1. About this page
This ESG Topic is designed to help fund managers quickly familiarise themselves with key issues that they may encounter when investing in companies where cumulative impacts from their operations and external activities occur. It includes guidance on understanding what cumulative impacts are and considerations in assessing cumulative impacts. An example Terms of Reference for undertaking a Rapid Cumulative Impact Assessment (RCIA) can be found here and under ‘BII Guidance’ on the Reference materials page. This ESG Topic is not intended to be a detailed technical guidance document.
- Additional considerationsFormal specific technical guidance is provided at the end of this ESG Topic and in Reference materials, including International Finance Corporation (IFC) 2012 Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts and IFC Good Practice Handbook on Cumulative Impact Assessment and Management: Guidance for the Private Sector in Emerging Markets. Where there are cumulative impacts related to resource efficiency and pollution then fund managers should also refer to IFC 2012 Performance Standard 3: Resource Efficiency and Pollution Prevention.
This ESG Topic provides an overview and general guidance. Fund managers should carefully consider each investment prospect based on its specific characteristics and circumstances including scale, location, technology, management capacity and commitment, and track record. Risks, impacts and opportunities relating to a particular company or sector can also change over time for a number of reasons. For instance, in the case of cumulative impacts, the likelihood of similar and related developments in close proximity over the life of the investment (such as mining or tourism related activities), changes in the applicable laws and regulations, or changes to a company’s activities or assets). Fund managers may need to engage external experts in some situations (see the ‘Advice for Fund Managers’ section below).
In the context of local, regional and global development there is increased pressure on resources. This pressure is affecting the environment, communities, biodiversity and companies. Often when small incremental impacts – that on their own may not be significant – are aggregated, the cumulative impacts may be significant in magnitude on a local, regional or, at times, global scale. Furthermore, impacts when aggregated may also be synergistic, therefore cumulatively larger the impacts of their constituents, for example the combination of constituents of air emission to produce fog. This may negatively impact the business directly (for example, by limiting the supply of water to production facilities and therefore reducing manufacturing capacity and profitability) or indirectly (for instance, declining ambient air quality which then results in community unrest or health impacts, reputational risks, fines and regulatory challenges). Therefore, it is clearly in the interests of a company to understand if there are any cumulative impacts that may negatively impact on the fundamentals of their business case or may impact on their operations. Once the potential nature and extent of cumulative impacts are understood then it is important to ensure that the project development incorporates practical management and monitoring measures to address these issues, including engagement with other stakeholders.
Assessment of cumulative impacts (and their management) is the governments’ responsibility and, hence, ideally led by government agencies as part of multi-stakeholder initiative. However, government agencies in emerging markets are not always successful in ensuring appropriate assessment and management of cumulative impacts. As such, frequently, when the E&S impacts of developments and operations are evaluated, the impacts are considered individually and in response to a specific proposed activity. This approach – one activity or impact at a time – may overlook important cumulative impacts. In order to address this gap, a broader approach to cumulative impact assessment is typically required. Similarly, cumulative impacts from other parties may create business risks (for instance water competition), which if not properly identified and understood means it is not possible to identify potential mitigation measures or if there is a fatal flaw in the business design. It should be acknowledged that managing cumulative impacts requires a multi-stakeholder approach (including government agencies), as such it is difficult for individual companies to effectively do so on their own. Therefore, engagement with other parties where cumulative impacts may exist is critical for success.
2.1 What are cumulative impacts?
Broadly, cumulative impacts are the result of multiple activities that when combined (potentially from existing or planned third-party activities, and external factors, e.g. environmental changes such as climate change) will impact the same resources, communities, biodiversity, ecosystem services and companies.
- Examples of cumulative impactsExample of cumulative impacts include:
- Negative impacts on ambient air quality due to multiple air emission sources in the same airshed.
- Reduced groundwater availability and increased depth-to-groundwater due to multiple abstraction sites or increased abstraction rates.
- Restrictions on the availability of labour as a consequence of multiple independent construction projects, over the same period, in a specific location.
- Fragmentation of forests, or areas of high biodiversity value, due to multiple developments/resource demands; for example, the establishment of multiple plantations in the same area.
- Sequential hydropower development in a single catchment resulting in impacts such as altered water flows or increased sediment loads.
- Increased land prices in a region as a result of multiple land acquisition processes in the same area.
- Increased pollutant concentrations in water bodies, soils or sediments.
- Increased in-migration of people associated with the opening-up of previously inaccessible areas; for instance, through the development of rights of way for transmission lines.
- Increased environmental vibration and noise from multiple developments in the same area; for example, the combined development of a railway, smelter and/or port.
- Multiple demands on the same resource; for instance, commercial fishing which threatens the sustainability of the target population.
- Reduced fertile land availability in a region due to the construction of large infrastructure projects, industrial assets and/or urban areas.
- A reduction in the availability of ecosystem services (e.g. water) supporting food supply, ecosystem regulation or cultural services due to multiple developments in the same area.
2.2 What is a cumulative impact assessment (CIA)?
The overall aim of a CIA is to assess the effects of multiple activities or operations over time within a defined area, that are occurring at the same time as the proposed investment, or which can be reliably predicted. In effect, the CIA considers impacts that would otherwise be missed or underestimated by assessing each activity or operation individually (which is typically the approach in an Environmental & Social Impact Assessment (ESIA)). The CIA should consider the direct and indirect impacts on resources and receptors associated with a project or business and their contribution to the overall cumulative impacts, relative to the potential impacts from other developments, activities and external factors. CIA is relevant both the greenfield development and brownfield developments (for example the expansion of manufacturing within the existing plant footprint).
Given that CIA naturally entails a wider number of stakeholders, as it considers a wider area than that impacted by a company and a wider range of stakeholders, they are generally led by governments. Cumulative impacts are best assessed and managed at this level, particularly through strategic environmental assessments (SEA), master planning, watershed management plans, etc. In some geographies there maybe existing CIAs undertaken as part of regional plans, watershed management, etc. In circumstances where a government-led CIA has been completed or where specified requirements for a CIA have been provided by regulators, there is a straightforward requirement to comply with these.
Where there is not a government-led CIA, and cumulative impacts are potentially a concern, then for private sector developments a Rapid Cumulative Impact Assessment (RCIA) maybe an appropriate and practical tool. The RCIA is a tool that allows a company to initiate the assessment of cumulative impacts and understand any negative impacts to the business or the context it will operate in. To be effective, there needs to be clear action on the outcomes of the RCIA and engagement with stakeholders including the design and implementation of management and monitoring measures.
Cumulative impacts are often the same or similar to the E&S impacts that are evaluated in an ESIA, and both a CIA and ESIA process rely on established ESIA practices. However, many ESIAs focus on a local scale in which only the footprint or area covered by each project component is considered. The CIA further enlarges the scale of the assessment to consider both a larger area and also a longer timeline. In a CIA basic concepts of importance to assess cumulative impacts are Valued Environmental and Social Components (VECs) (the concept is further explained in section 2.4 below), area of influence (both the spacial area and time span), and limits of acceptable change. In combination, these constitute the main points in defining the study area, the type of cumulative impacts that are important to consider, and their significance. Similar to an ESIA, in the CIA, impacts on the VECs are identified and then a mitigation hierarchy is then applied to avoid them when possible, and to minimise and mitigate them when avoidance is not possible. Notably, any potential cumulative impact that warrants additional mitigation and/or monitoring beyond that identified in the ESIA should be considered significant.
In some geographies there maybe existing information (such as a Strategic Environmental Assessment (SEA) or regional plans, such as may relate to watershed management which may provide useful information or form the basis of the CIA, or may provide valuable information on cumulative impacts which can be incorporated into a RCIA.
2.3 What is a rapid cumulative impact assessment (RCIA)?
The concepts behind a RCIA and CIA are the same. However, a RCIA is a simplified version of a CIA. A CIA is likely to involve a more complex process with consultation with multiple stakeholders to determine VECs, baseline data requirements, sampling methodology, amongst other considerations. However, the work completed for a RCIA may progress to a CIA, if required. In practical terms, a RCIA is typically performed through a desktop review using existing ESIA(s), existing strategic, regional or local E&S and resource planning information, secondary baseline information (such as academic or NGO research) and other desktop resources. A RCIA can also be included as part of an ESIA for a brownfield or greenfield development, even if cumulative impacts are screened out at the scoping stage.
- CIA vs RCIAA comparison of the typical characteristics of a CIA and RCIA is in Table 1 below.
Table 1: Broad Comparison of Typical CIA and RCIA Characteristics
Cumulative Impact Assessment Rapid Cumulative Impact Assessment Typically time intensive Accelerated review and can typically fit with ESIA timelines Data intensive using information from various stakeholders including primary information gathering and use of secondary information Desktop review of existing information from ESIA(s), secondary baseline information (such as academic or NGO research) with, if needed, some very focussed new baseline data if required and potentially some additional stakeholder engagement Usually led by governments in a multi-stakeholder approach with an iterative process with a typically complex governance structure Possible for a private sector developer to lead with often a less complex stakeholder approach Typically beyond the financial and technical capacity of a single developer Feasible to be undertaken by a single developer Where undertaken by a government or regulator there is greater potential to oversee and manage impacts on VECs using the outcomes of the CIA Where undertaken by a private sector developer the level of influence and control on managing VEC impacts is less certain using the outcomes
Generally a RCIA can be undertaken in two ways
- As part of a properly scoped ESIA; or
- As a standalone RCIA.
In both cases the approach is largely the same, although where a RCIA is included in an ESIA, there may be cost and time synergies achieved in doing this when the ESIA is appropriately phased and planned.
Overall, the impact assessment process (e.g. ESIA) and CIA should be linked, and the RCIA should utilise information from the impact assessment process. During the ESIA process, at a minimum, there should be assessment whether the proposed development may contribute to cumulative impacts and/or may be at risk from cumulative effects for features that it depends on, for example water availability.
For the RCIA, in addition to considering information from ESIAs, available public desktop information (e.g. existing ESIAs, NGO reports, research publications) on previously completed assessments and on existing and proposed activities and operations is utilised along with stakeholder engagement and consultation with relevant parties (specifically including local communities). For an effective RCIA there are occasions when further baseline data may also need to be gathered; for example, to fill gaps between ESIAs for multiple projects.
2.4 Valued Environmental and Social Components (VECs)?
Given that CIA is a complex area that can be time and cost intensive, there is a need to best define the elements that are of interest to support good overall E&S management and in the case of a RCIA remains focussed on project/business-specific aspects, rather than considering all possible E&S aspects. To support this approach, as noted above, the concept of VECs is used. In practical terms, a VEC is an E&S attribute that has some “value” (the value could be inherent or could be ascribed to it by an individual, community, science, society, etc.) and can be measured (either quantitatively or qualitatively) and should reflect public concern about social, cultural, economic, or aesthetic values. VECs may also reflect the scientific concerns of the professional community. Cumulative impacts are generally the same as those assessed in an ESIA, except (as noted before) they are considered in a different context, with the focus on VECs, rather than in an ESIA the focus being on the development
- Examples of VECs
- Physical features, habitats or wildlife population (for example, air quality, ambient noise levels, surface water quantity/quality, biodiversity etc.).
- Ecosystem Services (such as forested areas mitigating soil erosion).
- Social conditions (for example, human health, housing, etc.).
- Cultural aspects (for instance, tangible and intangible cultural heritage).
- Natural processes (including water and nutrient cycles, etc.).
As a CIA is future orientated, the focus on the assessment of cumulative impacts is to predict the conditions of VECs that are anticipated to result from the combination of development impacts and other factors, like natural stressors. As an example, to what extent would air quality be reduced to unhealthy levels as a result of multiple developments with emission from the development of a special economic zone incorporating a port, refinery, smelter and manufacturing operations all being developed separately at different times, but in the same area.
The context of being able to assess cumulative impacts requires consideration of thresholds or “limits of acceptable change”, beyond which the condition of the VEC is no longer acceptable. In other words, what is the maximum level of use or activity that a system can sustain without undesirable consequences. As in the special economic zone example above, this threshold beyond which the condition is unacceptable may be where ambient air quality standards are breached. Defining these thresholds requires scoping of the environmental and social conditions that incorporates scientific understanding in a considered rationale process and typically needs professional support.
- Example VECs and Cumulative EffectsTable 2 below introduces some example VECs and associated cumulative impacts upon them and condition changes.
Table 2: Example VECs and Cumulative Effects/Change of Conditions
VEC Cumulative Impact/Condition Change Air Quality Ambient air quality reduced below acceptable levels from multiple project emissions reducing visibility and impacting on health Biodiversity Loss of species due to fragmentation of habitats Surface water Reduced surface water availability due to multiple abstractions Human health Increased respiratory diseases due to cumulative air emissions Cultural heritage Damage to tangible cultural heritage through increased visitor numbers and vandalism
3. Why companies and fund managers should address this topic
3.1 Risks for the business
Unless assessed and understood, cumulative impacts have the potential to cause significant business risks across the spectrum of E&S topics that are included in this ESG Toolkit.
Potential issues from cumulative impacts include:
- Restrictions on the natural resources that the business requires to operate; for example, water scarcity because of competition from other users.
- Loss of a social licence to operate, resulting in construction or development delays. For instance, because operations are disrupted by social unrest and tensions with local communities and/or legal claims from local communities.
- Legal claims from other businesses and local communities, which can delay or halt permits and licences being issued.
- Increases in operational costs due to the need to comply with more onerous licensing and permitting conditions. For example, the installation of additional equipment to treat air emissions, or the need to obtain resources from further afield, such as importing water.
- Increased operational costs due to reduced availability and/or poorer quality of the resources. For instance, water scarcity is likely to increase the cost of water. Another example may be land degradation and/or erosion that may lead to an increase in the required inputs, such as fertiliser, to maintain yields.
- Increased vulnerability to natural events and/or climate change risks due to cumulative depletion of ecosystems resilient to climate change (for instance, loss of mangroves, which reduce coastal erosion).
- Reputational risks due to adverse media and/or NGO attention. Reputational risks may be exacerbated if a project’s impact is combined with the impacts of nearby third-parties.
3.2 Opportunities for the business
There are clear upsides to understanding cumulative impacts, including:
- An early and proactive understanding of the fundamental risks that may impact on operations can allow companies to design more effective management measures (for example, using closed-loop cooling systems, rather than open-loop, where water availability is a concern).
- Enabling Affected Communities concerns about potential or perceived cumulative impact to be identified and addressed, thereby avoiding negative stakeholder interactions and securing the social license to operate.
- CIAs can improve access to capital. For example, if a number of power projects are being developed in close proximity, investors may require the different developers to jointly fund a CIA before providing finance or guarantees.
- CIAs can help maintain good stakeholder relations, protect a company’s reputation and preserve a social licence to operate.
- Enabling confirmation that perceived Development Impact is not undermined by cumulative environmental and / or social impacts.
- Fully considering cumulative impacts can lead to a more sustainable business plan. For example, a water-bottling company dependent on an aquifer could be significantly impacted by nearby projects (due to depletion of the water resource or pollution).
- Cumulative impacts management, frequently requires the collaboration of different actors, including other companies and/or local authorities. This can present an opportunity for companies to building good relationships with other actors and explore collaboration in other areas, projects and/or initiatives.
- Potentially improving access to capital, since this is a requirement from a large number of investors following international E&S standards.
4. Advice for fund managers
Fundamentally, companies and investors should understand the risks their activities pose to, and their impacts upon, local communities and the environment, in addition to potential risks from E&S factors on their business model. Companies can identify risks and impacts via a formal ESIA, though it is important to recognise that cumulative impacts may not be well considered in ESIAs (which may be a function of consultant capacity, and/or the timing and scope of ESIAs). In circumstances where the factors in the bullet points below are potentially present, particular attention should be paid to potential cumulative impacts in the terms of reference for ESIA and Environmental and Social Due Diligence (ESDD), and to the track record of consultancies in assessing cumulative impacts.
Fund managers should ensure that, at a minimum, companies operate in compliance with applicable laws and regulations. Additionally, where there are potentially cumulative impacts (either the company may be impacted by cumulative impacts, for example water scarcity, or the company may contribute to cumulative impacts, for example water quality), fund managers should assess:
- Government capacity and commitment
Government capacity and commitment to systematically assess and understand cumulative impacts, in line with good international industry practice (including the incorporation of cumulative impact risks into regional and national developments assumptions and plans). In the absence of government capacity and commitment there can be challenges in the full assessment, monitoring and management of cumulative impacts.
- Local and national plans
Where local and national plans have been produced, there is a need to evaluate whether cumulative impact assessment risks have been adequately recognised and incorporated into development assumptions.
- Companies’ alignment with international standards
Companies’ alignment with international standards and ability (as appropriate) to ensure that impact assessments are undertaken which consider cumulative impacts (where relevant) and to develop action plans that address any gaps within a reasonable time frame, including understanding if the company operations maybe negatively impacted by other factors (including or reasonably predictable future development).
- Potential impacts from third parties
Assessment, as necessary, of potential impacts from third parties that may negatively impact the company’s operations and potential mitigation measures.
Where cumulative impacts are likely to occur, fund managers should seek specialist professional advice as cumulative impacts are often complex issues.
The potential for significant cumulative impacts to arise is partly dependent on the nature, scale and location of a company’s activities. However, cumulative impacts are more likely in certain sectors because of their inherent characteristics.
- Sectors with inherent risks
- Agriculture, aquaculture and forestry.
- Heavy manufacturing (including metals processing, cement manufacturing and chemical production etc.).
- Tourism (especially when clustered around a particular geographical feature, for instance coastal areas).
- Oil and gas operations (including upstream, midstream and downstream operations).
- Power generation (particularly thermal power generation), transmission and distribution.
- Risk factorsIn terms of cumulative impacts, particular attention should be given to circumstances where:
- There is an unclear or non-existent in-country framework for the assessment of cumulative impacts, or the assessment has not been undertaken
- There are known existing or future developments in or in the proximity of a project’s area of influence. For example: within heavy industrial parks, in areas designated for intensive development and in areas where features will tend to result in the aggregation of similar industries (or activities) with similar resource demands over time (for example mineral deposits or geographical features of tourist interest.
- Where companies are highly dependent on relatively scarce resources (or natural features) or where a company’s activities may significantly contribute or exacerbate cumulative impacts on these resources.
- There are known existing and generally significant demands on land, natural resources and/or ecosystem services in the project area of influence and the company is likely to have an impact on these.
- A project(s) and/or an activity(ies) will require the development, expansion or upgrading of infrastructure or services (e.g. a power plant may need the construction or expansion of a transmission line and new access roads).
- A project(s) and/or an activity(ies) which is likely to result in population influx or outflow (e.g. large number of workers moving into a remote are to work in a mine).
- Impacts on vulnerable groups, indigenous communities and/or cultural heritage are likely to be exacerbated as a result of cumulative impacts.
- There is a lack of capacity or ability to commit by regulators and other parties who will need to be part of CIA monitoring and management.
- Potential impacts related to supply chain for a company’s operations, for example reliance on a target species in production that is also being exploited (or is likely to in the future) by other companies that requires assessment and potentially monitoring.
It should be recognised that in consideration of a project or business, any assessment should consider both impacts from direct operations and activities, and impacts from Associated Facilities and other related infrastructure such as roads, ports, waste management facilities and pipelines.
The guidance included below provides additional information and primarily focuses on the rapid identification of cumulative impacts which can help fund managers and companies to assess risks associated with cumulative impacts. The output of a RCIA will often require the engagement with multiple stakeholders to address the issues raised. On a best-efforts basis, strategies and approaches for collaboration in the implementation of management and mitigation measures should be adopted. It is acknowledged that this maybe challenging, however, this may offer a realistic approach to mitigating risks for the company.
Also, see the BII Environmental and Social Checklist as it contains questions and tips to help fund managers to assess the E&S aspects of an investment.
4.1 Why, when and how should a RCIA be conducted?
- Why conduct an RCIACumulative impact assessment and management should be undertaken where there is a concern that a project (or activity) under consideration may contribute to cumulative impacts (or impact upon the feasibility of the project or activity itself), or there is an existing concern relating to cumulative impacts, for example reduced river flows.
In circumstances where a government-led CIA has been completed or where specified requirements for a CIA have been provided by regulators, there is a straightforward requirement to comply with these.
Where there is not a government-led CIA, then as described above, a RCIA offers a practical process to initiative the assessment of potential cumulative E&S impacts. The RCIA should be undertaken where there is potential that the development or activity of a project or business may contribute to material / significant cumulative impacts to one or more VECs. Additionally, when a company is anticipated to have significant or irreversible impacts on the future condition of one or more VECs that are also, or will be, affected by other developments. The other developments may already exist, be reasonably anticipated, or be a mix of existing and reasonably anticipated developments. Where a series of developments of the same type are present – or being planned – in the same area, the need for CIA is strong. There may be circumstances when the need to consider cumulative impacts is less obvious, however, circumstances indicated in Section 4 above provide considerations as to when the assessment of cumulative impacts may be required.
- How to conduct a RCIAWhere a company is undertaking an RCIA it is recommended that they:
- Use a six-step process to conduct the RCIA, including engagement if necessary of qualified third parties to undertake the RCIA (also see Annex A for an example Terms of Reference for a RCIA).
- Ensure that relevant stakeholders are engaged early in the process and there is ongoing relevant engagement during the impact assessment and decision making process, and build positive productive relationships with stakeholders.
- Build up a record of the decisions made in the RCIA, with supporting evidence to show robust decisions.
- Consider through the process how the management and mitigation measures can be most effectively designed and implemented, given the various stakeholders.
- Good practiceAs noted before, the reality is that the creation of a framework for a CIA that is supported and can be implemented at a regional level is typically beyond the capacity and capability of individual developers. However, good practice to support these types of initiatives includes:
- Supporting the development of these types of frameworks through working with others in the cumulative impact assessment process
- Information sharing through providing the results of any cumulative impact assessment (including recommendations for management actions related to VECs).
- Providing support to implement approaches to manage cumulative impacts (for instance shared management initiatives, participation in meetings, sharing data, polling resources etc.)
- When to conduct a RCIAIn terms of timings, the RCIA is best completed as early as possible in the impact-assessment process to enable the mitigation hierarchy to be used. Some companies may have options on deciding their location, or use of technology, that would avoid or mitigate cumulative impacts. Where possible, avoidance of cumulative impacts should be the first preference, in line with the mitigation hierarchy.
Conducting a RCIA will generally require the use of specialist professional advice as cumulative impacts are often complex issues (a draft Terms of Reference is included here and under ‘BII Guidance’ on the Reference Materials page to assist in the appointment of appropriate specialists).
4.2 Key considerations of a RCIA
Where a company initiated RCIA is undertaken, there are broadly six objectives which are as follows:
- To complete an assessment of the potential risks and impacts of the project or business over time, in the context of the potential impacts from other projects or businesses, and external environmental and social receptors.
- To verify that the project or business’s cumulative social and environmental impacts and risks will not exceed a threshold that could compromise the sustainability or viability of the selected VECs (and apply the mitigation hierarchy if this is predicted).
- To assess whether the project or business’s value and feasibility are limited by cumulative social and / or environmental impacts.
- To encourage the development of governance structures for making decisions and managing cumulative impacts at an appropriate geographic scale (for example, region, airshed, watershed, etc.).
- To ensure that the concerns of Affected Communities regarding the cumulative impacts of a proposed development are identified, documented, and where appropriate, addressed.
- To manage any potential associated reputational risks
4.3 Key Challenges in a RCIA
As described above, the assessment of cumulative impacts (and their management) is the governments’ responsibility and, hence, ideally led by government agencies as part of multi-stakeholder initiative. However, government agencies in emerging markets are not always successful in ensuring appropriate assessment and management of cumulative impacts. Therefore, responsibility for completing a cumulative impact assessment often falls to the private sector.
- Challenges for the private sectorAccordingly, there can be challenges for the private sector in understanding cumulative impacts and make a meaningful assessment, including:
- Cumulative impacts may have not typically been assessed on a regional basis or in a systematic manner (and a national-level framework may be lacking).
- There may be restrictions in the availability of information from other operations/activities in the study area due to commercial confidentiality.
- There may be multiple parties that are potentially responsible for understanding and managing cumulative impacts (for example, across different jurisdictional boundaries).
- Companies may be reluctant to collaborate with each other. For instance, because of a perception that a CIA/RCIA may be costly and/or disruptive.
- There may be limited environmental & social baseline information available.
- Stakeholders may assign different priorities to VECs.
- There may be uncertainty in identifying and describing “predictable future development” and “external natural and social stressors” in enough detail to assess the environmental and social impacts.
- Cumulative impacts often relate to public goods and services, or the presence and quality of labour pools – aspects which are generally seen as the responsibility of the public-sector agencies.
- Effectively influencing or applying leverage to governments and other developers can seem an insurmountable or pointless task.
4.4 Recommendations to overcome challenges around cumulative impact management
Whilst there are potential challenges in undertaking an assessment of cumulative impacts, ignoring cumulative impacts can negatively impact the fundamental aspects for the viability of a business or result in other risks described in Section 3.1.
On an individual company basis, an RCIA offers a pragmatic approach for a company to assess cumulative impacts. However, as noted above, addressing the management and mitigation measures that will be the outcomes of the RCIA, typically require a multi-stakeholder approach to be implemented.
- Key items that can assist in overcoming challenges
- The team appointed to undertake the RCIA has the right skills and qualifications and ideally experience (although recognising that finding personnel with cumulative impact assessment experience in a particular geography may not always be possible).
- Timelines are realistic, particularly given the input of various stakeholders.
- The best possible (and most up to date) information is obtained and used.
- Budgets have been set aside that reflect the potential scope and timeline for the assessment.
- Ensuring clarity on the roles and responsibilities of various parties.
- Maintaining positive and constructive relationship with the various stakeholders.
- Being cognisant of the resources of each stakeholder and avoiding “engagement fatigue”.
- Where possible collaboration with other developers or those undertaking relevant activities in the area of interest.
In circumstances where there is no information available from third parties on existing or planned developments, the developer may promote the benefits of the assessment of cumulative impacts to third parties and encourage them to provide information on existing developments and future plans, in addition to obtaining the available information from government authorities may have on existing (and future planned) developments. Where there is a lack of specific information about developments and their impacts use of representative information about the other developments, inputs, impacts etc. for typical developments of similar size to provide some bridging information.
4.5 How should the results of the RCIA be used?
In order for the recommendations of the RCIA to be effective, the success will be directly linked to the realisation of the design and implementation of the management and mitigation measures.
This is likely to be on two levels:
- Considerations for the company, that the company has direct influence over.
- Broader considerations that may require support from, or impact upon, multiple stakeholders.
- Company levelAt a company level, there may be outputs from the RCIA that indicate that the fundamental business model is not sustainable, for example, a water-bottling company dependent on an aquifer could be significantly impacted by nearby projects (due to depletion of the water resource or pollution). In which case, they may represent a fatal flaw for the business and therefore limit potential investment, cause reputational risks, community issues, etc.
The RCIA may identify risks and impacts that maybe more readily addressed, for example adopting a different technology, installing air emissions abatement, changing construction timing so that labour availability is not an issue.
The RCIA may identify risks and impacts that need to be managed, similar to the management of impacts identified in an ESIA. For this the most effective way to manage E&S risk and impacts at a developer level is to ensure that it is integrated into the company business plans and approach from planning, construction to operation and ultimately decommissioning. Therefore, once the RCIA is complete, the results can be used – with the outputs of the ESIA – in the project / business’s environmental and social management system (ESMS) and provide a framework for monitoring. The outputs of the ESIA and RCIA may also inform the stakeholder-engagement process.
Furthermore, appropriate monitoring is critical to assess the actual outcomes that occur from development, and to assess whether the predictions made in the cumulative impact assessment (and ESIA) have been realised. The monitoring is then used to assess if further actions need to be taken. The monitoring maybe as part of compliance for any consents obtained, but also the wider monitoring of VECs (which is likely to require support and engagement with other stakeholders).
- Broader levelGiven the inherently wider considerations in a RCIA, the stakeholders who may have been involved in the RCIA are likely to be important actors in establishing management and monitoring programs where there is a need to mobilise the recommendations of the RCIA. Importantly, the work undertaken in the RCIA may then form the basis of a CIA which is larger in scale and led by government and/or several companies or other actors.
Ultimately, the management measures required to minimise and prevent cumulative impacts are dependent on the context in which the impacts occur (the impacts from other projects and natural drivers that affect the VECs) and the characteristics of the project’s impacts. In order for the management measures in a RCIA to be enacted and effective there needs to be agreement involving third parties and other actors that is understood and captured appropriately in a manner that promotes collaborative monitoring and management, for example in Memorandums of Understanding (MoUs) or agreements that set out responsibilities and clear actions. Whilst there is a need for concrete action the engagement with other companies, governments and stakeholders on acknowledging the risks associated with cumulative impacts and managing them is on a best efforts basis and should utilise any leverage that the company may have.
Good practice involves making the cumulative impact assessment (and ESIA) available to others who are working to manage cumulative impacts within the relevant regional context.
The IFC Good Practice Handbook on Cumulative Impact Assessment and Management provides further insights into how to use the outputs from a RCIA.
5. Further resources
- Further information and guidance
- 2012 Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts (and the accompanying Guidance Notes).
- IFC Good Practice Handbook Cumulative Impact Assessment and Management: Guidance for the Private Sector in Emerging Markets (2013).
- IFC Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets
 The mitigation hierarchy to address identified risks and impacts favours the avoidance of impacts over minimisation, and, where residual impacts remain, compensation/offset, wherever technically and financially feasible should be undertaken.