New Rules Bring Indigenous Communities on BoardWed, 02/22/2017 - 11:44
All energy companies that want to operate in Mexico should get familiar with the Social Impact Assessment (SIAs) and the Free, Previous and Informed Consent process for indigenous communities because both are here to stay as part of the new regulatory framework.
The social dimension of energy projects has not enjoyed the same level of attention as the environmental side, even though failure to address social considerations could lead to a project’s cancellation. The Mexican government aimed to change that by implementing SIAs and making indigenous consultations mandatory in project development. Both measures are expected to promote the use of adequate social strategies, avoiding project attrition due to social rejection. “Social license to operate has been understood as getting the local communities’ approval by investing in them,” says Fabián Casaubón, Partner at Overflod Social. “The Mexican regulation wants to expand this vision further. It looks to acknowledge that companies can generate profits due to the resources provided by local communities.” Overflod Social is a Mexican consulting company with over 15 years' experience in the design, implementation and assessment of strategies to establish healthy relationships between companies and communities impacted by infrastructure projects such as pipelines or power plants.
According to Article 120 of the Electricity Industry Law, all companies interested in obtaining the required permits to develop an energy project must present a SIA to the Ministry of Energy. This assessment, as defined by law, consists of a document identifying, characterizing, predicting and assessing the project’s social impact, as well as the corresponding mitigation strategies and social management plans. The law also states that a previous consultation must be carried out in the case of projects having indigenous communities in their area of influence. “The indigenous consultation is another critical part of the new framework because failing in this aspect might lead to the project’s cancellation,” says Casaubón. According to INEGI, more than 7 million people belong to an indigenous group and speak a native language in Mexico, with the states of Oaxaca, Yucatan and Chiapas holding the largest indigenous populations. The most common spoken languages are Nahuatl, Maya and Tsetsal but more than 72 languages are found across the country.
Mexican regulation stipulates the compulsory nature of the two requisites but it still lacks in-depth specifications about the proper way to implement them, according to Casaubón. “The government’s biggest challenge is to clarify the guidelines that companies should follow to respect the indigenous communities’ rights without compromising the viability of renewable energy projects.”
In Casaubón’s view, “acknowledging the social dimension of the project is not the same as being a socially responsible company. A proper social strategy goes beyond providing physical or financial assets to the community. It is about creating strong bonds among all the stakeholders involved.” Implementing participatory processes and involving the community in decisions are key to effective social management strategies. “We managed the successful case of a hydroelectric company, establishing a social strategy in its project’s early stages and adopting a benefit-sharing approach by improving the water infrastructure of the surrounding communities,” says Casaubón.