Issue No. 5, September 2007
Global corporations have made great progress in developing programs to understand and manage the environmental and social impacts of their activities worldwide. But how is industry actually addressing these priorities in developing countries facing capacity constraints and competing priorities?
This August, Acorn International hosted a web forum with its international partners to better understand how four issues of emerging importance are being addressed by multi-nationals and governments in developing countries when planning and reviewing capital development programs. The issues that Acorn International considers to be of most emerging importance to our industrial and investment industry clients are:
- Stakeholder Engagement and Social Impact Assessment
- Health Impact Assessment
- Climate Change
The web forum served as one of the ways we share experiences on these issues and thereby build capacity among our network of in-country partners in 35 countries. The forum and on-going dialogue with our partners has provided an opportunity to discuss why these concerns are important to industry and how they are being integrated into project planning through mechanisms such as Environmental Impact Assessment (EIA). Acorn International’s perspective and key findings from the forum and ongoing partner dialogue are described below for each of the topics.
Stakeholder Engagement and Social Impact Assessment
International industry and investors are finding that stakeholder and social concerns represent both short term risks to the success of development projects, and longer term reputation risks. Financier requirements such as the Equator Principles are driving companies to develop grievance mechanisms for stakeholders, conduct an evaluation of potential economic displacement from a project, and require companies to engage in capacity building. Emerging government requirements and company policies are integrating stakeholder engagement and social impact assessment (SIA) into EIA and early project planning, helping concerns to be identified and addressed up front, and allowing companies to anticipate potential opposition and mitigate future risk and liability.
Through the web forum and dialogue, Acorn International learned that although SIA appears to have been well-introduced into legislation around the world, the process is still being learned by government, the private sector and the public. The view from some of our partners is that legislators in many developing countries may not have the capacity to date to thoroughly address concerns. Acorn International believes that as continued emphasis on other sustainable development trends (such as biodiversity, water consumption, and human rights) grows, so will the focus on stakeholder engagement and SIA and the need for governments to develop capacities needed to work with industry and investors to manage this sensitive issue.
The risk that developments could cause a reduction of biological diversity or irreversible loss of value of an ecosystem has become a critical concern to financiers and shareholders. Recognizing the project viability and reputation implications, some industry leaders are addressing biodiversity concerns early in a project lifecycle – putting in place corporate policies backed by requirements for Biodiversity Action Plans1. This is helping companies limit delays to projects, build relationships with local stakeholders, improve their reputation and secure future company activity in an area or region.
The web forum revealed that there is a growing application of Biodiversity Action Plans worldwide, with some governments specifically addressing the topic through regulations or guidelines and attention given to decommissioning activities as well as for new developments. Acorn International’s Colombian partner shared that the Ministry of Environment in Colombia includes requirements in project Terms of Reference that address biodiversity protection through ecological management plans, monitoring and mitigation and compensation.
Health Impact Assessment
As industries continue to expand to remote areas of the world, public health is becoming an increasingly important issue to manage. The influx of large numbers of non-native workers to a project area combined with poor sanitation can adversely impact the health of the public, strain existing public health resources and increase the spread of communicable diseases. As costly health effects are recognized in existing projects, the industry is responding by giving focused attention to local and regional as well as immediate and long term health impacts early in project development through Health Impact Assessments (HIA). Additionally, countries are starting to regulate health impacts more broadly; for example, Thailand passed HIA requirements last March.
Our partners confirm that health impact is an increasingly important issue overseas, but warn that the application of HIA is still not common in most regions. One example discussed in the forum is the conversion of millions of hectares to cropland in Latin America for ethanol feedstocks to support biofuel development interests. While new ethanol plants are subject to impact assessment, the wide scale conversion of land use is often not subject to review. As a result, there is rising concern among stakeholders in some countries that the introduction of new workforces into remote areas and a large increase in water consumption could introduce public health risks that go unrecognized.
Greenhouse Gas Management and Climate Change
In Acorn International's January 2007 review of sustainable development priorities, climate change was the highest priority concern of the oil industry and was also found to be a high concern among NGOs and other industries. Unlike the other three issues, climate change is not considered an immediate project risk but it is seen as a major business, reputation, and long-term liability risk. The industry is increasingly reporting metrics such as greenhouse gas emissions to provide sustainable development business indicators. International investors and industries are also starting to evaluate possible threats from climate change in EIAs, and there is an increasing amount of guidance available for incorporating various analytical techniques into impact assessments2.
The forum and on-going partner dialogue have shown us that although climate change receives great attention in the US and Europe, it is often not among the most important issues in other countries. Certainly some advances such as carbon sequestration projects, carbon credits, energy initiatives and clean development mechanisms are being incorporated into industry activities worldwide. However, at present many developing countries with limited resources have concerns that are more urgent, tangible and manageable, and thus take precedent over climate change. As the collective consciousness and awareness of the issue increases in these countries, we believe that pressure on governments to emphasize regulation and review of climate change issues related to development programs will follow.
Overall, the forum and our continuing dialogue with our in-country partners has highlighted the emerging importance of these issues to the short and long term success of industrial development investments overseas, and helped clarify how they are being addressed in EIA practice around the world. Social and Health Impact Assessment, Biodiversity Action Plans and evaluation of climate change factors are being integrated into EIA practice and business planning by industries, financiers and legislators. As these trends continue to develop, Acorn International anticipates that stakeholders worldwide will become more knowledgeable about industry impacts in the four issue areas, and that developing countries will see an increase in legislation around these issues.
Understanding emerging trends that impact our international clients and how these are being successfully addressed in EIA worldwide is critical to Acorn International. Our business model of directing and building the capacity of in-country partners in delivering consulting services requires an ongoing commitment to both capacity building and ongoing dialogue with our partners. The forum allowed Acorn International to better understand the challenges our partners face, and allowed Acorn International to share its view of our clients' priorities and objectives. We look forward to working together with our partners to help our international industry and investment clients meet the challenges of these emerging SD trends.
1See an example of how industry associations are supporting these advances at www.ipieca.org/biodiversity
2See, for example, Byer, Phillip H and Julian Scott Yeomans, "Methods for Addressing Climate Change Uncertainties in Project Environmental Impact Assessments" in Impact Assessment and
Project Appraisal – Journal of the International Association of Impact Assessment. Vol 25, No 2, pp 85-100. This article identifies three methods commonly applied to address climate change in EIA, depending on the extent of uncertainty present and the objectives of the assessment.
Acorn International Notes
Acorn Notes is a series of periodic papers to share ideas regarding EHSS and sustainability management for international industry.
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