Background Note
Dialogue on
The Extractive Sector and Sustainable Development Enhancing Public-Private-Community Cooperation
December 3-5, 2014, Brasilia
1. Introduction
The Government of Brazil (GoB) and the United Nations Development Programme
(UNDP) are jointly organizing a dialogue on the Extractive Sector and Sustainable
Development − Enhancing Public-Private-Community Cooperation in the context of the
Post-2015 Agenda. The conference will take place between 3 and 5 December 2014 at
the Brazilian National Confederation of Industry (CNI) headquarters in Brasília, Brazil.
It is expected that representatives from governments, the UN system, academia,
business and civil society will gather to discuss the role the extractive sector can play in
accelerating the achievement of the emerging post-2015 sustainable development
goals.
This note is prepared to highlight the issues that will be discussed and debated at the
dialogue. The note is divided in five sections. Section one focuses on issues related to
the extractive sector, including the recent growth in the sector and major trends
observed in the industry. The second section discusses the proposed Sustainable
Development Goals (SDGs) by the United Nations Open Working Group. Section three
outlines the type of public-private-community partnerships needed in the extractive
sector to accelerate the achievement of inclusive growth and sustainable development
in the context of the future development agenda post-2015 The objectives and
expected outputs of the conference are detailed in Section four. Section five makes
concluding remarks.
2. Growth and trends in the extractive sector
The extractive sector consists of industries that extract raw materials from the earth −
oil, gas minerals − for the purpose of exports as well as domestic use as inputs and final
goods. In recent years, the number of countries that rely on oil, gas and minerals to
drive their economies has increased significantly. As the global population grows; more
countries embark on industrialization and as economic development accelerates,
especially in emerging economies, the demand for metals and hydrocarbons is expected
to continue to grow. The development of new mining, oil and gas projects will intensify,
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despite global pressures to move towards cleaner energy sources, greater resource
efficiency and overall more sustainable production and consumption patterns, especially
in developed economies.
The extractive sector today makes up approximately 5 per cent of global GDP. The
sector currently generates about US$3.5 trillion in annual gross revenue. The oil sector is
by far the largest, making up about 65 per cent of the aforementioned amount, with
coal and natural gas making up around 11 per cent each, and non-fuel minerals about 13
per cent. Rents, or potential net revenues, are estimated at about US$1 trillion for lowincome and lower-middle-income countries.1
The extractive sector has contributed to human, economic and social development in
many parts of the world over the last century. Major infrastructure projects, social
services and key industrial developments have been financed by revenues obtained
from the export of extractive resources. Resource extraction can be a force for good as
long as the environment is protected, the affected communities’ (local and indigenous)
human rights are respected, protected and fulfilled, and as long as the proceeds are
used to invest in human development.
While many countries have done well and have managed to diversify their economies, a
large number of resource-rich countries still face significant challenges. Recent evidence
shows that resource wealth can go hand in hand with unstable growth, macroeconomic
instability2; high rates of unemployment, poverty and inequality3; environmental
degradation; resource-related conflicts4; rent-seeking behaviour among both
international companies and domestic governments and entrenched corruption5;
negative health impacts, alongside the devastating impact on individual and collective
livelihoods and ways of life. The so-called “resource curse” thesis captures these ill
effects of resource-dependence.6
But, the above negative impacts of extraction are not inevitable. The global evidence
shows that countries that reaped the benefits of resource wealth have: 1) developed
the capacity to formulate and implement as well as enforce laws, policies and
institutions that govern extractive operations; 2) ensured the participation of local and
indigenous communities (with a larger proportion of women) in decision-making and
1 FSG presentation on “Shared Value in Extractives”.
2 Auty (1993 2001)
3 Ross (2007)
4 Collier and Hoeffler (2002 and 2004)
5 Karl (2007); AfDB and AU (2009a and 2009b)
6 Refers to a situation where resource-dependent countries grow slowly; lack economic diversification; suffer from
environmental degradation; experience corruption; undergo violent conflict; and local communities, mainly
indigenous peoples and women, do not fully participate in decision-making. The term was coined by Auty (1993)
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management of extractive industry operations; 3) established systems for the prudent
and transparent management of revenues obtained from license fees, taxes and
royalties; and 4) strengthened their capacity to invest these resources in economic
diversification, social development and environmental sustainability leading to inclusive
and sustainable growth.
As more countries start extracting oil, gas and minerals there is a pressing need to look
closer at how the resource curse can be avoided and how the extractive sector can be a
force for sustainable development. The key is learning the lessons from the successful
countries to ensure that the extractive sector positively contributes to the future
development agenda.
3. The Sustainable Development Goals (SDGs)
The Post-2015 Development Agenda is taking shape. A list of 17 proposed Sustainable
Development Goals to be attained by 2030 has been released by the UN’s Open
Working Group on Sustainable Development. The SDGs are currently being negotiated
between UN member states.
The private sector has been participating in the discussions on the Agenda and should
play an important role in its implementation. While the Agenda is still under discussion,
among governments as part of the United Nations General Assembly, the dialogue will
provide an opportunity for all stakeholders to advance the debate on how the extractive
sector can contribute to efforts for poverty eradication and the promotion of
sustainable development.
For the purpose of manageability and focused discussion during the dialogue, the wide
range of sustainable development priorities, as articulated in the proposed Sustainable
Development Goals, will be clustered into four thematic areas. These are outlined
below along with some indicative questions for discussion during the event:
a) Promoting sustainable economic growth and employment generation through
industrialization, with the aim of reducing poverty, hunger and inequalities (including
gender and income)
Questions:
o How can the extractive industry promote inclusive economic development
through direct job creation, export promotion and local and regional
economic development?
o How can the extractive industry promote inclusive business practices through
supply and value chain development, particularly among small and medium
enterprises?
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b) Ensuring access to public services, mainly to health, education, water and
sanitation, energy and urban infrastructure;
Questions:
o How can social development be enhanced through prudent and transparent
revenue generation and investments in social infrastructure?
o How can the extractive industry, using its Corporate Social Responsibility
(CSR) as well as its core business activities, promote social development
through improved access to public services?
c) Protecting the environment, with special attention to sustainable use of marine
resources, forests, ecosystems;
Questions:
o How can sustainable extractive operations be ensured to protect the
environment, including biodiversity and water resources?
o How can investments and economic growth generated by the extractive
sector lead to more sustainable production and consumption patterns?
d) Promoting human rights and social inclusion
Questions:
o How does the extractive industry obtain social licences for its operations?
o How does the extractive industry ensure the protection of human rights
during exploration, extraction, revenue allocation and investment of
revenues?
The proposed future SDGs offer a unique opportunity to align private sector core
business operations with public policies and investments for their achievement.7 While
questions still remain about the specific accountability and roles of business in the post2015 project, a growing number of businesses see sustainable development as a
strategic business imperative and are ready to take action. They recognize that what is
good for societies is also good for business over the long term. Within the extractive
sector, there is also a growing recognition that attaining sustainable development will
require greater collaboration and dialogue between the public, private and civil society
sectors.
The Rio+20 outcome calls on development actors to “promote integrated and sustainable management of natural
resources and ecosystems that support (…) human development.”
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This dialogue becomes ever more urgent as the global population and its consumption
needs grow, creating additional social and environmental pressures and opening the
debate on sustainable consumption rather than just sustainable extraction.Cooperation
between the public and private sector will play an important role in complementing
public sector development efforts and commitments.
However, to date there is limited coordination, dialogue and engagement between the
industry, governments and civil society to address the sustainable development
dimensions of the extractive sector, both at global and country levels. In recognition of
the need to strengthen the debate on this subject, the upcoming dialogue will facilitate
discussion on the type of public-private-community cooperation that is necessary for
sustainable development outcomes.
The dialogue will dedicate sessions to select topics under the four themes highlighted
above − where there are needs and opportunities for enhanced multi-stakeholder
action. Existing tools and approaches with potential for scaling up will be examined and
areas where new knowledge is needed will be identified.
4. Public-private-community partnerships (PPCPs) to achieve the SDGs
One key area where public-private-community partnerships are needed is to align the
core business operations of oil, gas and mineral companies as well as their Corporate
Social Responsibility (CSR) with national and local development policies. There is a
growing interest from many companies to harmonize their investments with national
and local development priorities to ensure sustainability.
Aligning the private sector’s work with global and national development strategies
requires close dialogue and collaboration. At the global level this would require scaled
up and more systematic engagement between industry associations and individual
multinational companies from both the North and the South on one hand, and with
governments, international organizations and global civil society representatives on the
other hand. At the country level there is similarly a need to support national level
platforms for dialogue, coordination and partnerships between public, private, CSOs and
other stakeholders.8 At the local level effective mechanisms for such dialogue should be
established and the capacities of the communities to partake in the dialogue must be
strengthened.
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For example, this would include raising awareness, exchanging and generating knowledge and exploring different
types of partnership opportunities related to: conflict and environmentally sensitive business practices, corruption
risk mitigation, adherence to human rights standards and contribution of industry to skills building, local economic
development and diversification.
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Although dialogue and consultations provide voice for affected communities, they do
not confer any authority to veto or shape the terms of the investment and therefore
falls short of consent. The effectiveness of dialogue mechanisms can also be
undermined by poor information flows to communities and by local elites capturing the
consultation process. Focus should be on raising awareness of the principles of business
and human rights among government and private sector staff both at the local and
national level as well as civil society representatives, indigenous authorities, and women
organizations.
The dialogue mechanisms will serve to:
1.
2.
3.
4.
Develop a common understanding and vision for how to enhance
sustainable development of the sector;
Identify main priorities where public, private and community actors can
take greater coordinated action;
Encourage and enable companies to adhere to international best
practices for extractive operations, including related to governance and
transparency, environmental and labour standards, gender equality, and
the UN Guiding Principles on Business and Human Rights9; and
Enable effective communication between public, private and community
representatives to develop policies and partnerships for local economic
development and employment opportunities for vulnerable women and
men.
5. Dialogue objectives, expected outputs and participants
The conference has the following two inter-related objectives:
a. To reach a better understanding of how the extractive sector can contribute to
the achievement of key sustainable development priorities, including the areas
articulated in the proposed SDGs.
b. To explore how the private sector, the public sector, civil society and affected
populations can coordinate and collaborate effectively to enhance the sector’s
development impact and contribute to further aligning the private sector’s
activities with global and national development priorities.
9 http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
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The proposed four outputs of the conference are:
i.
Overall proposals for the role of the extractive sector in advancing
sustainable development
ii. A set of practical recommendations for further aligning the private sector’s
operations with national plans and strategies
iii. A network of public-private-civil society (multi-stakeholder) actors for sharing
knowledge and tracking contributions of the extractive industry to
sustainable development.
iv. Pilot country level public-private-community dialogue platforms on the
extractive sector and national sustainable development priorities
The conference participants will include:
• Oil, gas and mining companies (from North and South)
• Global industry associations, country industry associations (including SME
•
•
•
•
representative associations)
Government representatives (North and South)
UN representatives; International Finance Institutions
NGOs, civil society representatives, academia
National Human Rights Institutions
6. Concluding remarks
The number of oil, gas and mineral producing countries is growing rapidly. Their natural
wealth is likely to propel their growth and development, as it has done in many
countries. However, there is also a risk of “resource curse” that threatens to limit the
benefits obtained from natural resource wealth. Nevertheless, the ill impacts of
resource-dependence can be avoided. The question is: what kinds of partnerships are
necessary among the public, private sector and communities that minimize the risks of
extraction and promote the benefits. The conference is intended to forge a vision and
come up with an action plan on how such partnerships can contribute to sustainable
development.
References
AfDB (2009a) Botswana 2009-2013 Country Strategy Paper. African Development Bank.
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AfDB (2009b) Impact of the Crisis on African Economies – Sustaining Growth and Poverty
Reduction African Perspectives and Recommendations to the G20, A report from the Committee
of African Finance Ministers and Central Bank Governors, African Development Bank.
Auty, R. M. (1993) Sustaining Development in Mineral Economies: The Resource Curse Thesis.
London: Routledge.
Auty, R. M. (ed.) (2001) Resource Abundance and Economic Development. New York: Oxford
University Press.
Collier, P. and A. Hoeffler (2002) “On the Incidence of Civil War in Africa”, Journal of Conflict
Resolution, Vol. 46, No. 1, pp. 13-28.
Collier, P. and A. Hoeffler (2004) “Greed and Grievance in Civil War”, Oxford Economic Papers,
Vol. 56, pp.563-595.
Karl, T. L. (2007). Ensuring Fairness: The Case for a Transparent Fiscal Social Contract, in
Humphreys, M., J. D. Sachs and J. E. Stiglitz (eds.): Escaping the Resource Curse. New York:
Columbia University Press, pp. 256-285.
Ross, M. L. (2007) How Mineral States Can Reduce Inequality, in Humphreys, M., J. D. Sachs and
J. E. Stiglitz (eds.): Escaping the Resource Curse. New York: Columbia University Press.
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