Managing social risks and impacts
Companies working in the extractive industries, especially those in the oil and gas sector, need to be aware of the impact their operations can have on local communities.
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Anticipating the socio-economic impacts of a project
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Working in regions where there is current or recent conflict, or the risk of conflict
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Implementing effective controls against corruption
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Impact assessments
Social impact assessments (SIAs) enable companies to anticipate the socio-economic impacts of a project. This enables them to find ways to minimize the negative impacts and enhance the positive ones. SIAs often take place alongside or integrated with environmental impact assessments (EIAs) and other specialized assessments on issues such as conflict, health, human rights and indigenous peoples.
IPIECA has produced a guide that outlines the use of SIAs by the oil and gas industry. It provides managers of existing oil and gas operations, or new projects, with an understanding of how to make the best use of SIAs.
Conflict
Political and social instability is a feature of many countries where there are large oil and gas resources. The competition for reserves is increasingly drawing the oil and gas industry into more conflict-prone regions of the world.
Conflict is a major business risk. Companies working in regions where there is current or recent conflict, or the risk of conflict, may need to take mitigating action to reduce and manage the difficulties their existing and future operations may face. Conflict and social unrest can cause costly delays to new projects and operations. In addition the project itself may unwittingly exacerbate an existing conflict.
It is easier to prevent discontent than to defuse it when it has already emerged. Companies should therefore research the potential impacts of their operations by building relationships with local communities and governments. They also need to assess whether their actions and policies could inadvertantly stimulate new conflicts or aggravate old ones.
IPIECA has produced a guide to provide, in a simple and accessible format, basic guidance on risk assessment and risk management in conflict settings that oil and gas companies might face.
The UN Global Compact has recently published a voluntary guidance that aims to assist companies in implementing responsible business practices in conflict-affected and high-risk areas consistent with the Global Compact Ten Principles.
Transparency and anti-corruption
Oil and gas companies conduct business in some of the most corruption-prone areas of the world. Companies cannot completely protect themselves against improper conduct, but they can reduce the risks of it happening by implementing effective controls.
Where the risks are internal (employees and certain types of intermediaries), many risks may be mitigated by effective internal controls. Where the risks are external (non-related business associates), the parties may be able to limit their liabilities to one another through mutual undertakings. In commercial partnering situations (joint ventures), a variety of controls and limitations on liability may be appropriate. While the bribery of government and state officials remains a serious concern, it must be recognized that corrupt practice can, and does, also occur entirely within the private sector.
The most significant international initiative in the fight against bribery is the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery, which came into force in 1999.
The United Nations, the World Bank, the European Union and the Organization of American States have also launched anti-corruption efforts.
IPIECA receives updates on this issue from the International Association of Oil and Gas Producers (OGP), whose Anti-Corruption Subcommittee monitors the Extractive Industries Transparency Initiative (EITI) process. OGP’s Anti-Corruption Subcommittee has also produced a training template on combatting corruption.
Categories:
- Social responsibility
