IFC consultation with civil society on the safeguard review

22 April 2005 | Minutes

A two day consultation took place between civil society organisations and staff members of the International Finance Corporation (IFC) on the revision of the IFC’s environmental and social safeguard policies. This was to discuss the ‘indicative draft of the IFC policy on social and environmental sustainability and performance standards’, which forms a summary of all comments received between August 2004 and January 2005; and ‘guidance notes’, (formerly known as ‘interpretation notes’) which explain the requirements in the performance standards but are “not intended to establish policy by themselves”. Prior to the meeting NGOs had submitted a list of detailed questions to the IFC relating to serious omissions or lack of clarity in relation to each of the proposed performance standards. During the consultation the IFC made a power point presentation, which it claimed would address many of the questions, and reveal a number of changes to the current drafts. It was unable to make this presentation public.

Civil society was dismayed by the evasive answers provided by IFC representatives, and in many cases, their outright failure to respond directly to much of the carefully researched analysis and questions on each performance standard put to them by civil society organisations. On the second day of the consultation IFC staff presence in the room was limited, and Rachel Kyte, who is understood to be leading the process was unable to attend for most of the day. At the end of the two days, little clarity had been gained on the questions submitted and few commitments on a crucial issues had been obtained from the IFC.

Some of the many general concerns included:

  • the IFC’s prioritisation of the “needs” of the client over and above the affected communities/ environment;
  • the alarming level of discretion afforded to the client in implementing the policies, the subsequent lack of accountability and potential loopholes;
  • numerous and serious weakenings from current World Bank group safeguard policies;
  • that the performance standards are so flexible, non-binding and ambiguous that it is no longer valid to consider them “policy” any longer;
  • disclosure issues in terms of access to information;
  • on independent assessments and monitoring: the IFC claimed that “for the vast majority of clients we do not believe that we need individual monitoring”. Their overall message was that they trust their clients to provide appropriate information, and did not see a reason for requiring third party input;
  • the lack of clarity regarding Broad Community Support (BCS): the IFC plans to move any reference of BCS out of the Performance Standards and into IFC’s overall policy, and make it their responsibility to certify when it exists. (Note – if BCS doesn’t exist in the Performance Standards, it means that it will not be applied to the Equator Banks);
  • the failure of the IFC to clarify key concepts and provisions of such terms as “broad community support”; “adverse impacts”; “eminent domain”; “critical natural habitats; “good international practice”;
  • the failure to clarify how the performance standards will be applied to non-project financing of IFC (financial intermediaries);
  • inconsistencies and/or the failure to reflect in the performance standards several commitments in the Bank’s management response to the extractive industries review (EIR);
  • the use of confusing and inaccessible use of language, in particular for affected communities;
  • ambiguity in relation to the action plan: the IFC did not agree to disclose and consult with the local community in developing a draft action plan. On this point, IFC staff member Bill Bulmer said “we can’t let consultation drag on and on for our clients…..”. The IFC have said that the final action plans will be disclosed, but haven’t said when yet (most likely after a project is approved);
  • the suggestion that the IFC would abolish the ABC categorization framework for assessing project risk;
  • the IFC’s failure to integrate and make specific statements that comply with international standards on environment, human rights, indigenous peoples and labour, and their claim that: human rights, and international standards in general had not been specifically integrated because the “UN hasn’t decided on the human rights responsibilities of multi-national corporations”. This was countered by NGOs, who pointed that the obligations of governments in the countries in which the companies operate are very clear.

Some general responses from the IFC

  • The IFC asserted that they didn’t want to put in language they couldn’t defend and fear of critiques if they are too strong with their language. Hence they claimed that that terminology such as “endeavour to ensure” is more accurate and balanced from their point of view.
  • They claimed that the process had been a “learning experience” for them and assured NGOs that they would “take their comments back into their thinking”.
  • Despite confusion raised by civil society organisations in relation to the safeguard policies, one IFC staff member said that they felt that “they seem to be crystal clear in most regards.”

At the conclusion of the meeting, civil society groups present reiterated the need for a second redline draft to be submitted before the performance standards and guidance notes are submitted to CODE in July. Otherwise it would be impossible to consider the consultation process as “free, prior” and, in particular “informed”. IFC staff did not address this issue directly when pressed by NGOs, and stated that only the board could make such a decision.

Selected concerns and issues raised on each performance standard

Performance standard 1 and 9:Social and environmental management system

  • These will be merged into a “process standard” on social and environmental assessment management system.
  • The performance standard is overarching and applies to all others. The clarity and specificity as to what is required and what isn’t applies doubly here, yet it remains ambiguous.
  • Severe lack of clarity remains in relation disclosure issues, in particular to the early/timely disclosure of relevant project details and potential social and environmental impacts to those who will be affected
  • Specific requirements in relation to what constitutes minimum consultation for category A projects is extremely vague
  • There appears to be no objective to identify and avoid environmental and social impacts and risks
  • It is not clear if the client will be required to disclose the full details of social and environmental assessments, and not just the results

Performance standard 2: Labour and working conditions

The consultation did not address this standard as the IFC stated that consultations had already taken place with unions and labour organisations at an earlier date

Performance standard 3: Pollution prevention and abatement

  • Arhus convention should be added. There should be something specific in PS 3 that deals with trans-boundary impacts and a requirement for public disclosure. The IFC responded: “Arhus is an agreement by governments to institute some disclosure systems. We will take that as an example but tailor it to the client.”
  • There should be independent third party monitoring of the client during planning and implementation. There should be linking of environmental monitoring and community health and safety.
  • Mention of Karachaganak as case study: The KPO just had its license revoked for violations and extreme emissions. If there had been third party monitoring of the project, it’s conceivable that those emissions would have been caught much earlier in the project.
  • Precautionary principle or approach is noticeably missing from standard 3, especially in context of chemicals, which does not address the complexity that exists when there is a lack of scientific certainty.
  • More language referring to prevention is needed. Currently says “reduce” rather than “avoid or eliminate” .
  • In reference to hazardous chemicals – “manufacture, trade, or utilize” – should also say “dispose”ensure that hazardous chemicals disposed of in environmentally sound manner” is much weaker than Stockholm which says: destruction or irreversible transformation, if these are not possible then dispose of in environmentally sound manner

Performance standard 4: community health and safety

  • Importance of truly independent monitoring should be made publicly available.
  • No clear definition of what constitutes “good international practice” in relation to the community health and safety plan. IFC responded that this is not an easy concept to define and that it will eventually be defined in the performance standards
  • Lack of language such as “prevent, guarantee, risk”. IFC responded that they doubted that “preventing risks” was grammatically correct.
  • CSOs asked why the board’s EIR commitment for the independent monitoring of large scale extractive projects had not been included in the performance standard. IFC response that “this is a sector issue for the Bank rather than performance standards, and that “sector by sector approaches would not be included in performance standards” and the the World Bank management response to the EIR wasn’t linked to safeguards.

Performance standard 5: land acquisition and involuntary resettlement

  • The very definition of “involuntary resettlement” remains unclear
  • Lack of definition of grievance procedures, despite the recognition by the IFC that “displacement of indigenous peoples is an extremely high risk scenario”
  • On the treatment of informal settlers, the IFC stated that “you can not compensate people for something they do not own”.
  • It is not clear how this performance standard will apply when resettlement has already taken place prior to IFC’s involvement.
  • The PS does not allow for the fact that problems with resettlement often emerge much later down the line, e.g when people are unable to reclaim their livelihoods or experience social problems in a new area.
  • There is no clause allowing for compensation of people who don’t have resettlement as an option
  • The PS refers to a situation where the client is exercising the power of expropriation but this is private sector client working for profit. Usually government seizure of land is supposed to be for public good. How will address this in the redraft so that there is consideration for broad public benefit, not just something because it benefits private company?

Performance standard 6: conservation of biodiversity and natural resource management

  • Failure to define “critical natural habitat”
  • that Shell and the Equator Banks have stronger policies on no-go zones than the IFC
  • Failure to implement clauses from the Convention on biodiversity
  • Failure to implement the precautionary principle
  • The IFC stated that it was still looking for appropriate language on no-go zones, and denied that there was anything in the EIR that said that the IFC will have a policy on no-go zones. Civil society disputed this point, and cited relevant clauses from the Bank’s management response

Performance standard 7: Indigenous Peoples

Whilst civil society recognised the improvement of the inclusion of “customary rights” in relation to land, this was overridden by the remaining grave concerns:

  • Indigenous peoples’ representatives warned the IFC that “resettlement” is a dirty word for indigenous peoples. When the land of indigenous peoples is destroyed so too is the culture. Moreover, resettlement is often carried out by the military and has resulted in grave human rights violations including rape and killings. They concluded that it was “unacceptable to formulate policy without the involvement of indigenous peoples”.
  • Civil society raised the specific example of Glamis goldmine, an IFC funded project which claimed to have obtained “broad community support” (BCS) when it was approved by the board. The IFC representative responded that BCS can change over time due to misinformation, asserting that the Glamis project continues to enjoy BCS by those affected. He implied that the local clergy in the area had misinformed those communities not affected by the project for their own political ends.
  • Provisions for indigenous peoples are mentioned in a number of different PSs and overall this is extremely unclear. The relevant information needs to be consolidated in order for indigenous communities and councils to fully understand what they are being consulted on.
  • The PS does not take into account the distinction between those indigenous peoples that have formal land titles and those who do not under national law, and fails to account adequately for the latter who make up the majority.
  • On the failure of the IFC to acknowledge Free Prior and Consent, CSOs pointed out that this has been recognised as customary law by the Inter American Court of Human Rights since 1984, regardless of whether national law exists on this or not.
  • The distinction between indigenous communities dependent on natural resources and those who are not is arbitrary and discriminatory
  • The IFC acknowledged for much of the above that they were “sensitive issues that need to be addressed carefully”. An indigenous consultation has not been carried out since the launched its safeguard review process in September
  • .

Performance standard 8: cultural heritage