8.3 The Seven Requirements of the EITI Standard

Figure 8.1 How the EITI Works

A country’s EITI report informs the public of what happens with its natural resources.

NATURAL RESOURCES Contracts & licencesProductionRevenue collectionRevenue allocationSocial &economiccontribution

VALUE CHAIN PUBLIC BENEFIT

Source: EITI 2016a, 5.

Box 8.3 The Seven Requirements of the EITI Standard

1. Effective oversight by the multistakeholder group 2. Timely publication of EITI reports 3. EITI reports that include contextual information about the extractive industries 4. The production of comprehensive EITI reports that include full government disclosure of extractive industry revenues and disclosure of all material payments to government by oil, gas, and mining companies 5. A credible assurance process applying international standards 6. EITI reports that are comprehensible, actively promoted, publicly accessible, and contribute to public debate 7. A multistakeholder group that takes steps to act on lessons learned and reviews the outcomes and impact of EITI implementation

improving technical aspects of the EITI reporting process, such as reporting templates or data collection for EITI reports, rather than improving extractive sector governance. Failure to implement recommendations has too often contributed to lost opportunities for impact and reform.

There is increasing documentation on how EITI reporting has highlighted shortcomings in government systems and recommended actions for improvements (EITI 2016b). The stories illustrate the impact in countries that have acted on these recommendations and highlight the potential and importance of considering EITI recommendations in the countries that have not yet done so.

The EITI was essential in turning around EI sector administration in Nigeria. Other countries such as Ghana, Liberia, and Norway have also achieved EITI compliance, and there are many candidate countries working toward satisfying the EITI Standard. EITI reports from the recently confirmed EITI-compliant Peru show that since the country

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began implementing the initiative, reported figures on revenues received from EI projects have increased sixfold, a testament to the positive benefits of transparency and a boon to Peruvian citizens. However, important gaps remain among nonsignatories in the energy and mining sector: the Russian Federation, the República Bolivariana de Venezuela, and most Middle East resource-rich states.

Moreover, after more than a decade of operation, expectations of EITI’s future contribution to transparency and accountability and to extractive sector governance more widely are a matter of debate. Transparency is, of course, not an end in itself. However, in terms of the transparency that the EITI had achieved, one interesting outcome is the volume of data that is now available in its reports. If properly analyzed, they offer the potential for contributing to policy making and public debate. This is discussed in section 8.8.

A key feature of EITI is the EITI Standard, which outlines the requirements applicable to countries implementing the EITI. In February 2016, a new standard was launched (EITI 2016a). It contains six notable features.

First, it allows countries the flexibility to mainstream disclosures into government and company reporting systems, such as portals, and webpages, instead of simply reproducing reports that they created to comply with EITI disclosure requirements. Stakeholders will be able to determine which aspects of the EITI Standard are mainstream priorities and focus on improving them (such as government and company information systems on license allocations or social and economic expenditure).

Second, all countries must now disclose the identity of those that own and profit from EIs. The companies that bid for, operate, or invest in extractive projects must declare who their beneficial owners are. This requirement will take effect January 1, 2020, allowing countries time to make the necessary preparations. A roadmap is to be produced by January 1, 2017, that outlines how countries will pursue these disclosures. Because a company has a complex or opaque structure of ownership does not mean that it cannot prove to be a reliable and reputable investor. However, secrecy can obviously benefit tax evasion and conflicts of interest and hide corruption. Information about beneficial owners’ identities will have to be assured by the companies that provide it, and EITI reporting needs to disclose any companies that have failed to submit all or part of the beneficial ownership information.

Third, reporting has been required on commodity trading transactions since 2013, but the 2016 Standard enhances existing requirements so that data on commodity sales has to be broken down by the buying company (not by individual sale). Oil, gas, and mineral transactions by governments and state-owned companies generate large revenues. This requirement can mitigate corruption, encourage oversight, and discourage self-dealing by government officials.

Fourth, recommendations that result from EITI reports must be actively considered by stakeholders. The recommendations have to be listed, and activities undertaken to address each have to be noted, as does the progress made in implementing each recommendation. The rationale behind any decision not to act on a recommendation has to be documented by the government. This has the potential to contribute to improving governance beyond transparency.

Fifth, an open data policy is included in the 2016 Standard. It encourages governments to release data under an open license and in formats that are interoperable with national and international standards. This goes some way to remedy the lack of open data in EITI reports, which limits use and analysis. Data standards are to be developed further on this basis.

Sixth, the 2016 Standard incorporates a revised civil society protocol which provides guidance on how to assess a country’s civil society environment.

In March 2017, the EITI took a decision to implement more thorough project-level reporting by requiring it in all EITI reports covering fiscal years ending on or after December 31, 2018, at the latest. National multi- stakeholder groups are to devise and apply a definition of “project” that fits the specific national legal regime as well as the relevant international norms. The aim is to strengthen transparency and accountability.

GOXI

As of March 2017, the World Bank Governance of Extractive Industries (GOXI) community membership was in excess of 3,800. GOXI is “a space to share, learn and connect for action toward greater accountability and, in turn, better development outcomes of extractive industries.”23 For this greater accountability, enhanced transparency is a vital precursor, and hence transparency functions alongside accountability as the core focus of the GOXI. While the initial focus of GOXI was Africa, it is now a truly global initiative convened by the United Nations Development Programme. The EI Sourcebook website and the GOXI website are strongly aligned and mutually supporting in terms of content, links, and shared understanding.

Public-private alliance for responsible minerals trade (PPA)

The PPA is a new, joint initiative among governments, companies, and civil society to support supply chain

230 OIL, GAS, AND MINING