The EITI plays a significant role in setting expectations for transparent and accountable extractives governance. It does this both through the EITI Standard, which is implemented in 55 countries, and through the Expectations for EITI supporting companies. An assessment of practice in meeting the EITI supporting company expectations was recently undertaken for the first time.
Introduced in 2018, the Expectations for EITI supporting companies cover eight areas and apply to over 60 EITI supporting companies in the mining, oil and gas and commodity trading sectors. The recent assessment sought to identify good practice as well as gaps in disclosures. It also highlighted opportunities for clarifying the expectations and improving communication around good practice.
Digging into the detail
Expectation 1: Publicly declare support for the EITI Principles and, by promoting transparency throughout the extractive industries, help public debate and provide opportunities for sustainable development.
The review showed that many companies have taken steps to adhere to the expectations and to incorporate these into their policies and practices. All but two companies have made public declarations of support for the EITI. Some companies have gone further to explain their role in promoting transparency in all countries in which they operate.
Expectation 2: As a guiding principle, supporting companies are expected to publicly disclose taxes and payments. Where companies choose not to, they should state why.
The assessment showed that the predominant practice is to publicy disclose taxes and payments disaggregated by country, and frequently also by project. However, 30% of supporting companies do not disclose this information for non-EITI implementing countries other than at an aggregated level, and do not explain why these disclosures are not made at the country and project level.
Expectation 3: Ensure comprehensive disclosure of taxes and payments made to all EITI implementing countries.
The assessment showed that all EITI supporting companies have disclosed taxes and payments made to EITI implementing countries where they operate.
Expectation 4: In accordance with EITI beneficial ownership requirements, publicly disclose beneficial owners and take steps to identify the beneficial owners of direct business partners, including Joint Ventures and contractors. Listed companies will do what is required by applicable regulations and listing requirements.
The majority of EITI supporting companies are publicly listed. These companies are de facto meeting expectations on beneficial ownership disclosures through their listing requirements. Disclosure related to beneficial owners of joint ventures and contractors are, however, less common. The review highlighted an opportunity for the EITI to collaborate with supporting companies to promote beneficial ownership transparency reforms and to communicate company best practices.
Expectation 5: Support the operationalisation of countries’ decisions to disclose future licenses and contracts entered into that govern the exploration and exploitation of oil, gas and minerals in accordance with the recommendations in the EITI Standard. Companies recognise that achievement of greater transparency must be set in the context of respect for contracts and laws in accordance with the EITI Principles.
Support for contract disclosure is envisaged in the EITI supporting company expectations. While many companies indicated in the assessment that they supported contract disclosure in EITI implementing countries where this was a legal obligation, public statements of support on contract transparency had been made by just over one-third of EITI supporting companies. Companies can be powerful advocates for contract disclosure, and companies supporting the EITI are therefore encouraged to make public statements of support for contract disclosure or to publish policies on contract disclosure, where these exist. While they do not replace registers of contracts at a country level, company websites or reports can also be an effective vehicle for publication of key terms of extractive sector contracts.
Expectation 6: Engage in rigorous procurement processes, including due diligence in respect to partners and vendors.
Practices in relation to procurement processes, including due diligence, were challenging to assess, as the expectation is qualitative in nature. The assessment found that practices vary substantially, with many EITI supporting companies providing significant information on procurement processes, including policies on local content, sustainable supply chains, conduct and expectations. Several companies also provided online registers of supplier information, including company ownership. Companies following good practice on this expectation offer information of potential value to sector stakeholders, enabling due diligence processes to be scrutinised and understood.
Expectation 7: Companies, working together with governments, to deliver natural resources in a manner that benefits societies and communities.
Evaluating how companies work together with governments to ensure that resources create benefits for societies and communities was challenging to achieve in a single assessment. However, the review demonstrated that all but one EITI supporting company published a sustainability, corporate social responsibility or environmental, social and governance (ESG) report discussing the company’s approach to delivering natural resources in a manner that benefits societies and communities.
Expectation 8: Ensure that company processes are appropriate to deliver the data required for high standards of accountability.
As with Expectation 7, it proved difficult to assess company progress in ensuring that processes are appropriate to deliver the data required for high standards of accountability, due to an absence of quantitative measures associated with this expectation. Public reporting on anti-corruption and ethics and compliance systems is undertaken by some EITI supporting companies. This information provides useful contextual information that can support anti-corruption efforts.
Next steps and opportunities to improve current practice
The review played a valuable role in highlighting examples of company practices which were successful in meeting the EITI Expectations for supporting companies. It also identified areas for improvement. These included expectations on disclosures relating to taxes and payments to governments in non-EITI countries, public statements of support for contract transparency, more accessible disclosures of beneficial owners, and the advancement of disclosures on the beneficial owners of suppliers and contractors.
EITI Board Chair Helen Clark welcomed the results of the assessment, which showed that many EITI supporting companies are adhering to robust reporting policies. Nonetheless, she acknowledged that there are opportunities to improve practice. “The disclosure gaps highlighted in the review undermine the efforts of those companies which do adhere to the expectations, as well as the credibility of the EITI,” said Clark. "Making further progress on the company expectations and on the gaps in company disclosures is in the interest of compliant EITI supporting companies and investors, and will also help meet the expectations of citizens in resource-rich countries for a more transparent and accountable extractive sector.”
At its next meeting in October 2021, the EITI Board will consider how to address areas for improvement in performance on the Expectations for EITI supporting companies.