The other night, I was watching an episode of The Ranch on Netflix. One of the protagonists, the rancher father, was offered a deal by a downstream natural gas company to build a pipeline underneath his Bennett Ranch. Before even considering breaking ground, the natural gas company sought to inform and respect the rights of the owners by sharing valuable information through geologic maps illustrating the boundaries of the property and identifying where mineral deposits might lie.
Those interactions helped build trust and a good relationship between the rancher and the company. The two-way communication shows how companies can interactively engage with their stakeholders before making any decisions. Stakeholders are persons or groups who have interests that could be affected by an enterprise’s activities. Examples are employees, consumers, non-governmental organizations, industry peers, local government units, business partners, investors, or shareholders. There are also rightsholders or those whose individual or collective human rights are or may be affected. Examples are indigenous cultural communities or indigenous peoples (IPs).
Meaningful engagements are particularly important in the extractive (i.e., oil, gas, and mining) industry, as their activities often have substantial economic, environmental, and social impact. These activities—which include environmental management, development, and intensive use of natural or energy resources—could significantly affect local communities.
For IPs, engagements or consultations are a right. They can exercise their right to their ancestral domain with their rights to self-determination, consultation, and participation in decision-making. Enterprises in the extractive sector can’t ignore these principles and must obtain, through meetings, hearings, or consultation, and other engagements, free, prior, and informed consent.
Engaging with stakeholders is an essential part of an enterprise’s due diligence in demonstrating they responsibly do business. In addition, engagement can be helpful in planning and making decisions in projects that may impact stakeholders.
Making sense of international frameworks and the concept and drivers of responsible business can be daunting. In keeping with its mission to help promote a common understanding among governments and stakeholders, the Organization for Economic Cooperation and Development (OECD) published in May 2018 a document entitled OECD Due Diligence Guidance for Responsible Business Conduct (the Guidance). The Guidance aims to provide due diligence recommendations enterprises can implement. The Guidance also recommends businesses carry out risk-based due diligence to avoid and address impacts related to local labor, human rights, the environment, bribery and corruption, consumer interests, disclosures and corporate governance that may be associated with their operations, supply chain, and other business relationships.
To assist enterprises in carrying out due diligence, the Guidance outlines a framework of six measures: (1) to embed responsible business conduct into policies and management systems; (2) to undertake due diligence by identifying adverse impacts on responsible business conduct issues; (3) to cease, prevent, or mitigate such adverse effects; (4) to track implementation and results; (5) to communicate how impacts are addressed; and (6) to enable remediation when appropriate.
Energy companies, for example, have been applying the same due diligence processes and measures in accordance with the spirit and principles of international frameworks, standards, and laws. Those that comply often start by embedding principles of responsible business into their policies and management systems by way of a code of conduct.
By aligning the code of conduct with international frameworks such as the United Nations Guiding Principles on Business and Human Rights, the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work and the ILO Tri-Partite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the OECD Guidelines for Multinational Enterprises, entities are able to articulate their commitment to due diligence principles and standards. A company’s code of conduct can also outline the standards and management systems by which it ensures it doesn’t infringe labor rights, local communities, the environment, and business ethics.
When enterprises, particularly those in the extractive sector, have a clear stance or commitment to meaningfully engage with their stakeholders and rightsholders, they can contribute to building trust and reduce adverse impacts or conflict. By seizing opportunities for dialogue, bridging gaps in the availability of information, and remaining participative in multi-stakeholder discussions and reporting, enterprises can help gradually improve public understanding. They will eventually gain from improved relationships, overcome skepticism, and bring transparency to their intentions.
I am hopeful we will see more meaningful interactions within our communities. As our government continues to create business-friendly conditions, we can all look forward to a business landscape where companies benefit by doing business responsibly.
Getting the buy-in from the rancher father was just the first step. dealing with protesters with whom the ex-wife had previously joined would be another tough hill to climb. Will they stick it out and risk hurting their reputation, or will they heed to the call of the protesters and keep their reputation intact? I’m about to find out.
Paul Gonzales is a director of the Adivsory Services Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firms in the Philippines, with 21 Partners and over 900 staff members. We’d like to hear from you! Tweet us: @PAGrantThornton, like us on Facebook: P&A Grant Thornton, and email your comments to email@example.com or firstname.lastname@example.org. For more information, visit our Website: www.grantthornton.com.ph.
As published in Manila Times dated 11 July 2018