Through ESG, Indigenous peoples and local communities can safeguard their rights and the rights of nature

As the world faces challenges like climate change, nature loss and social inequality, Environmental, Social and Governance (ESG) frameworks, both voluntary and mandatory, are critical for our collective future. They can help guide businesses, particularly those with natural resource-based supply chains, to contribute positively to society, mitigate internal and external risks and build long-term value for investors, people and the planet. ESG frameworks and their provisions help ensure that companies operate in an environmentally, socially and ethically sound manner. 

Essential to this discussion but often overlooked are Indigenous peoples and local communities, who are rights holders and stakeholders collectively known as affected communities, which includes nature. Nature is considered a silent stakeholder in ESG provisions such as the European Sustainability Reporting Standards (ESRS). At Pact, we are paying particular attention to this. The interdependence of Indigenous peoples, local communities, nature, climate and supply chains is central to ESG frameworks. Effective mitigation of climate change and nature loss requires the active participation of affected communities. This interconnectedness is reflected in due diligence provisions for supply chains and engagement with these affected communities.

As ESG becomes more integral to corporations and society, it is increasingly important to ensure that implementation includes the consideration of all affected communities, which are often most affected by climate change and environmental degradation. Their deep-rooted knowledge and connection to nature are key to creating sustainable solutions. If leveraged effectively, we believe that ESG provisions can serve as a significant avenue for affected communities to protect their interests, their rights and the rights of nature.

Despite their critical role in sustainable practices, affected communities face numerous obstacles in leveraging corporate ESG provisions to protect their interests. These include a lack of representation and voice in corporate ESG due diligence and decision-making processes; a complex compliance landscape, which affected communities may not have the resources, expertise or access to effectively navigate; fragmented data that restricts transparency and hinders their ability to participate meaningfully in ESG due diligence processes and monitor corporate compliance; and cultural differences between corporate entities and affected communities, which can lead to misunderstandings and the undervaluing of traditional knowledge.

Current ESG practices often fall short in genuinely integrating Indigenous perspectives and addressing their unique challenges. Many existing corporate ESG practices focus on disclosure and reporting compliance, which can lead to a checkbox approach and greenwashing that overlooks deeper impacts on affected communities and the environment, including loss of local livelihoods linked to ecosystem degradation and nature and biodiversity loss. While some progress has been made, such as the release of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations in 2023, the implementation of these provisions often remains superficial. Indigenous peoples and local communities frequently continue to find themselves marginalized. 

Pact’s Sustainable Supply Chain ESG Framework
This is why Pact has designed our Sustainable Supply Chain ESG Framework. This framework offers a structured and inclusive approach to integrating affected community perspectives into ESG due diligence processes, which include identifying, prioritizing and addressing impacts, risks and opportunities. By focusing on supporting the process of active and meaningful engagement between corporations with natural resource-based supply chains and affected communities, our framework is being designed to ensure that the rights, knowledge and priorities of affected communities are central to corporate ESG risk and opportunity measures. This not only bolsters the effectiveness and equity of ESG measures but also leverages the invaluable contributions of affected communities to sustainable and resilient environmental practices.

Through this approach, Pact is working to bridge the gap between corporate ESG performance and the practical realities faced by Indigenous peoples and local communities, fostering collaboration that protects both human rights and the environment. Our framework is designed to be a tool for empowerment, facilitating the use of ESG provisions by affected communities to safeguard their interests and the natural world upon which they and corporations both depend. We believe that ESG provisions can provide a platform for affected communities to engage with corporations on more equal footing. 

A framework for change
Pact's vision behind our Sustainable Supply Chain ESG Framework goes beyond disclosure requirements and compliance. Our approach emphasizes creating shared value for businesses, communities, climate and nature. This means shifting to meaningful engagement with affected communities and value creation. By identifying and addressing the specific impacts, risks and opportunities that affect Indigenous peoples and local communities, Pact aims to advance ESG practices that genuinely benefit all rights holders and stakeholders. 

So how does it work? Pact’s Sustainable Supply Chain ESG Framework is a human-centered set of tools and processes that helps to: 

• Identify and engage with all affected rights holders and stakeholders 
• Assess climate, nature and affected community-related impacts, risks and opportunities
• Incorporate national policy requirements and international best practices and standards, such as the TNFD 
• Implement strategies to mitigate risks, build resilience and create shared value for businesses and affected communities
• Support ongoing monitoring, evaluation and reporting to ensure transparency and continuous improvement

We envision our framework being implemented through close collaboration with civil society organizations (CSOs), which are ideally placed to support corporations, Indigenous peoples and local communities with direct engagement, ensuring active involvement and protection of affected communities, climate and nature. This involves conducting thorough assessments to understand local contexts and rights holder and stakeholder needs, developing tailored due diligence assessments and engagement strategies, using data and evidence to inform decision-making and track progress, and providing ongoing support and capacity development to both corporate and community partners.

Our hope is that Pact’s framework will lead to transformative change in how corporations interact with Indigenous peoples and local communities. Ultimately, our aim is to sustainably improve the interplay between supply chains, climate, nature, Indigenous peoples and local communities, ensuring environmental protection, climate mitigation and improved human rights. 

If you are interested in learning more about Pact’s Sustainable Supply Chain ESG Framework, or if you would like to partner with us, we encourage you to reach out to us. @email