Environmental impact of extractive activities

MSGs are encouraged to agree objectives and activities that assist stakeholders in the assessment of:

• The adequacy of the regulatory framework as well as management and monitoring efforts
• Extractive companies’ adherence to environmental obligations

To inform this, the MSG is advised to consider:

• What is the demand for environmental impact information from different constituencies? Have stakeholders raised any concerns about the environmental management and monitoring? Are there national priorities that relate to environmental management and monitoring that the process can contribute to?
• Is the information about the applicable environmental regulatory framework available? Is it comprehensive and easy to understand?
• How are environmental regulations enforced? Which government agencies are responsible for environmental management and monitoring? Is the information on enforcement activities and results publicly available?
• How do companies inform stakeholders of their compliance with environmental regulations? Are there additional actions undertaken by companies to assess and mitigate their environmental impact? Is information about these actions publicly available?
• Are there any non-regulatory voluntary environmental standards, such as voluntary international sustainability reporting frameworks or guidance, that may be available at the national level?
• What other publicly available or potentially available information could be useful for managing and monitoring the environmental impact of extractive industries?

The specific objectives will vary from country to country. They will depend on national contexts, stakeholder interest and the availability, comprehensiveness and quality of the information. Examples of objectives could be:

• Strengthen government and industry procedures for management and monitoring of environmental impact and ensure a more effective environmental permit allocation process.
• Improve public understanding of environmental regulations and how they are enforced in practice.
• Improve public scrutiny of environmental management and monitoring activities and public understanding of corruption risks associated with enforcing environmental regulations.
• Improve industry environmental performance in accordance with the industry’s principles for environmental management.

The MSGs might also wish to identify where additional capacity building is needed to support the disclosure and analysis of information. The MSG might wish to consider whether such activities can be supported by MSG members or EITI stakeholders from various constituencies, or whether they would require engaging with specialists to strengthen capacity of key reporting agencies or stakeholders with an interest in using the information.

MSGs are advised to consider what information related to environmental impact is already disclosed, and how this data can be used and improved. In doing this, the MSG might address questions such as:

• Are the different components of the regulatory framework clearly identified and explained by key government agencies?
• Is the information on enforcement of environmental regulations available from relevant government agencies?
• Is this information comprehensive and publicly available?
• Are there gaps in information that need to be addressed? Are there gaps related to accessibility, timeliness, reliability and quality of information?

Government agencies and companies are likely to disclose different types of data with different levels of detail. Relevant government agencies can ensure that information is made accessible about the environmental management and monitoring framework that applies for all companies and projects.

Such information can be useful for companies to gain a clear understanding of what is expected from them and to ensure that they comply with the relevant regulations. This data can also provide context for company disclosures (e.g. data on water use disclosed by a company can be compared to data on water use at the industry-wide or regional level). Companies are often well placed to report more detailed information at the project level about measures to mitigate environmental impact.

The universe of information related to the management and monitoring of the environmental impact of extractive activities is vast. When identifying existing disclosures, the MSG could consider documenting the following types of information:

1. Disclosures that ensure transparency in how governments and companies manage environmental impact. These could include:

• Descriptions of existing legal provisions and administrative rules for managing environmental impact. This information can help stakeholders get a general overview of the relevant legal procedures and administrative rules and key actors involved, and can include:
  • Laws, regulations and specific provisions related to the management of environmental impact of extractive industries.
  • Relevant agencies, including their scope and roles and responsibilities.

Examples: Description of a legal environmental framework in the Kyrgyz Republic and Liberia and descriptions of agencies’ roles and responsibilities in Armenia, Colombia and Peru.  

• Environmental management instruments such as environmental impact assessments (EIAs), certification schemes, licenses, rights or permits, etc. The IMF advises publication by the government of environmental and social impact assessments and associated management plans and reportsSee IMF (2019), IMF Fiscal Transparency Code, Dimension 4.4.4, p. 22. 
• Descriptions or assessments of actual practice. These can help stakeholders understand how the framework is implemented in practice and what are possible areas of improvement. MSGs may include a description of the efforts made by the government to manage environmental impact of significant projects, an overview of EIAs undertaken, environmental certificates or licenses awarded, etc. If the supreme audit institution has undertaken environmental audits, these reports could help to understand how procedures are implemented in practice.
• Description of reforms that are planned or underway. If changes to existing regulations or practices are planned, the objective and timescale for such legislative changes could be outlined, including the process for stakeholder consultation.

2. Disclosures that ensure transparency in how governments monitor environmental impacts. These could include: 

• Descriptions of existing legal and administrative frameworks for monitoring environmental protection. This can help stakeholders get an overview of the relevant legal procedures and administrative rules and key actors involved, and can include:
  • Laws, regulations and specific provisions related to monitoring environmental impact of extractive industries.
  • Relevant agencies, including their scope and roles and responsibilities.
• Environmental monitoring instruments, such as sanctioning processes, environmental liabilities, rehabilitation and remediation programmes. 

Examples: Disclosures on environmental certifications and sanctions in Peru and disclosures on environmental protection, rehabilitation and water and waste management in Mongolia.

• Descriptions or assessments of actual practices. MSGs could consider addressing aspects of these framework and actual practices on an ad hoc basis.
• Description of reforms that are planned or underway. If changes to existing regulations or practices are planned, the objective and timescale for such changes could be outlined, including the process for stakeholder consultation.

3. Disclosures that help measure environmental impact of companies and projects. These could cover energy consumption, use of water, effluents and waste, efforts towards higher circularity, CO2 emissions, biodiversity, compliance with environmental laws and regulations and the number of environmental grievances filed.

Many companies disclose information on environmental management and impact through their sustainability reporting, applying standards such as the Global Reporting Initiative (GRI) Standards HideRelevant GRI Standards include “GRI 302 Energy”, “GRI 303 Water and Effluents”, “GRI 304 Biodiversity”, “GRI 305 Emissions” and “GRI 306 Waste”and the Sustainability Accounting Standards Board (SASB) StandardsHideSee the SASB Extractives & Minerals Processing Standards covering relevant subsectors such as coal, construction materials, iron and steel, metals & mining, oil and gas (exploration and production, midstream, refining & marketing and services). There is also sector-specific guidance such as the IPIECA sustainability reporting guidance for the oil and gas industry .

Once the objectives and scope have been agreed, the MSG should establish how to disclose the necessary information. The MSG might wish to consider:

• Is there demand for any environmental management and monitoring information that is not publicly available?
• What is the best way to disclose or gather additional information? Could such information be systematically disclosed?
• How can environmental management and monitoring information be presented in a more accessible way (e.g., relevant website or portal, EITI reporting, thematic brief, special report, etc.)?

The MSG could consider a timetable for working with the relevant reporting entities to systematically disclose information on environmental impact and for disclosing information gaps through EITI reporting. The timetable should be aligned and integrated into the MSG’s annual work plan.

The MSG should consider the accessibility, inter-operability, comprehensiveness and quality of the information to be gathered or referenced. Information in open data formats should be prioritised. When information is not available and the MSG wishes to disclose data via other means, the MSG could consider synergies with other data collection systems such as company reporting portals or open data platforms.

The MSG could also consider the sustainability of these disclosures for subsequent reporting cycles, and design reporting frameworks that build on existing disclosure systems.

The MSG is encouraged to review and analyse the disclosures, with a view to: 

• Ensure that the disclosures are widely accessible and disseminated, and that they promote public debate on relevant issues related to environmental protection.
• Meet the objectives set for these disclosures. This could entail conducting an assessment of the adequacy of the regulatory framework, especially on the actual practices compared to the rules and procedures.
• Agree recommendations with a view to strengthen the impact of EITI implementation on natural resource governance. In particular, recommendations could address:
  • Opportunities for improving systematic disclosures of data on environmental impact.
  • How the information could be presented to help stakeholders better understand the regulatory framework and its enforcement.
  • Identify corruption risks associated with applying this regulatory framework and suggest actions for mitigating these risksHideExisting research on corruption in environmental management can support MSGs in identifying risk areas. Examples: OECD (2016), Corruption in the Extractive Value Chain (see sections on “Specific risk factors associated with environmental and social impact assessments and land tenure” and “Corruption in relation with violation of environmental regulations”), and U4 (2016), Deciding over nature: Corruption and environmental impact assessments.  

The MSG might wish to consider the following questions:

• What additional analysis should be undertaken to respond to the objectives agreed in Step 1?
• What is the best way to review and discuss the information disclosed or referenced on the managing and monitoring of the environmental impact of extractive industries?
• What is the best way to document the review and analysis of the information presented as part of this requirement?
• Is there a need to expand the initially agreed scope of disclosures?