Challenge Topic

Contexts With Weak Governance and Transparency

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A

Engagement with host governments in contexts of weak governance: avoiding (the perception of) complicity

Good Practices

Clearly and widely communicate the company’s commitment to respect the rights of local communities.

  • Report transparently on the implementation of soft law guidelines, as well as on how severe human rights risks are addressed. Communicating how human rights risks and impacts are addressed is a key elements of human rights due diligence procedures

  • Publicly condemn violence against civilians in the region where the company operates, as well as more broadly . 
  • Be aware that silence or inaction in case of government malfeasance can be seen as a demonstration of indifference by the company and hence expose it to dangers and risks. In particular within conflict-affected areas, businesses are not neutral actors; their presence is not without impact. Even if a business does not take a side in the conflict, the impact of its operations will necessarily influence conflict dynamics (see armed conflict factsheet). Even the perception of collaboration with States that are allegedly involved in significant abuses can polarize local communities. It can also attract the ire of local and international civil society groups, as well as shareholders who perceive that the company has aligned itself with illegitimate actors. 
  • Ensure the company’s grievance mechanism is known and accessible to internal and external users (see Community mistrust: ensuring an effective grievance mechanism within Stakeholder engagement strategy – Working with Communities).

Ensure the human rights impact assessment includes a legal assessment.

  • Assess how and to what extent the legal system is able to address security and human rights issues.
  • Evaluate the potential for the company to be indirectly or directly complicit in human rights abuses, the illegal use of force and/or gross human rights violations.  

Approach the risk of causing or contributing to gross human rights abuses as a legal compliance issue.

Do not assume that conducting human rights due diligence, by itself, will automatically and fully absolve the company from liability for causing or contributing to human rights abuses.

Consider the emergence of mandatory human rights legislation in different jurisdictions, as it may impact the company’s operations or supply chains (see human rights due diligence factsheet).

Conduct a human rights impact assessment to ensure that any proposed development do not adversely affect the human rights of local communities.

(see human rights due diligence factsheet and Unidentified root causes, unaddressed impacts of the operation, or unfulfilled commitments: addressing persistent tensions within Stakeholder engagement strategy – Working with Communities).

Develop human rights due diligence procedures in line with the UN Guiding Principles on Business and Human Rights and in consultation with communities and other relevant stakeholders.

(see human rights due diligence factsheet and Senior management buy-in: securing recognition and resources required for engaging constructively with communities within Internal alignment and coordination on stakeholder engagement – Working with Communities).

  • Develop detailed policies on bribery and put in place robust management procedures, such as training and whistle-blower protection mechanisms, to prevent corruption (see Lack of transparency in payments from extractive companies: managing the potential fall-out within Contexts with weak governance and transparency – Working with Host Governments).
  • Prioritise the most serious risks and impacts. Where risks or potential impacts are high or extreme, do not start the project or activity until the risks have been reduced or mitigated. The UNGPs make clear that severity is judged by the scale, scope or irremediable nature (i.e. irreversibility) of the impact.
  • If a company is unable to operate without avoiding harm, it should consider withdrawing from the area. Companies should carefully weigh the human rights implications of withdrawing versus the human rights implications of staying.5 If a company's operations exacerbate the conflict,  it may be necessary to withdraw in order to avoid causing harm. On the other hand, if a company provides key services, withdrawing may have more negative than positive impacts. (see responsible exit)
  • The Institute for Human Rights and Business explains that companies should ‘exceed national legislation on human rights where it falls short of best practice or international law’.
  • As part of human rights due diligence procedures, tailor the risk mitigation strategy to the company’s involvement in particular risks or impacts, considering also the seriousness of each of those risks and impacts. (see human rights due diligence factsheet).
  • Ensure that the company does not exacerbate the situation. For example, OECD guidance says companies should ‘avoid contributing to the criminalisation of human rights defenders or the use of law enforcement agencies to repress peaceful protest or other forms of opposition to the project’.
  • Engage local communities, through their own representatives, in any decision-making process involving the exploitation of natural resources or construction on land. This is especially relevant where stakeholders are likely to be impacted, but are not necessarily protected by the government negotiating the agreement. Comply with international standards, laws and best practices on the rights of indigenous peoples. (see indigenous peoples factsheet) (see Navigating different stakeholders: avoiding inadvertently favouring or excluding sub-groups within communities; community representatives: ensuring they engage in support of communities as a whole rather than narrow interests within Stakeholder engagement strategy – Working with Communities).
  • Be aware that conflict resolution and peacebuilding are highly complicated, and a business cannot solve local issues unilaterally. There are no 'quick fixes' for conflicts, and while companies can support peace processes, they should not try to address conflicts on their own.
  • Constantly evaluate the effectiveness of human rights due diligence procedures and update them when appropriate to better assess, prevent and mitigate actual and potential adverse human rights impacts.

Engage with relevant government agencies to advocate for effective resource governance and compliance with human rights standards.

(see Engagement on human rights concerns: using leverage to strengthen security and human rights within Human rights concerns – Working with Host Governments).

  • According to the commentary on the UN Guiding Principles on Business and Human Rights, ‘Where a business enterprise contributes or may contribute to an adverse human rights impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm. The company may have leverage to prevent or mitigate the adverse impacts on security and human rights.’ Companies can increase their leverage and ability to affect more effective risk mitigation of their security service suppliers or sub-contractors in a variety of ways. For example, companies can offer capacity-building or other incentives to the related security supplier. 
  • Clearly set out expectations with regards to human rights from the start of engagement with the host government. Negotiate contracts and agreements accordingly (see Sensitive discussions on security and human rights: addressing issues constructively within Human rights concerns – Working with Host Governments).
  • Seek to ensure the government fulfils its responsibility regarding consultations with indigenous peoples to ensure that any responsibilities to obtain free, prior and informed consent are fulfilled. Ensure that consultations with communities start early and are carried out according to international standards (see indigenous peoples factsheet, Development of an inclusive engagement strategy: identifying an appropriate division of responsibility with the government to ensure that indigenous peoples’ rights are respected within Stakeholder engagement strategy – Working with Communities) and Consultations conducted too late or not according to international standards: facing a lack of social license to operate within Information sharing and consultation – Working with Communities).
  • Ensure investment agreements do not reinforce weak governance by interfering with national efforts to implement laws, regulations or policies. As explained by the UN’s interpretive guide to the UN Guiding Principles on Business and Human Rights, ‘Contractual stabilization clauses, if used, should be carefully drafted so that any protections for investors against future changes in law do not interfere with the State’s bona fide efforts to implement laws, regulations or policies in a non-discriminatory manner in order to meet its human rights obligations'.
  • When investment agreements, concessions or licenses include third party companies which are co-licensees, ensure that the Voluntary Principles on Security and Human Rights and/or other human rights standards, such as the International Code of Conduct for Private Security Providers are included so that all parties are bound by the same standards.
  • When necessary, ensure that land acquisition and resettlement are conducted in accordance with human rights standards, including free, prior and informed consent (see Development of an inclusive engagement strategy: identifying an appropriate division of responsibility with the government to ensure that indigenous peoples’ rights are respected within Stakeholder engagement strategy – Working with Communities). Communicate expectations clearly with the host government and ensure these standards are incorporated in agreements.
  • When governments are unwilling to include human rights provisions in agreements, try to include these issues through other avenues, such as memoranda of understanding with security forces, training programmes, capacity-building and operating procedures (see Memorandum of Understanding and Training within Working with Public Security Forces.
  • Coordinate with competent authorities to strengthen their ability to respond to increased risks, ensuring that any security measures adopted are appropriate to the risks.
  • Advocate for changes in royalty distribution to ensure that portions of private sector royalties are reaching local communities and having a positive impact on local wellbeing and economic diversification.
  • Develop plans of action with local authorities in order to foster responsible investment.

Engage with other actors to develop host government capacity and promote good governance and respect for human rights.

  • Develop a dialogue with international and national actors playing a role in governance reform and state-building.

Support efforts by international donors to assist host governments with security sector reform, developing national institutions’ capacities and strengthening the rule of law.

Support capacity-building in the legal system to strengthen judicial grievance mechanisms related to human rights.

Identify and support programmes to build capacity of national and local authorities on business and human rights. Ensure these are adapted to the local context.

Support efforts to strengthen local government institutions, such as anti-bribery programmes.

  • Support efforts to promote fair rules for investment. This may include rules allowing for a better division of the territory between areas assigned to private companies and areas reserved for the use of the local population (e.g. artisanal miners, farmers).
  • The Institute for Human Rights and Business recommends that companies ‘harness the potential of multi-stakeholder initiatives to lobby host governments on relevant human rights matters’.
  • Promote the establishment of local, regional and national forums to discuss potential and actual social and environmental impacts of projects in order to prevent, mitigate and remediate them.
  • Consider collective corporate action for addressing government policies that have negative impacts on local communities.
  • Support the efforts of media and civil society—including human rights institutions—to hold the local government accountable.
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Responsible Exit

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B

Lack of transparency in payments from extractive companies: managing the potential fall-out

Good Practices

Include questions on governance and transparency in the human rights risk assessment and update it regularly

(see human rights due diligence factsheet).

Make a clear and unequivocal commitment to transparency, including of all revenue flows to governments.

Conflict Sensitive Business Practice: Guidance for Extractive Industries, flashpoint issue 9:6 (International Alert 2005).

  • Develop a detailed company policy on transparency and anti-corruption.
  • Highlight international, regional and national legislation on bribery and corruption (from both host and home country) prominently on the company’s website.
  • Put in place robust management procedures—such as anti-bribery training, risk assessment, tip hotlines and whistle-blower protection mechanisms—to prevent corruption.
  • Publish payments to governments in a clear and accessible form. Make all payments to governments available in the company’s financial reviews. Guidance on related good practices can be found at Publish What You Pay.
  • Inform communities about payments to the host government. Use booklets, video and audio that explain the company’s operational processes and payments in simple language.
  • If appropriate, become an Extractive Industries Transparency Initiative supporter and join its in-country multi-stakeholder group. 

Promote international best practice on transparency of payments and financial management in all engagement with the host government. ​​​​​​​

  • Include a clause on transparency in agreements and/or memoranda of understanding with the host government. Agree with the host government to make information regarding payments, transfers or any other support ‘unclassified’ and available to the public (subject to legitimate commercial and security concerns).
  • Encourage the host government to distribute a part of the taxes paid by the company to regional and/or local governments, making this commitment known to the population so that local authorities are held accountable for the use of these revenues.
  • Promote engagements and compliance with the Extractive Industries Transparency Initiative (EITI).

Engage in efforts to improve government management of revenues from corporate operations.

  • Support host government efforts to develop, implement, enforce and strengthen legislative frameworks for transparency, anti-corruption and oversight of financial processes. Also consider engaging with parliamentary committees to understand their roles and responsibilities with regard to oversight of resource management.
  • As noted by the UN Department of Peacekeeping, identify ways to ‘support the development of national capacity in financial management- including a reliable corps of accountants, auditors and bookkeepers who can ensure that the financial integrity and probity of the process is guaranteed from a national perspective’.
  • Encourage the oversight of public investment decisions by relevant State bodies, such as anti-corruption commissioners and security sector oversight bodies (e.g. parliamentary committees, independent oversight institutions).
  • Engage constructively in multi-stakeholder processes that provide forums for business-government engagement on transparency and accountability at both national and international levels. This may include Extractive Industries Transparency Initiative (EITI) multi-stakeholder groups. and
  • Take part in collective action to stop corruption, such as the UN Global Compact’s and .
  • Support the role of civil society organisations in analysing how revenues are utilised in order to provide additional transparency to the process.
  • Promote broad participation and transparency in decisions regarding the use of revenues, as this contributes positively to national ownership by enhancing popular understanding of the dynamics and challenges involved in the national management of revenues from corporate operations.

C

Perception of undue influence exerted by companies on the host government: supporting transparency and public institutions

Good Practices

Share information on any company involvement in strengthening public institutions. ​​​​​​​

  • Ensure clear communications on the company’s involvement in strengthening public institutions and why. Share these communications both nationally and locally.
  • When engaging with local communities, solicit ideas on how to support capacity-building for public institutions. Where possible, integrate these suggestions in ongoing efforts to strengthen public institutions.

Support national ownership of host government security sector reform processes.

  1. Ensure that company engagement with host governments is inclusive and consultative, and that company policies are informed by the perspectives, priorities and vision of national stakeholders (i.e. not only by company executives, but also civil society, communities, the legislature, the media, etc.).  If the public is involved in consultations and planning, they will be able to see more clearly and have confidence that the company is operating transparently and not unduly influencing public institutions.
  2. Where feasible, provide the host government with matching funds rather than grants or donations. This ensures national ownership, empowers government officials, encourages a national process of prioritisation and contributes to national capacity-building.
  3. Cooperate with government monitoring agency (auditor or transparency board) to ensure effective oversight of the use of funds provided by the company.
  4. Support appropriate efforts by the government in its re-organisation of law enforcement around project sites (e.g. by providing some financial support) while leaving decision-making to the relevant institution.

Engage with other actors to develop host government capacity and promote good governance.

(see Engagement with host governments in contexts of weak governance: avoiding (the perception of) complicity within Contexts With Weak Governance and Transparency – Working with Host Governments).

D

Lack of basic public services to local communities: supplementing the provision of services (see 4.5.)

Good Practices

Carry out an analysis of the government’s capacity to provide public services

(see human rights due diligence factsheet).

  • Analyse the government’s capacity and deficiencies in providing public services and protecting the population’s rights. Consider the risks associated with any gaps in resources or capacity.
  • Include current developments (e.g. an influx of migrant workers, health crises) that further draw on services, and observe how poor services may cause social unrest.
  • Be sure to analyse the impacts of the company’s operations on the provision of public services (e.g. water, sanitation, electricity), especially in times of crisis. This includes cumulative impacts arising from multiple companies or projects. For example, if several companies are collectively using high amounts of electricity during shortages, this can negatively impact communities’ ability to access electricity, even if each individual company’s usage is within legal limits.

When engaging with all stakeholders, emphasise the central role of the State in ensuring respect for the rule of law, providing social services and developing the local economy.

Work together with host governments to improve public service provision at the local level. ​​​​​​​

  • Provide technical assistance to strengthen the government’s capacity to deliver social services efficiently.  
  • Exercise the company’s convening power to bring government representatives and local communities together. Discuss gaps and steps for improving government-provided services.
  • Form a tripartite partnership with government and local communities, where each of the three partners contributes to making the project successful. Ensure there is a good understanding about the roles and responsibilities of each party, in alignment with the UN Guiding Principles on Business and Human Rights.

Engage in efforts that enhance governance capacity and support international best practice in resource governance

(see Engagement with host governments in contexts of weak governance: avoiding (the perception of) complicity within Contexts with weak governance and transparency – Working with Host Governments).

Ensure that social investment programmes are sustainable and developed with local communities.

  • Ensure that social investment programmes are sustainable and developed with local communities.
  • Use the findings from the analysis of the operational context to identify development opportunities. In particular, identify any gaps and deficiencies in areas such as logistics, suppliers, distribution channels and/or training. Consider investing in development projects that fill those gaps, drawing on the company’s own expertise.
  • Prioritise projects in consultation with community members and development partners. Develop, implement and manage social investment programmes in partnership with local communities and with the support of government authorities.
  • Work directly with national, regional and local governments to ensure that the company’s social investments are in line with and do not displace regional and local community development plans.
  • Design all social investment with a clear and conscientious exit strategy and ensuring that other parties, including local communities and government, can take them over (see responsible exit). This means that local stakeholders must have a sense of ownership over the programmes from the beginning.
  • Assess the effectiveness of the social investment in terms of impacts rather than short term outputs.
  • Consider concluding a community development agreement or a similar arrangement. Community development agreements aim to minimize negative impacts and advance local socio-economic development. They are formal agreements negotiated in good faith between companies and communities in relation to resource projects; they should be coordinated with national and local authorities.
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