Companies should recognize the importance of their “social license to operate” by taking steps that go beyond minimum legal requirements to implement international best practice. This should not be limited to passive observation of norms. It should include engagement with governments and communities to ensure the delivery of benefits to the host society and support for the development of capacity and best practice in partners.

Companies, in their dealings with governments and society, should operate with integrity, inclusivity and transparency. When complying with international best practice in their contracting, operations and payments companies should:

1. observe external rules and best practice and set consistent internal standards,
2. ensure staff and subcontractor compliance,
3. adhere to industry standards and ethical business practices, and,
4. respect citizen rights.

Companies should recognize that the capacity of governments and host societies to deliver the expected benefits from resource extraction may be limited, at least initially, as will be the ability to monitor social and environmental protection. Exploitation of these weaknesses is unlikely to lead to a successful long-term partnership and could result in renegotiation, nationalization, or expulsion. Companies should instead support local capacity building and institutions and the development of industry standards with self-policing and voluntary reporting. Governments should consider what international best practice and capacity building requirements are appropriate to include as contractual obligations for companies.

Major oil and mining companies have embraced the Extractive Industries Transparency Initiative (EITI) and work to promote it. A number of companies unilaterally disclose details of physical and financial operations country-by-country and provide social services to the communities in which they operate. Some companies voluntarily seek to procure products and services locally. This form of corporate social responsibility should be the norm—not the exception—for all companies within the extractive sector.

There are a number of voluntary efforts already in place within the extractive sectors. Perhaps the broadest of these is that of the International Council on Mining & Metals (ICMM). ICMM has undertaken studies to identify policies and practices that can increase the economic benefits that accrue from mining at the local and national levels, recognizing that extractive companies are not passive actors but have the ability to influence governance and economic outcomes beyond the extractive process ⁽¹⁾. ICMM has created a Sustainable Development Framework defining best practices across the full range of mining activities, from the decision to extract, to local content provisions, to revenue transparency, and right up to mine closure and cleanup. Its members have agreed a far-reaching set of binding principles together with reporting and assurance processes.

Petroleum industry organizations OGP (International Association of Oil & Gas Producers) and IPIECA (International Petroleum Industry Environmental Conservation Association) are also to be commended on their efforts to standardize good practice among their members. However, they have yet to produce an initiative comparable to ICMM’s. Such an initiative would be welcome for all extractive company associations and could use the Charter as a framework.

There is an evolving body of international law and practice that suggests that corporate responsibility goes beyond a legal license to operate and short-term profit maximization. Many OECD countries encourage corporate responsibility, variously defined. Danish law requires large companies to report on their Corporate Social Responsibility policies. The UK Companies Act requires boards of directors to “have regard” for “the impact of the company’s operations on the community and the environment.” Investors with a long-term perspective are also requiring action, with some large funds like the Norwegian Pension Fund barring investment in companies that do not observe international codes and standards or follow industry best practice.

Extractive activities fall under UN and international conventions, including for the protection of the environment, human rights and labor. The United Nations has long been developing a set of principles for business and human rights, in collaboration with the business community. The organization’s definition of human rights includes economic rights and the “right to development.” The conceptual framework presented by the Special Representative of the Secretary-General for business and human rights, John Ruggie, has been endorsed unanimously by the Human Rights Council and by leading business organizations including the International Chamber of Commerce and the ICMM. Ruggie describes the responsibility to respect human rights as a near-universal norm that exists independently of state duties and variations in national law. There are signs of growing acceptance of this in some areas.⁽²⁾

Through the interaction of many formal and informal stakeholder processes, a body of international norms and industry best practice for the extractive industry is being built up. This includes EITI, the transparency and environmental standards adopted by international financial institutions for their engagement in commercial extraction projects (the Equator Principles), the principle of free and informed consent, the Voluntary Principles on Security and Human Rights, and guidelines for investors and companies like the project risk assessment of the social license to operate developed by Critical Resource.

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