Corporate Social Responsibility and Extractive Industries (EI) A

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					Corporate Social Responsibility and
    Extractive Industries (EI)
   A World Bank Perspective


      Houston December 2004
The World Bank Group (WBG)

                       A group of 5 Institutions with
                         a common goal:
                       • sustainable economic
                         development
                       • poverty reduction

   IBRD - helps finance and advise governments
   IDA - helps governments of the poorest countries
   IFC - helps develop private business through financing
   MIGA - helps private sector through political risk insurance
   ICSID - resolves investors-government disputes

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The WBG and CSR


 Privatesector operating in competitive
  markets is fundamental to development
 WBG  helps governments create appropriate
  framework for this.
 Finances   private investment (IFC and MIGA).
 CSR  is seen as a means of broadening
  business’ positive development impacts


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    The WBG and CSR II

   Active program to encourage CSR: http://www.crswbi.org

   Active partnerships with other institutions and private sector.

   International Finance Corporation (IFC) is:
     – Helping companies benefit from focus on sustainable development:
     http://www2.ifc.org/sustainability/

     – Assisting improve standards of corporate governance generally:
     http://ifcln1.ifc.org/ifcext/CorporateGovernance.nsf/content/Home
     – Specific programs to help private sector with issues:
     e.g. IFC HIV/AIDS guide for the mining industry
        http://www.ifc.org/ifcagainstaids
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Extractive Industries
being challenged

   Questioning about contribution to national development:
     – Academic “resource curse” literature
     – Examples of apparent notable failures of resource riches to
       contribute to national development.
   Communities have not always benefited:
     – “Enclave projects”
     – Social impacts
     – Revenues captured by national governments with few local benefits
   Environmental concerns:
     – Local level – hazardous materials, bio-diversity protection
     – Contribution of green house gases from fossil fuels to global
       warming.

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The WBG recently completed a
major review of its role in EI
The Major Messages:
External consultations: - “The EIR believes that
there is a role for the WBG in oil, gas and mining
sectors – but only if its interventions allow
extractive industries (EI) to contribute to poverty
alleviation through sustainable development. And
this can only happen when the right conditions are
in place….”

Internal evaluations: - Overall development results
in WBG EI projects were about the same as in other
sectors… But…
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Key Issues

   Governance
      – Governance
      – Revenue Transparency
   Communities
      – Ensuring communities benefit
      – Protecting the rights of people
      – Disclosure
   Mitigating environmental risks
      – Local
      – Global
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    Governance

Governance is key EI issue – when should WBG step back
and focus on capacity building (sequencing)

   In the case of EI the WBG will:
     – Address EI issues in Country Assistance Strategies (CASs)
     – Clearly confront governance risks in EI projects
            Explain when we choose to proceed with projects
            Not promote investment when the balance of risks is too poor
     – Require mitigation of revenue risks in the largest projects
     – Identify and use appropriate indicators to judge governance risk
       (CPIA, rule of law, corruption, transparency, risk of conflict)


But,   one size does not fit all, judgment needed
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Revenue Transparency

Transparency about EI revenues is a key step to
stronger accountability and better governance.

Transparency and accountability are key objectives
 WBG will:
    – Encourage revenue transparency for all projects now
    – Require revenue transparency for largest projects (>10%
      government revenues) now
    – Require transparency for all EI projects in two years
    – Ensure public disclosure of relevant terms of key project
      agreements when appropriate
    – WBG is a leading partner in the Extractive Industries Transparency
      Initiative (EITI)


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Ensuring Communities Benefit

Affected communities must benefit from projects.
WBG   will:
  – Require free, prior informed consultation with affected communities
  – Ascertain if “broad support” of affected communities exists
  – Develop and implement best practices with others to ensure
    communities benefit
  – Where possible link small business development/linkages programs
    to EI projects
  – Identify and track poverty and development objectives and outcome
    indicators for EI projects




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Protecting the Rights of People

Human Rights are a vital part of the development
process and need to be central to WBG approach.
 Human Rights is a complex issue for the WBG that
affects all activities
   – Use of Security Forces - Ask clients to agree to requirements
     based on US/UK Voluntary Principles on the Use of Security
     Forces
   – IFC’s draft Safeguards revision provides for right to organize and
     no discrimination plus existing requirements about child and forced
     labor




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Disclosure

Communities need meaningful information about
projects to fully participate and benefit.

   WBG will:
     – Ask clients to ensure regular public information about economic,
       social & environmental impacts of ongoing projects
     – Publicly identify expected EI project development impacts prior to
       board approval (SPI) and track outcomes
     – Publicly disclose assessment of governance risk (SPI)




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    Mitigating Environmental
    and Social Risks
 Safeguards need to be updated, expanded and better implemented.

 IFC now revising its safeguards, and will:
    – Address specific EI recommendations (e.g. mine closure)
    – Fully explore more general issues (e.g. no-go zones)
    – Undertake a rolling update of technical guidelines (best practices) with
      priority for EI issues
    – Address risks equitably and realistically with increased focus on going
      beyond “no harm”


 Fossil Fuels are contributing to global warming and WBG should
 address this threat.

 WBG will make special efforts to promote and support renewable
 energy (when in interests of member countries).
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   How to meet the challenge -
   stakeholders roles.
                                           Government
               Setting the rules to establish an appropriate investment
               environment and ensure that EI occurs in a socially &
               environmentally responsible way including good use of revenues.




Community                                          Corporate Sector
Organizing itself to manage the impacts            Managing environmental & social risks and
(both negative and positive) of EI, including      adding value so that the project leaves a
avoiding becoming overly dependent.                positive legacy for the community.


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Immediate Next Steps for WBG:

    Implementation of most recommendations over next
     6-12 months
      More detailed guidance for WBG staff
      WBG EI Advisory Group to be set up
      Annual reporting to our Board on progress
      IFC Safeguard and Disclosure policies – now in consultation
     phase
      Revised IBRD/IDA Indigenous Peoples Policy to CODE end
     November 2004



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