Throughout the tropics, staggering amounts of land have been designated for natural resource extraction—as much as 40 percent of Peru, 30 percent of Indonesia and 35 percent of Liberia. However, much of this land is already in use; it is being inhabited by local communities and indigenous peoples. And while it is possible to live on and extract resources from the same land, when local communities are not consulted in this exchange, conflict may erupt.
“When governments sell the land, forests and other natural resources out from under the people who live there, local conflict becomes inevitable,” said Andy White, coordinator of Rights and Resources Initiative (RRI). “All of these conflicts—and the financial risks that investors confront—are avoidable. The companies and governments implicated need to first fully respect and involve Indigenous Peoples and forest communities in all aspects of proposed investment, not as bystanders who can be pushed aside.”
Conflict between extractive industries and local communities was the focus of a report by The Munden Project. The “Communities as Counterparties” report was commissioned by Rights and Resources Initiative, a global coalition of 14 organizations and partners engaged in land policy reform, and examined 73,000 oil and gas, mining, logging and agricultural developments in eight countries across the tropics.
The research group found 93 percent of these lands is inhabited by indigenous peoples and local communities, many of whom may be affected by development activities.
“The granting of concessions without the knowledge or approval of people directly affected by them is obviously a human rights issue of grave concern. But it may also have a real financial impact, and this impact concerns more than just those companies with ground-level operations…” states the report. “Given the extreme rarity of uninhabited concessions, investors should assume some degree of interaction between a concessionaire and whoever lives within (or in many cases, close to) the concession territory. The financial cost of getting this interaction wrong can be significant-a recent major study of business costs, resulting from conflict found, for example, that ‘company-community conflict in one country cost one project US$100 million per year in stoppages.’
“On some occasions, for example where local communities have legally recognized rights to land, infringements of those rights can lead to complete shutdowns of operations.”
The good news is that the researchers found these conflicts occur in a somewhat predictable manner, meaning that they may be avoidable in the future. They looked into 100 case studies and identified three main patterns surrounding conflict in areas of extractive development: timing, compliance with environmental regulations, and level of collaboration with affected communities.
The majority of conflicts occur near the beginning of a project—after plans have been made, and in the early phases of operation. When communities that will be affected by the project are not involved in the planning process, the team found things can get messy from the onset. Often it is the early phases of a project (such as clearing land or breaking ground) that the majority of the contact between landholders and industry takes place, making it an especially ripe time for contention.
Conflicts also predictably occurred when companies did not follow environmental regulations and local parties took legal action to address the issue.
“The evidence showed several occasions in which local organizations were able to use regulatory systems to hold a company to account,” says the report. “More interestingly still, environmental regulations were the most common source of losses related to non-compliance. If this evidence continues to accumulate, it will strongly imply that maintaining environmental standards is an important method to reduce risk.”
The third conflict trend happens when the rights of the communities living on the land are disregarded. “Just like other important counterparties – a government agency or an engineering firm hired to construct a mine – the community’s consent and cooperation must be properly secured before a concession can operate effectively. Recognizing communities as counterparties is one way of thinking through what is required to properly secure consent.”
Land and resource rights for local communities are scant in many countries. According to Global Forest Watch, Liberia has only a few very small areas in which community resource rights are officially recognized.
The Communities as Counterparties report was released before RRI’s 16th Dialogue on Forests, Governance and Climate Change titled, “Investments, Communities, and Climate Change: Risks and Opportunities” which took place in Lima, Peru, on 30 October, 2014. Rights and Resources Initiative hopes that by making industry and company leaders aware of these trends, they will do a better job of including communities and avoiding conflict, both as a human rights issue and to address the bottom line.
“Natural resource concessions cannot be considered economic development when they fail to account for the economic rights of local inhabitants,” concluded Andy White of RRI. “True economic development empowers and enriches everyone involved. Only by securing the rights of Indigenous Peoples and local communities to their land can you ensure that they will share in prosperity when development visits their forests.”
- Hansen, M. C., P. V. Potapov, R. Moore, M. Hancher, S. A. Turubanova, A. Tyukavina, D. Thau, S. V. Stehman, S. J. Goetz, T. R. Loveland, A. Kommareddy, A. Egorov, L. Chini, C. O. Justice, and J. R. G. Townshend. 2013. “Hansen/UMD/Google/USGS/NASA Tree Cover Loss and Gain Area.” University of Maryland, Google, USGS, and NASA. Accessed through Global Forest Watch on Nov. 20, 2014. www.globalforestwatch.org.
- “Resource Rights.” World Resources Institute. Accessed through Global Forest Watch on Nov. 20, 2014. www.globalforestwatch.org.