Compliance Advisor Ombudsman (CAO)
The Office of the Compliance Advisor Ombudsman (CAO) is the independent recourse mechanism for environmental and social concerns regarding the private sectors activities of the World Bank Group.
It relates to the:
- International Finance Corporation (IFC); 2 and
- The Multilateral Investment Guarantee Agency (MIGA). 3
The CAO has three functions: 4
- Dispute resolution with project-affected communities and companies to address environmental and social concerns.
- Compliance investigations of the environmental and social performance of IFC/ MIGA.
- Independent advice to the World Bank Group president and IFC/MIGA senior management on systemic environmental and social issues.
What are the issues that can be dealt with?
Regarding the social and environmental impact of the projects they support, IFC and MIGA apply their Performance Standards (PS) which cover the following areas:
- Assessment and management of social and environmental risks and impacts
- Labour and working conditions
- Resource efficiency and pollution prevention
- Community, health, safety and security
- Land acquisition and involuntary resettlement
- Biodiversity conservation and sustainable management of living natural resources
- Indigenous peoples
- Cultural heritage
Revision of IFC Sustainability framework
The IFC Board of Directors approved the updated sustainability framework in May 2011, culminating a two-and-a-half year review and a 18-month consultation process. The new policies and standards came into effect on January 1st 2012. The main objectives of the new framework are to strengthen IFC commitment to critical issues such as climate change, business and human rights, supply-chain management and transparency.
The 2012 PS include measures to enhance energy, water efficiency and target greenhouse-gas reduction. The framework advocates for more transparency and also recognizes the responsibility of the private sector to identify adverse risks and impacts through environmental and social due diligence and to provide effective grievances mechanisms. Updates also address human trafficking, forced evictions (even if the PS does not specify that evictions are forbidden or that private sector must be carried out also in accordance with international human rights standards) and communities access to cultural heritage. The IFC has adopted the principle of “Free, prior and informed consent” introduced by the 2007 un Declaration on the rights of indigenous peoples, but only in certain cases: where activities have impacts on lands and natural resources subject to traditional ownership or under customary use, in cases of relocation of indigenous peoples from lands and natural resources subject to traditional ownership or under customary use and where a project may significantly impact on critical cultural heritage.
In 2011, the IFC recognised the responsibility of business actors to respect human rights, and stated that it would be guided by the principles of the International Bill of Human Rights and of the 8 core ILO Conventions. More specifically, it considered that in “limited high risk circumstances, it may be appropriate for the client to complement its environmental and social risks and impacts identification process with specific human rights due diligence as relevant to the particular business”. 5
Civil society had called for stronger human rights language in the policies, including engagement by the IFC not to support activities that could lead to or contribute to human rights abuses and a requirement that IFC clients should carry out human rights due diligence.
Some improvements include requirements regarding the disclosure of principal contracts for extractive projects, greater transparency and communication at the project-level concerning the environment and social impacts and development outcomes of projects funded by the bank 6 and the requirement to obtain “free, prior and informed consent” of indigenous peoples. Although the new PS disclose significant improvements with regard to rights of indigenous peoples, the UN Special Rapporteur on this question 7 highlighted some of the limitations that can still be found in the final version and recommended:
- The establishment of a consultation model for all projects affecting local communities;
- The prohibition of a project if the free, prior and informed consent is not obtained;
- The establishment by states of mechanisms to financially and technically support affected communities with a view to balance negotiation powers between the latter and IFC clients.
Who can file a complaint?
Any individual or group of individuals directly impacted or likely to be impacted by social or environmental impacts of an IFC or MIGA project can file a complaint.
A complaint may be lodged by an organisation or individual representing those affected, if they provide explicit evidence of authority to present the complaint on their behalf. 8
Under what conditions?
- The complaint may not be anonymous but the complainant can ask for confidentiality. 9
- The complaints may relate to any aspect of the planning, implementation, or social or environmental impacts of IFC/MIGA projects.
- The complaint may be submitted in any language.
- The complaint must be submitted to the office of the CAO in writing.
Process and Outcome 11
Within five days after submission of the complaint, the CAO will acknowledge its receipt. The CAO will then determine whether the complaint is receivable and will inform the complainant of either its acceptance or rejection within 15 days. The CAO will then conduct an assessment of the complaint for up to 120 days, which may include:
- a visit to the project site
- a review of IFC/MIGA files
- meetings with the complainants and other project stakeholders.
At the end of the assessment, the CAO issues an Assessment Report. Such assessments should not entail judgements on the merits of the case, but rather are an opportunity for the CAO to learn more about the issues, engage with the parties, and determine which process the parties seek to initiate.
The complaint may first go through the Dispute Resolution process, if the CAO sees an opportunity to reach a solution through mediation, which may involve hiring a professional mediator, hire experts to assist with fact-finding or use other techniques to address the conflict.
If Dispute Resolution is not possible, or if at any point either party no longer wishes to be a part of the process, the complaint is transferred to the Compliance Function. The CAO decides whether a case deserves investigation in 45 days during the Appraisal phase, and then conducts a Compliance Investigation which may involve review of documents, interviews and site visits. In cases where the CAO’s investigation shows that the IFC or MIGA is not in compliance with their rules, the CAO will keep the case open to monitor IFC’s actions until compliance has been achieved. 12
CAO process for handling complaints 13
The CAO in action
In 2019, the CAO handled 60 cases in 35 countries, including 12 new eligible complaints and 48 ongoingcases. 14
Palm oil production, Wilmar Group, Indonesia 15
Between 2003 and 2008, the IFC made several investments in the Wilmar Group, a multinational agri-business company head-quartered in Singapore.
In July 2007, NGOs, smallholders and Indigenous peoples’ organisations of Indonesia (under the lead of Forest Peoples Programme, Sawit Watch and Serikat Petani Kelapa Sawit) filed a complaint with the CAO alleging that the Wilmar Group’s activities in Indonesia violated a number of IFC standards and requirements.
The complainants raised concerns in particular about the analysis of social and environmental risks and impacts that were examined in a social and environmental assessment which looked at the actions related to provisions given for land acquisition and involuntary resettlement, for biodiversity conservation and sustainable natural resource management, and for Indigenous peoples and cultural heritage.
The CAO concluded that IFC did not meet the requirements of its own Performance Standards for its assessment of the Wilmar trade facility investment and that “the adoption of a narrow interpretation of the investment impacts – in full knowledge of the broader implications – is inconsistent with IFC’s asserted role, mandate of reducing poverty and improving lives, and commitment to sustainable development”. 16
This case clearly relates to indigenous peoples’ rights as well as the right to be protected against forced evictions.
“The IFC/World Bank President, Robert Zoellig has then agreed to suspend IFC funding of the oil palm sector pending the development of a revised strategy for dealing with the troubled sector. 17 ” Furthermore an in-depth six month review of how the IFC will engage in the palm oil sector in the future was supposed to be implemented through open and extensive consultations. The Wilmar Group’s social and environmental procedures were to be analysed and assessed. 18
In April 2011, the World Bank announced its new strategy 19 in the controversial palm oil sector putting an end to the investments moratorium in the sector. Considering the concerns of the stakeholders, the IFC says it will now pay attention to the careful selection of the clients depending on their ability to address environmental and social issues, the land acquisition in compliance with local regulations, biodiversity conservation, profit sharing with local communities and finally the need to focus on the food and agribusiness supply chain.
This strategy relies on four pillars:
- Sharing the benefits with people from rural areas, local communities and small farmers;
- Limiting the palm oil culture’s impact on natural habitats through implementing a biodiversity conservation policy;
- The sustainable development of the private sector investments;
- Enable small farmers to access markets and finance through the enhancement of the services to improve their productivity and the development of new financial mechanisms.
However, NGOs criticise this strategy 20 denouncing the weak provisions regarding free, prior and informed consent of indigenous peoples and the lack of clarity on how performance standards will be applied across the entire supply chain.
Movimiento Unificado Campesino del Aguan (MUCA) v. Corporación Dinant, Honduras
The Honduran palm oil and food company Corporación Dinant has operating plantations, mills and refineries in the Lean and Aguan Valleys, and around the cities of Tocoa and La Ceiba. It was granted a loan of $30 million by the IFC, partially financing the increase of its production capacity, the expansion of its distribution networks and the building of a biogas facility to produce electricity.
On 25 July 2014, the MUCA filed a complaint with the CAO against Corporación Dinant, alleging that its operations in the Aguan Valley had a negative environmental impact, and generated land disputes, the displacement of communities, as well as the use of violence and security forces against peasants.
After having found the MUCA’s complaint eligible in August 2014, the CAO conducted a first trip to Honduras in October 2014 as part of its assessment of the case. Since discussions had already been initiated between both parties under the supervision of the IFC and CBI, the CAO decided to postpone the completion of its assessment. This decision was discussed and confirmed with the MUCA and Corporación Dinant during a second trip of the CAO in November 2014. At the request of the complainants, CAO resumed its assessment in June 2016. The CAO team had conversations with the relevant parties, to help them take stock of the situation, and understand how they would like to move forward in the CAO process in the context of the ongoing dialogue efforts of IFC and CBI.
In the meantime, the CAO affirmed that it is helping IFC to address the shortcomings in its environmental and social performance regarding its investment in Corporación Dinant, that were highlighted by an investigation report published in January 2014, following concerns raised by FIDH and other civil society groups who continue to monitor the process. 21
In June 2017, CAO’s compliance appraisal noted that a number of issues raised in the complaints were similar in substance to those covered in a 2014 CAO audit of IFC’s investment in Dinant (Dinant-01 case), and thus by CAO’s ongoing monitoring of IFC’s response to the 2014 audit. CAO did not consider that they require a separate compliance investigation. CAO released a monitoring and closing report for the three Dinant cases in November 2018. Its monitoring report acknowledged work supported by IFC to ensure that Dinant’s policies and practices for the management of private security personnel reflect IFC’s Performance Standard 4 (PS4) and recognized learning from the Dinant Audit, particularly as relate to contextual risk, use of security forces, and procedures related to client E&S performance, as well as supply chain and conflict risk assessments for agribusiness investments. It noted, however, that IFC’s response only partially addressed the project-level non-compliance findings, especially regarding Dinant’s security personnel. It recognised that depending on the outcome of the inquiry on Performance Standard 1, remedies for adverse impacts caused by the project, including compensation, may be required. Nevertheless, CAO decided to conclude its monitoring and close these cases considering that Dinant fully repaid its loan to IFC in April 2017.