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BHP MOZAL Smelter Back for OECD MNE Review

OECD Watch reports that UK National Contact Point for OECD Guidelines for Multinational Enterprises re-initiated review of BHP Billiton's bypass case of its MOZAL smelter in Mozambique after IFC Compliance Advisor Ombudsman appears to have failed to facilitate a resolution of this case. 

In late 2010, a coalition of NGOs had lodged complaints about BHP’s MOZAL aluminum smelter with the Johannesburg Stock Exchange (JSE) SRI Index, the IFC’s Compliance/Advisory Ombudsman (CAO) and OECD National Focal Points in Australia and the UK. The case involved a planned bypass that would allow the MOZAL aluminum smelter to operate without exhaust treatment for a period of six months to allow for urgent repairs.

Around the same time last year, this case caught my attention and I posted a blog entitled NGOs Testing BHP Billiton and Investors’ Metal. Looking at public information available on IFC’s website, it seemed that serious corrosion problems were already identified a decade prior to the need for emergency bypass. This was reported in the (only) IFC web-posted Annual Environmental and Social Performance Monitoring Report (AMR) for MOZAL, dated September 2002 (see here).

Earlier this months (November 2011), OECD Watch reported that “after several meeting and attempts to reach an agreement between the parties facilitated by the CAO, the case was closed without an agreement.” Although no recent status update about MOZAL has been posted on IFC’s CAO case web page  by the time I posted this blog (28 Nov 2011 - please see 28 Dec 2011 update further below) and taking OECD Watch's report on face value, I assume that the IFC CAO Ombudsman will now need to pass the case to IFC CAO Compliance and, subject to its findings, consider auditing IFC’s own performance and adequacy of interventions.

In its Initial Assessment (February 2011), the UK NFP for the OECD Guidelines for Multilateral Enterprises (MNE) decided that some of the issues raised by the NGO complaints about MOZAL merited further consideration. However, the review was suspended given the parties’ decision to undergo conciliation/mediation offered through IFC CAO. Given the closure of the IFC CAO mediation efforts reported by OECD Watch, it would appear that the UK NFP for OECD Guidelines for Multinational Enterprises will now resume its review of the case. In addition, OECD Watch indicates that a review of the case by the European Investment Bank (EIB) is on-going.

Curious learn more about why IFC CAO’s mediation efforts were closed and the outcome of the UK NFC review of this case. I would have also loved to read anything about this topic in BHP Billiton’s 2011 A+ sustainability report. Sadly, BHP's report, with limited assurance provided by KMPG that actually included a site visit to MOZAL and apparently followed ICMM’s Sustainable Development Framework Assurance Procedure, is silent about this topic.

How would you approach this topic in terms of sustainability reporting and have you seen better reporting and assurance examples? Please share your insights about this interesting case.

29 Dec 2011 Update: On December 19, 2011, the CAO posted an update. Indeed, an agreement between the parties regarding the Mozal complaint was not reached through a CAO dialogue process. The case has been transferred to CAO Compliance.  A conclusion report documenting outcomes from the CAO’s dispute resolution process is available here: English - Portuguese.

12 April 2014 Update: IFC's CAO releases Audit and IFC's Response with regard to Mozal case.  The audit report is available in English and Portuguese, with IFC's response, at this link. CAO's key conclusions:

"In a context where the [Fume Treatment Centers or FTCs] were known to be subject to corrosion and had previously been shut down for repairs on this basis, the audit finds shortcomings in the way in which IFC worked with its client to address the changing risk profile of the project. In particular CAO finds that it would have been reasonable for IFC, after it became aware of the earlier corrosion incident, to have requested that Mozal assess, monitor and report regularly on its approach to the management of risks associated with the possible future failure of the FTCs. Had this been done, CAO finds that appropriate advance consultation with affected communities could have been conducted.

While asserting that IFC staff took reasonable action timely action consistent with its policies and procedures, IFC acknowledges the importance of the issue raised by the audit; specifically the reporting of incidents relevant to a client's environmental and social performance (particularly in mature investments)."

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3 Responses to “BHP MOZAL Smelter Back for OECD MNE Review”

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