Stakeholder engagement performance indicators
The Equator Principles (EPs) and IFC Performance Standards (PS) have been considered as benchmarks in social and environmental policies, procedures and standards relating to project financing activities the last decade. Most resource companies who seek for lending from the Equator Principles Finance Institutions (EPFIs) need to conform to these standards, depending on the potential level of significant adverse impacts of the proposal. Standards for effective and genuine stakeholder consultation and participation are presented throughout in the Equator Principles and IFC Performance Standards. The PS also provides performance indicators and validation methods for ensuring free, prior and informed consultation. Stakeholder engagement performance indicators are essential to good practice.
History of the Equator Principles
In 2002, ten international banks including the International Finance Corporation (IFC) met and volunteered jointly to develop a banking industry framework for addressing environmental and social risks in project financing that could be applied globally and across all industry sectors. The Equator Principles were launched in 2003 and were initially adopted by ten global financial institutions. Ten years later, the EPFIs now comprise of 79 adopting financial institutions together covering most of private sector financing across all continents. It is most likely that when a resource company seeks for lending from a bank, it will be an EPFI. For a project with a capital cost of US $10 million or more, the company’s environmental and social performances will need to conform to the Equator Principles. For specific social and environmental performance standards, the EPs refer to the IFC Performance Standards which are a set of standards that define the borrowers’ responsibilities for managing their environmental and social risks.
Consultation and Disclosure Performance Standards and Indicators
For projects with high potential significant adverse impacts (Category A) and potentially limited adverse impacts (Category B) in the non-OECD or low-income OECD countries, EPFIs require that the borrowers consult with the project affected communities in a structurally and culturally appropriate manner. For Category A projects, the consultation process must ensure free, prior, and informed consultation, and that the company incorporates in their decision-making process the views of the affected communities on matters that affect them directly such as mitigation measures, implementation issues, development opportunities, etc. The IFC PS recommends a set of key indicators for effective community engagement, including:
1. Company’s strategy, policies, or principles on engagement
2. Stakeholder identification and analysis – Identification of all affected communities, their disaggregation, their needs and interests, and level of project impacts on each group.
3. Community engagement – Ongoing community engagement evident in the schedule and record of all community engagement activities
4. Information Disclosure – Timely disclosure of project information including nature and scale of the projects, potential risks and impacts
5. Free, prior and informed consultation – Evidence that: a) affected communities have not been coerced or intimidated or incentivised to support the project, b) consultation occurred early in the planning phase to facilitate meaningful influence on the project designs, c) consultation was based on adequate and relevant information, was inclusive and culturally appropriate
6. Informed participation – Evidence that the company has incorporated community views, issues and concerns in the project design, environmental and social management plans
7. Consultation with vulnerable groups – Evidence that the company has engaged with these groups and specific measures were developed to mitigate project impacts to their satisfaction
8. Grievance mechanism – A fully functioning mechanism that is culturally appropriate, free and readily accessible
9. Feedback to affected communities – Evidence that the company has demonstrated to the affected communities how their issues, concerns, and suggestions have been considered and incorporated into the project design and implementation plan.
Key validation methods suggested by the IFC include documentation of the engagement process, records of consultation, records of grievances received and addressed, and documentation of measures taken to avoid and minimise risks on the affected communities such as action plans, implementation plans, monitoring plans, etc.
The Equator Principles and IFC Performance Standards do not apply to OECD countries such as Australia and Canada as the regulatory, permitting and public comment process requirements generally meet or exceed the IFC PS, as defined by the World Bank. However, the EPs and IFC PS are often reflected in the extractive industry standards and guidelines such as the International Council on Mining and Metals (ICMM) stakeholder engagement framework, and the Mining Association of Canada (MAC) engagement performance indicators.
Effective Engagement Compliance Demonstration
An effective and efficient way of demonstrating a company’s engagement performance is through a stakeholder engagement management system. Darzin software is being used by resource companies to not only assist with documentation of the stakeholder engagement processes during the approval and financing phases, but also to effectively manage ongoing engagement into construction and operations. In terms of demonstrating how the company performs against the key IFC indicators, Darzin’s stakeholder engagement performance indicators would assist in the following area:
1. Stakeholder analysis:
- Maintain up-to-date list of stakeholders, their groupings and subgroups such as project affected community and their disaggregation , government agencies, indigenous groups, environmental activist groups, etc
- Use custom fields to store stakeholder analysis results such as level of importance, level of impacts that the project may have on each group.
2. Documentation of engagement activities:
- All community engagement activities are stored in Darzin for record-keeping and analysis
- Consultation activities are grouped into different engagement phases according to the company’s consultation plan
- Stakeholder issues and comments as well as the company’s responses are documented and categorised.
3. Analysis and reporting:
80+ reports in Darzin help demonstrate compliance on indicators such as free, prior and informed consultation, informed participation, vulnerable groups, and community feedback. The reports include qualitative, quantitative and spatial analyses such as:
- Number of engagement activities by stakeholder group, by engagement type, and by topic
- How regularly each stakeholder group was engaged, issued raised by them, in what forum, and how the company has addressed those issues
- Top issues raised by each stakeholder group, or specific stakeholder groups
- Detailed analysis of all issues raised by stakeholder groups as well as by individuals.
4. Grievance management:
- Register, classify grievances, assign responsibilities and timeline for addressing grievances following the company’s protocol
- Report on number of grievances received by date, by status (closed or opened), and specific issues raised by complainants.
In addition to the ability to effectively demonstrate IFC PS compliance, Darzin also helps manage the company’s social risks by having all auditable engagement records in one place, and better manage stakeholder expectations by ensuring consistency in messaging and that the organisation’s commitments and promises are followed up in a timely manner. It also assists in sharing stakeholder information as well as knowledge about stakeholders across the organisation. Above all, stakeholder engagement performance indicators helps make informed and timely decisions on matters that are important to stakeholders that would support the social license to operate.