Red Flag 3. Project timelines that undermine consultation with communities

Research in the mining sector shows that often there is a tension between “technical time” – the time needed for the construction or completion of a project – and “social time” – the time needed to address community concerns related to the project.

Even when companies see the importance of consulting affected communities, their approaches are not always effective.

• A survey of construction project managers shows that while they believe engagement with the local community improves relationships, they see it as a burdensome, arduous, time consuming and costly process.

• A Chatham House report with perspectives from the extractives sector shows that even though setbacks from break-downs in community relations are costly, community engagement often fails because it is seen as a “distraction,” as a box-ticking exercise, or because community relations officers are marginalized or only involved when things go wrong.

• Recent research suggests that while more companies are making commitments to free, prior and informed consent (FPIC), implementation is still weak. Further, the UN Special Rapporteur on the rights of Indigenous Peoples has commented that ongoing debates by corporations and governments about FPIC “lose sight of the spirit and character of these principles” which seek to end historical models of decision-making that have tended to exclude Indigenous Peoples.

• In a 2024 book exploring the various facets of meaningful stakeholder engagement, the authors highlight that “several studies have found that the practice of stakeholder engagement has been characterized by processes that are often out of touch with the experiences of affected people whose daily lives intersect with the activities of industry.”

• A 2019 study of Nigerian infrastructure projects highlights significant barriers to meaningful engagement, such as failure to understand stakeholders’ needs and expectations, late identification of stakeholders, failure to identify key stakeholders, failure to identify potential conflict areas, poor understanding of effective stakeholder engagement and timelines misaligned with stakeholders expectations.

Even companies or financial institutions that have policy commitments to community engagement can sometimes have business models that depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders.

The low carbon transition is leading to a growth in business models that carry this risk. The urgency of the global climate challenge and the imperative of transitioning as quickly as possible to a lower carbon economy have, in certain cases, resulted in states and companies “fast-tracking” development of transition mining projects and/or low emissions energy projects. A 2022 study found that, in the case of energy transition minerals, not only is there a risk that procedural safeguards for consultation and consent will be diluted, but also that the future supply of energy transition minerals will exacerbate social inequalities in already vulnerable locations. For example, an estimated 54% of energy transition minerals are located on or near Indigenous Peoples’ land. An Amnesty International study looking at the impact of cobalt and copper mining expansions in the DRC found that many communities around the key mining locations have endured significant impacts as a result of energy transition mineral mining, including the absence of any community consultation and forced evictions. On the renewable energy front, several jurisdictions, including India, South Africa, and Japan, have adopted legislation intended to speed up project development. Unfortunately, such legislation often exempts project companies from or reduces requirements for prior consultations with communities and/or enables forced expropriation of land.

A business model focused on expedited timelines that don’t allow for sufficient consultations, can lead to the following risks to people:

• Loss of Livelihood and Negative Health Impacts: In Mexico, Indigenous communities near a newly built dam in Sonora were not consulted or informed when the dam started to be filled. As the dam was filled, the communities reported they had not yet been relocated, that the dam had flooded areas where they used to access medicinal vegetation and that the project had cut road links to other communities. In Myanmar, opposition to the Myitsone dam on the Irrawaddy river forced the government in 2011 to put the project on hold. The 3.6 billion USD dam was to be financed by China. The dam itself would displace thousands of people and affect fishermen and communities downstream. The reservoir was expected to flood an area the size of Singapore. Local communities reported losing their farmland, which was the source of their income. In addition, the dam would affect cultural rights, as the Myitsone area is believed to be the birthplace of the Kachin people. In recent years, fears that the project may be revived have sparked new protests.

• Forced Displacement: In Brazil, residents of Vila Autódromo resisted displacement to clear land for construction of the Olympic Park in Rio de Janeiro for the 2016 Rio Olympics. Although the majority of the residents had been offered compensation, others preferred not to leave their homes and felt the government’s plans to go ahead with construction amounted to forced eviction. In 2024, a French coalition of community associations issued a report asserting that nearly 20,000 people had been forcibly displaced from informal housing between April 2023 and September 2024 as part of preparations for the 2024 Paris summer games. Many of these people were migrants from places like Sudan, Eritrea or Afghanistan that had sought and were awarded asylum in France, but had precarious living arrangements. More generally, research shows that in the 20 years to 2007, approximately 2 million people in different countries were displaced by the Olympic Games. And this phenomenon is global – occurring in Chinese and Brazilian cities hosting sporting events, as well as European cities, such as Paris, Berlin and Barcelona. Non-sporting mega-events have also led to forced evictions and displacement: for example, 18,000 households were displaced in Shanghai, China, in preparation for the World Expo 2010 and early reports indicate that evictions are occurring around the site of World Expo 2025 in Osaka, Japan. In Saudi Arabia, there have been reports of evictions of members of the Howeitat tribe from their homes and traditional lands to make way for the NEOM project, which describes itself as the world’s first cognitive, smart city.

• Impacts on water availability and quality: In the US, the Standing Rock Sioux and other American Indian tribes raised concerns that the Dakota Access Pipeline could damage their water supply and cultural heritage. In 2020, a court ordered a temporary shutdown of the pipeline, finding that the environmental impact assessment had been inadequate.

• Environmental Damage: The lack of consultation in the construction of a tourist train in Yucatán, Mexico raised concerns that the new towns that will be created along the line will put pressure on biodiversity and nature reserves which are managed by local communities.

• Loss of Cultural Heritage: In Australia, the Wangan and Jagalingou community challenged the provision by Siemens of rail signaling to the Adani coalmine, stating that they had not provided approval for the project and the mine would cause environmental damage and limit their access to ancestral ceremonial grounds. In Cambodia, communities from Ratanakiri province filed complaints with the Compliance Advisory Ombudsman (CAO) of the International Finance Corporation (IFC) related to the IFC’s investment in Vietnamese rubber company Hoang Anh Gia Lai (HAGL). Local communities complained that HAGL’s use of its rubber land concessions had resulted in loss of forest and grazing land, destruction of burial grounds, and lack of access to resin trees and non-timber forest products necessary to sustain livelihoods. Moreover, communities reported that no effort was made by HAGL to obtained their free, prior informed consent, involve affected communities in the decision-making process, or provide adequate information to them. As of 2025, the case is still ongoing.

• Violation of Indigenous Peoples Rights: It is important to highlight Indigenous Peoples as a vulnerable group among affected stakeholders. Failure to obtain FPIC can undermine Indigenous Peoples’ right to self-determination. It can also undermine their access to other rights such as to life, liberty, security, culture, language, spirituality, education, information, employment, etc. A 2023 study found that Indigenous Peoples are affected in at least 34% of all documented environmental conflicts worldwide. More than three-fourths of these conflicts are caused by mining, fossil fuels, dam projects, and the agriculture, forestry, fisheries, and livestock sector.

Business models that substantially depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders can lead to the following risks to companies:

Financial, Legal and Reputational Risks:

• A study digging into the Costs of Conflict for extractive companies identified two broad “cost” categories – costs associated with preventing or responding to conflict (e.g., security, risk management, personnel costs from time spent managing the conflict) and costs associated with the outcomes of conflict (e.g., project modifications, redress, material damage, lost productivity, impact on capital, reputational impact and impacts on personnel) and found that a major, world-class mining project can suffer costs of USD20M per week due to lost sales as a result of temporary shutdowns or delay stemming from community conflicts.

• First Quantum Minerals was granted a 20-year extension to their copper mining concession in Panama on an expedited basis by the Panamanian government in 2023, allowing little or no time for consultation with affected stakeholders. In response, protests erupted across Panama, including blocking the port that serves the mine, effectively shuttering the mine site. Panama’s Supreme Court then declared the company’s contract unconstitutional and ordered the closure of the mine, which is estimated to cost USD800 million. Discussions around the ultimate fate of the mine are ongoing, but even if temporary, the economic cost of the lucrative mine’s shutdown for both FQM and the Government of Panama has been significant, including lost production and export income. FQM was reportedly spending USD11-13 million/month on labor and maintenance, with no permit to export any of the stockpiled material.

• A 2021 study by ODI found that social risk mitigation cost about 2% of project costs versus potential financial damages of around 24-37% of project costs when projects failed to achieve social license to operate.

• In 2024, after a 3-year-long legal dispute, a Parisian court ruled that a civil lawsuit brought by Mexico-based Indigenous communities against EDF can go ahead. The issues underpinning the lawsuit include violation of land rights and inadequate community consultation. The case was filed under the French Corporate Duty of Vigilance Law, designed to hold French companies accountable for abuses overseas.

• Rapid decision-making that left no time for community consultation underpinned the 2020 destruction of the Juukan Gorge Indigenous cultural heritage site as part of Rio Tinto’s mining operations in Western Australia. The fall-out of this event included intense media scrutiny for Rio Tinto, the resignation of three members of the company’s senior leadership team and two board members, as well as a high-profile parliamentary inquiry. In 2022, the company settled for an undisclosed sum with the impacted Indigenous communities.

• A 2020 study examined the cost and material losses experienced by ETP and other companies with an ownership stake in the Dakota Access Pipeline (DAPL), which was subject to sustained opposition from Indigenous groups and characterized by widespread national and international protests. The owners lost revenue, operating costs and legal fees estimated at US$7.5 billion, in addition to material downward pressure on the company’s share price.

• In early 2024, a US federal judge ordered the dismantling of Enel’s 84 turbine operating wind farm, as, according to the decision, the Oklahoma-based project did not undertake sufficient community consultation or respect the land rights of Indigenous Peoples in Oklahoma, US. This tear down is estimated to cost the company US$260 million, in addition to any damages awarded to the Osage Nation who challenged the wind farm.

• In 2024, Indonesia’s highest court ruled in favor of a community’s petition to revoke the environmental permit for Dairi zinc-lead mine – a decision based partly on lack of citizen participation in the project’s development.

• Recent disputes over hyperscale data centers in both the U.S. and UK illustrate the risks to business posed by expediting project development processes. In the US, a Virginia judge voided approval for the 1,700-acre “Digital Gateway” project after finding procedural failings in the approval process, following a “rushed” and divisive 27-hour public hearing where residents opposed the project’s proximity to historic and residential land. Similarly, in the UK, a planned 90 MW data center on protected Green Belt land near London is facing a legal challenge for bypassing environmental safeguards and community concerns.

Operational Risks Linked to Social Unrest:

• From the riots related to the Rio 2016 summer Olympics to the deaths of demonstrators protesting the Conga Mine in Peru, social unrest can create operational risks for the company as well as security risks for company staff and local communities.

• A 2020 study published in the journal Environmental Research found that opposition to fossil-fuel and low-carbon energy projects are having important operational impacts. Of the 649 projects reviewed that had encountered some form of social resistance, more than 25% were “shelved, suspended or delayed”, suggesting significant operational risk for project proponents, in addition to reputational hits or financial costs incurred, as a result of the media attention and lost time spent on project development, respectively.

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• In Australia, the co-development of shared standards (e.g., Infrastructure Engagement Excellence Standards) has provided government, industry and communities with a common basis upon which to understand, participate in and assess meaningful community engagement or, in the case of the Best Practice Principles for Clean Energy Projects, to help support indigenous communities in seeking to share the benefits of Australia’s clean energy sector expansion.

• Encouraging active citizenship by building the capacity of civil society to unlock productive dialogue between the company and local communities. For example, Oxfam’s NORAD project in Ghana, Tanzania and Mozambique to improve petroleum governance.

• Dialogue tables co-owned by companies, local communities and stakeholders (civil society) as spaces for respectful, patient engagement and joint problem-solving. The dialogue tables can be facilitated by neutral third parties, which can help companies and communities build trust in the process. For instance, Anglo American participated in dialogue tables in the Quellaveco project in Peru. This enabled the company to make commitments to the local community on water management, environmental protection and social investment.

• A mediation process between Alcoa and an affected Brazilian community on land use sharing for mining and community was established and mediated by Brazilian government authorities and ultimately resulted in benefits and compensations for all parties.

• Monitoring agencies set up between representatives of Indigenous peoples, local government and businesses to enable joint decision-making and monitoring compliance with the terms of the agreement between the company and local communities. The Snap Lake Environmental Monitoring Agency was set up by DeBeers, the Government of the Northwest Territories of Canada and a number of aboriginal groups. Its board was comprised of representatives of Indigenous groups, and the agency functioned as a “watchdog” to monitor environmental compliance by DeBeers.

• Tailored approaches that respond to community concerns and go beyond compliance can help companies and communities build trust. In New Zealand, Newmont Waihi Gold (NWG) wanted to expand their gold mining beneath homes of the local community. The company realized that a primary concern of the community related to property damage. In response, NWG set up a number of platforms that went beyond the legal requirements to provide transparency and enable the community a role in decision-making. These included an independent ombudsman for property matters, a policy to guide how the company would respond to matters of property damage, and a community forum with members of the community, the company and local government.

• Empowered community liaison officers who, in addition to being approachable and personable towards the local community, can take decisive action when concerns are raised. For instance, in Bolivia, Total empowered a Community Liaison Officer to lead dialogue and participatory engagement with Indigenous groups in areas of complex land tenure, improving stakeholder communication and fostering transparent, inclusive social and environmental assessments. This approach, part of a broader human-rights strategy, helped to build trust and align company operations with community expectations.