Global miners are being asked to publish what they pay, but is transparency enough?
This was the hard question being asked of governments, mining and extractive industry representatives, intergovernmental agencies and the Extractive Industries Transparency Initiative (EITI) Secretariat itself in Sydney recently.
It’s been 10 years since the Extractive Industries Transparency Initiative (EITI) Principles were agreed at the Lancaster House Conference. Those principles set out an agenda for financial transparency in the mining and extractives industries which aimed to promote disclosure of resources companies’ payments to governments and revenues received by those governments.
In six years, numbers attending EITI’s global conference have increased almost tenfold to 1,200 people from 96 different countries, reflecting the initiative’s growing stature and level of buy-in.
Delegates from non-profit organisations such as Oxfam rubbed shoulders with senior government figures and executives from global players such as BHP Billiton, Anglo American, Royal Dutch Shell and Chevron.
Yet, while the EITI has made considerable legitimacy gains and achieved widespread industry acceptance in the decade since the initial agreement, there is increasing debate and impatience from some nations that transparency reporting has not necessarily translated to “social good”. A 2011 evaluation found that “little impact at societal level can be discerned”.
This is a severe and significant critique. But it does not mean that the EITI should be shelved, or that there is no potential to transform the practices of both extractives companies and governments.
EITI is not “targeted transparency” like the restaurant hygiene labels which help you decide whether to eat at the local curry hut. And it’s not full-scale freedom of information. It’s somewhere in-between, and the reports of representatives from a variety of countries suggest more formalised accountability measures are necessary if EITI wants successfully to advance “financial democracy”.
Changes to the EITI Standard, formally launched during the conference, go some way towards addressing accountability concerns. The Standard will apply across the mining life cycle, allowing it to tackle a greater number and scope of issues, including early licensing, corporate social responsibility and issues related to value and supply-chains.
Mid-last year, EITI supporters were frustrated by certain companies pushing back against movements towards project-by-project reporting. The new EITI Standard requires more rigorous and comprehensive reporting at least down to a company level, with some requirements for project-by-project reporting. It is likely these requirements will be the focus of future debates.
Difficulty engaging with and understanding EITI reports has also been a major criticism of the initiative. The recording of payments and revenues is important, but how meaningful is disclosure if the communities it seeks to help cannot understand it? As Open Society Fellow Diarmid O'Sullivan said, “When people hear that mining is coming to their community, they want to know two things: "What on earth has the government done with our money?” and “Are the foreigners cheating us?”
Partly in response to this type of critique, the Standard has been simplified down from 21 rules to seven. EITI reports will also now provide readers with contextual data, such as production data, licensing information, contract disclosures and concessions, to assist them to make sense of the figures presented. The new Standard also places greater emphasis on accessible and meaningful reports.
But to achieve societal impact, accountability beyond EITI is needed in conjunction with the Standard. In an impassioned speech to the conference plenary, OECD Chair of the Development Assistance Committee Erik Solheim declared that, “Unless we have political will, we will not have anything”.
Solheim went on to suggest that to overcome the “resources curse” faced by many of the developing nations in attendance, the international community should look to his own home country, Norway, for the solution.
Citing Norway’s current 78% tax level for oil and gas, Solheim urged governments to be bolder in their application of tax to create a strong “social contract” between extractives companies and the countries from which they draw their wealth.
But perhaps the conference’s most prescient insight came from Dr Sixtus Mulenga, CEO at Tranter Zambia, when he used a colloquial metaphor to explain that the real solution lies in both accountability and close cooperation of companies, governments and communities. “If you want to understand the workings of the crocodile, you must ask the hippo,” he said, “For they all must live in the pond.”