Jaime Martínez
Business Development Director
View from the Top

Characteristics of the Social Impact Assessment

Wed, 02/24/2016 - 10:08

Q: What new services must you launch, taking the energy transition into consideration?

A: The aftershocks of the Energy Reform are beginning to be felt and we have been preparing ourselves for some time now. As we transition from the old scheme to the new one, there are particular factors that are gaining importance such as the Social Impact Assessment for energy projects. ERM has been providing services in these areas and it will gain momentum, which is why we have a designated group for tackling social aspects. In addition to prepared staff, we are active in contacting relevant authorities such as the Ministry of Energy to facilitate this transition process and share our expertise in developing the social guidelines of this new era. The Social Impact Assessment and ILO Convention No. 169 are two factors that will impact the industry and we are well positioned to support our clients in these areas.

Q: How successful have companies been in upholding their commitment to benefit indigenous communities with their projects, and what are the main barriers to be addressed for improving these practices?

A: It is important to distinguish between general social aspects and indigenous communities. Currently, there is some confusion and uncertainty in the industry regarding the definition of what constitutes an indigenous community. When it is clear that a project must liaise with indigenous communities then it can begin to address the issues related to ILO Convention No. 169. This is an area of concern for our clients so we are creating a dialogue between authorities and private sector representatives so these issues can be addressed with clarity. As a result, we have seen a flexibility and willingness from entities such as the Ministry of Energy in helping players respond to these social aspects. We have seen more activity from companies preparing their social management strategies and the main driver behind this change is the level of maturity in the industry.

Companies have learnt that the best way to face social implications of the projects is to engage as early as possible. Once the communities perceive the openness, proactivity, and transparency of the company then a level of trust is created. At the beginning, communities can be defensive, but once they pick up on the first signs of true interest in engaging properly then a project can move forward.

Q: To what extent can consulting services for engaging with communities impact the increased development of projects?

A: One of the key aspects that cannot be disregarded in the Social Impact Assessment is the definition of the direct and indirect areas of influence of a project. A company should not limit the impact area to the footprint of the project because the impact typically goes beyond that. Firstly, ERM helps determine the areas of influence and identify the key stakeholders in the region and, once this is mapped out, plans for engaging with key players can be designed based on the assessment of the social context. It is important that companies consider all relevant stakeholders in the communities in order to define the social strategies and investment plans. These investments must be allocated to areas of real need so these resources can have a positive impact on the development of the communities.

Q: How does the approach to social management differ between regions in the country and the type of technology to be implemented in the project?

A: Companies are learning that doing things right from the outset pays off. A company in Tamaulipas developed a wind farm on ejido land and it implemented a proactive approach by including the ejidatarios in the process. One of the conditions they negotiated was to pay above the average in land leasing and the ejidatarios became stakeholders in the project. This approach had a positive impact in the development and operational stages of the project, since ejidatarios are now involved in providing information about malfunctioning equipment. We help other wind developers adopt best practices and engage early by organizing group meetings with community members and defining the message they wish to transmit. There are many factors that influence the whole development of the project, such as the location and the biodiversity. Proposing a power plant in Chiapas, where there is more biodiversity and where the impact may be bigger, differs from developing a project in the north of the country, where the environment is more arid and desert-like. In situations like this, these assessments help companies make the right decision before they commit a significant amount to the development of the project. Solar and wind are technologies that require a lot of land and developers have to scout for regions where there is real potential. This means that developers are more likely to be familiar with carrying out the environmental and social assessments before breaking ground.

Q: What are the challenges companies have pinpointed with the implementation of ILO Convention No. 169, especially in how to perform the public assemblies?

A: Companies must conduct public and open assemblies prior to the development of the project in accordance to international standards. They cannot start measuring and assessing the site without these consultations, so they have to participate in early engagement with the communities and thoroughly document this. The aim of this early work is to identify potential red flags that might pop up and address them as soon as possible. When the secondary legislation was published, the players in the industry knew that the Ministry of Energy would be involved in the Social Impact Assessment, yet it was unclear what role the agency would play. It was only later that companies understood that the Ministry of Energy would provide regional Social Impact Assessments to potential bidders and subsequently companies would be obliged to carry out local assessments. There will be a new agency called ASEA involved in the environmental assessment. International best practices dictate that the environmental and social assessments have to be conducted in parallel and presented in a document called ECHA; however, in Mexico these must be separated and players have to become accustomed to this peculiarity.

Q: How do ERM’s integrated solutions help clients tackle all the obstacles encountered in the life cycle of an energy project?

A: ERM offers integrated solutions in order to provide support throughout the entire life cycle of a project. In the startup phase we ensure that the facilities comply with safety and security regulations, and that the plant operates in accordance to Mexican regulations. After 20 or 30 years, a power plant is decommissioned and the company must bear in mind all the environmental and social implications, meaning that sometimes Asset Retirement Funds are necessary. In the past we would offer individual services ranging from regulatory compliance to environmental remediation, now our approach is holistic and it suits the new energy market.