Statkraft violates its self-imposed human rights obligations
The reputation loss could be greater than the costs of rectifying the human rights violation in Fosen. PHOTO: Sámi human rights activists in solidarity with the Mapuche struggle for Pilmaiken, outside Statkraft HQ in Lysaker, October 2023.
As a large international energy company, Statkraft has established its own policy to operate according to certain environmental and international law standards.
This is done according to the so-called ESG guidelines. The ESG concept consists of 3 elements:
Environmental
The company must have a policy that describes how it intends to meet environmental standards throughout its value chain. These can be industry-specific standards and should reflect what the company itself commits to.Social (Corporate Responsibility)
Within this aspect, a company must establish its own policy concerning human rights, indigenous peoples, relations with the local community, and how the business, in general, can influence and should interact with the broader environment.
Governance
In this area, a company should detail the working conditions its employees should expect, ranging from HSE rules to employment contracts and similar matters. Additionally, there should be systems in place to address deviations from these self-imposed standards, ensuring protection for whistleblowers, both internal and external. It's also essential for the company to demonstrate its capability and commitment to promptly rectifying any errors or shortcomings in its operations.
Statkraft's ESG Policy and Human Rights
Statkraft states in its sustainability policy:
Our approach to respecting human rights
All parts of Statkraft's operations are based on the recognition of the fundamental rights and freedoms that belong to all people in the world. (www.statkraft.no)
In addition, various parts of the human rights obligations Statkraft have committed to through international standards are elaborated.
Statkraft explicitly states that they adhere to the UN Guiding Principles on Business and Human Rights and the UN Global Compact, and that they place particular emphasis on fulfilling their obligations in relation to indigenous peoples. Under the heading Rights for Minority Groups, the company says:
Focus on the rights of indigenous peoples
When indigenous and tribal peoples are present where Statkraft operates, their rights are a priority area that the company seeks to manage through effective and meaningful collaboration with local affected groups.
Statkraft and the Fosen ruling
Statkraft itself mentions the Fosen ruling in its sustainability policy and expresses that:
The Supreme Court's decision necessitates a renewed process to ensure that indigenous groups on Fosen can continue to practice their culture.
The Supreme Court rejected in October 2021 the petition from Fosen Vind for the determination of compensation for two Sami sijte (reindeer herding groups) in connection with the Roan and Storheia projects, which are part of the Fosen wind farm development. The reason for the rejection was that the Supreme Court found the licenses invalid as they violated the indigenous rights of the Sami sijte under Article 27 of the International Covenant on Civil and Political Rights. The court found that the impact that the wind farms could have on the reindeer's winter grazing areas posed a clear risk that the Sami sijte would eventually have to reduce the number of animals significantly. The conclusion was that this would have a significant negative effect on their ability to practice their nomadic culture unless satisfactory mitigating measures are implemented. The Ministry of Petroleum and Energy (OED) has confirmed that no immediate measures will be taken in relation to the concession as long as work is underway to identify appropriate mitigating measures that can be implemented. (the Saami Council’s emphasis)
The process and interpretation of the Supreme Court's ruling by the OED are then referred to.
Statkraft has not made an independent assessment of the ruling and emphasizes in its account that they will adhere to the ministry's assessment of both the concession and the process around mitigating measures.
Statkraft's External Evaluation of Its Obligations in Relation to Human Rights (due diligence)
Statkraft conducted a basic due diligence of its work with human rights in 2020. The following four areas were identified as central to include in its management system:
working conditions, including health and safety
impact on local communities
respect for minorities and indigenous peoples' rights
decent working conditions throughout the company's supply chain
After the Fosen ruling, no new external evaluation of Statkraft's policy and management systems to follow up on human rights has been carried out.
Assessment of Statkraft's follow-up of the Fosen ruling in light of Its own self-imposed human rights obligations
This will be a brief analysis based only on what the company itself reports on its websites. We do not have access to any processes that the company has participated in that have not been made public.
No Free Prior Informed Consent with the Sámi in Fosen
Both the UN Global Compact and the comprehensive report related to the UN Guiding Principles on Business and Human Rights (A/68/279) refer to the requirement for free and prior informed consent from affected indigenous peoples. Without going into too much detail on this principle, it is about requiring consent from the Sámi in Fosen for measures that affect their rights.
Such consent does not exist.
The company took a risk by starting construction before the case was fully litigated
When no agreement was reached on the operating license, the Fosen Sámi requested that the construction of the facilities not start until the validity of the operating license had been tried in court. This was not complied with by Statkraft. The company thus took a risk by requesting to start construction before the validity was determined.
No independent assessment of the Supreme Court's ruling
The Supreme Court's leading voter states in the ruling’s paragraph (151) (The Saami Council’s emphasis):
(151) Against this background, the Court of Appeal’s solution with compensation for winter feeding is burdened with so much uncertainty that it cannot determine whether or not Article 27 ICCPR has been violated, even if a duty to adapt should be relevant also under Article 27 ICCPR. My conclusion is therefore that the licence decision violates the reindeer herders’ rights under the provision.
It further says in (153) (The Saami Council’s emphasis):
(153) Against this background, the licence decision is invalid. In my perception, the contention that the appraisal is inadmissible only concerns Storheia and Roan windfarms, not the damages for the consequences of Statnett's 420 kV power line. I will formulate my conclusion in line with this.
Statkraft does not make its own assessment of the Supreme Court's ruling that the operating license explicitly violates SP Article 27 but refers to the OED's assessment. This in itself is a breach of a functioning ESG policy. You cannot leave it to others, including the authorities of individual countries, to assess what you yourself have committed to comply with and respect. As a company, you must have a system that assesses and acts independently of external parties' assessments, especially when it comes to human rights violations.
No Independent Follow-up of the Responsibility to Stop or Prevent Violations
The UN Covenant on Civil and Political Rights has clear provisions in Article 2 that a duty to repair is triggered in the event of a breach. This, of course, also includes companies that have committed to following human rights.
The UN Guiding Principles on Business and Human Rights express the following (The Saami Council’s emphasis):
15) In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances, including:
(a) A policy commitment to meet their responsibility to respect human rights;
(b) A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights;
(c) Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.
The Supreme Court concludes that the facilities on Fosen result in a violation of Article 27 of the UN Convention on Civil and Political Rights. Statkraft has taken no action to halt operations despite the Supreme Court's conclusion, thus there is an ongoing breach of human rights. Statkraft has not undertaken any measures to limit the activities causing the breach, other than referring to a process overseen by the Ministry of Petroleum and Energy.
Fosen in the 2022 Annual Report:
In its 2022 annual report, the company acknowledges that they have had some cases affecting the HR area. They mention the Fosen case in their note 35. There, they state that the follow-up of the Supreme Court's decision might result in losses, and they are also liable for the part sold to Roan Vind:
Supreme Court ruling of reindeer herding court case at Fosen wind farms
On 11 October 2021, the Norwegian Supreme Court ruled that the concessions and expropriation permits of 2013 for the Storheia and Roan wind farms at Fosen in Norway violate the Sami reindeer herders right to cultural practice under Article 27 of the UN International Covenant on Civil and Political Rights and are therefore invalid.Statkraft owns 52.1% of Storheia through Fosen Vind DA, whereas Roan was divested in 2021. Statkraft must on certain conditions indemnify the buyers of Statkraft’s 52.1% shareholding in Roan Vind for potential losses following the Supreme Court ruling.
…
The outcome and the financial impact of the Supreme Court ruling is highly uncertain at this stage. Several potential scenarios for the impact of the ruling have been estimated and probabilities are assessed for each scenario.
Statkraft has used this to calculate a weighted best estimate. The carrying value of Storheia is NOK 1300 million.
Reputation Cost:
Statkraft's inaction following the declaration of the license as invalid and the operation being in violation of SP Article 27 means that Statkraft's reputation as a company and partner could be severely impacted. ESG principles are about adhering to and upholding standards in the environment and human rights, but also about having credible systems for addressing issues that arise. This is noticed by investors and partners. The problem isn't just that a convention violation occurred. What will be judged is whether there are systems in place to rectify such errors.
An ESG system in a large international company cannot be set up so that the company does not respond when something goes wrong and merely refers to authorities and other actors to handle it. This is subservient and lacks credibility. Would they do this in other countries where Statkraft operates? Is the trust in the Norwegian state so strong that they can wash their hands and not make independent assessments?
The cost of taking action may be much less than the costs of inaction
We have many examples of severe reputation losses among large companies like Shell and VW. Statkraft seems to be betting on the state to solve all problems in the human rights field in Norway. It could prove costly if they don't show responsibility and ensure that the violation is stopped. Statkraft is a company with a profit of 28 billion in 2022 and a company value of about 300 billion. It's not enough to create a company policy that you expect others to follow up when problems arise. This demonstrates that the company's commitments to human rights are not up to standard. The risk is that a potential downgrade by rating agencies may be much more expensive than the costs of dismantling, restitution, restoring, and rebuilding trust, even if it has a cost of up to 6 billion.
If Statkraft does not take action in a case where their facilities are the very cause of the human rights violation, they will lose credibility regarding their own commitments.
