Business’ potential contribution to social and economic development — and the importance of development for business success — is perhaps nowhere more evident than in the extractives sector. The scale (both physical and financial) and long life of extraction operations can transform host communities through economic stimulus and sustained philanthropic investment. This potential is particularly profound when one considers that the majority of future mineral, oil and gas reserves are located in developing countries — and often in their poorest, most remote corners. However, capitalizing on this promise for development can be challenging, given the environmental and social changes associated with extraction, operation in conflict-prone areas, and the need to equitably share and intelligently invest revenues for broader economic growth.
Investment in community development is therefore a critical component of business success for extractives companies. In particular, obtaining a social license to operate from host communities — as well as legal license — has proven vital for accessing resources and capital, and smooth operation, all of which bear direct implications for corporate financial health and reputation. In addition, investment in development can yield benefits, including positive government relations, increased availability of local labor and suppliers, and solutions to key business challenges such as shortages in engineering talent, employee retention, and minimization of conflict in difficult operating environments.
Equipping companies, communities, civil society and government with practical tools and advice to maximize the positive impact of extraction projects on community development is the focus of BSR’s recent collaboration with the International Finance Corporation’s (IFC) Oil, Gas and Mining Sustainable Community Development Fund (CommDev), which has recently launched a new Web site: the Community Development Information Clearinghouse (www.commdev.org).
At CommDev’s request, BSR’s Energy and Extractives team created “Community Development in Practice,” a series of briefs that serve as the site’s primer for all stakeholders on the practice of community development in the extractives context. The briefs draw together the best of our team’s research and experience in designing and implementing strategic community development projects with our oil, gas and mining member companies. They provide an overview of seven key themes in community development:
- Opportunities and challenges for extractive industries in community development, e.g. local procurement, in-country beneficiation, and philanthropy; or managing social impacts of labor migration and resettlement, and creating livelihoods beyond closure;
- Key social trends shaping the business case for investing in communities, including global activism, use of social criteria in investment decisions, and proliferation of voluntary standards for responsible conduct;
- The need for tri-sector partnerships and the mechanics of their establishment and maintenance (for example, building internal support and deciding when to disband a partnership);
- Stakeholder engagement and capacity building as key components of project effectiveness and sustainability;
- The importance of a community development strategy that aligns community needs and company resources to produce tangible, sustainable benefits;
- Local content in supply chains as a means of linking business need to economic development by enabling locals to take advantage of employment and supply opportunities;
- Use of monitoring and evaluation to drive accountability and transparency, inform decision making, and build trust and institutionalize stakeholder engagement.
Every brief, along with analysis of each theme, offers practical advice, tools and resources to assist with implementation. Through creating the briefs, BSR observed several trends that characterize leadership examples of community development practices:
- Strategic approach: Focusing company support for development in a handful of high-impact areas, where community needs overlap with company assets
- Upstream investment: Planning for, and investing in, community development efforts much earlier in the project life cycle (for example, pre-feasibility or even during exploration)
- Partnering: Reaching out to, and helping to build capacity in, local partner organizations to work together with the company in the design, implementation, monitoring and evaluation of community development projects.
- Cluster development: Working with other companies — extractives or not — in the project’s area of influence to promote a collaborative approach to community development.
Along with “Community Development in Practice,” the Community Development Information Clearinghouse pulls together the best current research, tools and learning from companies, civil society and government to serve as a comprehensive Web-based resource on sustainable community development.
Notwithstanding its primary focus on the extractives sector, the site contains resources that can be used by companies in any industry to enhance community investment programs, including guidance on establishing community foundations, managing conflict and fostering gender equity. The experiences of the extractives sector in sustaining long-term development projects, cultivating broad economic growth, developing employees, establishing mechanisms for transparent management of revenue, and using participatory approaches to development with communities and partners also provide valuable lessons that can be applied across industries.
We at BSR are excited to see the site evolve as lessons learned from projects sponsored by CommDev and on the ground by companies — as well as the tools, experience and knowledge of other stakeholders — are added.
For more information about “Community Development in Practice” or BSR’s community development services, contact Julia Nelson, BSR Energy & Extractives Program, at +1.415.984.3251 or jnelson@bsr.org. For questions, comments or suggestions for the Community Development Information Clearinghouse, please contact Dafna Tapiero, Manager for CommDev, at +1.202.458.5499 or dtapiero@ifc.org.
