Why corporates must design projects to involve local populace

The future belongs to companies that design and implement business models that make local communities direct beneficiaries, says Rajni Bakshi.

Reports about dilution of Indian regulations that require companies to seek the consent of tribal communities for industrial projects will be welcomed by many investors.

However, this joy is likely to be short-lived. Businesses that either take local communities for granted or see them as an obstacle to be ‘managed’ are skating on thin ice.

This reality has certainly been acknowledged by global networks of mining companies over the last decade, it is now becoming seeping into Chinese as well.

India’s Forest Rights Act (2006) gives tribals and other jungle dwelling communities the right to exercise a veto over any mining or industrial projects in their area.

This is now sought to be diluted on the assumption that this will boost investments and thus raise the GNP.

However, any dilution of rules will be out of tune with emerging global standards.

It was after many years of losses caused by conflicts with local communities that the largest mining companies formed the International Council on Mining and Metals, to frame best practices that create win-win situations for companies and local people.

In 2012 the International Finance Corporation accepted that Free, Prior and Informed Consent by local communities in tribal areas is a must for all industrial projects.

In October this year the Chinese Chamber of Commerce for Mineral, Metals and Chemicals Importers and Exporters has issued guidelines for social responsibility for those making outbound investments in mining.

The Chinese chamber of commerce has asked mining companies to carefully assess if the area they are entering is likely to be conflict affected.

It also highlighted the need to conduct due diligence on the specific needs of conflict affected areas.

The Canada based International institute for Sustainable Development (IISD) has recently released a 'Guide to Negotiating Investment Contracts for Farmland and Water'.

This guide has been prepared by lawyers, social scientists and environmentalists after a three-year investigation of 80 agricultural investment contracts in different parts of the world.

The purpose of this document is to serve as a user-friendly guide that offers options for countries to develop rural economies, boost employment, build agricultural processing factories in ways that are socially just and environmentally sustainable.

In a statement that accompanied the release of this guide the IISD emphasized that the ongoing development of domestic laws and regulations is the most important step to ensuring positive impacts of foreign investment.

The Union government’s move to dilute rules aimed at protecting the rights of tribals is being strongly opposed by the Ministry of Tribal Affairs.

However this is not just a tribal rights and human rights issue.

It is instead an issue of outdated business models vs. futuristic models.

Companies that support dilution of regulations to fast-track projects are much more likely to face protracted opposition on the ground. 

Police actions to suppress this opposition are increasingly unacceptable to many global institutional investors who are now signatories to various social responsibility codes.

The future belongs to companies that design and implement business models that make local communities direct beneficiaries.

This can be done by making the people who live on top of or around, the desired sites, shareholders in the enterprise.

It can also be done by adopting state-of-the art technologies that reduce the damage of extractive industries.

Forcing operations on the ground under the cover of government ‘protection’ is as outdates as the telegraph which was phased out this year.