Sustainable Social Investment

During the past 20 years, major international institutions such as the World Bank, USAID and the regional development banks have refocused their efforts on eliminating rural poverty. This new approach reflects a growing consensus among development professionals that the “top-down” investment strategy previously favored by large agencies often failed to improve living standards among the poor. Ultimately, many villagers migrate to urban megalopolises – in the false hope that they will be able to find a better life there.

In the last decade, extractive industries have increasingly faced similar challenges and somewhat unique expectations. Companies often operate in remote areas with weak economies and fragile social institutions where they are expected to provide basic social services. They must form strategic relationships with NGOs, community-based organizations, academic specialists and other members of civil society. These experts then work with communities to design and manage village-level projects that meet real, high priority local needs. The result: improved living standards for local residents and greater focus on core operations for hydrocarbon companies.

The Terra Group has helped oil and gas companies design and implement ground-breaking social investment programs in Africa, Asia and Latin America.
In general, our approach to successful social investment involves six key strategic elements:

  • Building consensus among stakeholders around the basic objectives of social investment. Common objectives include ensuring equity, fairness and transparency; achieving the broadest community impact; sustainability; capacity-building; strengthening the rights of indigenous peoples; respect for women and children; sensitivity to community cultural norms; etc. Once stakeholders agree on their basic objectives, they can prioritize specific investment decisions.
  • Assuring effective participation by community members, their leaders and government officials in all phases of social investment: collecting and analyzing baseline data, identifying development opportunities and mitigation measures, designing project monitoring and evaluation systems, and approving conflict resolution procedures. In particular, participatory data analysis allows stakeholders to reach a “shared understanding” of community needs and provides an important conflict management tool.
  • Ensuring long-term sustainability by strengthening local management capacity and by avoiding dependency, hidden subsidies or assuming the role of government. One important step often involves identifying community assets that can be invested in development projects along with company contributions: “sweat equity,” land or other resources that give local communities an ownership stake in project outcomes.
  • Forming effective partnerships with local and national development experts (e.g., NGOs and academic specialists) to assist local communities in planning, implementing, monitoring and evaluating local projects.
  • Developing a governance structure for social investments that includes clear lines of authority and accountability, revenue management and transparency, community oversight, monitoring and evaluation systems and grievance procedures.
  • Harmonizing social investment and other company initiatives into a vision of a sustainable future that is shared by key stakeholders. Such initiatives include job creation, small and medium enterprise development, local procurement, infrastructure improvements, royalty payments, etc.