Why a fund for community legal and technical support?

Land-based investments frequently lead to significant social and environmental challenges, posing financial risks for businesses. Research on over 360 projects involving land tenure disputes revealed that 54% suffered material impacts, with one-third facing severe issues, such as production suspension or cancellation. Additionally, some projects experience losses between 25% and 300% of their net present value (NPV) due to unresolved land-related conflicts. Independent legal and technical support is critical for improving corporate-community engagement, addressing these risks early on, and fostering more sustainable outcomes.

The status quo in land-based investments: an implementation gap

Corporate efforts to engage communities affected by land-based investments often fall short due to weak communication and lack of effective processes. A review of 110 major companies in the apparel and extractive sectors found that while 61% had human rights due diligence (HRDD) processes in place, only 27% disclosed any meaningful engagement with communities. Additionally, despite growing recognition of Indigenous people’s right to Free, Prior, and Informed Consent (FPIC), there remains a large gap between acknowledging this right and actual implementation. Companies relying on audits or codes of conduct often fail to detect or mitigate human rights risks.

Bridging the gap: Independent legal and technical support to improve community engagement and HREDD outcomes

Providing independent legal and technical support significantly enhances corporate-community engagement by levelling the playing field. Companies that invest in these mechanisms gain better insight into local dynamics, allowing for informed decision-making and more equitable negotiations. A study highlights that allocating just 2% of project costs to social risk mitigation, including legal support, can prevent delays and conflicts, which often reduce a project’s NPV by 25% to 37%. By enabling communities to access timely legal advice, companies also reduce the risk of costly operational delays and reputational damage.

Filling the funding shortfall: Contributions to independent legal and technical support

Grassroots organisations that offer critical legal and technical support often lack sufficient funding. In a 2021 survey, 78% of these organisations reported financial difficulties, with many at risk of closure. Despite this, human rights funding represents only 2% to 8% of total foundation grant-making worldwide, and just 11% is allocated to environmental and resource rights. Businesses involved in land-based investments should contribute to an independent, pooled fund to support these organisations. This would provide companies with trusted intermediaries and help avoid project shutdowns, delays, or fines.

Recommendations

The report recommends establishing an independent, pooled fund to provide legal and technical support to communities impacted by land-based investments. Companies should treat their contributions to this fund as a core part of responsible business, rather than philanthropy. This fund should be governed independently to avoid conflicts of interest and must ensure that legal and technical assistance is accessible to affected communities throughout the lifecycle of the investment, from initial negotiations to grievance redress. Adhering to this approach strengthens community trust, reduces operational risks, and improves project outcomes.