Global perspectives

ESG Performance |  14 May 2023

Home country and host country governments and local communities expect companies to respect their law, to operate openly and in consultation with them and to implement best practices. While there are many (too many maybe) good practice guidelines, these six widely recognized international social performance guidelines provide a solid platform for any project:

OECD Guidelines for Multinational Enterprises: The Guidelines are a set of recommendations on responsible business conduct addressed by governments to multi-national enterprises operating in or from adhering countries. These include the US, Canada, Australia, Great Britain, Japan, Korea, Chile and most of Europe. The guidelines are particularly relevant for companies operating in or from OECD countries as impacted communities (or civil society groups acting on their behalf) can lodge a complaint with the National Contact Point (NCP) in an adhering country against a specific company for failing to follow the guidelines. The guidelines aim to ensure that enterprises operate in line with government policies, to strengthen confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises. They provide non-binding principles and standards for responsible business conduct in a global context consistent with applicable laws and internationally recognised standards. Key principles include:

Adverse impacts: Enterprises should avoid causing or contributing to adverse impacts on matters covered by the Guidelines, through their own activities, and address such impacts when they occur. Due diligence: Enterprises should carry out risk-based due diligence to identify, prevent and mitigate actual and potential adverse impacts, and account for how these impacts are addressed. The nature and extent of due diligence depend on the circumstances of a particular situation. Stakeholder engagement: Enterprises should engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning and decision making for projects or other activities that may significantly impact local communities. Confidence and trust: Enterprises should foster a relationship of confidence and mutual trust with the societies in which they operate. This includes respecting the internationally recognised human rights of those affected by their activities, encouraging business partners to apply responsible business conduct principles, and abstaining from improper involvement in local political activities. Human capital: Human capital formation and local capacity building by enterprises are encouraged. Enterprises should co-operate closely with the local community, create employment opportunities, and facilitate training opportunities for employees. Corporate governance: Good corporate governance should be implemented by the enterprise – this includes supporting and upholding good corporate governance principles and developing and applying good practices.

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: The 2011 Guidance was developed in response to the problems posed by conflict minerals, whereby minerals and metals are illegally mined and their illicit proceeds used to finance armed conflict. The core guidance document and two mineral-specific supplements explain how multinational companies sourcing gold, tin, tantalum, and tungsten can avoid fuelling conflict and responsibly source and trade minerals. While the Guidance is voluntary in nature, it has strong industry support, and has contributed to peace-building and stabilization efforts in mineral-rich fragile states. While specific due diligence requirements and processes will differ depending on the mineral and the position of the company in the supply chain, companies should review their choice of suppliers and sourcing decisions and consider using the five-step framework when undetaking a risk-based due diligence for responsible supply chains of minerals from conflict-affected and high-risk areas: 1. establish strong company management systems; 2 identify and assess risk in the supply chain; 3 design and implement a strategy to respond to identified risks; 4 carry out independent third-party audit of supply chain due diligence at identified points in the supply chain; and 5 report on supply chain due diligence.

International Finance Corporation Performance Standards on Social & Environmental Sustainability: IFC applies the Performance Standards to manage social and environmental risks and impacts and to enhance development opportunities in its private sector financing.  The Performance Standards also form the basis of the Equator Principles which are applied by a large and growing number of financial institutions (EPFI) and are becoming the de facto benchmark for the mining and other industries.  Together, the eight Performance Standards establish standards of good international industry practice, which the IFC defines as ‘the exercise of professional skill, diligence, prudence, and foresight that would reasonably be expected from skilled and experienced professionals engaged in the same type of undertaking under the same or similar circumstances globally or regionally.’ The standards are systematic, pragmatic, and flexible with a focus on outcomes. They promote risk management that is commensurate with the level of risks, incorporating time-based action plans to address actual and potential impacts. When used appropriately the standards can reduce reputational risks; be a business driver for investors (and customers); reduce operating costs through better resource efficiency; mitigate the potential costs associated with environmental mishaps and mitigate potential conflicts with communities.

Global Reporting Initiative: Since 1999, GRI has provided a comprehensive Sustainability Reporting Framework that is widely used around the world. As a result of the credibility, consistency and comparability it offers, GRI’s Framework has become a de facto standard in sustainability reporting and is increasingly used by the extractive sector for CSR reporting as a way to enhance transparency and encourage market-based rewards for good social performance. A structured approach to social performance reporting based on the GRI framework can help companies to measure, understand and communicate their economic, environmental, and social and governance performance. A good quality social performance / sustainability report can be the platform for communicating social performance and impacts - the positive and the negative.

Voluntary Principles on Security and Human Rights for projects involving private or public security forces: Established in 2000, the Voluntary Principles on Security and Human Rights are a set of principles designed to guide companies in maintaining the safety and security of their operations within an operating framework that encourages respect for human rights. The Voluntary Principles are the only human rights guidelines designed specifically for extractive sector companies. They provide companies with the ability to align their corporate policies and procedures with internationally recognized human rights principles in the provision of security for their operations. Participants in the Voluntary Principles Initiative — including governments, companies, and NGOs — agree to proactively implement or assist in the implementation of the Voluntary Principles. In practice the Voluntary Principles provide guidance on conducting effective risk assessment related to security, conflict and human rights, interactions between companies and public security providers and interactions between companies and private security providers.

United Nations (UN) Guiding Principles on Business and Human Rights (GPs): The Guiding Principles operationalize the Protect, Respect and Remedy Framework first presented to the UN Human Rights Council in 2008 by the Special Representative on Business and Human Rights, Dr. John Ruggie. They identify distinct but complementary responsibilities of companies and governments regarding human rights, resting on three pillars: 1) the state duty to protect against human rights abuses by third parties, including business; 2) the corporate responsibility to respect human rights through due diligence; and 3) ensuring greater access to effective remedies for victims. The Principles were unanimously endorsed by the Human Rights Council in June 2011, and have since been referenced in a number of international standards, including the OECD Guidelines for Multinational Enterprises. They require a company to demonstrate senior level commitment to human rights, by formulating a human rights policy, having a system in place that allows the company to assess its human rights impacts using a structured due diligence process and to provide access to remedy to stakeholders impacted by company operations. In practice this last one means having a community grievance procedure in place.


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