Politics of Poverty

Watching the watchdogs

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Do so-called “independent monitoring expert panels” protect communities and reduce corporate risk, or are they nothing more than fig leaves for accountability?

In recent decades, extractive industry companies increasingly have extended their reach to more remote and sensitive areas, as well as to more politically risky environments, in search of oil, gas, and other natural resources. At the same time, local communities, NGOs, and others increasingly demand more accountability of the corporations managing projects with the potential to cause serious environmental and social harm.

Within this context, expert panels – consisting of experienced, “independent” or third-party individuals who provide recommendations to project sponsors on social and environmental issues – have emerged as one approach to mitigate project risk for companies and communities. But in an era where public image can have a very real bottom line impact on corporate revenues, and given that expert panels typically have only advisory authority (a bark with not much bite), are these panels being used by companies and international financial institutions for image rather than for constructive advice?

That is the question that inspired Oxfam’s new report launching today “Watching the watchdogs: Evaluating independent expert panels that monitor large-scale oil and gas pipeline projects.” We looked closely at expert panels for three large-scale pipeline projects to evaluate their performance based on four criteria: independence, transparency, stakeholder participation, and influence. The panels examined included: International Advisory Group for the Chad-Cameroon Pipeline Project, Caspian Development Advisory Panel for the Baku-Tbilisi-Ceyhan (BTC) Pipeline Project, and Peru Advisory Board for the Peru LNG Project (international financial institutions like the World Bank provided financing for all three projects). Each panel included between three and five prominent experts.

The panels performed with varying degrees of success. In general, they were most successful at increasing stakeholder engagement and dialogue, bringing new and impartial information into the public realm, and in some instances encouraging project sponsors to expand social programs and safeguards. For example, civil society representatives in Chad credited the Chad-Cameroon panel with helping to air problems and promote debate among actors (although they also noted that since the panel finalized its work, this framework for dialogue and openness has diminished). Recommendations from the BTC panel led project operator BP to create new human rights and civil society monitoring programs, and to increase its contributions to sustainable development programs in the region.

However, panel sponsors (the companies or international financial institutions that created these panels) should have done better at avoiding potential conflicts of interest and ensuring geographic and gender diversity on the panels. Two of three panels examined included a panelist with a potential conflict of interest. Only one of 12 panelists was a woman, and only the Chad-Cameroon panel included regionally based panelists (all BTC and Peru panelists were male and based in North America).

The panels for the Chad-Cameroon and BTC pipelines engaged with a wide array of actors (governments, NGOs, international financial institutions, and others) and provided in-depth reports that accurately reflected the concerns of community members. However, in all three cases, project-affected communities had limited awareness of panel findings and recommendations. In order to ensure the accuracy of panel findings and create a base of support for panel recommendations, panels need to closely engage and relay their findings to local communities.

Expert panels by their nature lack the authority to enforce recommendations, but there are ways to add some “bite” to their “bark”. For instance, they should be created early in the project planning process and develop strategies to promote their recommendations, like holding local press conferences and maintaining public checklists to track compliance.

Independent oversight and monitoring of high-risk projects is relevant here in the US as well. After the disastrous oil spill in the Gulf of Mexico last summer, the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling determined that BP and its partners in the Macando Well had cut corners with regard to safety, preparedness and spill response planning. Had an independent expert panel reviewed the spill response plan beforehand, they would have surely recognized this very quickly.

Well-constituted and truly independent expert panels represent a useful tool for reducing environmental and social risks to communities affected by extractive industries projects. Such panels should be employed for any publicly-financed, high-risk extractive industry project (including projects financed by World Bank’s private-sector lending arm, the International Finance Corporation). Over the long run, international financial institutions, companies, and communities will all benefit.

Editor’s note: Oxfam America’s press release about this report is here.

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