The International Finance Corporation (IFC) has adopted policy requirements and guidelines (Performance Standards, or PS) that include stipulations for public consultation and disclosure to ensure projects are implemented in an environmentally and socially responsible manner.
Theis discussion evaluates key IFC policy provisions on consultation and disclosure.
IFC’s Policy on Social & Environmental Sustainability highlights the need for Community Engagement and Broad Community Support. Specifically, it states that “IFC is committed to working with the private sector to put into practice processes of community engagement that ensure the free, prior, and informed consultation of the affected communities….leading to broad community support for the project within the affected communities…” Broad community support, in IFC’s definition “is a collection of expressions by the affected communities, through individuals or their recognised representatives, in support of the project.”
To ensure appropriate management of project social and environmental risks, IFC requires disclosure of information that is adequate to ensure that the public and other stakeholders are aware of critical information. IFC also promotes transparency of revenue payments from extractive industry projects to host governments. Accordingly, IFC requires that: (i) for significant new extractive industries projects, clients publicly disclose their material project payments to the host government (such as royalties, taxes, and profit sharing), and the relevant terms of key agreements that are of public concern; and (ii) in addition, such projects should publicly disclose their material payments from those projects to the host government(s). Where the balance of benefits and risks is not acceptable, IFC will not lend its support. The policy also promotes transparency of revenue payments from extractive industry projects to host governments. Specific requirements for extractive industries projects are public disclosure of material project payments to the host government (such as royalties, taxes, and profit sharing) and the relevant terms of key agreements that are of public concern such as host government agreements (HGAs) and intergovernmental agreements (IGAs). Finally, where a project in the extractive industries relies to a considerable extent on third party activities—including government agencies, a principal contractor or supplier with whom the project has a substantial involvement, or an operator of an associated facility—IFC also seeks to ensure project outcomes that are consistent with the Performance Standards.
The IFC Performance Standards on Social and Environmental Sustainability define clients' roles and responsibilities for project management—including requirements for information disclosure.
There are a total of eight Performance Standards, six of which contain specific requirements for public consultation and disclosure:
- PS 1:Social and Environmental Assessment and Management System
- PS 2: Labour and Working Conditions
- PS 5: Land Acquisition and Involuntary Resettlement
- PS 6: Biodiversity Conservation and Sustainable Natural Resource Management
- PS 7: Indigenous Peoples
- PS 8: Cultural Heritage
To summarize briefly:
Performance Standard 1 establishes the importance of effective community engagement through disclosure of project-related information and consultation with local communities on matters that directly affect them. Community engagement is defined as “an on-going process involving the client’s disclosure of information… free of external manipulation, interference, or coercion, and intimidation, and conducted on the basis of timely, relevant, understandable and accessible information”.
IFC articulates three general topics within the framework of community engagement: 1) Disclosure, 2) Consultation and 3) Grievance Mechanisms.
Disclosure refers to public disclose of key project documents, principal among which is the Assessment document—information on the purpose, nature and scale of the project, the duration of proposed project activities, and the nature of such potential risks and impacts. Consultation refers to process via with the proponent provides affected communities with opportunities to express their views on project risks, impacts, and mitigation measures. Such consultation should also allow the client to consider and respond to community inputs and be tailored to the language preferences and decision-making process of the affected communities and to the needs of disadvantaged or vulnerable groups. For projects with significant adverse impacts on affected communities, consultation must ensure their free, prior and informed consultation and facilitate their informed participation, meaning that the proponent incorporates community inputs directly into the Client decision-making process. Such consultation must be documented—particularly the measures taken to avoid or minimise risks to, and adverse impacts on, the affected communities.
The project Grievance Mechanism is a system for receiving and facilitating resolution of communities’ concerns and grievances. This system should address concerns promptly using an understandable and transparent process that is culturally appropriate and readily accessible to all segments of the affected communities—at no cost and without retribution. The mechanism should not impede access to judicial or administrative remedies.
Reporting refers to the formal process for compiling and presenting written information about technical aspects of project design as well as for project action and implementation plans. IFC requires clients to disclose to affected communities an Action Plan describing specific mitigation measures and actions necessary for the project to comply with applicable laws and regulations as well as with the requirements of the Performance Standards. Clients must also provide periodic reports that describe progress with Action Plan implementation on issues that involve ongoing risk to, or impacts on, affected communities and on issues of concern identified via the consultation process or grievance mechanism. Reports must be accessible to the affected communities and distributed regularly (not less than annually).
Performance Standard 2 requires consultation in cases of large-scale retrenchment. In such cases, the proponent must ensure consultation with employees, their representative organisations and the government (where appropriate) in a manner that is absent of discrimination. IFC PS 2 also stipulates the need for a grievance mechanism for workers (and their organisations, where they exist) to raise reasonable workplace concerns. IFC obligates clients to inform their workforce of the grievance mechanism at the time of hire, and make it easily accessible to them.
Performance Standard 5 requires consultations for matters of Land Acquisition and Involuntary Resettlement that evidence the informed participation of affected persons and communities in decision-making processes. It stipulates that consultation “will continue during the implementation, monitoring, and evaluation of compensation payment and resettlement”. IFC also mandates that clients establish special grievance mechanisms for receive and addresses concerns specific to compensation and relocation.
In Performance Standard 6, the need for community consultation is understood as integral to defining an appropriate system of independent certification for the sustainable management of the resources.
Under Performance Standard 7, when a project initiative will affect communities of Indigenous Peoples, the proponent must work to establish an ongoing relationship with these communities. Projects with adverse impacts require a process of free, prior, and informed consultation with affected communities of Indigenous Peoples to facilitate their informed participation on matters that affect them directly. Processes of community engagement must be culturally appropriate and commensurate with the risks and potential impacts to the Indigenous Peoples.
To ensure these aims, IFC mandates the following steps:
- involve Indigenous Peoples’ representative bodies (e.g. councils of elders or village councils, etc.)
- be inclusive of both women and men and of various age groups in a culturally appropriate manner
- provide sufficient time for Indigenous Peoples’ collective decision-making processes
- facilitate the Indigenous Peoples’ expression of their views, concerns, and proposals in the language of their choice, without external manipulation, interference, or coercion, and without intimidation
- ensure that the grievance mechanism is culturally appropriate and accessible for Indigenous Peoples
IFC also requires clients to seek to identify opportunities for culturally appropriate development benefits that are commensurate with the degree of project impacts and which aim the improving the standards of living and livelihoods of Indigenous Peoples and that fostering the long-term sustainability of the natural resources upon which indigenous communities rely.
Performance Standard 8 states that where a project may affect cultural heritage, the proponent must consult with affected communities who use, or have used within living memory, the cultural heritage for longstanding cultural purposes and must incorporate the views of the affected communities on such cultural heritage into the client’s decision-making process. Consultation will also involve the relevant national or local regulatory agencies that are entrusted with the protection of cultural heritage.
As part of IFC commitment to socially and environmentally sustainable development, the Environmental and Social Review Procedures1 (ESRP) [2009, version 4] establish and support evaluation of the sustainability of client projects, as well as their conformance with the Performance Standards and the Extractive Industries Review (EIR).
Included within the ESRP is IFC’s explanation of the terms “Free Prior and Informed Consultation (FPIC)”2 and “Broad Community Support (BCS)”3 as part of the requirements for community consultation under the Performance Standards and the Extractive Industries Review. The ESRP also details which projects require FPIC and BCS and the methodology used by IFC to determine client fulfilment of these requirements.
The 2006 IFC Policy on Disclosure of Information4 is a 13-page document outlining the scope of materials that IFC makes publically available—either on a routine basis or upon request. This disclosure policy is intended to reflect IFC’s commitment to transparent business practices in-line with the Policy on Social and Environmental Sustainability and the Performance Standards.
In accordance with the prescripts of IFC’s Performance Standards, the disclosure policy requires that IFC clients self-disclose information to project-affected parties about all types of adverse environmental and social impacts that could potentially result from the project, as well as the client’s plan to mitigate or eliminate these impacts.