Are supporting companies meeting the expectations of the EITI?

Like a three-legged stool, the Extractive Industries Transparency Initiative (EITI) is built on the participation of three equal pillars – governments, companies, and civil society. These three constituencies come together via a Multi-Stakeholder Group or MSG to help govern a county’s natural resources, promote transparency and support informed policy decisions to benefit citizens. As a governance platform its strength is built on these three ‘pillars’. If one pillar is weak, frail or breaks, the platform collapses.

More than 50 EITI-implementing countries are assessed through a validation process against the EITI Standard. Civil society has extensive guidelines for selecting its board representatives and expected standards of behaviour. Extractive companies participate in national MSGs, through reporting in EITI-implementing countries, and alongside commodity traders and financial institutions they can also be a “supporting company”. The 62 EITI-supporting companies commit to advance transparency and good governance in the extractive sector globally by promoting the EITI Standard and contributing financially to its implementation. These supporting companies also commit to observing some expectations as they should be seen as EITI champions.

Presently, a few of these supporting companies are also on EITI’s governing board too.

What are the expectations for companies?

EITI Standard Requirement 1.2: Company Engagement lays the foundations for companies’ participation in the EITI in that they:

• are fully, actively, and effectively engaged in the EITI process,
• are expected to publish an anti-corruption policy describing how the company manages corruption risk, including the use of beneficial ownership data, and
• are expected to engage in rigorous due diligence processes.

To promote accountability, the EITI is committed to assessing the supporting companies against the expectations. In 2021, over 60 companies were evaluated based on their compliance with the then five expectations. The detailed results were published in August 2021.[1]

Like standards for aviation safety, the EITI standard and company expectations get more robust over time. In 2022, the EITI strengthened and expanded the company expectations reflecting the crucial leadership role that supporting companies, including those on the board, can and should play.

These nine company expectations are now outlined Part 4 of the 2023 EITI Standard.

They include minimum commitments such as publishing a statement of support for the EITI (expectation 1), contract transparency (exp. 8), making comprehensive disclosures in EITI countries (exp. 2), and disclosing audited financial statements (exp. 5). Other long-held transparency norms like publishing project-level payments (taxes, royalties, fees) to governments in all countries of operation (exp. 3) are also included. Expectation 3 is particularly important as it demonstrates leadership and a real commitment to transparency in resource-rich countries that have yet to become EITI-implementing countries like Australia, Brazil and South Africa.

Reflecting the evolution of the EITI Standard, the expectations also include a focus on beneficial ownership (exp. 6), gender policies and gender-disaggregated data (exp. 9), and due diligence (exp. 7).

WHY DOES THIS MATTER?

EITI-supporting companies include some of the largest and most influential oil, gas and mining companies in the world. How they behave helps set a global standard. More than that, the 12 company seats on the EITI Board allow a select group of companies to sit at the helm of an initiative literally tasked with standard-setting. This gives power and responsibility. They can advance, block, or plateau work towards better transparency, accountability, and good governance in the extractive sector.

HOW DO EITI-SUPPORTING COMPANIES STACK UP?

The last major assessment was published on June 13, 2023 against the backdrop chorus of protests from civil society groups at the EITI Global Conference in 2023 demanding Exxon be removed from the EITI board[2]. In late 2023, after much negotiation, goodwill and compromise, the new EITI board agreed to conduct a follow-up survey with supporting companies that were assessed as ‘not met’ or only ‘partially met’ for any of the nine expectations.

Overall, the good news for the 2023 assessment was that some companies including BHP, Rio Tinto and Anglo American who sit on the EITI Board ‘fully met’ all of the nine expectations. Also the latest follow-up survey demonstrated some progress from those companies yet to have ‘fully met’ the expectations.

We are still waiting for the data to be presented by the EITI in a more user-friendly format but here’s what we know.

The latest follow-up survey shows that 17 companies ‘met’ and 45 ‘partially met’ Expectation 6 that companies must publicly declare and publish their support for beneficial ownership transparency and disclose their beneficial ownership. This now includes TotalEnergies, Tullow and Woodside Energy publishing statements in support of beneficial ownership.

With one in two corruption cases involving hidden ownership and an estimated US$4 trillion needed to be invested in clean energy to meet the Paris Targets, there are huge gains from publicly supporting beneficial ownership transparency registers, disclosures and encouraging third parties to disclose. We are keen to see others including BP, Ivanhoe Mines, Shell, Kosmos and Vale step up.

As for Expectation 7, which relates to performing comprehensive due diligence processes and globally publishing an anti-corruption policy, 41 companies fully met the expectations. Disappointingly, there are still 20 companies that ‘partially met’ them, and one company that did not. We say it’s time to lift your game. Combatting corruption should be a board-level priority and the tone starts from the top.

It’s essential to have a robust due diligence process to prevent corruption, criminal, unethical conduct and non-compliance in the extractive sector. Disclosing the policy also helps reduces the risk of corruption and can help build trust and social license.

On Expectation 9, most companies (59 out of 62) have published a commitment or policy on gender diversity. However, there is still room for improvement in collecting, analysing, and publishing gender-disaggregated data on the sector’s impact and benefits, and providing more transparency for both men and women.

It’s essential to recognise that corruption risks can occur at every stage of the industry’s value chain. Providing detailed external financial reporting, including disclosing taxes and payments to governments in non-EITI countries (Expectation 3), especially when disaggregated by project, can help track money flows, demonstrate economic contribution and hold governments accountable for the revenues they receive. In a time of super profits for the oil and gas sector, it’s hard to fathom how ExxonMobil can refuse to take this basic step, claiming ‘competitive disadvantage’ even as their peers fulfill this expectation.

CREATING MOMENTUM FOR GREATER CHANGE

All EITI-supporting companies – especially those on the EITI Board – should be practicing transparency and accountability. As a first step this means meeting all nine EITI company expectations. This will help ensure a race to the top amongst extractive companies, reducing corruption risks and ultimately benefiting citizens from resource-rich countries. A hearty congratulations to those companies already meeting these expectations, and those diligently working towards them. We hope the next full company assessment will show much more progress helping to benefit the 3.5 million people living in resource rich countries around the world.

[1] 2021 assessment of adherence to the expectations for EITI supporting companies (2021) EITI. Available at: https://eiti.org/documents/2021-assessment-adherence-expectations-eiti-supporting-companies (Accessed: 07 June 2024).

[2] Menard, A. (2023, June 7). Oxfam will oppose any EITI Board that includes ExxonMobil. Oxfam. https://politicsofpoverty.oxfamamerica.org/oxfam-will-vote-against-any-eiti-board-that-includes-exxonmobil/ (Accessed: 31 July 2024).