Lights, camera, revolution

Despite the fact that protest movements are, by their nature, hard to pin down a year in advance, it is possible to predict to a certain degree what factors will influence the impact they could have on government policies and corporate reputations. Charles de Mornay Davies, WMRC, provides a region-by-region overview of the most significant activism 'hotspots' likely to affect companies in the coming year.


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In 2001 the Kyoto Protocol talks in Bonn (COP 6.5) constituted perhaps the

single most significant global catalyst for activism. In the first instance,

the talks themselves brought protestors to Bonn. This activism was also replicated

in local protests, as environmental NGOs and lobbying groups stepped up their

campaigns to push for government support of the protocol in individual countries.

The Kyoto talks are scheduled to continue in 2002, with the eighth round of

negotiations, COP 8. According to the European Commission, all 15 Member Sataes

of the EU aim to ratify by June 2002. This would mean that the Kyoto Protocol

could conceivably come into effect in time for the tenth anniversary Earth Summit

(Rio+10) in Johannesburg, South Africa, in September 2002.

Green issues will be brought increasingly into the public eye through media

coverage of the Rio+10 talks. The arrival of the Bonn talks in 2001 compelled

corporations and governments to reveal their stance, either for or against Kyoto.

When US President George W. Bush unveiled his controversial energy policy, which

rejected the Kyoto process, any US energy company that supported his policy

– or directly condemned Kyoto – became a target for environmental campaigners.

Rio+10 is likely to present a similar scenario, magnified by the 10-year run-up

to the summit. Companies that expressed even limited support for the Kyoto process,

such as BP and Shell, benefited from the positive, free publicity on the back

of the talks, as well as the goodwill of environmental NGOs. Rio+10 will present

a significant opportunity to energy companies – or a threat to those that do

not address the issues that are likely to be broached.

Region by region

President Bush has faced significant obstacles in trying to develop a final

draft of energy legislation. It has proved especially difficult to garner sufficient

support for a bill that allows exporation for oil and gas in Alaska’s Arctic

National Wildlife Refuge (ANWR) – probably the most contentious issue facing

the energy industry in 2002. If the Democrats, who have so far managed to stall

the bill’s passage throught the Senate, lose the fight to prevent ANWR drilling

and an unscathed bill emerges in 2002, environmentalists may set up shop in

Alaska.

The green lobby continues to stress that ANWR drilling will threaten the existence

of rare species of animals by damaging their feeding grounds, and disrupting

their reproductive cycles and seasonal migratory patterns.

Environmentalists are likely to find substantial support for their campaigns

from within Canada, where the Canadian government has made clear its opposition

to drilling in the territory. Protests by Canada’s indigenous peoples are becoming

increasingly vocal.

An 1899 treaty enshrines the right of indigenous peoples to live off the land.

As oil and gas development progresses and groups feel increasingly that the

treaty is being ignored, incidents involving disruptive protests by these peoples

have risen. In British Columbia, protests have brought oil and gas exploration

and production activities to a halt.

Oil and gas companies are increasingly seeking to enter into consultation with

indigenous groups, as well as provincial governments, in order to try to avert

costly delays to projects. Many firms planning to step up activities in regions

like British Columbia and the North-West Territories in 2002 will have to cede

ownership stakes in oil and gas projects to these groups in order to move ahead.

Latin America

Corporate Social Responsibility is moving up the agenda in Latin America, with

state oil companies increasingly accepting their role in protecting the environment.

Petrobras, which has been hit by higher insurance premiums and heavy fines following

the sinking of the world’s largest offshore oil rig in 2001, has learnt to its

cost how damaging oil spills can be for public relations.

If 2001 is anything to go by, however, the primary issue that energy firms in

Latin America will have to face up to will be indigenous protest over land rights.

In Peru, this will be a particular priority as President Alejandro Toledo is

of indigenous descent, and upholding indigenous rights was one of his electoral

promises.

When the E&P concession for the huge Camisea natural gas field in Peru’s

Amazon region was held by the Shell-Mobil consortium, it was lauded as a model

example of how companies can develop a major project in an environmentally sensitive

area, with minimal disruption. the Pluspetrol-led consortium, which plans to

start exploratory drilling in Camisea in March 2002, has been encouraged to

follow its predecessor’s example. The rights of indigenous people is an issue

that will always be a factor for investors in the energy sector. Local protests

sometimes gain international backing and investors across the region would do

as well to keep an eye on how things develop in Peru.

W/C Europe

In Europe, the future of nuclear power has provoked protests across the board,

both within parliaments and by individual compaigning organisations. In Central

Europe, the issue perhaps most representative of wider protests across the region

was the movement opposed to the re-opening of the Czech nuclear power plant

in Temelin.

The movement had a strong presence in Germany, Austria, and the Czech Republic.

This has overlapped with actions by environmental groups in Germany and Western

Europe that have been monitoring nuclear waste shipments that are transported

by road and rail to reprocessing centres. The anti-Temelin opposition managed

to force German giant, E.on, to drop its contracts with Czech state-owned power

producer, CEZ, to export electricity from the Czech Republic. It was also backed

by political opposition from the Austrian coalition’s far-right Freedom Party,

which threatened to use its right of veto to obstruct the Czech Republic’s bid

to join the EU. In 2002, the Temelin issue is likely to remain a recurrent concern,

as its capacity increases and it is included in the privatisation package of

CEZ.

Anti-nuclear protests are also likely to be seen across Europe. The nuclear

reprocessing plant at Sellafield in the UK will face continued opposition from

green groups and the Irish government. In 2002, we can expect to see these protests

gathering pace, as litigation proceeds (Greenpeace vs UK Government; Ireland

vs UK Government) and as fuel reprocessing transports continue. As they do so

the impact on government policy may affect investors across the board, with

possible consequences for the Czech Republic’s accession to the EU, the UK’s

commitment to the increased use of nuclear power, and the German Government’s

stance on nuclear power (having already pledged to phase out nuclear plants).

The main risks for companies in this regard can therefore be split into the

direct risks (being caught up in NGO protest campaigns) and indirect risks (derailing

investment decisions such as E.on’s export contract with CEZ), and more doubts

over the nuclear industry in general.

Asia-Pacific

Environmental protest and activism will continue to manifest itself in two characteristic

forms in the year ahead. In the wealthier North-East Asian nations, particularly

Japan, South Korea and Taiwan, environmental awareness is on the rise. The possibility

exists for new scandals and revelations of environmental abuse by companies

to emerge.

Past abuses, often taking place with the connivance of local officials, are

only now coming to light. Taiwan, in particular, has witnessed serious environmental

degradation as a result of two decades of rapid industrialisation. For the first

time its politicians are putting credible environmental regulations in place.

The nuclear issue is also likely to remain sensitive. With Japan, South Korea

and Taiwan so heavily dependent on energy imports, the public remains divided

over the issue, and the balance of opinion either for or against is inconclusive.

Looking elsewhere in the region, environmental activism is likely to rise in

India and Indonesia, reflecting the strengthening of civil society that is taking

place in those countries. Local activism is already on the rise in Indonesia,

but will continue to face difficulties from the persistent influence of local-level

military officials and bureaucrats. Despite its democratic heritage, local environmental

opposition is also a relatively new phenomenon in India.

The Narmada Dam is only the most prominent of many environmental issues in

India, where protesters are using modern communications and media to champion

their cause in a wider world.

Thailand provides the best example of how environemtnal issues have become

more inflammatory, as the power of civil political discourse increases. Thailand

has more energy related environmental disputes that any other country in the

region. From the Hin Krut and Bo Nok power plants, to the Songkhla gas pipeline,

to the Pak Moon Dam, Thailand provides countless examples of local communities

successfully delaying and challenging government and foreign investment projects

which they feel are not in their best interests. Whilst many of these projects

are likely to get the go-ahead in 2002, new issues and controversial projects

may come to the surface in their place.

Africa

Although environmental activism is not particularly prevalent across Africa,

it does play a part in locally-focused protests by community groups. These protests

focus on immediate, local concerns such as workers’ rights, oil spills and any

areas of interaction between companies and local communities. Community groups

are becoming increasingly fluent in co-ordinating actions against companies

whose actions affect them directly.

In Nigeria in 2001, both Shell and ChevronTexaco ended up in the courts following

disputes with local communities. In Nigeria, the degree of sustainble indigenous

employment opportunities is often at the root of local community agitation and

frustration, and the chances of new legislation to address these concerns are

relatively high.

Foreign investors in Africa’s energy industry, particularly the petroleum sector,

must be prepared to accommodate calls for the active participation of indigenous

companies, especially in E&P activities. If legislation emerges in the leading

energy exporting countries, emerging exporters are likely to take similar steps.

The best preparation on the part of foreign investors would be to have concrete

proposals on engaging indigenous firms in operations right from the outset of

planning such sovereign investments. New and/or improved legislation or policy

on this issue could emerge in Angola, Nigeria, Gabon, or even Equatorial Guinea.

Implications for investors

Even though protests are unpredictable, some factors do emerge concerning the

differing environmental movements around the globe. For companies to protect

their reputations effectively, or indeed in some cases even carry out their

day-to-day operations, consideration for the social and environmental impact

of energy projects must form part of any major company’s strategy. Looking at

the protests across different continents it is also clear that even though environmental

movements form an increasingly coherent global network, different regions can

be seen to have their own kind of environmental activism with its own specific

and recognisable characteristics. Companies with global interests can therefore

benefit – or suffer – from the extent to which they are able to address these

differing local demands. Where companies do not communicate effectively in an

open dialogue with local communities, NGOs and campaigners, the threat of protest

remains an unknown quanitity, and thus an additional risk for projects.

With the Rio+10 conference and the Kyoto process coming to a head in 2002,

this is clearly a year where companies can benefit from taking a progressive

approach to issues of environmental and social responsibility, reaping the rewards

of diminished risk from protestors, and positive, free publicity from environmentally-focused

media coverage. Instead of thinking in terms of damage limitation and defensive

reputation management, by adopting a pro-active, engaged approach to environmental

concerns, corporations can take advantage of international interest in energy

issues.

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