EI Sourcebook | 9.5 Objectives

9.5 Objectives

Comprehensive social and environmental impact assessments and mitigation plans should be required of all EI projects and the institutional capacity to enforce them and related regulations ensured.

The reasons for this are clear enough. EI projects can have significant externalities or spinoff impacts, both positive and negative, on society and on the physical environments.

Ideally, EI sector policy and project design should provide support to or encourage beneficial externalities while mitigating or offsetting any negative consequences. Pursuit of these objectives is in the interest of investors and government alike. In the case of the former, appropriate attention to social and environmental issues provides a 'social license to operate' from the project host country or community which goes beyond the strictly legal license. From government’s perspective it demonstrates responsiveness to the legitimate interests of its citizens.

Box 9.1: Why they Matter: Environmental and Social Issues

Attention to social and environmental impacts and concerns has become mainstreamed to all aspects of EI sector management Impact assessment and mitigation plans and the institutional capacity to enforce good practice are critical to success.

Mineral and hydrocarbon projects can have significant environmental and social impacts that need to be identified, monitored, managed and mitigated. For countries with a smaller less sophisticated industry, a largely regulatory/audited oversight approach is needed. However, in countries with a larger industry with greater capacity, an approach in which the legal requirements are complemented by placing more responsibility on operators with a good track record to work within agreed codes of conduct may prove to be equally effective and more practical. The key principle is an outcomes oriented approach to reduce and manage risks and maximize development benefits. A well-designed environmental and social regime will:

Have environmental standards and compliance criteria that are set in line with good international practice including the environmental and social requirements of International Financial Institutions and, in particular, the IFC Performance Standards; and
Give particular attention to monitoring and reporting arrangements including public reporting of and government verification of company reported environmental and social data.

Also, given that most of the impacts take place at the local level, a second key principle is that development should take place based on broad based community support and prior informed consent of the local community. A well-designed consultation and consent regime will:

Specify regulatory requirements for a high degree of information disclosure and dissemination, notification and consultation at the local level prior to the time that decision making takes place i.e. starting at the exploration stage and continuing through project life;
Ensure very close collaboration and cooperation between the environmental and social authorities and sector ministries/agencies in view of the nature of the risks involved;
Require full EIAs and SIAs or combined ESIAs including baseline assessments, and associated Environmental and Social Management Plans (ESMPs) to be prepared for all commercial scale investments and submitted for verification and approval;
Include separate consultations with women, youth and other potentially vulnerable and disadvantaged groups and not be limited to just the local male leaders and elite;
Require that information be provided to local groups in a form that is readily accessible and understandable by them;
Encourage company officials to develop a relationship and trust building with leaders of a broad range of different local community groups, including providing effective grievance mechanisms;
Give due consideration to cross-border/regional and global environmental protection issues; and
Provide direct support, and encourage others such as donors, to provide support to communities for capacity building so that communities can respond effectively in an informed manner to information received from the company.

Benefits. Beyond risk management and mitigation, oil, gas and mining can also provide significant direct and indirect benefits at both the local and national levels such as employment, income, demand for goods and services, and detailed environmental data for ecosystems. Benefit sharing is best managed by developing a shared understanding between the government, the company and the community of how benefits can be increased, improved and shared. Commitments by different parties can be included in a tri-partite agreement between the government, the investor and affected communities. Obtaining broad community support and a ‘social license to operate’ is one of the most important issues. Despite improvements in social impacts, there are many communities that oppose oil, gas, and mining operations in their vicinity. Companies are much better able to manage their operations and are at far less risk of unexpected opposition that can cause work stoppages if they have obtained broad based community support for their mining activities. Such support is generally built on four key foundations. First, is These are: first, good information dissemination so that local communities are satisfied with information from and communication and consultation with the company operating in their vicinity. Second, is the adequacy of compensation for land required and lost assets and livelihoods due to oil, gas and mining investments and operations taking place. Third, is good access to local economic benefits from oil, gas, and mining activities such as direct and indirect employment and mining company community programs and improved provision of local health, education, sanitation, and other services by the government. Fourth is And finally, adequate mitigation of potential impacts that may adversely affect local living conditions including land reclamation, environmental protection, safety and crime.

Dealing with social and environmental impacts presents a number of challenges and special issues. Over the past several years, general principles have evolved and been largely accepted as good practice in this area, and specific instruments have been designed to ensure their effective practical implementation. These are discussed below.

Social and environmental impacts are considered together since they are closely related.

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