Reports about dilution of Indian regulations that currently require companies to seek the consent of local communities for industrial projects in tribal areas 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 seeping into China as well.
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.
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.
Sudeep Chakravarti, author of recently published book Clear, Hold, Build: Hard lessons of business and human rights in India, said in response to an email query:
“Opposition by local people is certainly a reason – among several – why projects are sometimes stalled. But businesses (including financiers) and governments are far too quick to pin the blame on project-targeted or project-affected communities, and live in near-total denial of their own role in creating entirely avoidable hurdles and mis-steps in the process of free, prior and informed consent. There is free, prior and informed consent between the businesses and the government and the bankers and suppliers of the project; not of the project-targeted or project-affected.”
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. Above all, it can be done by not going into an area where there is entrenched opposition.
Forcing operations on the ground under the cover of government regulations that favour businesses at the cost of local people is as outdated as the telegraph which was phased out this year.
Rajni Bakshi is the Gandhi Peace Fellow at Gateway House: Indian Council on Global Relations.
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