities.

Thus, a sizeable portion of the finance available for mining projects in areas where Indigenous peoples live now oblige companies to come to terms with their communities and seek and obtain their consent. This is not an easy task. There are issues around definitions of ‘indigeneity’; around processes and implementation of this policy; around representation (who does one obtain consent from in multi-ethnic communities?); around what constitutes consent? (Is FPIC the right of veto? What if it is coming from a minority of the community?) The role of government is also largely ignored in the IFC standard and this leaves companies in a quandary where those governments may not recognize the status of the Indigenous citizens. It also does not take account of a democratically elected government’s sovereign right to develop their natural resources. Nevertheless, while a robust consultation process is the cornerstone of what constitutes ‘consent’, the FPIC movement requires a final ‘yes’ or ‘no’, despite the quality of the consultation process.

Despite all these issues, FPIC is here to stay, and the new International Council on Mining & Metals ‘Good Practice Guide: Indigenous People and Mining’ is a good start to helping companies implement FPIC. It includes guidance on building knowledge bases of communities early on, having the right people to establish and nurture strong relationships, building capacity in the company on stakeholder engagement, the necessity for committed leadership, patience and a focus on process more than just outcomes, among other things.

Movement of some mining companies such as Rio Tinto and Newmont toward formal agreements with communities is also a strong indicator of where mining and extractives more broadly are going. These agreements are generally comprehensive statements on joint and separate roles and responsibilities, dispute settlement mechanisms, commitments on environmental mitigation and protection, cross-cultural awareness, employment & training, local supply chain, social investment, as well as financial benefit sharing. The development of these agreements can sometimes take years but just the process of engagement and the relationships that arise out of it are perhaps more important to the success of the ultimate operation than is an outcome of ‘consent’.

Helping our clients understand FPIC and related non-technical risk challenges is a critical part of what we do at Acorn International. We are delighted to welcome Chris Anderson, PhD to our team, as he brings internationally-respected FPIC and indigenous people’s expertise, along with a great sense of judgement and humor, to our work.

See more on Chris at http://www.acornintl.net/news/15Sep22news.html

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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1 For example, the United Nations Declaration on the Granting of Independence to Colonial Countries and Peoples (1960), and the International Covenant on Civil and Political Rights (1966) and International Covenant on Economic, Social and Cultural Rights (1966)

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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
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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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