Antoine Heuty and Cornelius Graubner, January 15, 2014
Over the past ten years, a growing number of philanthropies, think tanks, civil society and grassroots organization have pushed companies to publish what they pay and governments to disclose what they earn form their mineral sectors. We actively participated in that effort at the Open Society Foundations and the Revenue Watch Institute –two great organizations on the frontlines of governance reforms in resource rich countries and beyond. A coalition of change makers from government, business and civil society enabled significant advances to follow the money in the oil, gas and mining sectors. The gap between the promises of transparency and its lack of transformational impact led us to look for complementary and alternative approaches to turning natural resources into development. There are five observations that compelled us to start Ulula.
1. Transparency initiatives alone are not enough to address poverty in resource-rich countries
A recent report by McKinsey on maximizing the potential of resource-driven economies estimates that over 800 million people from 81 countries dependent on oil, gas and mining are poor while extractive industries account for trillions of US dollars in annual revenue. Transparency has emerged as the most broadly recommended policy response to the poor governance records in resource rich states and their damaging developmental effects. The theory of change here is that more information available to the public will make governments and extractive industries more accountable and lead to better spending of resource revenues, thus reducing poverty. The problem is that evidence supporting this simplified theory of change is weak. While transparency is important, it alone does not harness natural resources for development. It needs – at least – to be augmented by approaches that recognize the political nature of poverty and strengthen citizens’ participation in decision-making in resource rich countries.
2. Sustainable development needs a trialogue between citizens, governments, and businesses
Transparency and accountability approaches need to integrate businesses in addition to governments and communities. Traditionally, transparency and accountability initiatives have focused on facilitating the relationship between citizens and their governments, while attempts to integrate businesses into such programs have been few and far between. This ignores that in the everyday realities on the ground businesses are important actors whose operations impact the communities that they operate in. There can be no sustainable development without acknowledging the role that commercial actors play. A recent blog by Andrew McLeod estimates that corporate-community investment in the extractive industries is worth in excess of $59 billion per annum – compared to a total $15 billion for the whole UN system.
3. Unaccountability is expensive
As the world becomes more connected and the demand for energy and minerals increases, unaccountability becomes more expensive for businesses and communities. Extractive industries are high-impact industries: they leave notoriously hefty local footprints as large-scale operations inevitably alter environments, economies and communities. Such transformations are disruptive and can lead to conflicts, the costs of which can be severe for everybody involved. A recent report by Chatham House on Conflict and Coexistence in the Extractives Industries summarizes the rising number and severity of clashes between communities and companies. For a world-class mining operation the average cost of a week of operational disruption due to social unrest or environmental events can easily reach $20-30 million in addition to reputational damages. Mining companies have recorded $75 billion of write-downs across the sector in the past two years.
For communities and workers, conflicts can result in injuries, loss of live, disappearing employment opportunities and other calamities. But severe conflicts do not happen overnight; they are the results of smaller issues that remain unaddressed and fester. It is better to address small problems before they accumulate and escalate, but this requires rethinking community outreach strategies.
4. Mobile technologies allow for easier community engagement
Community outreach has long been an activity of extractive industries operating in developing countries. For companies, community outreach can improve the acceptance of their operations on the ground and keeps them in touch with problems that communities might be facing due to their operations, while communities gain access to services that their government or NGOs might not be able to provide. However, in order to be effective in leading to better development outcomes for communities and operational risk management for companies, community outreach has to be done right. Key challenges here involve including marginalized groups and strengthening participation and voice of citizens on issues that affect their lives. This makes outreach to communities a cumbersome and expensive process: site managers spend between a third and half of their time on community outreach. It is here that mobile technologies can provide real value for companies and communities. Simple text- and voice-based approaches allow closing the feedback loop for continuous, cost-effective, and more accurate community engagement.
5. Even in rural settings mobile phones are ubiquitous
Setting up mobile networks with satisfactory coverage requires much less investment into infrastructure than traditional phone and Internet access through landlines would cost. Accordingly, the last 10 years witnessed a global explosion of mobile phone ownership and mobile-cellular subscriptions, even – or especially – in rural areas. In 2013, there are 6.8 billion mobile-cellular subscriptions: that means that that there are almost as many subscriptions as there are people in the world. In developing countries the mobile-cellular penetration rate is 89% and continues to rise. In many parts of the world mobile phones double as banks, weather stations, doctor’s offices, maps, textbooks or radios.
Ulula is the product of these observations. With Ulula we provide a simple, mobile-phone based solutions for high impact industries to manage risks and create shared value. We offer a suite of solutions– Community Feedback, Mobile Polling, Supply Chain Management, and Data Analytics – that are based on a continuous, inclusive, and systematic process of dialogue and response between communities, businesses, and governments.
We do not believe a simple “technology fix” will solve all the problems of resource rich communities. Ulula relies on the idea that putting communities at the center of a feedback mechanism with companies and local governments is paramount to improving the local impact of business in society. We strongly emphasize human centered design approaches to build and adapt to the local context. The data-driven and real time information gathered by the platform will provide a source of learning and evaluation to iterate and adapt our methodology and services to the complex challenges of implementing and scaling Ulula’s model.
Antoine Heuty is the founder of Ulula. He is an experienced development practitioner with a long track-record designing and delivering policy reforms and working for social good with business, civil society and government in over twenty countries.
Cornelius is a senior expert on business and strategy development. As passionate development professional with over eight years of experience he has worked with groups in the former Soviet Union, Mongolia, Pakistan and Afghanistan on issues of organizational development and effective strategy implementation.