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Maceió, the “Sinking City”: the importance of corporate responsibility and accountability frameworks

Updated: Oct 5

Fernanda Peixoto Silva

Former research assistant at the ERC Research Project Curiae Virides, Brussels School of Governance (Vrije Universiteit Brussel).


KeywordsDisaster, Mining, Braskem, Maceió, Brazil, Corporate Responsibility


1. The sinking city

 

Brazil's landscape is known for its calm geological activity because it sits on the South American tectonic plate, an ancient and steady landmass (de Alkmim, 2015). However, in 2018, Maceió residents, a city in Brazil, felt a slight earthquake after heavy rains typical of the end of summer. This led to visible cracks and severe damage to houses, evacuating 6 thousand buildings and relocating around 25 thousand residents from the Pinheiros neighborhood (Ravilious, 2021). The event drew the attention of authorities and the research community, leading to inquiries into potential causes. Only in 2019, the CPRM (Mineral Resources Research Company) released a report connecting the cracks and tremors to Braskem, a Brazilian petrochemical company, that has been engaged in rock salt extraction activities since 1970 (Contieri, 2021). Braskem is a subsidiary of the big Brazilian conglomerate Odebrecht, which recently rebranded as Novanor and operates internationally. Petrobras, the state-owned petrochemical company, owns 47% of Braskem's stocks (Braskem, 2024). Although Braskem contested the findings (Browning, 2021), they ultimately settled a lawsuit for USD 1.75 billion in 2020 (Figueiredo et al., 2020).

 

Rock salt, made up of sodium chloride (NaCl), is a key player in the chemical industry, providing the primary source for chlorine and its derivatives. Braskem operated over 35 extraction plants in Alagoas State, all authorized by Brazilian environmental agencies. The salt layers are around 1000 meters deep and require the dilution method by injecting water through a tube, dissolving the salt underground, and then channeling the resulting saltwater to the processing plant (Contieri, 2021). After decades of mining salt, the underground cavities formed are causing the salt rocks to gradually collapse, destabilizing the ground and facilitating caves to shift over time, expanding the problem (Lacerda, 2023).

 

Since 2018, five more neighborhoods have faced the same issues as Pinheiros, displacing over 55,000 residents by 2023. In December 2023, civil defense reported a 1.69-meter ground sink since monitoring began in late November. The issue resurfaced when Braskem's Mine Number 18 nearly collapsed, prompting timely evacuations that prevented harm. Despite Braskem halting operations in 2019, the below-ground mass movement continues, as evidenced by the collapse of Mine Number 18 (Coelho & Paiva, 2023), and ground monitoring will be necessary for decades to avoid the complete collapse of the mines (Lacerda, 2023). The Brazilian news has portrayed the submerging of numerous neighborhoods in Maceió as one of the country's most severe urban catastrophes, with an unparalleled scale that has led to the city being labeled "the sinking city". This case exemplifies a transnational ecological conflict, involving stakeholders from different regions, such as companies, international NGOs, and several jurisdictions.

 

2. The investigations and Brazilian lawsuits

 

The GFZ German Research Centre for Geosciences conducted a comprehensive study utilizing satellite data and geological modeling tools to analyze land movements in Maceió from 2004 to 2020. The findings revealed that surface subsidence in the city commenced as early as 2004, with a gradual sinking rate of up to 27cm per year. The study attributed this occurrence to salt extraction activities and suggested that the land continues to sink,  an ongoing risk to neighborhoods (Ravilious, 2021). Furthermore,  researchers from the Federal University of Alagoas (UFAL) also warned about the possibility of ground sinking for over a decade (Dolzan, 2023), which suggests that the company may have overlooked this critical issue for years. Despite having contingency plans, such as filling the mine galleries with sand to stabilize the ground, the company was unable to execute these measures in time (Galarraga Gortázar, 2023). New studies also revealed the possibility of groundwater reservoir contamination and the emergence of new craters in the urban area (Coelho, 2023).

 

The company's negligence has resulted in multiple lawsuits filed or in progress against Braskem, with estimated compensation claims exceeding R$40 billion (USD 8 billion) (Contieri, 2021). These claims aim to compensate for the extensive harm brought upon one-fifth of Maceió's land and its residents (Galarraga Gortázar, 2023). For instance, the Brazilian Federal State and the State prosecutor filed a new lawsuit, demanding that Braskem and the City Council allocate 1 million Reais (USD 200.000) to address environmental harms caused to the affected families (Galarraga Gortázar, 2023). Additionally, since 2018, the Environmental Institute (IMA) has fined the company 20 times for various harms caused in the Mutange region (Jornal Nacional, 2023), which shows a persistent disregard for the country's legislation by the company.A Parliamentary Inquiry Commission (CPI) was opened in Brazil in  2023 to investigate crimes against property, the environment, and human health. Previous declarations by parliamentarians vehemently assert that the companies involved conducted superficial risk assessments and that Braskem has been evading responsibility (Agência Senado, 2024; Marcos Amorozo, 2024). As explained by journalist Alice Maciel, Braskem follows a pattern observed in other disaster-involved companies, by initially ignoring multiple alerts of imminent risks and failing to take early action to prevent disasters, as seen in cases like the Mariana dam case in Brumadinho, and Maceió (Dip et al., 2023).

 

3. Transnational lawsuits


The case also holds cross-border legal implications, as Braskem was sued in the U.S. by the shareholders of the company's American Depositary Receipts (ADRs) (Contieri, 2021; Pierson, 2019). The class action was filed by people who bought Braskem SA's ADRs on the New York Stock Exchange (NYSE: BAK) between June 1, 2010, and March 11, 2015. This means that anyone who purchased these specific financial products during that period is included in the lawsuit. This issue has been justified by the company's lack of transparency and involvement in corruption scandals (see Kessler Topaz Meltzer & Check, n.d.).  

 

Besides the investigations in Brazil and the US, residents impacted by Braskem in Maceió also pursued legal action in a Dutch court against the Brazilian petrochemical company, given its subsidiaries are run from Rotterdam (Pogust Goodhead, 2024). In February 2024 at the Rotterdam Tribunal, the plaintiffs underscored that the Dutch parent company indirectly contributed to pollution, benefiting from and supporting mining activities in other countries, leading to disasters and impacting millions of people (Rodrigues, 2024). Tom Goodhead represents the plaintiffs, and before the first session, victims held a manifestation in front of the tribunal, displaying signs such as "Braskem sank our dreams" (Rodrigues, 2024). The plaintiffs argue that the settlement of 10 million Brazilian reais reached with the city administrative office, is insufficient, as it is equivalent to almost the same value as the compensation received for a missing bag at the airport (Leitão, 2024).

 

The 2019 settlement document, signed by representatives of the State, Federal Public Defense, General Justice Procurator, and Public Ministry of Alagoas, highlighted that Braskem had not yet admitted responsibility for the Maceió disaster (Fernandes, 2023). In 2024 the company's advisor suggested that there was no disaster since no lives were lost, underscoring the lack of accountability from the company's side. This statement disregards the economic and mental health impacts on individuals and exposes the company's failure to take full responsibility for the situation. The overarching aim of lawsuits, beyond fair compensation, is to hold corporations accountable for environmental degradation and assist the communities they have impacted (Browning, 2021). Ultimately, the uncertainties surrounding the situation led to the abandonment of the planned acquisition of Braskem by the Dutch company LyondellBasell (Contieri, 2021).

 

4. A structural issue

 

Maceió, the capital of Alagoas State, witnessed economic and urban growth in the last decades fueled by the agrarian economy and development of the service sector (Galvão, 1993). However, despite its scenic beaches and economic activities like tourism and salt extraction, the city still grapples with socioeconomic challenges. With almost one million inhabitants, the 16th largest among Brazil's 5 thousand municipalities (Rodrigues & Leão, 2024), ranks the second lowest Human Development Index ranking (UNDP, 2023). The recent sinking of neighborhoods in Maceió is a reminder of the historical neglect and environmental exploitation experienced by marginalized communities, emblematic of broader systemic inequalities in Brazil.

 

While Braskem's Mine Number 18 in Maceió was nearing collapse, the company presented itself as environmentally responsible at the Conference of the Parties (COP28), participating in sustainability panels like  "Impacts of Climate Change and the Need for Industry Adaptation" (Martins, 2023). However, the company was eventually compelled to cancel participation in some panels due to the escalating news headlines (Galarraga Gortázar, 2023).

 

This episode highlights broader concerns about corporate accountability. As explains Prothero (2021), corporate law often limits companies' financial exposure to environmental harm by restricting liability and facilitating the use of subsidiaries, which may complicate compensation processes for affected communities. Additionally, Prothero (2021) suggests that the influence of corporations over regulatory agencies could, in some cases, contribute to weaker enforcement of environmental regulations. While there is increasing consumer pressure for companies to adopt environmentally responsible practices, many corporations may focus on "green" marketing efforts, often referred to as greenwashing, without adequately addressing deeper issues like environmental justice. According to Prothero (2021), there is a need for corporate governance reforms that more effectively balance profit motives with public health and social equity.

  

5. Maceió Internally Displaced People (IDP) and international protection gaps


The victims of the Maceió Disaster fall into the category of Internally Displaced People (IDPs), which includes those forced to flee their homes due to conflict, disasters, or development projects, but who remain within their country's borders under their national government's jurisdiction (Deng, 1998). However, despite being forced to move, they lack protection under international or national frameworks (Sambo, 2017). As new waves of environmental and social activism gain momentum, issues like this come into focus.  However, the current approaches often rely on soft laws based on international human rights frameworks as a guide, emphasizing the need for greater attention to this critical issue.


For instance, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (the Guidelines) established in 1976, represent the longest-standing and most comprehensive international standard for Responsible Business Conduct. Since their inception, the Guidelines have undergone five revisions. To enhance adherence to these standards, the OECD created National Contact Points (NCPs) in 1984—government-supported mechanisms designed to facilitate dialogue and mediation (OECD, 2023). Over the years, the role of NCPs has evolved from merely promoting the Guidelines and addressing inquiries to, by 2000, actively facilitating solutions to issues arising from companies' implementation of the Guidelines (OECD, 2023). Created in 1998, the UN Guiding Principles on Internal Displacement recognizes disasters as potential causes of internal displacement and affirms that IDPs are entitled to the same human rights as other citizens, with the responsibility for assistance falling on their respective governments (Cohen & Bradley, 2010). The 2011 UN Guiding Principles on Business and Human Rights stipulate that businesses should respect human rights, which includes the obligation to prevent adverse impacts and conduct human rights due diligence to evaluate how they manage such impacts. Likewise, the 2018 Due Diligence Guidance for Responsible Business Conduct focuses on essential issues such as human rights, labor rights, and environmental protection, highlighting the significance of transparency in these assessments. Yet, even with these important initiatives in place, there remains a notable gap in efforts to create a comprehensive international framework for Internally Displaced Persons (IDPs).

 

However, despite these initiatives, insufficient efforts have been made to establish a comprehensive international framework for IDPs. In addition to the absence of strong legal protections, investigation and policy formulation can take place behind closed doors, excluding the voices and needs of the affected community (Dip et al., 2023). This lack of transparency can lead to solutions that do not adequately address the community's concerns or provide fair compensation for the damages they have suffered. For example, the negotiations regarding the ground subsidence in Maceió occurred without meaningful public involvement and were finalized before further investigations, including the subsequent establishment of the Parliamentary Inquiry Commission (CPI), highlighting a disregard for the well-being of the affected individuals ( Agência Senado, 2024). 


6. Civil Society's impact on representing affected-communities


Given this scenario, NGOs and civil society organizations have played a crucial role in representing affected communities against corporations. For instance, Greenpeace Brazil has been actively denouncing companies like Braskem, mediating many socio-environmental conflicts, including the Maceió case. For instance, Greenpeace reported that only 12% of the total compensation owed by Braskem has been paid to the victims, with no outreach to those indirectly affected, such as those who lost their jobs due to store closures and the impact on commercial areas, which could result in  200 thousand affected people, according to the Unified Movement of Braskem Victims (MUVB) (Greenpeace Brasil, 2023). Another example is the investigation carried out by the Intercept Brazil that uncovered historical links between the military regime in Brazil and their knowledge of potential risks associated with extracting rock salt, using repressive tactics against journalists, workers, and protests. Besides, journalistic investigations have raised concerns about the company’s lobbying activities, including political donations, as well as reports of inappropriate behavior during parliamentary sessions. These reports include alleged harassment of aides, discourteous treatment of activists, unauthorized photography of attendees, and attempts to listen in on statements made by the CPI rapporteur (Rodrigues, 2024).


7. Protecting communities, enforcing accountability


In conclusion, transnational companies with vast financial resources and political influence often capitalize on regulatory loopholes to their advantage. Given Brazil's historical challenges with law enforcement and oversight may, at times, create conditions where multinational corporations operating in the country face less rigorous investigation or offer compensation that is perceived as insufficient for damages. In the aftermath of disasters, these companies may downplay the extent of their impact diminishing the consequences for both people and the environment, thereby weakening the pursuit of justice. Their significant presence in political and legislative spheres may allow them to engage in negotiations that influence the application of regulatory controls and enforcement measures. To complicate matters, international frameworks provide guidelines but lack robust enforcement mechanisms, resulting in prolonged investigations that can span years, and unsatisfactory outcomes for victims. As demonstrated by the case of Maceió, thousands of displaced individuals endure years of waiting for any form of compensation after losing their homes, still awaiting fairer compensation and acknowledgment from the company. In response to these challenges, there is an urgent need for a robust framework to monitor and regulate the operations of large corporations, preventing social-environmental crimes. This calls for rigorous law enforcement and international collaboration, given the widespread reach of many companies and the vulnerability of socially and economically excluded communities.


Disclaimer: This content is based primarily on journalistic reports available up to May 2024


 

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