Beneficial Ownership https://eiti.org/beneficial-ownership
Knowing who owns and controls extractive companies
The real owners of extractive companies, known as the beneficial owners, are often kept anonymous or hidden by a chain of shell companies. This can be a particular challenge in the extractive industries, where knowing who has the rights to extract oil, gas and minerals is key to addressing risks of corruption or conflict of interest.
Protecting anonymity can deter investment and make it harder to curb corruption. It is estimated that developing countries have lost USD 1 trillion a year since 2011 as a result of corrupt or illegal deals, many of which involve anonymous companies. Investigations using beneficial ownership information culminated in data leaks such as the Panama Papers, the Luanda Leaks and the Pandora Papers.
The EITI has been able to deliver practical results through the inclusion of beneficial ownership information in licensing and company registration processes as well as through EITI reporting. Publishing details of company ownership can help close channels for corruption, enable effective taxation, build fairer markets, encourage responsible investment and manage business risk. Addressing these issues will remain critical as the energy transition gathers pace.
EITI REQUIREMENTS
The EITI Standard requires implementing countries to disclose beneficial ownership information for extractive companies from 1 January 2020. Disclosures related to beneficial ownership transparency are covered by EITI Requirement 2.5.
Commodity Trading https://eiti.org/commodity-trading
Shedding light on how oil, gas and minerals are bought and sold
In some cases, extractive companies pay governments for the right to extract resources with in-kind payments of oil, gas and minerals. The state or the state-owned enterprise (SOE) then sells these physical resources to commodity trading companies or domestic refineries. Commodity traders may also provide resource-backed loans to governments or state-owned companies in exchange for future production of commodities.
Almost half of total government revenues reported through the EITI come from the sale of oil, gas and minerals to commodity trading companies. The scale and significance of these payments make them a matter of public interest. State-owned enterprises and commodity traders making payments to governments have been facing increasing demands from advocates and policymakers to adopt more transparent business practices.
Without transparency over the terms of these transactions, commodity trading is vulnerable to corruption and can jeopardise public revenues. Commodity trading transparency ensures that all parties understand the terms on which trades take place and how these may affect the funds available for public expenditures and development.
EITI REQUIREMENTS
The EITI Standard requires governments, state-owned enterprises or third parties appointed by the state to disclose the revenues collected from the sale of oil, gas and minerals, as well as the volumes sold broken down by buying company. Disclosures related to commodity trading are covered by EITI Requirement 4.2.
Contract transparency https://eiti.org/contract-transparency
Strengthening public oversight of extractive sector agreements
Contracts, licenses and associated agreements are important elements of a country’s legal framework. They explain the rights and obligations of all parties involved in the exploration and production of oil, gas and minerals.
By shedding light on the rules and terms that govern extractives projects, contract transparency can help curb corruption and empower citizens to assess whether they are getting a good deal for their resources. Publication of contracts gives visibility on how much revenue is expected to flow to national and subnational governments. This information can be crucial in contexts where precious revenues are impacted by market volatility and emerging energy transition policies.
When EITI countries commit to contract transparency, they accept to publicly disclose the full text of any contract, license, concession or other agreement governing the exploitation of oil, gas and mineral resources.
EITI REQUIREMENTS
The EITI Standard requires implementing countries to disclose all contracts and licenses that are granted or amended from 1 January 2021. Disclosures related to contract transparency are covered by EITI Requirements 2.2, 2.3 and 2.4.
Energy Transition https://eiti.org/energy-transition
Using data to inform energy transition pathways
As the energy transition gains traction, it will have a transformative impact on the extractive industries and global economy. It will expose producer countries to new risks and opportunities, requiring governments of resource-rich countries to make important decisions about the management of their natural resource wealth.
To be sustainable, the shift to renewables needs a transparent and accountable extractive sector. Data on the current and expected production, exports, revenues and employment of the sector can inform investment decisions on future fossil fuel projects and can help shape new policies on energy and mineral production.
The energy transition presents a significant opportunity for countries to use EITI data and dialogue to inform public debate and policy decisions on transition pathways. As one of the EITI’s strategic priorities, the EITI is supporting implementing countries and multi-stakeholder groups in building awareness around the transition, making use of data that is available, and working with supporting countries and partners to achieve sustainable outcomes.
EITI REQUIREMENTS
The EITI Standard requires that significant mandatory social expenditures and environmental payments are disclosed and reconciled where possible. Disclosures related to social expenditures and environmental payments are covered by EITI Requirement 6.1.
State owned enterprises (SOE’s) https://eiti.org/state-owned-enterprises
Strengthening accountability of state participation in the extractive sector
State-owned enterprises (SOEs) play important roles in exploiting natural resources and managing the extractive sector. They can generate significant revenue for the state, enable a government to exercise greater control over the sector, help improve local technologies and skills or manage exposure to energy transition risks.
The way that state participation and SOEs are governed has considerable implications for public finances and the economy. Although some SOEs have made significant contributions to development and revenue generation, others have struggled with poor governance and corruption. Lack of transparency about how much the state receives from the sale of its oil and gas can create a distorted picture of government revenues from the extractive sector.
EITI reporting and Validation have shown that although financial transactions related to state-owned companies have become more transparent, there is still demand for improving transparency standards around SOE governance.
EITI REQUIREMENTS
The EITI Standard requires countries to explain the role of SOEs in the oil, gas and mining sector, as well as the rules that govern the financial relationship between the government and SOEs. This should include the level of ownership that the government has in SOEs, subsidiaries and joint ventures. Disclosures related to SOEs are covered by EITI Requirements 2.6, 4.5 and 6.2.
Systematic disclosures https://eiti.org/systematic-disclosure
Reporting data at source
Transparency should be an integral and systematic part of extractive sector management. EITI implementing countries are increasingly disclosing data at source – through government and company databases, online registries, websites and portals – providing citizens and stakeholders with accessible and up to date information on the sector.
When governments make the transition to systematic disclosure, EITI reporting becomes simpler and more cost-effective. This approach, also known as mainstreaming, enables stakeholders to shift their focus from data collection to data use, analysis and debate.
For companies, disclosing data at source helps build trust by improving their social license to operate, setting expectations with communities and citizens and supporting a level playing field for business.
EITI REQUIREMENTS
In accordance with the EITI open data policy, systematic disclosure is a default expectation for EITI reporting. Furthermore, in cases where transparency is widespread and data quality is of sufficient quality, countries may seek EITI Board approval to systematically disclose data without reconciling payment data in accordance with EITI Requirement 4.9.
Environmental reporting https://eiti.org/environmental-reporting
Enabling public scrutiny of data on environmental impact
Mining, oil and gas operations have substantial environmental impacts which are often a focal point of public debate. Environmental management and monitoring of extractive operations are largely regulated by environmental protection agencies, who enforce national legislation, regulations and environmental taxes.
Disclosures on the legal provisions and regulations, as well as environmental payments made by companies, can inform public understanding and debate among affected communities and help promote responsible natural resource management.
EITI REQUIREMENTS
The EITI Standard requires implementing countries to disclose material environmental payments to governments and encourages the disclosure of information related to environmental impact and monitoring. Disclosures related to environmental reporting are covered by EITI Requirements 6.1 and 6.4.
Gender https://eiti.org/gender-and-extractives-governance
Promoting more equal participation in the extractive sector
The social, economic and environmental impacts of the extractive industries are often experienced differently by men and women, and women tend to face greater barriers in accessing information and decision-making spaces.
Ensuring equal participation in decision-making on the extractive sector is critical to addressing inequalities and ensuring that the sector is managed in the interest of all citizens. By recognizing and promoting the participation of women in the extractive sector – as employees, business owners, community members and decision-makers on resource governance – governments and companies can ensure that resources are managed more equitably.
To this end, the EITI encourages women’s participation in extractives governance and EITI processes, as well reporting on the gender distribution of employment in the sector. We routinely track gender representation and reporting to monitor countries’ progress in this area and collaborate with partners to deliver guidance on gender sensitive EITI implementation. Gender reporting is now included as part of the Expectations for EITI supporting companies.
EITI REQUIREMENTS
The EITI Standard includes provisions that aim to improve the participation of women in extractives sector management and encourage the publication of data by gender. Disclosures related to gender are covered by EITI Requirements 1.4, 6.3, 7.1 and 7.4.
Exploration and licensing https://eiti.org/exploration-and-licensing
Transparent Framework for license allocation
Information on recent, ongoing and planned exploration can help stakeholders understand investment in the country’s extractive sector. Publicly available license registers, or cadastre systems, support sector oversight and are essential to the good management of extractive resources. They ensure that the public can access comprehensive information on property rights related to extractive deposits and projects.
Disclosing information on the legal, regulatory and fiscal framework for the extractive sector, including how it is applied in practice to govern the award of licenses is essential for informed debate and to support public oversight. Identifying and addressing possible weaknesses in licensing processes can help prevent corruption in license allocation and bidding processes.
EITI REQUIREMENTS
The EITI Standard includes requirements related to a transparent legal framework and the awarding of extractive industry rights, covering the legal framework and fiscal regime, contract and license allocations and the register of licenses. It further requires implementing countries to disclose an overview of significant exploration activities. Disclosures related to exploration and licensing are covered by EITI Requirements 2.1, 2.2, 2.3 and 3.1.
Production and exports https://eiti.org/production-and-exports
Transparency from ground to market
Transparency over extractive production and exports is an integral part of natural resource governance, especially in countries that depend heavily on revenue from the sector. As production quantities often determine the size of tax and royalty payments to governments, knowing the volume and value of extractive resources produced and exported is a matter of public interest and is essential for public oversight of natural resource management.
In fiscal regimes where government revenues from the extractive sector are based on the volume or value of goods produced or exported, reliable data is needed to ensure that companies are adequately taxed for the commodities they produce and sell.
EITI REQUIREMENTS
The EITI Standard includes requirements related to the timely disclosure of production and export data, including production volumes and values by commodity. It encourages the disclosure of data disaggregated by region, company or project, as well as the sources and methods for calculating export volumes and values. Disclosures related to the production and export of oil, gas and minerals are covered by EITI Requirements 3.2 and 3.3.
Artisanal and small scale mining https://eiti.org/artisanal-and-small-scale-mining
Uncovering data to help formalize artisanal and small scale mining
In many resource-rich developing countries, artisanal and small-scale mining (ASM) provides a livelihood for millions of people, representing a major source of economic development. While it is estimated that more than 40 million people work in the sector globally, it remains largely unregulated, resulting in limited information on production, revenues, employment and operations.
Including ASM in the scope of EITI reporting allows countries to improve access to data on artisanal mining, underpinning public debate and policies to improve legal and regulatory frameworks, curb smuggling and corruption and build capacity to formalize the sector. Such measures are particularly applicable in regions hosting minerals critical to the energy transition, where stronger governance frameworks can support the responsible supply of minerals in a period of increased demand.
EITI REQUIREMENTS
The EITI Standard requires implementing countries to provide an estimate of informal sector activity. Several countries also disclose information on the legal and regulatory frameworks, licenses, registers, production, exports and revenues linked to the ASM sector. Disclosures related to ASM are covered by EITI Requirement 6.3.
Revenue Distribution https://eiti.org/revenue-distribution
Monitoring how extractive revenues benefit communities
Extractive operations have an impact on the regions and communities where exploration and production take place. Taxation regimes may therefore provide for transfers of revenue from extractive sector projects to the subnational governments of hosting regions, either directly from companies or as redistributed revenue from central government.
Revenues can also be allocated to local development funds that finance development projects and priorities. In addition, extractive companies frequently make mandatory or discretionary contributions in cash or in kind to support the social and economic development in communities surrounding operations.
These revenues and payments are often important sources of income for local governments. EITI implementation has shown strong demand from local communities to increase transparency on their collection and allocation, to ensure that they meet their intended purpose of contributing to sustainable local development.
EITI REQUIREMENTS
The EITI Standard includes provisions on subnational payments and transfers and social expenditures by companies. Disclosures related to revenue distribution and expenditures are covered by EITI Requirements 4.6, 5.2, 6.1, 6.3 and 7.1
Revenue Collection https://eiti.org/revenue-collection
Enabling public oversight of extractive sector revenues
Income from the extractive sector – in the form of taxes, royalties, production shares, fees and bonuses – makes up a significant portion of the revenues of many EITI implementing countries. Countries are considered resource dependent when the contribution from their extractive sector exceeds one-fifth of total government revenues or export earnings.
A detailed understanding of company payments and government revenues can inform public debate about the governance of the extractive industries. Making revenue information public can help identify tax administration practices that are vulnerable to abuse, inform fiscal policies and strengthen tax administration, enhancing government’s ability to collect revenues from the extractive industries. As the energy transition gathers pace, understanding resource dependency and the impact of terms of trade on extractive projects is key for addressing the economic implications of the transition.
EITI REQUIREMENTS
The EITI Standard requires the comprehensive, disaggregated and reliable disclosure of company payments and government revenues from the extractive industries, as well as disclosure of the contribution of the extractive sector to the economy. Disclosures related to revenue collection and economic contribution are covered by EITI Requirements 4 and 6.3.
