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Enhancing the impact and protecting the brand: EITI Validation

22 June 2016

One of the most important outcomes from the recent EITI Board meeting in Oslo was an agreement on the next steps for Validation.

Validation is EITI’s currency – it needs to be a quality assurance system that really tests whether our global standards are being achieved and encourages countries to go further. Yet it is often misunderstood. 

The EITI is often lazily referred to as a voluntary initiative. It’s true that countries voluntarily seek admission as an EITI candidate. But once admitted, there is a limited period to achieve compliance with the EITI’s requirements. As long as a country remains a member, it comes with obligations on not just the government, but also on companies operating in the sector and on civil society. The EITI requires collaboration between government, industry and civil society, and comprehensive EITI reporting with full government and industry participation. Once a country has committed to the EITI, it’s no longer “voluntary”. The obligation to deliver is quite substantial.

Validation is one of the key tools that the EITI Board uses to verify whether implementing countries are delivering on their commitments. Through Validation, countries receive recognition for their efforts and progress. Where EITI implementation is inadequate or has stalled, the findings from Validation can lead to suspension and delisting. Validation recognises and incentivises good implementation and gives the EITI teeth where implementation is not good enough. The new Validation process should lead to greater focus on continual improvement.  

Changes to Validation

The EITI’s Validation work had been on hold while the EITI Board considered changes to the Validation system and procedures and the arrangements for funding Validation (see here for more details on the process). In recent months there have been several important developments:

  • In February 2016 the EITI International Board approved the 2016 EITI Standard including a revised Validation system. The new system combines data collection undertaken by the International Secretariat with independent quality assurance by an independent Validator who reports directly the EITI Board. As previously, there are extensive opportunities for stakeholder participation and the EITI Board takes the final decision. An overview of the new Validation system is available here.
  • In May 2016, the Board agreed the Validation Guide, which provides detailed guidance on assessing EITI Requirements, and more detailed Validation procedures, including a standardised procedure for data collection and stakeholder consultation by the EITI International Secretariat and standardised terms of reference for the Validator.

At the Board meeting in Oslo in June, there were two further developments. First, the Board agreed the transitional arrangements for how the 2016 EITI Standard will come into force. Most of the changes compared to the 2013 Standard are of a clarifying nature, addressing weaknesses and ambiguities based on lessons learnt from the first three years of implementation. Second, the Board agreed a revised schedule for Validations. The Board agreed that:

  1. 15 Validations (in Azerbaijan, Ghana, Kyrgyzstan, Liberia, Mali, Mauritania, Mongolia, Niger, Nigeria, Norway, Peru, Sao Tome & Principe, Solomon Islands, Tajikistan and Timor-Leste) will commence on 1 July 2016.
  2. Six further Validations will commence on 1 January 2017 in Honduras, Iraq, Mozambique, Philippines, Tanzania and Zambia.
  3. The Board will confirm the schedule for the remaining countries at its 35th meeting in Astana on 25-26 October 2016.

In agreeing how to apply this new approach to Validation, a number of different views were presented for and against a quick schedule. Some implementing countries were eager to be validated, as Validation plays a key role in motivating implementation. Others argued that implementation of the EITI Standard had proven more demanding than expected, and that Validations should be deferred. Some were concerned about losing their compliant status (earned through earlier Validations under the EITI Rules). Some Board member emphasized that Validation was an essential feature of EITI implementation, and that further delays to the Validation schedule would present a significant credibility risk. Funding for Validation was also a key factor (see here for more details on the EITI’s funding review).

A ladder not a step – Validation as a tool of continual improvement

With the Validation procedures and schedule now clear, the International Secretariat has started work preparing for the Validations commencing on 1 July. We are working with National Secretariats to ensure that all stakeholders have an opportunity to comment and contribute their views. The process for recruiting the Validator is underway

The findings from these Validations will no doubt lead to wider discussions about the development of the EITI. It was evident from the discussions in Oslo that we need to explain Validation in better. As I commented in Oslo, comparing Validation under the 2016 EITI Standard with the 2011 EITI Rules is like comparing a multi-disciplinary sport like the triathlon with the 100 meter sprint. Thirty-one countries have achieved compliance with the EITI Rules, but no country has yet achieved compliance with the EITI Standard. That means that while many have met the earlier requirements on revenue transparency and a providing platform for dialogue, they have not yet been tested on everything from license allocations, to production, to state-ownership, to social payments, and so on.

As countries undertake Validation in the coming months, it would be surprising if many achieved compliance with every requirement. Therefore they will not become compliant with the Standard, even if the until now had been compliant with the EITI Rules.

That does not mean that countries have failed Validation. Validations under the 2016 Standard will include an assessment of the detailed requirements at four levels: satisfactory progress, meaningful progress, inadequate progress and no progress. 

It is therefore no longer fair to consider the EITI as a binary system: compliant or not. The disaggregated assessments of each requirement will provide the most important insights. The Validation reports will address the impact of the EITI, based on the national priorities for the extractive industries. The reports will also make recommendations on strengthening implementation, including opportunities for mainstreaming transparency in corporate reporting and government systems. 

The EITI is about providing a platform for reforms, for improved governance. Change was not adequately captured with the previous crude system of candidate or compliant. The previous methodology provided at best a still picture silhouette.

By introducing more nuance – the combined effect of determining progress on a scale from compliant to various degrees of progress – together with the more written analysis, will hopefully be more like a 3D films tracking and encouraging change.

Within the EITI community, we now have a big task in communicating that moving from compliant (with the 2013 Rules) to having made meaningful progress (but not yet compliant) (with the 2016 Standard) can be a sign of successful change and significant improvements.