Here is my attempt to explain why project level reporting is much more than an obscure technical detail.
But first, a little background…
At the beginning, the EITI only required that countries lump together all payments companies make to government. Countries could publish just two figures – how much governments said that they received from companies and how much companies said that they had paid.
Then the EITI required that all payments were broken down company by company and payment stream by payment stream. This gave much more information as can be shown in this graph from the Republic of Congo.
We can see that Total E&P Congo is the largest company by revenue operating in the country, paying USD 3.5 bn to the government in 2013 through a variety of taxes, primarily, the oil and RMP taxes.
But it doesn’t tell us anything about which of Total’s projects are providing most of the revenue, this is where project level reporting is going to bring clarity.
Let me explain through my favourite carbohydrate, sugar. Below, we can see that at the moment, EITI data covers the section on the right and tracks revenue payments from companies, represented by Total, to the Government, in this case the Republic of the Congo.
Project level data is represented by all the piles of granulated sugar on the left, historically, most governments have received taxes and payments from companies on a project basis but would only publish the aggregated or combined total as part of their EITI Reports, represented here with the big bag of sugar on the right.
Who wants this data? And why?
Knowing what’s in the big bag of sugar helps track which taxes are being collected and which government department is collecting them.
Different groups of people want this information for a variety of reasons. EITI multi-stakeholder groups, the institutions that formally decide and guide implementation at the national level, are formed by three main types of stakeholders: government, companies and civil society.
For civil society organisations (CSOs), project-level reporting will assist them and communities in their ability to hold companies to account, comparing payments to governments with actual activities and production at specific sites as well as fiscal, legal and contractual terms. Access to more granular data could also help in managing communities’ expectations, as less areas of company activities are opaque and therefore subject to speculation. Lastly, communities and CSOs have a real interest in understanding how companies operate in a specific location, and in comparing their activities to other similar projects in other parts of the country.
Similarly for extractive companies, sector-wide reporting by mines sites or oil fields will enable companies to present more precisely how they contribute to the communities in which they operate and ensure that they are operating on the same terms as their competitors.
Governments want to ensure that they are receiving their fair share of companies’ profits, through taxation and other payments from companies to governments. This blog, written by Open Oil, tries to explain some of these benefits in more detail.
How does project level disclosures fit in with current EITI reporting?
Project-level disclosures could make EITI reporting easier, as it will align EITI reporting with existing monitoring, recording and reporting practices of governments and companies.
In other words, this is how government collects the information already. So there is no need to create new systems for collecting the data. Avoiding separate reporting systems is part of the EITI’s ‘mainstreaming’ efforts to strengthen existing reporting systems.
A key problem in the past has been information asymmetry, particularly during contract negotiations between governments and companies. Information asymmetry means that one group may take advantage of the relative lack of knowledge or information held by another. Getting granular, project-level reporting means that everyone has the same level of information.
With thanks to Chris Claussen and Eddie Rich for their input.