Using free, prior and informed consent to secure your social license to operate

  • Published: 14 February 2018
  • Author: Kelly Cooper

Developing indigenous economies

Corporate globalisation has expanded extensively in recent years throughout Asia. Assisted by the integration of the Association of South East Asian Nations (ASEAN) member states and free trade agreements (FTA), creating as The Government of Hong Kong explained in November, “a conducive environment for economic development”, particularly in emerging economies like Vietnam, Cambodia and Myanmar. Large-scale investment projects have the potential to generate economic growth and prosperity for indigenous and rural communities in ASEAN states.

Growth of these emerging economies largely involves the extraction of natural resources, which has negatively impacted local ecosystems and indigenous communities. The World Economic Forums’ (WEF) Global Risks Report 2018, describes how geopolitical tensions and environmental degradation are two of the most pressing risks facing our world today. Rising military tensions, economic and commercial disruptions have also created unprecedented risks to business.

While corporates receive tax, tariff and regulatory benefits, local communities affected by development projects have had their traditional land rights ignored and are experiencing sometimes extreme incidences of involuntary resettlement, negative environmental impacts and associated poverty. The United Nations warns of conflict and violence including harassment, arrest and the militarisation of indigenous communities, where differences exist between regional governments and indigenous peoples.

Reactive compensation based investment

Through large-scale development projects, businesses work to implement sustainable community investment initiatives, which offer “job creation” and the “development of infrastructure” including schools, houses, ports and electricity. However, according to the Ernst and Young Top 10 business risks facing mining and metals in 2017-2018 study, there exists an “expectation gap” between what a project developer is offering to a community, versus what the community needs. Without consultation with the indigenous community, a project can create very little true social value, nor can business be aware of the true impacts of their project. The report also reflects that in regions with a weak judicial system the capital generated is almost never reinvested into the community.

How to avoid the ‘Expectation Gap’

When projects are designed without consultation of the local indigenous community, the project is open to a host of risks, including; employee strikes, worker fatalities, adverse media attention, capital losses and delayed or closure of projects, which threaten the continuation of any investment project. To strengthen corporate stakeholder relationships the use of free, prior and informed consent (FPIC) can be used as a participatory tool to assist project development where indigenous communities are present.

The phrase ‘the right to Free, Prior and Informed Consent’ is a shorthand expression. More fully articulated, it enforces the prior and inherent right of indigenous people to their lands and resources over external parties, which includes businesses. FPIC was established by the ILO Convention 169 on Indigenous and Tribal Peoples (1989) and is recognised in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). FPIC can assist companies with mitigating risks associated with both the social and legal license to operate by improving the quality of social impact assessments, strengthening corporate stakeholder engagement effectiveness and indigenous peoples’ and communities’ relationships with companies. The diagram below sets out key stages to be considered in the implementation of FPIC:

The user guide above demonstrates a non-exhaustive three step approach to FPIC implementation. It highlights important points at each step of the process:

Step 1 Open and early engagement with communities, identifying all relevant stakeholders.

Step 2 Creation of engagement and development programmes with a detailed engagement plan, including all relevant stakeholders.

Step 3 Monitoring and documenting all development and engagement outcomes to communicate the value to all stakeholders – making necessary adjustments to the project for the benefit of the community and project.

Note: Additional action or steps may need to be included, to adapt the process to a particular context, project or location.

Source: Conservation International Guidelines for Applying Free, Prior and Informed Consent

Proactive collaborative investment: A business’ license to operate

For businesses, implementing FPIC can gain the ongoing support, social acceptance and approval of the community and stakeholders impacted by a project, as it activates the companies’ Social License to Operate (SLO). A report by Ernest and Young reveals that the status of a companies’ SLO is one of the Top 10 business risks faced by some sectors in 2018. The starting point for projects where indigenous communities’ land rights are involved, is to acknowledge the connection between land and human rights and to increase the role of indigenous peoples, as actors of change in large developments. Through a consultative FPIC process, the Mekong River Commission advises that companies can tackle risks and improve the longevity and stability of a proposed project.

Governance challenges and opportunities in Myanmar

The development of Myanmar’s Special Economic Zone (SEZ) in Thilawa is the first of its kind in the region. To promote the development of this region, the law created regulatory exemptions for investors, which encourage economic trade and development. Projects often result in lack of transparency, insufficient consultation and participation of affected local communities in project-related decisions, and inadequate compensation for losses. This often leads to economic growth benefits disproportionately rewarding investors and businesses at the expense of displaced local communities. The fate of resettled communities should sound alarm bells for both investors and communities, who should encourage a transition to collaborative and strategic communication through free, prior and informed consent.

Under Myanmar’s new democratic law, the National Land Use Policy refers to participatory, transparent and accountable processes, requiring environmental impact assessments to be conducted for investments from certain industries, which can be perceived as the first step towards using international best practice and observing rights of indigenous peoples and relocation practices.

Transparent opportunity for business

Land issues are undoubtedly complex, the prevalence of land-related grievances presents challenges for governments and companies, however it is also an opportunity to take bold steps towards the protection of land rights and to improve the quality of the relationship between the project, community and stakeholders. Through FPIC implementation, illegal land acquisitions will be addressed, promoting efforts made to meet international standards for consultation, compensation and resettlement.

To learn more about the FPIC tools available, and further information on to adapting this process to a particular context, project or location, contact [email protected].

Recommended reading
CONFLICTS OVER LAND – A Role for Responsible and Inclusive Business” CSR Asia research, 2014
Top 10 business risks facing mining and metals 2017-2018” EY Research, January 2018
“What is Social License?”
United Nations Declarations of the Rights of Indigenous Peoples” March 2004

Guidelines for applying Free, Prior and Informed Consent – A manual for Conservation International” Conservation International Research
In Getting Rich, Myanmar Can’t Forget its Poor” Earth Rights International, September 2016