Report finds evidence linking inadequate engagement with Indigenous Peoples and local communities to operational disruption, legal action, financing risks and billions of dollars in losses across sectors.
Businesses can face significant financial losses if they fail to adequately engage with Indigenous Peoples and local communities on nature-related issues, according to a report by Shift.
Shift, a non-profit working globally to embed respect for human rights into business, has published a new report on “Community Engagement, Nature and Financial Materiality: An evidence review of the financial effects of engagement with Indigenous Peoples and local communities on nature-related issues.”
Shift analyzed a range of evidence, including more than 1200 cases where impacts companies had on nature through the use of land, water or other natural-resources affected Indigenous Peoples and local communities.
In 69% of cases, Shift found evidence that the quality of a company’s engagement with Indigenous Peoples and local communities had a positive or negative effect on its financial prospects.
“This research shows that meaningful engagement with Indigenous Peoples and local communities is not only essential for respecting rights and managing impacts on people and nature, but is also increasingly financially material,” said Caroline Rees, President of Shift. “The quality of community engagement can help determine whether nature-related impacts become a source of trust and resilience, or of conflict, disruption and financial loss.”
Shift found that poor or non-existent engagement often led to community opposition that resulted in significant financial losses for companies from operational delays, reputational damage and legal or regulatory challenges.
By contrast, companies that engaged early, consistently and meaningfully with local communities often avoided opposition and associated financial risks. Some businesses that created partnerships with local communities experienced financial benefits such as more stable operations and resilient supply chains.
The report has been published as the International Sustainability Standards Board (ISSB) considers how to introduce reporting on nature-related issues into its disclosure standards and guidance. Shift’s analysis shows that information about the quality of a company’s engagement with local communities can affect cash flows, project viability and valuation, making it decision-useful for investors.
“The evidence is clear. We support calls for companies across sectors and geographies to report on steps they are taking to engage with local communities and Indigenous Peoples,” Rees said. “However, the relevant information is not just how companies pursue such engagement, but also how the insights or agreements that result shape company decisions and actions. That’s the information that shows whether risks are being managed.”
“Businesses can have profound impacts on nature which many Indigenous Peoples and local communities depend on and take pride in stewarding on behalf of everyone on the planet,” said Lucy Mulenkei, co-chair of the International Indigenous Forum on Biodiversity. “I am delighted with this research which provides extensive evidence of the financial materiality of community engagement.”
The report has been published alongside a companion document which includes 24 detailed case studies. These examples illustrate how the quality of a company‘s engagement with Indigenous Peoples and local communities can contribute to a range of positive and negative financial effects.
The case study document includes contributions from the United Nations Environment Program World Conservation Monitoring Centre (UNEP-WCMC), Liquen Consulting, a group that mediates disputes between companies and communities and TMP, a global advisory group.
Editor’s note:
- The publication was written with financial support from the International Climate Initiative (IKI) of the German Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety (BMUKN) via the United Nations Development Programme (UNDP) and Global Canopy.
