Maximizing Partnerships between Indigenous Communities and the Extractive Sector

By Daniel F. Runde

Between now and 2050, global population growth and rapid urbanization are expected result in an additional 1.6 billion people in need of electricity. Traditional energy sources based on extractive industries – coal, oil, and gas – will continue to drive the market and satisfy the energy demands of burgeoning populations in the short to medium term. The emerging markets of China and India, for example, account for approximately one-third of the world’s population and will need to exponentially increase imports of cheap energy sources in order to produce electricity for their growing middle classes. Where will these resources be extracted and imported from? Largely from the lands inhabited by indigenous peoples, who live on top of the some of the most biodiverse and resource-rich regions on earth.

Indigenous peoples have suffered marginalization, intimidation, and even displacement at the hands of their national governments and multinational companies in the past. However, this has largely changed for the better as many companies have recognized that the ultimate success of extractive investments depends on local partnerships with indigenous communities. Forward-thinking companies that implement guidelines to include the input and build the capacity of indigenous populations have the opportunity to achieve successful, profitable outcomes that simultaneously meet end-user energy demands and benefit the local populations from where that energy is sourced.

Panelists at a recent event hosted here at CSIS discussing partnerships between extractive companies and indigenous communities.

Panelists at a recent event hosted here at CSIS discussing partnerships between extractive companies and indigenous communities.

There is undoubtedly a salient financial case for uniting the extractive industry’s objectives for powering the world with corporate practices that promote cultural awareness and local capacity building among indigenous community partners. A participant at a recent CSIS meeting noted that companies that mitigate social risk by partnering with indigenous populations have a 5-6% higher return on investment. Partnerships with these indigenous populations can drive profit, and social and economic development for underserved communities.  Failing to partner with indigenous communities, on the other hand, increases the risk that local opposition will impede a project’s success and hurt the company’s bottom line.

A growing body of knowledge and policy support, in part led by the landmark 2007 United Nations Declaration on the Rights of Indigenous Peoples, has spurred corporations such as BHP Billiton, and multilateral finance institutions such as the Inter-American Development Bank, to form Indigenous Peoples Policy statements to guide extractive sector businesses and development projects in vulnerable communities.  Other multilateral development banks would be well served by reviewing their own policies relating to indigenous peoples to ensure projects impacting these communities are mutually beneficial.

While certain broad policies such as the Extractive Industries Transparency Initiative  have been established to regulate the extractive sector, steadfast implementation of pro-indigenous policies wherever possible remains a challenge for most corporations. Poor collaboration between corporations and standards-setting groups operating on behalf of environmental and indigenous community interests is often the norm. In order to ensure standards are properly adhered to and regulated, it is important that regulatory organizations incorporate extractive industry voices in the process of setting up operational standards for resource extraction on indigenous land. Engaging companies early on in this process is mutually beneficial, as companies are better informed and more likely to adhere to standards on which they were consulted.

These partnerships represent an opportunity, both for the extractive industry and indigenous communities, to profit from natural resource wealth while contributing to the positive development of historically marginalized peoples. Indigenous communities are major stakeholders in our collective modern future.  Companies and government should ensure these communities share in global advancement and prosperity.

Daniel F. Runde holds the William A. Schreyer Chair in Global Analysis, and is the Director of the Project on Prosperity and Development as well as the Project on US Leadership in Development at CSIS.

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