A World Resources Institute report promotes free, prior, informed consent from communities affected by major projects; an International Finance Corporation report advocates consultation.

By Bill Baue

A mere two letters separate consent and consult, but that slight spelling shift makes a profound difference in meaning—denoting the dividing line between, for example, lovemaking and date rape.  This distinction extends to the case of negotiations between communities and corporations over major projects such as mines and pipelines, where two models of stakeholder engagement have evolved: free, prior, informed consent (FPIC) and free, prior, informed consultation.

The splintering into these two models culminated with the 2003 “Extractive Industries Review” (EIR), an independent report commissioned by the World Bank in 2000 to determine whether resource extraction aligns with the bank's mission of poverty alleviation and sustainability.  EIR promoted FPIC, which empowers communities with self-determination.  In its 2004 Management Response Report, the World Bank favored consultation that leads to the "broad support of affected communities," fearing consent would open to door to "veto power" for individuals and groups.

Two recent reports play out this split. “Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets” by the International Finance Corporation (IFC), the private sector arm of the World Bank, predictably support the consultation model. As the title suggests, “Development Without Conflict: The Business Case for Community Consent” by the World Resources Institute (WRI) promotes FPIC as preferable to consultation.

“FPIC differs importantly from mere consultation in the way decision-making authority is exercised and legitimated,” states the WRI report, which is endorsed by the Interfaith Center on Corporate Responsibility (ICCR).  A coalition of 275 faith-based institutional investors and socially responsible investing (SRI) firms, ICCR plans to release a report on FPIC this summer.  “Consultation requires only an exchange of information among project sponsors, regulators, and affected communities”.

It therefore provides only a limited mechanism for the public to provide information to project decision makers, or to be apprised of decisions that have already been made elsewhere,” the report continues. ”Consultations do not involve sharing or transferring decision-making authority to those who will be directly affected. Furthermore, they do not necessarily facilitate more inclusive and collaborative decision making, and are rarely an empowering form of public engagement.”

While the WRI report acknowledges consultation, the IFC report avoids even using the word consent, as if loath to admit the term exists—it appears only four times in the 200-page IFC report (compared to 363 instances of consult and its variants), none of them original to the report itself.  The word consent appears once in a quote of Article 6 of International Labor Organization (ILO) Convention 169, and three times in reference to a case study of a natural gas pipeline in the Philippines constructed by Shell from the WRI report.

WRI uses this Malampaya Deep Water Gas-to-Power Project case study to illustrate the six best practice principles it proposes for FPIC: information, inclusiveness, dialogue, legal recognition, monitoring and evaluation and corporate buy-in.  The study underlines the business case for FPIC by comparing the costs incurred through FPIC (about $6 million) with the costs saved (between $50 and $72 million, with $36 million attributed to construction happening ahead of schedule by 3 months.)  The project is also being used as a training case study for other Shell projects worldwide.

”For a large-scale infrastructure project, the total costs of engaging the affected communities and gaining their consent are likely to be extremely small relative to the total project costs,” the WRI report states.  “Moreover, a proven track record of harmonious community relations can make future interactions with government regulators much easier, and can help a project sponsor win public contracts for other project”.

The WRI report also includes three case studies exemplifying the flip side--namely the risks of failing to employ FPIC.  These risks relate to financing, construction, operations, reputation, host government and host country politics.  One of these case studies focuses on a joint venture between Newmont and IFC—the Minera Yanacocha Gold Mine Project in Peru.  

After the mishandling of a major mercury spill by project managers, the Cajamarca community vehemently opposed the expansion of mining to Cerro Quilish in the Yanacocha concession.  Under pressure, Newmont eventually publicly apologized and formally requested the Ministry of Mines revoke its permit to explore Quilish, thereby abandoning an estimated $1.7 billion in potential revenue and also jeopardizing its ability to secure social license to operate in future projects.
 
While the IFC report short-shrifts the notion of consent, it is long on practical advice for other elements of stakeholder engagement, which it divides into eight components.  Some of these components overlap with the WRI report, such as information disclosure and stakeholder involvement in project monitoring.  For on-the-ground practitioners, fusing the detailed practice recommendations of the IFC report with the principles of the WRI report may prove wisest.