What makes corporations engagement in the EITI important?

Transcription

1 The Extractive Industry Transparency Initiative (EITI) has created a bridge between government, civil society, oil, gas and mining companies and investors to improve global standards to promote transparent management of natural resources. The EITI has a proven track record of improving corporate responsibility, however there remains opportunity for further enhancement of corporate reporting in EITI processes. Opportunities include reducing costs of report production, contextualisation and simplification of EITI report information and the merging of voluntary and mandatory frameworks; all must be addressed for a move toward better corporate reporting within the EITI initiative. What makes corporations engagement in the EITI important? The Extractive Industry Transparency Initiative (EITI) is a tripartite membership of governments, corporations and civil society. Without the engagement of corporations, cross comparison between government payments and receipts is evidently impossible. This comparison is the key basis of the success of the EITI s attempts to increase transparency within the sector, and acts as a catalyst for reduction of corruption, thus its importance is paramount. Fifty EITI compliant countries, along with the corporations operating within these nations are now producing reports. However, the EITI s 7 th Global Conference demonstrated a recurring demand by stakeholders that there is a necessity that

2 reporting for corporations is improved in order to encourage the maximum amount of industry engagement. Current reporting motivated by legislation In the USA and the European Union, regulations are now in place to enforce mandatory reporting. In 2010 US President Barack Obama signed the Dodd-Frank Act. Section 1504 of this act focused on reduction of corruption in the oil and mining industry. The section requires corporations in the Extractive Industries to disclose in an annual report payments made to the United States or foreign governments in an annual report. The U.S. Securities and Exchange Commission is required to make a compilation of information available online. The European Parliament responded to the Dodd-Frank Act in 2010 by requesting that the European Commission act on the issue. In May of the same year, President Barroso proposed legislation which would necessitate disclosure requirements for extractive companies. Both the European Commission and the USA had legislation implemented before becoming an EITI compliant country. The EITI can learn from the successes of these legislations in order to take advantage of best practice experience, which can then be used to aid other countries in implementing sufficient legislation also. The Role of EITI in Supporting Legislations Tanzania, a compliant country since 2012, passed three legislative Acts in July 2015 in an effort towards corporate transparency through their involvement in the EITI: the Petroleum Act 2015, the Oil and Gas Revenues Management Act 2015 and the Tanzania Extractive Industry (Transparency and Accountability) Act The latter states that all concessions, contracts, and licenses relating to the extractive industry are to be published; noncompliance is a criminal offense and companies are fined. Despite 50 countries being compliant with the EITI, evidently there remains many who have yet to adopt the standards. Canada for example, has a mandatory reporting scheme, and has adopted CSR regulation since 2009 yet is not an

3 implementing country. It also remains active in regulating this area with the introduction of the 2015 Extractive Industry Transparency act. The debate continues regarding whether countries with existing CSR regulation in place has a need for the EITI standards. This leads onto compliance between countries. The EITI has yet to become a truly global standard, with not all natural resource rich countries compliant with the initiative. There has been motivation to create compliance between differing country standards. The European Commission for example is empowered to consider equivalence of other s methods, such as Canada, and this is an ongoing debate within the Parliament. It must be noted that the European Union s efforts to bring transparency with the EI should be praised, with twenty-eight member states, the implementation of this directive is no mere feat. The EITI were able to focus on four nations of the EU; UK, France, Spain, Germany and Netherlands, with the intention that after these nations have become compliant, others in the Union will follow. Voluntary reporting by corporations Corporations voluntarily produce reports as there is a business case to do so. Rio Tinto for example has produced reports for the last eight years, before it was a requirement to do so in the country it operates so has therefore developed competitive advantage over its rivals. There are existing voluntary CSR Frameworks for the EI, including, but not limited to: - The United Nations Global Compact - OECD Guidelines for Multinational Enterprises - PDAC e3 Plus A framework for responsible exploration - Global Reporting Initiative (GRI). Policy recommendations It is a key moment for the future of corporate reporting. The EITI seems a promising vehicle to achieve enhanced reporting by corporations, alongside government led legislation. But lessons

4 must be learnt from previous and ongoing efforts, most vitally that stakeholder insights must be meaningfully taken into account. The following recommendations must be priorities moving forward: Firstly, he there is a need to reduce the cost investment of producing reports. The largest barrier to corporations willingness to engage with corporate reporting is the cost of creation and implementation. A Rio Tinto spokesperson expressed a view that cost should be a heavily considered factor in deciding the content and requirements of these reports. The corporations require that the benefits accrued is the best value for money. Secondly, the EITI must engage with corporations to improve the EITI s reporting systems. In parallel, government should ensure engagement when developing policy in the reporting field. Governments can learn from Canada for example. While issues still remain in their EI sector, there has been coordination of aboriginal people, civil society organisations, and corporations to share advice, and ensure that the new legislation meets global standards. Stakeholder groups including NGOs and Corporations were asked for feedback, which was then included into a gradual process of improvements It is also recommended that governments continue contentious dialogue with stakeholders in order to have the most efficient reporting. Thirdly, a key issue is the need for contextualisation of the information provided by EITI reports. NGOs at the conference highlighted the need for further details such as mapping of extractive sites, in the report in order to allow the most effective use of the data. The national coordinator of the DRC reiterated the importance of the conference s theme From Reports to Results. He highlighted that the reports are not being read due to their inaccessible nature. Furthermore, it is recommended that attention is brought to how the EITI can bring together voluntary and mandatory frameworks, whilst creating benefit for all three stakeholder groups. Companies are requesting standardisation of these

5 frameworks and the EITI should take this opportunity to lead a true global standard. dialogue there is confidence that the situation can be improved upon. Finally, while there is need for contextualisation of the information, corporations have expressed their desire for a simplification. A challenge faced is how this simplification can be balanced with the necessary contextualisation required by civil society. This is the nature of a tripartite relationship with conflicting needs, however through stakeholder In summary, corporations with the EI and NGOs are willing to engage in dialogue with the EITI in order to improve the reporting required and outlined by the EITI, therefore this must be advantaged to increase the potential impact of the EITI.