CIAO DATE: 06/03

Towards an Improved Governance Agenda for the Extractive Sector

Malaika Culverwell, Bernice Lee and Izabella Koziell

The Royal Institute of International Affairs

March 2003

Abstract

Today, the extractive industries (oil, gas and mining) face enormous challenges in maintaining their so-called ‘social licence to operate’, especially in developing countries. This issue has become important not least because of mounting pressures on the traditional boundaries of corporate responsibility in the past decade. These pressures include the appeal of the sustainable development agenda, rising expectations and demands from civil society, the political imperatives of home country governments, conflicts between extractive companies and communities/ civil society, and the evolution of corporate culture and values. Half of the respondents to the latest UK corporate responsibility study by MORI (Market and Opinion Research International) say that business should give as much attention to society and the environment as to financial performance. If most natural resources extraction will increasingly take place in developing countries or in remote, mostly undeveloped places, the public will increasingly expect the local communities and host countries to benefit from the activities of extractive companies.

The challenge of maximizing economic benefits and minimizing negative environmental impacts are not new. Discussions have taken place in many different forums, and it is now clear that implementation and actions are far more important than words.

One way of addressing these challenges is via partnerships or relationships with key stakeholders. ‘The term ‘multistakeholder processes’ describes processes which aim to bring together all major stakeholders in a new form of communication, decision-finding (and possibly decision-making) on a particular issue. They are based on recognition of the importance of achieving equity, accountability and transparency in communication between stakeholders.’

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