7. Implementing Sustainable Policies

According to the United Nations’ World Commission on Environment and Development, sustainable development can be defined as development that meets the needs of present generations without compromising the need and the ability of future generations to meet their own needs. Sustainable development calls for an integrated approach to managing benefits and impacts in three distinct areas: economic, social, and the environment.  

Figure source: Summary of issues in INTOSAI, Working Group on Environmental Auditing, Auditing Mining, 2010.

Key considerations for oil and gas

According to the EI Source Book, two key challenges for sustainable development are: identifying and implementing policies to ensure that EI sector investments lead to positive and sustainable impacts on growth and development and developing policies that minimize, manage, and mitigate the environmental and social costs and/or risks that accompany a decision to develop oil and gas resources.

Figure: Implementing Sustainable Policies for Oil and Gas

Environmental managementBaseline measurements of environmental conditions should be taken prior to extraction. Liability for cleaning up oil spills, and well decommission should be clearly assigned and the capacity of companies to cover these costs should be assessed. Gas flaring should only be allowed in emergencies.
National economic and social developmentThe economic benefits of the EI sector are best managed by developing a shared understanding between the government, investors, and the affected community for how benefits can be increased, improved and shared, and related commitments can be included in an agreement between all parties. Gas resources should be used when produced or reinjected into wells for future use. To be successful, converting natural resource capital to economic and social development should generate wider effects and be sustainable past the exhaustion of the natural resources.
Community developmentThe economic benefits of oil and gas extraction should be shared with affected communities, such as direct and indirect employment, community programs for local health, education, and other government services.  Special care should be taken to ensure vulnerable populations such as indigenous peoples, women, and children are represented in this process.
The flow of informationSustainable development requires transparency. Good information dissemination is essential to ensure that local communities are satisfied with the communication between themselves and the extraction company.
OversightSystems of accountability are essential to monitor company performance. Penalties should be enforced for failure to comply with required responses to environmental and social impacts. There should be a grievance process for communities to hold companies accountable for negative impacts.
Unconventional oil and gas extractionSpecial care should be taken to address environmental and social impacts from unconventional extraction, such as increased water use and potential groundwater contamination from fracking.
Table source: Summarized from the World Bank’s EI Source Book.

Key considerations for mining

According to INTOSAI’s Working Group on Environmental Auditing, the purpose of a sustainable development framework for mining is to help ensure the minerals sector as a whole contributes to human welfare and well-being today without reducing the potential for future generations to do the same.

Table: Implementing Sustainable Policies for Mining

The control, use, and management of landThe decision of whether or not to mine in a certain area must be based on an integrated assessment and balancing of ecological, environmental, economic, and social impacts. Compensation should be made for any harm that occurs as a result of mining-related land use decisions.
National economic and social developmentThe marginal benefits and costs to society should be equalized. Revenues should be shared equitably between the public and private sectors and among central, regional, and local levels. Some of the mining revenue should be set aside and re-invested at the national level to ensure a sustainable income when the resource is used up.
Community developmentThe economic benefits brought by mining should be shared equitably within communities. A share of the rents should be invested in the affected community as other forms of capital, such as trust funds, skills training, or social infrastructure. Special care should be taken to ensure vulnerable populations such as indigenous peoples, women, and children are represented in this process.
Environmental managementThe negative effects of minerals and metal products on the environment and human health should be minimized through all phases of the minerals life cycle. No permit should be sought on the basis of a trade-off today against long-term legacies that may harm future generations.
The flow of informationSustainable development requires greater transparency in information production and dissemination throughout the minerals life cycle. Systems of accountability and verification are essential to monitor the performance of companies, governments, and civil society.
Artisanal and small-scale miningASM’s contribution to local economic development must be optimized by investing a share of the generated revenue into other forms of capital, such as education and alternative income-producing opportunities. The negative environmental and social impacts of ASM should be avoided or reduced.
Table source: Summarized from INTOSAI’s Working Group on Environmental Auditing, Auditing Mining: Guidance for Supreme Audit Institutions, 2010.

Key guidance and further information

The following resources provide additional information on a sustainable development framework for extractive industries.

EITI: The Extractive Industries Transparency Initiative is a global standard to promote the open and accountable management of oil, gas and mineral resources. EITI has guidance specific to companies’ social expenditures (Requirement 6.1), quasi-fiscal expenditures (Requirement 6.2) and economic contribution (Requirement 6.3).
IFC: The International Finance Corporation (IFC)—a member of the World Bank Group— has developed performance standards designed to help private companies operating in developing countries adopt socially and environmentally sustainable practices. Topics include risk management, labor, resource efficiency, community development, land resettlement, biodiversity, indigenous peoples, and cultural heritage.
EI Source Book: The EI Source Book is intended as a guide to good-fit practice in the management of oil, gas, and mining sectors across the EI value chain. Sustainable Development provides additional information specific to extractive industries, including challenges, environmental and social impacts and relevant differences across EI sectors.
ISO: The International Organization for Standardization is an independent, non-governmental international organization with a membership of 164 national standards bodies. It has standards for managing sustainable development, environmental impacts, and anti-corruption practices.
Business and Human Rights Resource Center: The Business and Human Rights Resource Center is an independent, nongovernmental organization that tracks the human rights policy and performance of over 9,000 companies in over 180 countries, making information publicly available.
WGEA: INTOSAI’s Working Group on Environmental Auditing (WGEA) developed guidance for auditing the environmental and other impacts of mining operations in 2010.

Key audit considerations

From an SAI perspective, it is important to understand how social and environmental impacts are assessed, how the social and economic benefits of extraction are shared between the public and private sectors, and does the public sector have sufficient capacity to fulfill their responsibilities. Below are some of the key questions that SAIs could consider when assessing sustainable development policies.

Figure: Implementing Sustainable Policies for Mining

Figure sources: Summarized from the World Bank’s  EI Source Book and AFROSAI-E, Guideline: Audit Considerations for Extractive Industries