Politics of Poverty

EITI makes progress on holding companies accountable, but will it work?

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The EITI Board meeting in Oslo, Norway, February 2020. The 52nd EITI Board meeting took place virtually from 16-17 February 2022. Photo: The EITI International Secretariat

To make transparency a reality in the extractive industries, EITI must prevent companies from skirting the organization’s expectations and undermining its purpose.

Authors: Aubrey Menard, Oxfam America’s Senior Policy Advisor for Extractive Industries Transparency, and Daniel Mulé, Policy Lead, Extractive Industries Tax and Transparency

For over a year, the global Extractive Industries Transparency Initiative (EITI)—a multi-stakeholder organization promoting good governance in oil, gas, and mining—has struggled to hold its supporting companies responsible for their actions. Last month, it made considerable progress, but the EITI will need to follow through on ensuring its new commitments to accountability are enforced in a meaningful way

In theory, companies that support the global initiative must comply with the EITI Company Expectations. This shouldn’t be controversial. But in practice, many companies are happy to flout the rules, and they get away with it.

Last year, an ExxonMobil lobbyist who also sits on the EITI Board was caught lobbying the US Securities and Exchange Commission (SEC) against a strong EITI-aligned implementing rule for section 1504 of the Dodd-Frank Act—a provision that requires companies to be transparent about their payments to foreign governments for oil, gas, and minerals. Since the US Congress adopted this provision in 2010, US implementation has stalled, but some 30+ countries have enacted similar legislation and begun enforcing it in line with EITI, allowing communities impacted by mining, oil, and gas to have the information they need to hold companies and governments to account. As an EITI Board Member, ExxonMobil should have been promoting—rather than undermining—rules that align with the Initiative’s core transparency and anticorruption aims.

After Publish What You Pay - United States (PWYP-US) filed a formal complaint with the EITI calling for the Exxon representative’s removal from the Board, the Board declined to hold Exxon accountable. Board Chair Helen Clark instead called on the Board to clarify the EITI Company Expectations and develop sanctions to hold non-compliant companies accountable in the future.

For over eight months Oxfam and PWYP have encouraged the EITI Board to adopt more stringent Company Expectations, and a corresponding set of sanctions to actually hold EITI-supporting companies to them. When the EITI Board met in February and approved a revised set of Company Expectations, several of our demands were met.

Some Significant Improvements

The revised Company Expectations both clarify expectations that some companies previously claimed were unclear, and introduce new provisions. Some of the improvements include:

● Companies must now publicly declare and publish their support for the EITI Standard and Principles, and for making them the internationally accepted standard for transparency in the sector. While this Expectation does not go so far as to explicitly prohibit lobbying against the Standard, this public declaration of support should help remove ambiguity about where companies stand on legislation in line with the EITI Standard being introduced in their countries of operation. Specifically, this Expectation implies that all EITI-supporting companies, including ExxonMobil, will support a strong, EITI-aligned implementing rule for Dodd-Frank 1504 and not lobby against such a rule.

● It is now explicitly clear that companies must commit to comprehensive project-level payments-to-governments disclosures in all countries in which they and their subsidiaries operate. This will force the 33% of companies not currently doing this to change their ways (including ExxonMobil and Chevron, two of the companies that are currently represented on the EITI Board).

● Companies must publish their beneficial owners and publicly support beneficial ownership transparency, which should lead to increased transparency around who the actual owners of companies are, and help protect against corrupt deals.

● In line with the EITI Standard, companies are expected to disclose contracts and licenses entered into or amended from January 1, 2021.

● For the first time, the Company Expectations include a provision to address gender inequality in the extractives sector. The provision is limited, only requiring companies to publish a commitment or policy on gender diversity, and to disclose gender-disaggregated employment data.

Major Loopholes Remain

While these Company Expectations mark considerable progress, they still include major loopholes:

The “lobbying loophole”

Though companies are now required to publicly state their support for EITI, the EITI Board neglected to include specific language prohibiting lobbying against the EITI Standard or principles. We worry that this “lobbying loophole” would allow a company to meet this expectation through a perfunctory declaration while at the same time working to undermine the intent and spirit of EITI.

The “feasibility loophole”

While new language makes it clear that companies are required to make project-level

payments-to-governments in all jurisdictions, there is an exception when “disclosure is not feasible.” Past experience indicates that companies resistant to disclosure will exploit this “feasibility loophole” far beyond its narrow intent. We suggested to the EITI that this loophole should be narrowed by making it clear that the existence of other companies disclosing payments in the same country would be dispositive evidence that disclosure is indeed feasible and that arguments to the contrary will not be deemed credible.

The “encouragement loophole”

The new Expectations don’t have much teeth in terms of consequences. Companies essentially get a slap on the wrist if they are non-compliant. They will simply be “encouraged” to shape up.

The “leadership loophole”

The new expectations leave room for non-compliant companies to claim Board seats, creating a “leadership loophole.” The new Company Expectations state that companies that are fully compliant with the Expectations should be first considered for Board seats, but does not then specifically prohibit non-compliant companies not meeting the Expectations from joining the Board and thus leading the Initiative. Given the strong deference that companies participating in EITI have granted to the few but particularly powerful companies that have fought tooth and nail against disclosure or being held accountable, the secondary consideration of non-compliant companies risks continued representation on the Board by “openwashers” —companies that want all the benefit of being seen as transparent but whose actions ultimately devalue the EITI’s reputation, credibility, and impact. Further, because the constituency’s nomination process is opaque, there will be no way of knowing whether compliant companies were considered first, as required by the new expectation.

Testing the Expectations

Whether or not the revised Company Expectations will prevent companies from skirting their transparency commitments remains an open question. We have urged the EITI Board and Secretariat to undergo an exercise to stress test the new Company Expectations against various scenarios. The EITI has also committed to revising the Company Constituency Guidelines to address how the new Company Expectations will be implemented.

The new Company Expectations will likely be tested in the real world soon as well. The US Securities and Exchange Commission is expected to review the 2020 Final Rule implementing Dodd-Frank section 1504 in April. If ExxonMobil, Chevron, and the American Petroleum Institute were to follow their playbook of the last ten years, they would lobby against a strong rule. In theory, the new EITI Company Expectations should compel them to offer their support for EITI-aligned project-level payments-to-governments disclosure in the revised rule and prevent them from lobbying to undermine it. We will see what happens in practice.

Another test might come in 2023 when the EITI evaluates companies against the revised Expectations. But again, in line with the new expectations, non-compliance will only lead to encouragement to shape up.

Will companies act in the spirit of their commitment to EITI and its principles? And if not, will the new Company Expectations be sufficient to hold them accountable?

We’re optimistic but remain vigilant, focused on corporate responsibility for increased transparency that allows citizens and communities to have the necessary information to ensure good governance and demand accountability from governments and extractive companies.

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