As the Theodore Roosevelt speech goes “It is not the critic who counts…the credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood”. So too credit belongs to the developers in tough markets taking on the various challenges of developing projects, with the scars to tell the tale. Taking advantage of SCAF’s unique vantage point of the market, we engaged the market to share their experiences and lessons learned on the ground managing social risk across the project lifecycle.
Developers face a series of challenges and hurdles to develop projects and get projects to financial close. A key risk encountered by developers, particularly in the developing and emerging markets that SCAF operates, is social risk. The design, preparation and implementation of renewable energy projects needs to incorporate and manage risks related to local communities, labour, land, health, safety and security. These risks differ based on various factors such as the type and scale of project, the market and location the project is being developed and the level of risk may fluctuate throughout the project lifecycle.
Social license to operate
During the SCAF engagements, developers continuously emphasized that maintaining good relations with local communities and stakeholders allows a developer the social license to operate, which entails the perceptions, acceptance and trust of the community in the developer and the project. Poorly managed community relationships or misaligned expectations can cause tension between the community, the developer and the various stakeholders and, if not managed well, could result in material reputational damage and delays in the project. The Kinangop Wind Park in Kenya is one example where social impacts and violent demonstrations ultimately led to the project being abandoned.
Reputational risk
Development Finance Institutions (“DFIs”) are significant providers of funding for developers in many developing and emerging markets, and DFIs have stringent environmental and social (“E&S”) risk management policies. Managing E&S related impacts and risks is nothing new to developers in these markets as DFIs have always demanded high standards in order to grant support and funding for projects. Hence, reputational risk resulting from E&S incidents can materially impact a developer’s access to financing.
Risk management and readiness to respond
What has also become increasingly apparent is that the best risk management systems and polices are indeed a necessity to mitigate the chances of an incident occurring. However, as with any system, even with the best polices and systems in place, it is still possible that E&S related incidents will take place. It then becomes important that the readiness to respond appropriately to these incidents is also instilled in these systems and procedures and that staff are appropriately trained.
Lessons learned from the field
SCAF engaged the market to glean lessons learned about social risk management strategies in the markets that SCAF operates. The intention is to share experiences and best practice to improve and better manage the social risks related to the areas renewable energy developers operate in. We asked participants to share best practice to ensure risk management flows from corporate to project level as well as sharing real world examples of how developers managed aspects such as community engagement, social impacts from projects, labour influx from projects, resettlement and installing accessible grievance mechanisms.
Case Study 1 – Resettlement
Developer had project related economic displacement i.e. developer bought land from people who were generating a livelihood off that land (subsistence farming). The land acquisition process was government led.
A local NGO conducted research and found concerns around the land acquisition process and compensation related to the project.
Response and changes made by developer
- Land acquisition and livelihood restoration plan (”LRP”) to ensure displaced project-affected people (“PAP”) have necessary conditions to restore and improve livelihoods.
- Addressed compensation errors with top-up payments.
- Put right in-house team in place: Social Performance Lead, Community Liaison Officer (CLO), Extension Officer and Field Officer) with clearly defined roles and responsibilities.
Lessons learned
- Poor baseline data on livelihoods makes livelihood restoration very challenging.
- Proactively monitoring of government led land acquisition processes.
- Be aware of poorly defined roles and responsibilities with developer and external parties.
- Using an implementing agent, the following lessons were learned.
- Generic approach as opposed to PAP context-specific approach
- Trying to implement too many components without achieving outcomes
Case Study 2 – Resettlement
Developer has strict policy to avoid physical resettlement wherever possible. Developer carefully designed the placement of wind turbines to ensure that no families had to be relocated. In situations where resettlement was unavoidable, developer ensured fair compensation and provided livelihood restoration support to help affected families rebuild their lives.
Lessons learned
- The importance of tailored solutions: Each community is unique, and a one-size-fits-all approach rarely works. Developer found that tailoring their social risk mitigation strategies to each community’s specific cultural and social contexts is essential.
- By working closely with local authorities and adhering to international standards, Developer ensured that the resettlement process was smooth and equitable.
Case Study 3 – Cultural heritage and practices
During the construction of the project, the region was experiencing a drought. The local community believed that the project activities had caused rainfall to stop in the area, which led to the local community threaten to “sacrifice” project workers in order to appease the rainmakers.
Response and changes made by developer
- Resolution was brought about by engaging the local leaders to assist the project team in enlightening the community on the project activities to give them comfort that the droughts were not due to the project.
Lessons learned
- Promptly addressing community concerns and communicating with community leaders reduces risk of escalation.
- Ensuring local community employment at the project site significantly reduced the social risks attached to the issue..
Case Study 4 – Gender Based Violence (GBV)
NGO engaged local community and published an article about alleged cases of GBV related to the project. The Developer became aware of the article through the media, attempts by the NGO to contact the developer went to an unattended email address.
Response and changes made by developer
- Multi-stakeholder case management team formed and GBV expert appointed.
- Updated website to display up-to-date contact information and introduced media response policy to adequately address queries from media.
- Joint GBV programme initiated to assist the affected community going forward.
Lessons learned
- The site-level ESG officers did not have autonomy on-site, instead they reported to senior engineers on-site who did not take the matter as seriously as one should. Since then, site-level ESG employees report directly to the ESG Manager at corporate level.
- Neither the developer nor EPC had the capacity or in-depth knowledge to ensure appropriate measures were in place to mitigate or address GBV incidents, especially in the local context.
- Project documents (attendance registers, HR records etc.) were not saved in central database, but with hard copies in on-site storage. Developer implemented a better document management system, monitored by ESG Manager.
Case Study 5 – Gender Based Violence (GBV)
Local NGO conducted community-based research and found concerns surrounding GBV related to project. These concerns were alleged to take place over the course of the construction of the project.
Response and changes made by developer
- Appointed GBV expert to undertake rapid assessment.
- Developed a GVB Action Plan to address the findings from the rapid assessment.
- Built internal capacity by hiring the GBV expert full time.
Lessons learned
- GBV was not properly identified as a potential issue of this scale in the Environmental and Social Impact Assessment (ESIA) where it was understudied and underrepresented.
- Developer did not have the internal capacity or knowledge to respond appropriately to GBV matters.
- Risk during construction is significantly higher than during operations due to labour influx.
- Reputational risk is real and has had an impact on the financing of other projects.
Case Study 6 – Cultural heritage and practices
Developer was notified by the community of a sacred site in the project area. The community requested the protection of this site and specifically that the site should not be moved or cut down, but should be protected.
Response and changes made by developer
- Developer communicated that they would preserve the cultural heritage site.
- Before the start of the construction work, a ceremony of customary and religious rituals was organized at the project site.
- Other rituals may be performed in the future if necessary. However, a request for access to the plant will be sent to the plant manager beforehand so that security measures can be taken.
- In order to avoid any accident or collision with the sacred shrub by rolling stock that could tear it off or damage of the shrub a barrier has been built with a fence surrounding it to ensure the sight is protected.
Lessons learned
- Elements of cultural heritage are best protected by remaining in place, as displacement is likely to result in irreparable damage or destruction of these elements and risk damaging community relationship.
Case Study 7 – Community engagement strategy
Developer held community engagement meetings for each phase of project by hosting meetings with local leaders and residents. These meetings allowed developer to gather feedback and address community concerns about the project’s potential impact on their livelihoods and local resources.
Developer approach
- Developer worked closely with local authorities to adjust project designs based on community input, which significantly enhanced local support and trust.
- The project’s staff could be reached easily by phone or direct meetings. As a result, the project progressed smoothly with active community participation.
Lessons learned
- The need for transparency and continuous communication: Transparent communication is crucial for managing social risks effectively.
- The developer learned that regularly updating stakeholders and local communities about project developments and potential impacts helps to build trust and prevent misunderstandings
The case studies shared above demonstrate the range of social risks in these markets and practical examples of what best practice looks like in terms of community engagement and social risk management. As repeated by several participants the right systems and processes are a necessity to mitigate these risks however equally important is the readiness to respond in the event of an incident taking place. Developers need to have risk management systems in place and adequately trained staff to proactively manage any E&S related incidents that may take place at projects. We will share some additional case studies in a following blog to share further experiences and best practice to improve and better manage the social risks.
