Overview of Performance Standard Six Requirements
There were several changes to Performance Standard 6 that will affect EP III. This included the replacement of the concept of “renewable natural resources” with the dual concepts of “ecosystem services” and “sustainable management of living natural resources”, which places greater importance on ecosystems and removed some specific details on forest and marine ecosystems. Another change was the redefinition of “critical habitat” and addition of the requirement for a Biodiversity Action Plan in relation to critical habitats affected by a Project.
The 2012 version of Performance Standard Six aims to:
- protect and conserve biodiversity;
- maintain the physical, provisioning, regulating, indirect, and cultural benefits that people and businesses obtain from the ecosystem (known as ecosystem services); and
- ensure the sustainable production of living natural resources.
The risks and impacts identification process will usually take the form of an environmental and social impact assessment, which includes a baseline of the relevant biodiversity attributes and ecosystem services, considers the values identified through consultations, and describes the threats, impacts and mitigation measures of the project.
This environmental and social risks and impacts identification process must be consistent with good international industry practice (GIIP). It is through this environmental and social risks and impacts identification process, and through the policy and process requirements set out in PS 6, that a Client determines which actions required by Performance Standard 6, if any, apply to a project.
The required actions described in Performance Standard 6 apply only to:
- a project located in modified habitat with significant biodiversity value, natural habitat, critical habitat, or a Legally Protected Area or an Internationally Recognized Area, which determination is based on specific definitions and tests that consider the nature and content (i.e., biodiversity) of the habitat in question;
- a project that may potentially impact, or is dependent on, ecosystem services over which the Client has direct management control or significant influence; or
- a project that involves the production of living natural resources.
Where Performance Standard 6 applies, a Client must develop an Environmental and Social Management System (ESMS) which manages the implementation of the actions (be they prohibitions, obligations or suggestions) set forth in Performance Standard. As well, a Client must consider issues related to alien species; engage and monitor primary supply chains related to the project; and seek to avoid impacts on biodiversity and ecosystem services, when possible.
Large-scale and complex projects that involve significant impacts across multiple biodiversity values and ecosystem services should apply an “ecosystem approach” to understanding the risk and impacts that exist in the environment in which the project is located. An ecosystem approach: (a) focuses on the relationship between components and processes in an ecosystem; (b) acknowledges that the many components of biodiversity control the stores and flows of energy, water and nutrients within ecosystems, which provide resistance to major perturbations; and (c) acknowledges that functional biodiversity in ecosystems provides many goods and services of economic and social importance (i.e., ecosystem services). An essential element in the ecosystems approach is the adoption of adaptive management practices, which must incorporate a learning process. This learning process helps to adapt methodologies and practices to the ways in which the systems are managed and monitored.
An Ecosystem Services Review may be required whereby an EPFI client must categorize the applicable ecosystem services to determine which ecosystem services are priority ecosystem services. Based on the review and categorization, a Client may be required to conduct further stakeholder consultation, develop a mitigation hierarchy, and implement mitigation measures.
A project that involves the primary production of living resources is required to implement sustainable management practices and, where such practices are codified, implement sustainable management practices to such relevant and credible standards including independent verification or certification.
Potential for Broad Application - Biodiversity in the Supply Chain
The CAO considered the relevance of supply chains to the application of the 2006 iteration of Performance Standard Six in its Audit Report dated June 19, 2009 of the IFC’s investments in Wilmar Trading (IFC No. 20348), Delta–Wilmar CIS (IFC No. 24644), Wilmar WCap (IFC No. 25532), and Delta–Wilmar CIS Expansion (IFC No. 26271) (C-I-R6-Y08-F096) (the Wilmar Projects). It gives some indication of the scope of application of the new 2012 version.
The complaint (made by the Forest Peoples Programme on July 18, 2007) specifically complained that the project proponent cleared rainforests, cleared peatlands, and destroyed the habitat of orangutans without giving adequate attention to threatened habitats, species and ecosystems and without giving adequate special attention to the conversion of natural habitats and the degradation of critical habitats. In considering these complaints, the CAO Audit Report found that the risk and impact identification process for the Wilmar Projects mistakenly did not consider the appropriate primary supply chains, so the project area and project scope were too narrow to result in the application of Performance Standard 6.
The CAO found that the IFC:
(a) excluded supply chains from its analysis;
(b) did not consider ecologically sensitive resources relevant to the sector;
(c) inconsistently focused on the proponent’s ownership of the primary inputs (crude palm oil); and
(d) failed to correctly assess the supply chains related to the project.
The risks and impacts identification process established under Performance Standard 1 set out the elements that must be included in such a process, including the risks and impacts associated with primary supply chains which determines whether Performance Standard 6 applies. This was found not to have been given proper consideration by the IFC and suggests how supply chain biodiversity risks may have bearing on an EPFI review.
Industry Driven Research and Support on Biodiversity Issues
Biodiversity has been the focus of recent research initiatives in the energy mining and financial industries. For example, Biodiversity for Banks (B4B) program of the Equator Principles Association with UNEP FI and WWF. The Biodiversity for Banks (B4B) program is designed to help financial institutions overcome the challenges of incorporating risks associated with biodiversity and ecosystem services – all of the valuable resources provided by nature including safe drinking water – into their lending decisions.
ICMM, IPIECA and Equator Principles Association have also recently launched a Cross Sector Biodiversity Initiative (CSBI) in Washington, D.C. The initiative has been created to develop and share good practices and practical tools to apply the new International Finance Corporation's (IFC) performance standard 6 on biodiversity conservation. As the CSBI notes, the IFC Performance Standards have become globally recognized as a benchmark for environmental and social risk management in the private sector.
Performance Standard 6 - A Topic to Watch
In light of these recent developments and the challenges in application of Performance Standard Six, this is definitely an area to watch for sustainability professionals. I will endeavour to update the blog with new developments.