Some of the major potential impacts on people and the environment to consider when leaving Iran include: (1) potential impacts on workers (directly and indirectly employed by the company); (2) potential impacts on other stakeholders, such as those that currently benefit from ancillary service provision (e.g. the provision of drinking water or health services); (3) potential environmental and social impacts related to handing over the project or business to companies with lower internal standards, know-how or capacity to manage social and environmental risks. Each company should do its own assessment of the potential or actual impacts of leaving, as these three areas may not cover all the risks posed and the specific impacts of every company’s exit will vary.
In Iran, as in other countries, local regulation may not be sufficient to guarantee projects are carried out in a manner that reflects international standards regarding respect for people and the environment (see IBR briefings #3 on occupational health and safety and #5 on environmental and social impact assessments). Responsible companies often make up for gaps in legislation with operational practices and internal codes of conduct that they pass on in contractual language with business partners or suppliers. Where they are operators of joint ventures they may also impose those standards for the project. Raising operating standards may also include the provision of training or capacity building for local business partners.
Where companies are actively raising operating standards in Iran, the handover of the business could threaten the continuation of such standards. This presents the risk of adverse impacts to people and the environment. One key element of a responsible exit strategy is effective support for the transfer and maintenance of enhanced social and environmental standards in future operations.
The core advice for companies is to formulate a responsible exit strategy that incorporates assessing and mitigating any adverse impacts to people and the environment that may result. Key actions in any responsible exit strategy should include:
Employing social and environmental expertise that can help identify the potential social and environmental impacts of leaving in the formulation of the exit strategy.
Ensuring timely disclosure and regular communication with relevant stakeholders. When the decision to leave has been made, companies should disclose the decision to all relevant stakeholders, including employees, suppliers, sub-contractors and impacted communities. Companies should also keep open a regular channel of communication to inform stakeholders of the implementation of the exit plan and address the concerns and expectations of stakeholders in relation to the exiting.
Providing support for impacted workers.
With respect to personnel that may lose their jobs following the exit, companies should at a minimum terminate employment contracts in line with what local law requires and mitigate the impact of severance. Company practice in this area has included:
Where personnel will be transferred to a new company taking over the business, companies have:
With respect to the personnel of subcontractors and suppliers, companies have:
Taking steps to help prevent lowering of operating standards going forward. When negotiating with a potential buyer or successor in the project or business, companies should ensure that adequate provisions are made to maintain operating standards to the highest possible level, in particular with respect to health and safety and environmental impacts. In cases where the acquiring company does not have the capacity to sustain the level of operating standards, exiting companies may consider providing training and capacity building, or other support, to help ensure standards are maintained.
Taking steps to ensure continuation of ancillary services. When communities are dependent on the company for the provision of ancillary services, companies can take steps to ensure the continuation of the services, either by negotiating with governments to take over the respective service or by putting measures in place that ensure the company or another designated entity continues to provide the service, at least until that service is ensured by the government or another private actor.
In Iran, responsible entry means planning for a responsible exit
Early planning can facilitate many of the mitigation steps outlined in this briefing. Indeed, responsible exit from any country (including Iran) will be easier, more efficient and secured if the company has created an exit strategy upon entry in which discussions with business partners, contracts and management plans have integrated basic contingency plans for eventual exit as well as agreed principles for what should happen in the case of an urgent exit from the market. Early planning may not resolve all issues, but it will go a long way toward facilitating the exit team’s work.
In geographies like Iran, where there may be uncertainty regarding the company’s ability to do business long-term in the market, planning for a responsible exit is part of a responsible entry into the market.
Responsible exit lays the ground for a successful return
A responsible exit will contribute to building trust with stakeholders and can therefore also facilitate future re-entry to the country.
For more detailed information on the issues in this briefing, please contact IBR project at info@ibrproject.org.
