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The Guidance Tool

Project-Level Guidance

Land-based investment projects appear in many shapes and sizes. They are planned to produce agricultural, forestry, and mineral products, among others. Each sector presents special land and forest tenure characteristics5 and each project will require a certain amount of land to produce the resource, house workers, and transport goods out of the project site. In all circumstances, land access, use rights, and management rights must be negotiated with a counterpart that holds those rights. The Interlaken Group has developed guidance according to the five project types that are most likely to be initiated by a company making land-based investments. Each project type has certain characteristics that distinguish it from the others.

Below are key considerations related to the VGGT for the five project types:

Project Type Consideration

Greenfield

No prior due diligence:
In a greenfield project, no prior due diligence has been completed on land and forest rights in the project area. A company’s due diligence process must be thorough and comprehensive to understand the legitimate tenure rights that exist in the project area. Greenfield projects have the most freedom to find new ways to engage host communities and the government in the site selection for a project and in the production model design. At the same time, a greenfield project can be abandoned or moved to a new location where the tenure situation is clearer or more equitable at less cost than other project types. In some cases, government agencies will expropriate land from communities to make it available for new investments. Companies must therefore complete a thorough due diligence process to ensure that the land was expropriated according to international legal standards and the VGGT.

Brownfield

Existing operational model:
Brownfield projects are implemented in an area where a previously operational production model exists or existed. Generally, the previous operator has already negotiated land and forest rights. In such a circumstance, the new operator interested in acquiring the brownfield site must conduct its own due diligence related to tenure in the area. The operator must also perform a retrospective analysis to understand what issues the previous operator encountered related to land and forest tenure rights, who granted the concession, and what types of compensation were provided to communities affected by the project. In brownfield sites, local communities may hold longstanding grievances against the previous operator that could affect the new operator’s relationships with the communities. Since the VGGT were published in 2012, it is likely that the previous operator did not conduct due diligence that meets the standards of the VGGT. In this situation, the new operator still has the option to look elsewhere for their project site.

Existing Holdings

Re-engaging communities:
When a company undertakes to implement the VGGT in its existing project, it is likely to uncover land and forest rights issues that did not appear in the initial due diligence. Companies are expected to thoroughly review prior Environmental and Social Impact Assessments (ESIAs) and Human Rights Impacts Assessments (HRIAs), the contracts they have in place granting their land access and the compensation they made to host communities. Companies might use this process as an opportunity to re-engage neighboring communities and identify new ways to augment their production through the inclusion of local household/community production models. In this circumstance, it is unlikely that the operator will move operations given the considerable cost it would face. At the same time, the company must face the reality that the expenditures made to remedy past mistakes related to land and forest rights might decrease the project’s return on invested capital.

Joint Ventures or M&A

Acquiring existing land holdings or working with local partners:
Gaining land and forest rights through a joint venture with a local company or through a merger/acquisition where the acquired company had previously negotiated the tenure rights poses particular challenges for a company aiming to act consistently with the VGGT. In many developing economies, local partners can acquire land and forest rights through political connections that do not respect the international standards for land acquisitions reflected in the VGGT. Companies engaging in joint ventures with local partners or acquiring companies with existing land holdings must therefore conduct retrospective due diligence on the process used to acquire those rights. A company can choose to abandon the joint venture or acquisition if it discovers especially egregious violations of the VGGT, but it can also use the negotiation process to remedy past violations and put the operations on a new footing that respect the tenure rights of the host communities.

Procurement / Supply Chains

Engaging suppliers who impact land and forest tenure rights:
For companies that purchase raw materials from suppliers that own or lease land and forests, adhering to the VGGT will mean engaging their suppliers in a dialogue on improving their respect for legitimate local tenure rights and human rights. In some cases, the supplier will have taken steps to adhere to the VGGT independently; in other cases, the supplier might require some assistance or encouragement. Large purchasers of commodities can develop policies based on the VGGT for their procurement teams to audit their suppliers. Suppliers might also be required to meet certain standards before entering into contracts with the purchasing company. The multitude of suppliers makes compliance more complex, but companies may want to change suppliers should the standards not be met. Ensuring full traceability in a company’s supply chain can help the company track how its suppliers impact local tenure rights.

  1. See Annex 4 for key considerations for agricultural and plantation forestry land.