What’s in it for the extractive industries? How companies contribute to and benefit from transparency and accountable governance

EITI Global Conference: Executive Session 2

Session Summary

Executive Session 2 highlighted the important role of companies in the EITI.  Speakers stressed the contributions of companies to fiscal revenues and positive development in EITI implementing counties and elsewhere around the world.  They noted that while the initial perception of the extractive industries can be negative, companies can through the EITI and their own practices, change that perception. 

Starting with the recognition that the extractive industries are vital to many economies, the session focused on what companies have done and can do to change perceptions, improve reputation, increase transparency, and advance companies as beneficial contributors to the societies, governments and economies in implementing countries and elsewhere. The session provided examples and discussion of how trust can be built between companies, government and communities through multi-stakeholder dialogue, how increased transparency can improve companies’ social license to operate, and how companies’ can meet shareholders’ and civil society expectations through the EITI process.

Speakers

Moderator: Ms Simone Niven, Corporate Relations Group executive, Rio Tinto, U.K.

Speakers:

  • Hon. Abdul Mahdy al-Ameedi, Director General, Petroleum Contracts and Licensing Directorate (PCLD), Iraq

  • Mr. Reg Manhas, Senior Vice President, External Affairs, Kosmos Energy, U.S.A.

  • Ms. Robin Hodess, Director, Governance and Transparency, The B-Team, U.K.

  • Hon. Carolina Rojas Hayes, Vice-Minister of Mines, Ministry of Mines and Energy, Colombia

Session Details

Simone Niven of Rio Tinto opened the session by providing an overview of both the session as well as Rio Tinto’s participation in the EITI and its commitment to good governance and transparency, including contract transparency.  Prompted by Ms. Niven, Ms. Carolina Rojas Hayes discussed here role with the Ministry of Mines and Energy in Colombia and explained how the extractive industries contribute significantly to the fiscal revenues of Colombia.  Ms. Rojas Hayes noted that disclosure of the taxes paid by companies to the government had helped to foster trust between the government, civil society and the private sector.  In addition, the multi-stakeholder dialogue prompted by the EITI process had enhanced discussion and cooperation with local communities, which has helped reduce risks for companies in Colombia.

Asked about companies’ role in the EITI process by Simone Niven, Reg Manhas of Kosmos Energy presented the company’s background and participation in the EITI.  Mr. Manhas indicated that companies in the extractive industries are often viewed poorly and assumed to be corrupt, but that by developing transparency through the EITI and voluntary good practices, companies can change this impage of the extractive industries.  Mr. Manhas discussed Kosmos Energy’s focus on transparency and the buy-in from corporate governance even on emerging practices, such as contract disclosure.  Explanation of Kosmos Energy’s activities in Senegal, where allegations of corruption in the government have surfaced, was also offered, with Mr. Manhas relaying Kosmos Energy’s position that it undertook proper due diligence and has remained transparent in its business transactions in Senegal.  Mr. Manhas later added that shareholders often drive companies’ decisions on emerging issues, and has they have done regarding transparency issues, they are now calling for companies to address new issues such as climate change.

Abdul Mahdy al-Ameedi of the Petroleum Contracts and Licensing Directorate in Iraq provided a lengthy summary of Iraq’s participation in the EITI and disclosures over the past decade.  He cautioned that increased disclosure and transparency can sometimes be counterproductive when the public is not educated and informed about disclosures, as the additional information, if not well-presented and explained can lead to more concerns and questions about governments’ and companies’ practices.

From a civil society perspective, Robin Hodess of The B Team discussed the factors important to change negative perspectives of the extractives industry and to advance governance of and transparency in the industry.  She explained that while improvements in governance and transparency are often born from crises and scandals, tax and contract transparency were the results of more voluntary endeavors by companies.  Ms. Hodess also noted that investors play are keen to promote beneficial ownership disclosure in order to assess and reduce risks to their clients.

Following discussion from each of the panelists concerning their participation in the EITI and how companies have conitributed to and benefited from extractives industry transparency and multi-stakeholder dialogue, Ms. Niven asked the panellists about the next frontier in responsible business conduct in the extractives industry.  Ms. Hodess and Mr. Manhas mentioned that civic rights and whistleblowing should be further protected, including by the private sector, and that when issues arise, companies should acknowledge the issue and immediately strive to resolve it with the stakeholders involved in order to avoid more extensive costs later.  Ms. Hodess added that board oversight at companies should include consideration of companies’ financing of politics.

Ms. Hodess and Mr. Manhas also agreed that companies should uphold the same standards along the supply chain.  On this subject, Mr. Manhas added that when a company notices discrepancies in compliance along the supply chain that it should engage in capacity building activities to address the discrepancies.  Carolina Rojas Hayes mentioned that technology provides an opportunity for governments and companies alike to develop transparency and check disclosures more efficiently and that such movement to systematic disclosure will lead to better governance.

Finally, the panellists shared their views on the impact of good governance and transparency on foreign direct investment in countries.  Ms. Niven and Mr. Manhas agreed that the presence of natural resources is the most important factor motivating a company to invest in a particular country, but that poor governance, corruption and lack of transparency then greatly influence the ultimate decision whether or not to invest and operate in a country.

Questions from the audience concerned whether the panellists agreed that a movement towards streamlined reporting would be beneficial for government and industry.  The questioner as well as the panellists agreed that a consistent reporting template across jurisdictions would be more efficient, but that the multitude of different country requirements and demands from civil society were a constraint.  Questions from the audience also asked whether discussion at the EITI Conference would translate into actual change in the EITI process and, more particularly, in how governments and companies conduct themselves in implementing countries.