Voluntary Approaches to Environmental Protection: Lessons from the Mining and Forestry Sectors

This paper provides an overview of voluntary approaches used in the mining and forestry sectors and the experience that has been gained with them. It examines the differences in approach taken by these two sectors and the implications and underlying causes of these differences. In particular, it examines the issues of coverage and ambitiousness, monitoring, sanctions for noncompliance, transparency and credibility of voluntary approaches. Finally, the experience of the mining and forestry sectors is used to extrapolate more general lessons for the potential role that voluntary approaches can play in improving environmental performance in the context of foreign direct investment.

As the OECD has recognised, foreign direct investment (FDI) has increased dramatically in recent years. While this has brought economic and social benefits to many regions of the world, some also argue that it threatens environmental quality in host countries, for example by producing pollution havens and generating a ‘race to the bottom’ in environmental standards. However, a counter-view suggests that large corporations most frequently involved in FDI will promote the establishment of higher environmental standards through technology transfer or via their environmental practices. Preliminary investigations suggest that the truth is more complex than either of these views would suggest, and that different sectors are subject to different pressures and respond in different ways.

What is clear is that FDI is continuing to expand and with it, the reach of large multinational corporations into developing countries. This trend has important environmental implications, and commonly involves large scale investment projects in environmentally and resource sensitive industries such as mining and forestry. The beha viour of corporations involved in FDI has important indirect as well as direct implications, for those corporations commonly act as models (both positive and negative) for the behaviour of local enterprises. From a public policy perspective, it is vital that companies involved in FDI are encouraged and rewarded for becoming environmental leaders rather than laggards. Yet in an increasingly globalised economy in which the capacities of host countries may well be outstripped by the pace and scale of FDI, the policy options for nurturing such leadership, are limited.