IBP1320_12 HUMAN RIGHTS IN THE ENERGY SECTOR - WHERE ARE WE GOING?

Dr Jim Wright1

Copyright 2012, Brazilian Petroleum, Gas and Biofuels Institute - IBP

This Technical Paper was prepared for presentation at the Rio Oil & Gas Expo and Conference 2012, held between September, 1720, 2012, in Rio de Janeiro. This Technical Paper was selected for presentation by the Technical Committee of the event according to the information contained in the final paper submitted by the author(s). The organizers are not supposed to translate or correct the submitted papers. The material as it is presented, does not necessarily represent Brazilian Petroleum, Gas and Biofuels Institute opinion, or that of its Members or Representatives. Authors consent to the publication of this Technical Paper in the Rio Oil & Gas Expo and Conference 2012 Proceedings.

Abstract
There is considerable guidance and tools to avoid and remediate adverse Human Rights impacts; Environmental Impact Assessment (EIA), specific Human Right Impact Assessments or stand alone assessments across the whole spectrum of Human Rights. However the oil and gas sector has yet to address Human Rights risks in a comprehensive manner. In 2011 the Special Representative of the Secretary-General issued Guiding Principles (GP) to implement the United Nations Protect, Respect and Remedy Framework. A survey of Human Rights performance against GP16 by the largest International Oil Companies (IOCs) and National Oil Companies (NOCs) shows a dichotomy with most (93%) of IOCs having a Human Rights Policy, approved at the highest level and available via the www to the general public (compliant with GP16) whilst 27% of NOCs have a Policy, of which, 9% are GP16 compliant. When service companies are included, only 23% are GP16 compliant. Only 8% provide Human Rights training. Human Rights in 41% of new projects are assessed via an EIA process, 18% via a specific Human Rights process, and 41% do not focus on Human Rights at all. Most companies do not have a Human Rights grievance mechanism. Whilst the IOCs are performing well the rest of the oil and gas sector, including the NOCs and service companies, are under-performing. The apparent reliance on the EIA process to Protect, Respect and Remedy Human Rights may be inadequate as the delivery of EIA is: still heavily biased toward environment compared to social and health impacts; they are time consuming and the Human Rights landscape can change during the EIA process; and the EIA disclosure process may expose vulnerable people to abuse. The oil and gas sector needs to address the record of poor compliance and develop and integrate some of the widely available Human rights tools.

1. Introduction
The aspirational Universal Declaration of Human Rights (UDHR) (1948) identifies rights and freedoms across civil, political, economic and cultural issues that should be protected, for all peoples and all nations. The International Covenant on Civil and Political Rights (1976) and its two optional protocols, and the International Covenant on Economic, Social and Cultural Rights (1966) make up the International Bill of Human Rights, which underscores all 30+ Human Rights and fundamental freedoms. National laws capture and implement these declarations and covenants, thereby making Governments responsible for protecting and promoting Human Rights. In addition to satisfying national laws the United States Alien Tort Claims Act allows courts in the United State to hear Human Rights cases, brought by foreign citizens, for conduct committed outside the U.S. To date a number of oil companies have been brought to court under the Alien Torts Claims Act including; Shell, Talisman, Chevron and Unocal. The UNEP Finance Initiative (www.unepfi.org) identifies a large number of Human Rights risks relating to oil and gas activities: Workplace conditions, particularly health and safety in the workplace

______________________________ 1 BSc, PhD, CFIWEM, CFIBiol, Executive Director KBC ENVIRONMENTAL

Rio Oil & Gas Expo and Conference 2012 Threats to livelihoods due to high use of and environmental impact on resources - including land and other natural resources previously depended upon by local (often rural and sometimes indigenous) populations; plus relocation of communities away from traditional means of living An influx of large, mainly male, migrant populations can disrupt social cohesion, and can lead to the spread of disease (eg HIV/Aids) to the existing population Security contractors in areas of conflict may be connected to military/paramilitary groups Misuse of revenues (corruption) by government officials may reduce local populations access to services Existing transport networks and local infrastructure (including health and access to water) may be over-stretched Loss of income following closure of installations Companies have typically managed Human Rights issues by ensuring compliance with national laws and by also working toward satisfying the ten principles of the July 2000 UN Global Compact (www.unglobalcompact.org), two of which relate to Human Rights: Principle 1: Businesses should support and respect the protection of internationally proclaimed Human Rights; and Principle 2: make sure that they are not complicit in Human Rights abuses. Ruggie (http://www.business-humanrights.org/SpecialRepPortal/Home) proposed a framework on business & human rights to the UN Human Rights Council in June 2008, resting on three pillars (Protect, Respect and Remedy Framework): the state duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights; and greater access by victims to effective remedy, both judicial and non-judicial. The financial case for avoiding adverse Human Rights impacts is made by the role of the Norwegian Council on Ethics for the Government Pension Fund Global (www.regjeringen.no): to determine if an investment is consistent with the established ethical guidelines which include: serious or systematic Human Rights violations such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation. If an investment is inconsistent with these guidelines then The Council can make a recommendation to the Ministry of Finance who can then exclude the identified company from their investment portfolio. The Finance Ministry has previously excluded energy companies. The business case (Dovey & Morrison, 2007) for avoiding adverse Human Rights impacts include: Having the social licence to operate and legitimacy in the eyes of stakeholders; Managing legal and operational risk and reputation; Modelling due diligence and quality control; Motivation and performance of staff, worker and management; Meeting shareholder and investor expectations; Codification of existing practice and impact; Strategic positioning in key markets or emerging markets more generally. The UN Global Compact web site (www.unglobalcompact.org) provides detail of guidance material that helps business implement their responsibility to respect Human Rights and there a number of approaches and tools to manage Human Rights issues. For greenfield and brownfield project development there is debate if Human Rights management should be the subject of an independent process or should be subsumed into the Environmental Impact Assessment (EIA, or equivalent) process, when the latter is being undertaken. In 2012 the IFC (www1.ifc.org) revised its 8 Performance Standards (PS) that are used extensively to inform the EIA process. However there is no specific Human Rights PS, rather Human Rights are considered by the IFC to be so pervasive that they are best treated as fully mainstreamed throughout the PS. There are a large number of guides and supporting documentation to mitigate against adverse Human Rights impacts including: A Guide for Integrating Human Rights into Business Management (Business Leaders Initiative on Human Rights United Nations Global Compact and the Office of the High Commissioner for Human Rights, Undated) offers practical guidance to companies that want to take a proactive approach to human rights within their business operations. The International Corporate Accountability Roundtable (http://accountabilityroundtable.org/) has established the Human Rights Due Diligence Project to develop mechanism for the inclusion of Human Rights due diligence into company management systems. The Guide to Human Rights Impact Assessment and Management is an online tool developed by IFC, UNGC and IBLF (www.guidetohriam.org). 2

Rio Oil & Gas Expo and Conference 2012 IPIECA (International Petroleum Industry Environmental Conservation Association), in cooperation with ICMM, IFC and ICRC, developed in 2011 the Voluntary Principles on Security and Human Rights: Implementation Guidance Tools. Broadly speaking there are three types of tool used to addressing Human Rights (ICMM, 2012): Build Human Rights issues into the ESIA (Environmental Social Impact Assessment) for the project Undertake stand-alone assessment on key issue(s) of concern Undertake stand-alone human rights impact assessment This paper reviews the implications of the Ruggie Reports (Ruggie, March and April 2011) for the energy sector and considers how compliance with the Ruggie Reports will affect energy companies and the delivery of energy projects.

2. Overview of Ruggie Report Guidance

The Ruggie Report (Ruggie, March 2011) presents a number of Principles pertaining to corporate responsibility. Principles 11 to 15 are Foundational Principles, Principles 16 to 24 are Operational Principles. In order to satisfy Principle 15, companies should have: a) A policy commitment to meet their responsibility to respect human rights; b) A human rights due-diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights; c) Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute. The Operational Principles (16-24) are summarised as follows: 16. The need for a Human Rights Policy and its approval level; expectations, availability to stakeholders, and that is supported by business wide procedures. 17. A due diligence process that addresses Human Rights that may be attributable to the company business relationships, scalable to the likely impact and be responsive to change. 18. A process to assess potential or actual adverse Human Rights impacts that is reliant on Human Rights expertise and involves meaningful consultation with stakeholders 19. Capture learning form the above due diligence process and implement appropriate scalable actions to prevent ad mitigate adverse Human Rights impacts 20. Track effectiveness of these actions based on indicators and feedback from stakeholders 21. Externally communicate sufficient information on actions to the intended audience ensuring no one is put at risk as a result 22. Even if after all the above have been applied the company still identifies they have caused or contributed to adverse impacts the company should cooperate in their reme3dation through legitimate processes 23. Companies should treat the risk of causing or contributing to gross Human Rights abuses as a legal compliance issue wherever they operate 24. Companies should prioritize actions to remediate the most severe or where delay may cause them to be irremediable

3. Oil and Gas Companies and their Human Rights Policies

Figure 1 shows a review of the web sites of the 25 largest International and National Oil Companies, against Principle 16. The definition of a National Oil Company (NOC) is one that is fully or majority owned by a national government. The companies consisted of 14 International Oil Companies (IOC) and 11 NOCs.

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Figure 1. Human Rights Policy (HRP) compliance (based on information available on company web pages) of the 25 largest oil and gas companies Full compliance with Principle 16 means evidence that the Human Rights Policy: a) Is approved at the most senior level of the business enterprise; b) Is informed by relevant internal and/or external expertise; c) Stipulates the enterprises human rights expectations of personnel, business partners and other parties directly linked to its operations, products or services; d) Is publicly available and communicated internally and externally to all personnel, business partners and other relevant parties; e) Is reflected in operational policies and procedures necessary to embed it throughout the business enterprise. In the oil and gas sector 64% of the largest companies have an HRP, whereas half of the FTSE 100 listed companies had adopted a HRP (Castan Centre for Human Rights Law, 2008). However the underlying data contributing to Figures 1 shows that 93% of the largest IOCs have a Principle 16 compliant Human Rights policy whilst 27% of the largest NOCs have a HRP of which, 9% are in full compliance with Principle 16.

4. Energy Companies and Human Rights Practices

4.1 Overview The following analysis is based on a survey in the Energy Sector (including IOCs (31%), NOCs (15%), and Service Companies/Consultancies (52%)). Figure 2 shows the geographic focus of the responding companies. Figure 2. Geographic focus Geography North America South America Europe, Middle East, Former Soviet Union Africa Asia 4.2 Energy Companies and their Human Rights Policies Figure 3 shows the companies where asked if there was a HRP, if it was signed off by senior management, and if it is made available to the general public. Existing Project Focus 8% 8% 38% 15% 31% New Project Focus 8% 8% 59% 8% 17%

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Figure 3. Availability of Human Rights Policy (HRP) In the energy sector nearly half (46%) of companies do not have a HRP, 31% have a HRP that is either not signed off or not made available to the general public whilst 23% have a signed off HRP that is made available to the general public. Of those companies with a HRP 71% require their supply chain to abide by the HRP. Almost 92% of energy sector companies provide no Human Rights training, however when there is training it is provided by Human Rights specialists. For new projects 41% of companies provide no focus on Hunan Rights whilst 18% have a Human Rights risk assessment process and 41% address Human Rights through the Environmental Impact Assessment (or equivalent) process. 69% of companies do not make the results of any Human Rights risk assessment process available, 8% report via the EIA process, 15% via the Sustainability Report (or equivalent) and 8% report Human Rights Risk assessment process by exception. No company prepared a Human Rights report. Most companies had no Human Rights grievance mechanism (61%); of those that did the majority relied on the EIA (or equivalent0 process whilst 8% had a free standing Human Rights grievance mechanism. The most common Human Rights issues identified by the energy companies where: Right to just and favorable remuneration Right to a safe work environment The outcomes of the survey are summarised at Table 1. Table 1. Compliance with Ruggie Operational Principles in the Energy Sector Ruggie Principle 16 Summary of the Principle Is there a HRP that is signed off and available to the public Is there a Human Rights Due Diligence Process Gauging Human Rights risks should utilize expertise and stakeholder engagement Human Rights should be integrated across company Degree of Compliance 23% in full compliance (assuming web access is available to public) 59% in compliance for new projects 8% utilize Human Rights specialists and 39% employ Stakeholder Engagement (via a Grievance mechanism) 59% of companies have an internal Human Rights process Comments Many companies have no Human Rights Policy Of those that have a due diligence process 18% have a specific process and 41% rely on the EIA process 61% have no means of engaging with stakeholders with respect to Human Rights

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Rio Oil & Gas Expo and Conference 2012 20 Track the effectiveness of response to Human Rights impacts Human Rights should be communicated to stakeholders 31% of companies report Human Rights compliance 39% of companies report Human Rights compliance via the EIA process, Sustainability Report or by exception, 31% rely on the EIA grievance mechanism Not specifically addressed in survey No company produces a Human Rights report Where interactive communication via a stakeholder engagement process occurs it is restricted to the EIA process and in some instances via a specific grievance mechanism

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Companies should provide for or cooperate in remediation of adverse Human Rights impacts

5. Conclusions
The risks of adverse Human Rights impact from oil and gas projects have been demonstrated in a number of high profile projects, so much so that the major IOCs now have in place HRPs that include commitment at the highest level and that are made available to the public, via the www. NOCs on the other hand are much less likely to have a HRP. The drivers affecting IOCs and the need for a HRP relate to: enhancing business performance and protecting brand, avoiding prosecution under national law; and avoiding prosecution under the US Alien Tort Claims Act Drivers affecting NOCs, by definition Government owned, are: less dependent on protecting their brand than IOCs as the shareholder is the Government; just as exposed to the US Alien Tort Claims Act as IOCs; and an assumed reduced likelihood of prosecution (by their owners, the national Government) In the energy sector as a whole (including service companies and consultancies) compliance with the Ruggie Corporate Operational Principles is much lower than for IOCs as evidenced by compliance with Principle 16 (92% versus 23%). There is no reason to suppose that the risk of adverse Human Rights impact is reduced for organisations contracting to the IOCs and NOCs. Perhaps the reverse given that many contractors are operating for short periods and are therefore unlikely to effectively develop long term mitigations. There are clear shortfalls in compliance with the Principles across the Energy Sector. However there are many tools available to companies to address Human Rights (see UN Global Compact web site (www.unglobalcpmpact.org)), including guidance focused on the energy sector (see IPIECA, Voluntary Principles on Security and Human Rights: Implementation Guidance Tools). The sector typically relies on the EIA process to manage Human Rights issues, however this process is not designed for this purpose and there are therefore a number of shortfalls: EIA is still heavily biased toward environment compared to social and health impacts; EIA is time consuming and the Human Rights landscape can change during the EIA process; Projects not subject to the EIA process can result in adverse Human Rights impacts; and the EIA disclosure process may expose vulnerable people to potential abuse. This paper has shown that the energy sector is not, today, in a position to effectively manage adverse Human Right risks. Recent guidance has identified a number of key requirements of any system to effectively manage Human Right risks. The reliance on the EIA process may not satisfy this guidance and therefore does not provide the energy sector with a fully effective means of addressing Human Rights.

6. References
ICCM (International Council on Mining & Metals). Human Rights in the Mining and Metals Industry, Integrating Human Rights due diligence into corporate risk management processes, March 2012-05-03 International Petroleum Industry Environmental Conservation Association, Voluntary Principles on Security and Human Rights: Implementation Guidance Tools, ICMM, IFC and ICRC, 2011 Business Leaders Initiative on Human Rights United Nations Global Compact and the Office of the High Commissioner for Human Rights, A Guide for Integrating Human Rights into Business Management, Undated

Rio Oil & Gas Expo and Conference 2012 DOVEY, J. & MORRISON, J. Opening perspective on the case for human rights in business, Embedding Human Rights in Business Practice II, United Nations Global Compact and the Office of the UN High Commissioner for Human Rights 2007 Castan Centre for Human Rights Law, Human Rights Translated A Business Reference Guide, Castan Centre for Human Rights Law, IBLF, OHCHR and the UN Global Compact. 2008 Universal Declaration of Human Rights (UDHR) (1948) International Covenant on Civil and Political Rights (1976) International Covenant on Economic, Social and Cultural Rights (1966) RUGGIE, J. Promotion and protection of all Human Rights, Civil, Political, Economic, Social and Cultural Rights, including the Right to Development. Protect, Respect and Remedy: a Framework for Business and Human Rights. April 2011 RUGGIE, J. Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Guiding Principles on Business and Human Rights: Implementing the United Nations Protect, Respect and Remedy Framework., March 2011 Additional sources of Information: Business & Human Rights Resurce Centre (www.business-humanrights.org) Danish Instiutue for Human Rights (www.humanrights.dk) Guide to Human Rights Impact Assessment and Management is an online tool developed by IFC, UNGC and IBLF (www.guidetohriam.org). IPIECA (www.rio20.ipieca.org/fact-sheets/human-rights) UNEP Finance Initiative (www.unepfi.org/humanrightstoolkit/oil.php) UN Global Compact web site (www.unglobalcpmpact.org) United Nations Human Rights (www.un.org/en/rights)