
OECD due diligence guidance for meaningful stakeholder engagement in the extractive sector
The guide helps financial institutions mitigate risks and enhance transparency by providing a framework for effective stakeholder engagement. This guidance supports informed and responsible investment decisions, ultimately improving relationships with affected communities and reducing potential legal and operational challenges.
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OVERVIEW
The OECD guidance for meaningful stakeholder engagement in the extractive sector emphasises responsible business practices to address social, economic, and environmental impacts. Extractive projects, due to their scale and lifespan, often impact local communities, including vulnerable groups. Effective stakeholder engagement mitigates risks such as human rights violations, reputational damage, and project delays while enhancing trust and securing a social licence to operate.
Key highlights include:
- Engagement benefits: Early identification of risks, improved corporate risk profiles, and reduction in conflict costs.
- Characteristics of meaningful engagement: Two-way, ongoing, conducted in good faith, and responsive.
- Legal and regulatory alignment: Enterprises are expected to adhere to national laws and international standards, including OECD Guidelines and UN frameworks.
- Primary users: On-the-ground personnel and executive management, with additional guidance for indigenous peoples, women, and workers.
Due diligence framework for meaningful stakeholder engagement in the extractive sector
This framework consists of six sequential steps:
- Understanding context: Collecting data on social, economic, and environmental conditions to design engagement tailored to the local context.
- Use tools like Social and Environmental Impact Assessments (SEIAs) and Human Rights Impact Assessments (HRIAs).
- Risk-based due diligence ensures engagement efforts are proportional to the likelihood and severity of risks, such as resettlement impacts.
- Identifying and prioritising stakeholders: Ensuring marginalised groups are identified and given priority. Vulnerable groups such as women, Indigenous Peoples, and local workers often bear disproportionate impacts. Representation must reflect diverse stakeholder views, avoiding tokenism or elite capture.
- Establishing support systems: Providing training, financial resources, and capacity-building to both personnel and stakeholders to ensure effective participation. Support systems should empower marginalised groups, address socio-economic barriers, and include gender-sensitive approaches.
- Designing engagement processes: Developing appropriate activities that align with project stages and stakeholder needs. The report highlights tailored strategies for mining versus oil and gas projects due to their differing spatial and operational impacts.
- Ensuring follow-through: Commitments registers are a cornerstone for tracking agreements, with clear responsibilities and timelines to avoid stakeholder dissatisfaction.
- Monitoring and evaluation: Participatory and transparent monitoring systems are recommended. Indicators like stakeholder satisfaction, resolved grievances, and impact assessments should be designed collaboratively with stakeholders.
Recommendations for corporate planning or to management
To position stakeholder engagement strategically, enterprises should:
- Policy development: Formulate corporate policies embedding stakeholder engagement as a strategic priority, aligned with OECD guidelines.
- Integration into management systems: Incorporate engagement into risk assessments, monitoring frameworks, and sustainability reporting.
- Sector-specific approaches: Tailor engagement strategies to operational contexts, such as open-pit mining or offshore oil drilling.
- Feedback mechanisms: Create systems that integrate stakeholder views into decision-making at management levels.
- Conflict resolution: Develop strategies for resolving competing stakeholder interests, addressing inherited grievances, and mitigating risks posed by previous operators.
Recommendations to on-the-ground personnel
Field personnel should:
- Understand local contexts: Regularly consult with stakeholders and technical experts to assess socio-economic and environmental impacts. This includes addressing legal and cultural sensitivities, especially when engaging with Indigenous Peoples or women.
- Facilitate stakeholder identification: Engage with diverse groups, prioritising those most vulnerable, such as women, children, and marginalised communities. Ensure representatives genuinely reflect community views and avoid elite capture.
- Support stakeholders: Provide necessary resources, including training, translation services, and financial compensation for participation costs. Gender-sensitive engagement is critical to address unequal power dynamics.
- Establish grievance mechanisms: Ensure clear, accessible, and culturally sensitive processes for addressing complaints and providing remedies. Responses must be appropriate to the context and avoid perpetuating inequities.
- Monitor and report progress: Use participatory monitoring and independent external reviews to evaluate engagement effectiveness. Include processes to address shortcomings or unforeseen adverse impacts dynamically.