BSR Insight Articles About Community Engagement & Development
Is ‘Responsible’ Fracking Possible?
Ryan Schuchard, Manager, Climate and Energy
There's little in the current energy debate that isn't a hot button, and "unconventional" natural gas is especially controversial. A report released by the International Energy Agency outlines the challenges and opportunities of natural gas—such as that obtained by hydrofracturing, or "fracking"—and proposes "golden rules" for the industry and regulators to ensure environmental protection and community engagement, while making profitable extraction possible: Read more
Local Social Performance Management in Energy and Extractives
Michael Oxman, Director, Advisory Services Joyce Sood, Former Digital Communications Manager
Local social and sustainable performance is critical to energy and mining companies' ability to secure and maintain a social license to operate at various sites around the world. BSR's Director of Energy and Extractives Michael Oxman highlights a few areas that form the foundation for planning and implementation of social performance management, including human rights, community engagement, community development and social investment, and local content, and offers solutions for effective management of local social performance plans. Read more
Rethinking the ‘Land Grab’
Laura Ediger, Associate Director, Advisory Services
The hunt for resources--fuel, water, labor, and minerals--is occurring on a global scale, as companies search for ways to minimize costs and risks while optimizing efficiencies. And today, arable land is becoming a global commodity, in demand to provide food, biofuels, and raw materials such as timber or cotton. The rapid growth in international land deals has heightened concerns about "land grabbing," and the social and environmental impacts of major land investments. A database recently published by the nonprofit organization GRAIN details land deals reported since 2006 (for food crops only) and demonstrates the international nature of these transactions. The list counts more than 400 deals in 66 countries, with funds arriving from nearly 60 different locations. And while agribusiness is the predominant industry sector involved, financial companies and sovereign wealth funds also made up about one third of all deals. Media reports often paint the transfer of land rights as driven by food-security concerns, a kind of calorie-hoarding by countries with low amounts of arable land per capita. Demand for biofuels is another important motivator, as policy and regulations provide additional stimulus for the sector's growth. Meanwhile, investors are finding physical land assets increasingly attractive as an opportunity for diversified portfolios and reduced exposure to inflation. These factors simply add to the ongoing trend of agribusiness companies seeking opportunities to develop commodity supplies in or near key markets. While the World Bank and others hope that land transfers can bring economic growth and increased productivity to small-scale farmland, there are also concerns about the negative environmental and social impacts that can accompany shifts in resource management. Recent cases include Sierra Leone, where protesters have called for a review of large land investment deals, and Ethiopia, where low prices prevailed but the national government has vowed to charge more for investor access to farmland. Whether international or domestic, large-scale agricultural investment carries a wide range of potential risks. Clearing of grassland or forests for agriculture or monoculture plantations can cause serious environmental degradation. The water withdrawals needed to make farmland productive may tax the natural ability of the local watershed to recharge groundwater reserves. And local farmers or herders may be displaced and lose their traditional land rights, along with their livelihoods. What should companies do to ensure that investments are well-managed and provide benefits to the host communities and countries? A group of investors have created the Farmland Principles to guide responsible investment, covering environmental sustainability, respect for labor and human rights, respect for existing land and resource rights, and expected business and ethical standards. The UN is also piloting a set of voluntary Responsible Agricultural Investment Principles that include requirements related to existing land rights, food security, transparency, consultation, and social and environmental impacts. Both sets of principles provide important perspectives on the risks associated with agricultural investments, as well as insights on the potential social and economic benefits. In a recent report, the World Bank argues that these investments can help increase agricultural productivity and local economic growth, if managed appropriately. Food and agriculture companies have also begun to see the opportunity for more direct socioeconomic benefits going to farmers and communities as a corollary to the development of their farm-based supply chains. Here are some specific ways large-scale agriculture can be managed to mitigate harm and provide local benefits: Look at the big picture first: Crucial environmental and social impacts must be considered from the beginning, in the process of site selection and project design. Companies should consider the overall ecosystem of a land asset (including the human element). In addition to physical feasibility criteria such as soil characteristics and water availability, the broader set of ecosystem services should be assessed: What crucial services--nutrient cycling, water purification, or provision of food (wild or not)--does the piece of land provide in its current state? Tools are increasingly available to help capture a wide range of ecosystem services to help inform selection and impact mitigation plans. Take rights seriously: In many places where land-use rights are being transferred, land-tenure regimes and legal frameworks may not protect smallholders or people with more traditional or informal land-use arrangements. Companies can learn from the experience of the extractives industry, where land transfers that did not sufficiently address existing claims have led to mistrust, protests, and the loss of license to operate. Thorough community engagement and application of principles such as free, prior, and informed consent (FPIC) are valuable investments for acquisitions that may be displacing large numbers of local people or disrupting current land-use patterns. Land-use transfers should be voluntary, transparent, and respectful of traditional and informal land-use rights. Mitigate impacts: Specific environmental and social impacts may vary based on the type of production--timber or cotton, perennial or annual--meaning that companies should make sure they thoroughly understand and address their own site-specific impacts. Whether through crop rotation, inclusion of buffer zones, or use of soil- and water-conserving techniques, large-scale land cultivation can take advantage of traditional and innovative methods for improving environmental impacts, including using local indigenous knowledge. On the social side, companies will need to consider not only impacts on nearby communities, but also relations with the resident and/or migrant workforce that will be providing labor for planting, harvesting, and processing. Invest in communities: As mentioned above, local communities and regions do have the potential for economic benefit from these large-scale projects, but economic interactions should be managed carefully to reduce the risk of negative impacts and to maximize social benefits. Development of infrastructure and new employment opportunities can provide economic value to local communities, but this must be done appropriately to ensure that value also accrues locally (e.g. by working with local residents and local businesses) while not negatively disrupting local economies. The global search for land has prompted companies to rethink how they work with local farmers, even on land the business owns. Models in which companies lease land back to smallholders and provide technical guidance as well as seeds and agricultural inputs may improve agricultural productivity while maintaining continuity of local livelihoods. As land becomes increasingly scarce, even as demand for food and fuels continues to grow, companies that are responsive to local needs and potential environmental impacts should see their investments bear fruit for their workers, communities, and shareholders. Read more
Free, Prior, and Informed Consent: New IFC Standards Raise the Bar on Stakeholder Engagement
Jasmine Campbell, EMEA Manager, BSR Advisory Services
Following a 2008 UN declaration regarding free, prior, and informed consent (FPIC) of indigenous peoples before states or companies operate in their areas, the International Finance Corporation (IFC) introduced new consultation standards and an accompanying guidance note in 2012 that increase requirements for community consultation for private-sector, IFC-funded projects. The mere recognition of FPIC by the IFC raises the bar on stakeholder engagement. The IFC’s requirements make project assessment and consultation processes, including mitigation and compensation measures, more stringent and inclusive of indigenous peoples. As a result, the extractives industry has had to adopt a more rigorous approach to consulting and engaging with local communities, particularly where there are national laws requiring full community consent before granting permits for new projects, such as in the Philippines. BSR will host a full-day workshop on FPIC, led by our energy and extractives experts and other private sector and NGO stakeholders, at the British Museum in London on June 19, 2012. For more information, please visit the event page. Read more
Doing Responsible Business in Latin America: Opportunities in the Agriculture Sector
Linda Hwang, Former Manager, Research Ryan Flaherty, Manager, Advisory Services
With less than a month before Rio+20, the UN Conference on Sustainable Development, the world is focused on Brazil and other countries in Latin America, a region that is frequently called out for its significant contribution to the post-crisis expansion of the world economy. As we learn from a discussion with BSR Advisory Services Manager Ryan Flaherty, one of our Latin America and food and agriculture experts, the region is poised to demonstrate the role of agriculture in long-term sustainable development--with significant opportunities for business to engage. There has been a lot of discussion about emerging economies in Latin America and the disposable income of the growing middle class. What's driving the growth? There is a lot of diversity within Latin America, so any discussion about regional trends should be understood in this context--we are making generalizations. With that caveat, we see several broad trends converging to create the "perfect storm" for growth. First, over the past 30 years, there has been a fair amount of openness to foreign direct investment (FDI), which has connected the region to global trade and to new ideas and technologies. Second, this region has an extraordinary wealth of natural resources and an abundance of unskilled labor. Third, the region is slowly warming up to the idea of transparency, which creates an enabling environment for participation in the global economy. The combination of these factors has contributed to a very consistent GDP growth that has attracted the attention of investors. From 2010 to 2011, the region saw a 30 percent increase in FDI, with Asia now representing about 20 percent of the region's trade. However, it is important to note that the benefits of this growth have not been evenly distributed: The environment has carried a lot of the burden, and the emerging middle class still lacks basic services and infrastructure for education, health care, water, and energy. Ongoing struggles with corruption only exacerbate this inequality. Why is agriculture becoming an increasingly significant player? Latin America, which is one of the world's richest regions in natural resources, has a large agricultural base of some 15 million farms. Many countries in the region see the global challenge of supporting 9 billion people by 2050 as an opportunity for growth via the agricultural sector. And the sector is evolving to meet that demand. Some areas have maintained an extensive network of smallholder farms, many of whom have organized into cooperatives or other structures that enable production at scale. In contrast, other areas have moved toward large-scale production. In both cases, grower-producers are improving their performance through better practices and/or improved technology that make them more competitive globally. Since agriculture still represents only about 10 percent of the region's GDP, the challenge will be how to capture more value as production grows. When I think of agriculture, I see the web that connects food, water, fiber, and energy. And when I think of Latin America, I see high rates of biodiversity and declining ecosystem services. What are companies operating in the region doing, or what can they do, to manage land responsibly given how connected it is to other sectors? The region's biodiversity and mineral resources present a great opportunity for many industries--including oil and gas, extractives, agriculture, health care, and tourism. There is often a natural tension that arises from balancing competing needs for natural resources among different industries, sectors, and local communities. The idealist in me would like to say that the trend is toward understanding mutual dependencies on natural resources and collaborating to find the best use of those resources in a way that benefits citizens in the short and long term. Unfortunately, the reality--as in most parts of the world--is more of a "take it while you can get it" mentality, which has had devastating impacts on ecosystems and the services they provide. So business, which has a vested interest in the long-term viability of these resources, has an opportunity to collaborate on sustainable resource management. One interesting example is a project initiated by AmBev (a subsidiary of Anheuser-Busch InBev) in Brazil. The company has brought together several water utilities and retailers to create the Cyan Bank, which provides consumers with incentives to reduce their water consumption. When consumers reduce their water use over time, they collect points that are redeemable for discounts at participating retailers. Speaking of consumers, in the last few years, mainstream media has covered community activism in the region. Much of this has been aimed at the mining sector, but do you foresee any implications for agriculture companies, given the environmental footprint of the sector? Latin America has a long history of communities speaking up against social injustice, even in the face of sometimes violent oppression. As the lines blur between social and environmental issues--between biodiversity and livelihoods, issues like land conversion and indigenous rights--communities are organizing around a broader range of issues that affect their well-being. Agriculture companies have a lot to learn from the experience of the mining sector. Both industries interact with local communities as they convert land and extract material from the natural environment. Often, these communities are concerned about land rights and the potential for negative impacts on biodiversity, soil health, and water quality. Leading mining companies conduct thorough assessments to understand the potential environmental, social, and human rights impacts of their operations and build community-development programs based on the results. When done correctly, companies can secure a social license to operate by showing they are dedicated to doing business in a way that respects land ownership, sustains local ecosystems, provides decent working conditions, and delivers economic benefit to the community. The challenge for multinational agriculture companies in Latin America is that, even if they are recognized globally as sustainability leaders, they won't necessarily be welcomed with open arms. Some in the region are frustrated when multinational companies make ambitious sustainability commitments and are very vocal in the global debate, but they are less active at the local level where change needs to happen. Companies should ensure that their local teams are translating global priorities into local context. You mentioned corruption earlier. Corruption regularly appears among the top two or three problems cited in opinion polls in most Latin American countries. How significant is this, and what's the impact on companies operating in the region? Widespread corruption and weak institutions have plagued the region for years, with some countries making more improvements than others. However, the challenge for companies goes far beyond just trying to conduct business ethically in a corrupt system--which itself is a significant challenge. Corruption and weak institutions have also exacerbated the unsustainable exploitation of natural resources and diverted the benefits to those with power, many times at the expense of the general population. As a result, you see a growing middle class that still lacks access to health, education, waste and sanitation services, clean water, and reliable energy. This represents a challenge for companies that are investing in emerging economies and dependent upon local infrastructure, strong institutions, healthy workers, and vibrant communities to be competitive. Companies must address these institutional shortcomings by making communities a central point of their sustainability strategies, but they should also be playing an active role in pushing for more responsible policy, transparent governance, and effective judicial systems. One of the challenges for the region will be how to maintain recent growth while addressing the issue of social inclusion. Have you seen any businesses do this well? This situation represents both a challenge and an opportunity. The challenge is a vocal and active population that is hearing about economic growth but is not seeing much improvement in their day-to-day lives. The opportunity is a growing customer base that values companies that strategically invest in the well-being of the communities in which they operate. In the agricultural space, leading companies are partnering with growers to implement more sustainable practices that ensure long-term productivity of the land, while improving product quality and reliability. They are also connecting farmers with financial institutions to provide financing for technology and equipment that improves farmers' ability to bring products to market. Another interesting opportunity that I haven't seen global companies explore is making fresh produce available in local markets. The requirements for produce exports are very high and in many cases heavily focused on non-quality aspects such as size, shape, and appearance. Instead of throwing that produce away, companies could sell it in the local market. Bottom line: What's your advice for companies expanding in Latin America? By focusing on creating sustainable local benefits, companies expanding in Latin America can help solidify their social license to operate by ensuring that local communities benefit from ongoing business operations. There are a lot of exciting things happening in the region right now, and I see significant business opportunity, but companies should take the time to understand the social, environmental, and economic tensions and build their growth strategies around long-term community well-being versus short-term profit maximization. Read more
More BSR Insight Articles About Community Engagement & Development
Filter Community Engagement & Development
- 18 Blog Entries
- 40 BSR Insight articles
- No BSR Voices podcasts at this time
- 4 Reports
- No Case Studies at this time
- No Sustainable Investment in China articles at this time
- Show All Community Engagement & Development Entries Sorted by Date
