Essential ESG: Episode 25 – Operating Responsibly In Conflict-affected Areas: The Role Of Grievance Mechanisms

In the latest episode of Corrs' Essential ESG podcast, Dr Phoebe Wynn-Pope and Kate Gill-Herdman discuss the critical role of operational-level grievance mechanisms in ensuring responsible and sustainable business conduct when operating in conflict-affected and high-risk areas (CAHRAs). 

As global demand for critical minerals surges, driven by the clean energy transition, businesses are increasingly drawn to strategic deposits in regions marked by political instability, weak governance and vulnerable communities.

Phoebe and Kate explore the ethical and legal responsibilities companies face in these environments, offering practical insights into how businesses can mitigate harm, uphold human rights. and engage meaningfully with local communities.

Essential ESG is a podcast series presented by Corrs that breaks down topical issues affecting the rapidly evolving environmental, social and governance landscape in Australia and beyond.

Video Transcript

Phoebe Wynn-Pope, Head of Responsible Business and ESG, Corrs Chambers Westgarth

Kate Gill-Herdman, Special Counsel, Corrs Chambers Westgarth

Kate: Welcome to another episode of Essential ESG coming to you from the lands of the Wurundjeri people of the Kulin nation. My name is Kate Gill-Herdman. I am a special counsel in Corrs' Responsible Business and ESG team and I am here with Dr Phoebe Wynn-Pope the head of our team and we are here to talk to you today about operational level grievance mechanisms, particularly in the context of conflict-affected and high-risk jurisdictions. And we know that, as global demand for critical minerals intensifies, businesses particularly in the extractives sector increasingly find themselves drawn to strategic deposits in emerging markets and at times in conflict-affected and high-risk areas. So Phoebe first can you walk us through what defines a conflict affected high-risk area, where are they?

Phoebe: Sure Kate, so obviously if it's conflict affected it has got to be either having a certain level of conflict in the country or neighbouring the country. So there's insecurity that exists and some of the high-risk areas which may be adjacent to countries or regional conflicts but may include other sorts of political or operational security exposures or sovereign exposures, and sometimes in the ESG space the community impact risks really stand out as especially critical in those circumstances. There's often a weak rule of law. There might be limited government capacity to protect civilian populations that heighten vulnerability amongst local communities. So it's these sorts of areas where in the operational space the communities that are being impacted by operations may be particularly vulnerable.

Kate: Are there particular areas that Australian businesses need to be thinking about?

Phoebe: Yes, well what we're seeing particularly in the critical minerals space which you mentioned in the introduction is that the numbers are persuasive around where those critical minerals are. So we're thinking about places like the Democratic Republic of Congo which controls about 70% of the world's cobalt reserves and then the lithium triangle which spans Bolivia, Argentina and Chile, not conflict affected necessarily but with lots of vulnerable communities or indigenous groups and first nations people there they supply 70% of the world's lithium and in recent years Australia has invested billions of dollars across 234 African mining projects in 2023. So it's a little bit of an old figure but it's a lot.

Kate: It's pretty staggering.

Phoebe: Of the mining projects in Africa that are going on. So there's a lot of places where people are operating there just needs to be a heightened sense of due diligence around community impacts.

Kate: And these critical minerals just for those of you who are listening and don't know, so these are critical minerals that are essential to the clean energy transition across a number of different sectors, so high demand.

Phoebe: That's right, absolutely. And as we're driving towards net zero, trying to meet our Paris commitments they're absolutely essential for the future.

Kate: So we've got you know we're talking about conflict affected and high-risk areas, we know minerals are coming from there, we know we need them so what should businesses be thinking about when moving into these types of conflict affected or high-risk areas?

Phoebe: There's a couple of things to think about. First if you're moving into these sorts of emerging markets or high-risk areas there are two things that you really need to appreciate. The first is that the company is likely to become one of the largest economic actors in a very fragile ecosystem which is marked by weak institutions, power vacuums and often volatile social fabrics. So, that's the first thing. The second thing is that every operational decision, whether it's related to land acquisition, security, hiring, waste management, directly shapes and impacts local livelihoods and the distributive equity that exists in those communities. So your starting point is that yes there's these great resources there that we need and that the world needs and that need to be extracted but also that you're going to have a really major impact on the people that are living there no matter what you do.

Kate: And that's something obviously it's critical for businesses to get right when they're operating in these areas because there's many well-known examples of where historically businesses got it wrong and it's caused all sorts of delays and business critical issues but also importantly had some pretty severe and negative impacts on those communities. Now is a good time to talk about what some of those types of impacts are on communities that can present themselves in the race for critical minerals in these jurisdictions.

Phoebe: Yes, I think some of the community impacts might be around you know if there's obvious things like around environment and health. So people being worried about water contamination, air pollution, noise, dust, long-term environmental degradation, those things are sometimes amplified in emerging markets but they're common issues in Australia around mining projects as well. Traffic and transportation issues, concerns about that sort of heavy truck traffic and road damage and safety and those sorts of issues are often in the front of people's minds, cultural heritage destruction, damage to sacred sites, cultural landmarks, traditional practices - these sorts of things can trigger actually quite severe community backlash if you don't get them right and legal challenges in the worst case particularly where cultural heritage protection law exists which isn't everywhere but again in an Australian context that would be applicable. So while we're sort of thinking about operational grievance mechanisms and complaints and community concerns in high-risk areas a lot of the principles actually apply wherever you're operating.

Kate: Yes a few things stood out to me in your illustration of the types of impacts there and one is yes these types of impacts are equally applicable in the Australian context or in a context where there is strong rule of law and adequate systems and frameworks for ventilating concerns but also that we often think about environmental impacts and human rights impacts separately when in fact they are inextricably linked.

Phoebe: That's right. And then that other things certainly in some areas where displacement and resettlement is required so that forced relocation of communities, inadequate compensation for land and assets or poor resettlement planning which can create lasting grievances and almost intergenerational issues. Indigenous rights and land disputes these happen in lots of places and in some countries Indigenous people aren't recognised and so that creates its own particular range of issues and challenges for companies. Inequitable benefit distribution - what does that look like, who is benefitting in the community, that influx of capital and workers' activity can create and really disrupt local communities and their traditional way of life so there's a whole lot of social impacts that lie around that as well.

Kate: This is not to say that we should steer clear of these areas but really, we need to be when we're going into these areas aware of the potential impacts and then thinking about how to manage them.

Phoebe: That's right absolutely management is key.

Kate: So Phoebe maybe then we could talk about operational level grievance mechanisms and the role that they have to play in helping to identify and manage those potential community impacts.

Phoebe: So operational level grievance mechanisms provide a way for people who are within the, let's say, the project zone for want of a better description whether it's a mining asset or a different sort of project that's been developed to be able to raise concerns and have them addressed. These are a key part of demonstrating and showing respect for human rights for business and to ensure that they're doing that and it's absolutely critical that it needs to be rights based and community focused. But these are also really excellent risk management tools for business because a well-designed operational level grievance mechanism can surface grievances early. It's relatively cheap to take a call or to receive a message from somebody or to try to understand what's going on in the community at that early stage and having a mechanism that people can assess easily means that it can stop complaints from turning into protests or shutdown or, at worst case, strategic litigation. So it does all of those things if it runs well. The second thing it can do is it can generate real time data about project impacts so that in itself also feeds that continuous improvement loop and maintains good relationships in the community.

Kate: So it's really interesting when you talk about an operational level grievance mechanism as a risk management tool because often, we think about that as a tool to enable you to discharge your responsibility to respect human rights within the framework of the UN guiding principles. But it seems to me that you know, we often talk about the process of human rights due diligence and having people at the centre of that process to identify and mitigate potential impacts on people and how that can be a useful risk management process for businesses, but now we're really moving into, you know that early detection for business. So it's got this dual function and I don't think people often think about it that way as a risk management technique. So it's been a really interesting perspective that you've shared with us today.

Phoebe: I think the risk is to think about them only as a risk management technique, and so you know, I would be hesitant to advocate for that, but I think that the risk management piece is an extraordinary benefit of a really good operational level grievance mechanism.

Kate: And as I would expect, you've summed it up perfectly, Phoebe. And so, Phoebe, maybe you could talk us through what the key elements of the design features of an operational level grievance mechanism look like.

Phoebe: So a good operational grievance mechanism: the starting point is community consultation and context, and very often the grievance mechanisms are designed with minimum community engagement and really are quite a narrow understanding of stakeholder impacts. For example, gender-based impacts and a focus on operational efficiency in these mechanisms as opposed to overall effectiveness can sometimes limit their capacity.

Kate: Can we explore that? Just by way of example, you've talked about gender-based impacts. Can you give us an example or bring that example to life a little bit?

Phoebe: Sure. I think that gender sensitivity and a requirement for gender sensitivity is often the Achilles heel of grievance mechanisms because very often, what we find is that the way projects impact on people of different genders, and I'm just going to use women and men for this particular example, is different. For example, if you have land acquisition, often the land will be owned by men, but women may be the ones that farm it and that earn their living from it and that have access to the land to provide food for their families. And so if you're going into an area and have a land acquisition kind of program that's going to compensate and remediate the men for their loss of land, but is it also thinking about the impacts on the women in the community and their loss of livelihoods. So this kind of piece about thinking about gender in the design of grievance mechanisms is really important. Other things are access points. So how to actually access and raise a concern through the mechanism and is there an accessible point for women where they feel safe to do that or not and if there's only a few access points which aren't kind of gender sensitive, you might find that you never get a woman making a complaint, ever. So there's kind of this, you know, some of these challenges which really require you to understand context. Now the UN Guiding Principles have very good effectiveness measures. So UN Guiding Principle 31, which requires a good and effective grievance mechanism to be legitimate, it needs to be accessible, it needs to be predictable, equitable, transparent, rights compatible. It needs to have a source of continuous improvement and learning and where appropriate it should be based on engagement and dialogue. Those things are all essential for a good grievance mechanism, clearly. But sometimes if you start with those effectiveness measures instead of starting with the context and the community and designing your grievance mechanism from the beginning and then at the end saying okay is this grievance mechanism going to be effective and then in this context and measuring against those criteria, then it's possible to kind of miss things on the way through.

Kate: Interesting because I bet you see a lot of grievance mechanisms. Well we do see a lot in our practise group and it's really interesting I think looking at how they've been designed and where the gaps are, particularly that gender-based overlay as well and how you integrate that into design.

Phoebe: And you know, it can be really difficult. It can be difficult to get under the skin of a community and really understand the dynamics and what's going on but if you do that and you really co-design, if you like, the mechanism you're going to end up with a really great tool and great community relationships in an ideal situation.

Kate: So when do you start? I mean, it sounds like you don't start when the project starts, you start when the project is being planned.

Phoebe: Absolutely. So start really early. A lot of that information can be drawn from pre-entry due diligence and planning that includes community and social research but you do need to kind of invest in that because social research isn't a proxy, for example, for gender sensitivity or cultural practice isn't necessarily a proxy for that. You won't necessarily really understand the dynamics unless you can get under the skin of what that looks like.

Kate: Okay, we did have a little bit of a well a segue, well it's not a segue its a deeper dive into a particular issue while we were talking about kind of the key elements of the operational level grievance mechanism. But I just wanted to make sure for the audience that we've covered off on all the key elements.

Phoebe: Okay, so we've talked about the effectiveness criteria and what makes it quite effective. We've talked about the community engagement and getting really in and under the skin of what that looks like and co design. So other things to think about are thinking about how information about the grievance mechanism will be communicated to community members and how to reach those diverse groups. So that's that accessibility piece, making sure that that's there and ensuring those channels really meet those diverse groups, so people with disabilities, women as we've discussed. Making sure that the intake and inquiry processes are implemented in a way that allows for appropriate acknowledgement, registration, assessment, referral investigation, where necessary. Those sorts of things and making sure that access is simple and clear, user friendly. If you want to know, you have to make it as easy as possible for people. That's not necessarily just a telephone number, because that's not going to work for everybody. So you need to make sure that you have safeguarding mechanisms set up, because we often see a lot of the case studies for the need for grievance mechanisms is when things go badly wrong in gender-based violence or in the community, or those sorts of things. So you need to make sure that if you get that kind of a response or a grievance raised that you have the appropriate response mechanisms in place and they will need to be fast because there might be a safeguarding issue at play. You can't sort of say well we'll get back to you in a month's time.

Kate: So there you're talking about really if there is a very immediate and severe risks that, say someone's personal safety - that you would have an escalation process built in but when you're talking about safeguarding what about the potential for protecting victims against retaliation? Is that the same type of thinking there?

Phoebe: Well it can be but protecting people from retaliation from any sort of complaint would be really critically important. So thinking about whether people might be at risk and that really speaks to the need to have all of these different access channels and the confidentiality and how that's managed appropriately so things don't escalate in a way you don't want them to. I think that that's probably pretty much it other than that sort of finalisation and review and performance indicators to make sure that the mechanism is working. So then we go back to our effectiveness criteria and look and think about and ensure that we're having that continuous learning and improvement and engagement and if you're not receiving any complaints you might want to have another look at the mechanism and see if there is a reason for that or whether everybody is happy.

Kate: Genuinely happy with how the project or the impact is occurring. I do have another maybe one or two questions. What about if you're already operating within, say, a high-risk jurisdiction and you don't yet have an operational level grievance mechanism. Is it too late?

Phoebe: I think it's never too late. I think getting started is good and if you have a grievance mechanism and you're not sure whether it meets all of these criteria doing reviews and doing regular reviews is sensible anyway because community dynamics will change over time and we talked at the very beginning about the impact any big major project is going to have in some of these communities. So you need to just keep tabs on what that looks like. It's a critical part of a social licence to operate. I think all big project operators and mining operators are very familiar with the need to do that. I think there is just some of those extra layers that need particular attention.

Kate: Terrific. Well thanks very much, Phoebe, for agreeing to be interviewed on this podcast because I know often you are interviewing as well as doing some of the question answering. So it's been nice to have you on the podcast in this role.

Phoebe: Thanks very much it's been great. It's a topic I'm very passionate about so it's always good to talk about it.

Kate: Terrific. Thank you.

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