Is the EITI a vehicle for corporate social responsibility?

Is the EITI a vehicle for corporate social responsibility?
Last Wednesday, Clare Short, a former cabinet minister in Tony Blair’s government, came to the University of Ottawa to present on the Extractive Industries Transparency Initiative, its achievements, challenges, and the way it is moving forward. Short is the chairwoman of the EITI board. She was joined by Mark Pearson, director general of external affairs at Natural Resources Canada; François Meloche, an extra-financial risk manager with Bâtirente inc.; and Ian Smillie, chairman of the board of the Diamond Development Initiative International. Ousmane Dème of Publish What You Pay opened the session. Not only was it a stellar group of experts in the area of mining and development, but there were also members in the audience from the Mining Association of Canada, Goldcorp Inc., and SNC-Lavalin, as well as members from a variety of non-governmental organizations. The room that fit about 60 people was over capacity and no one minded skipping the break in order to have a longer discussion.
People were respectful and engaged. Needless to say, this does not always happen when you get human rights activists, mining companies, and government representatives in the same room. While maybe not all of the cynicism and skepticism from these different perspectives was suspended, I did sense a willingness to take the time to understand what the initiative was all about and how it could be used to improve human rights on the ground.

The history of the emergence of the EITI is an impressive reminder that while change can be slow, no change happens without effort, and improvements are the result of multiple efforts by many individuals.

In 1999, Global Witness published a report entitled “A Crude Awakening,” which exposed the links between the oil industry, the continuation of the war in Angola by the Angolan government, and the deepening poverty of Angola’s people. In fact, the oil industry was paying the Angolan government huge sums of money to extract the oil from the ground, which in turn allowed the government to purchase even more weapons from shady arms dealers and continue the war while the people suffered greatly.

The report argued that the oil companies should take some responsibility for their contribution to the suffering of the Angolan people. Whether oil companies wanted to believe it or not, their activity was contributing to the continuation of the war. The report argued that if people could see where the money was going then they could voice their opposition to the choices being made by oil companies and the government. The report challenged both the oil industry and the Angolan government to make transparent monies paid and received, or to “publish what you pay.”  

In 2002, Publish What You Pay was started as a campaign by a handful of NGOs in the United Kingdom including Global Witness, CAFOD (Catholic aid agency for England and Wales), Open Society Institute, Oxfam GB, Save the Children UK, and Transparency International UK. It has since grown into a global network of more than 600 groups.

That same year, Tony Blair announced the creation of the EITI at the World Summit on Sustainable Development in Johannesburg, much like Prime Minister Stephen Harper’s decision to champion maternal and child health in Africa. Since then, there have been a number of high-level meetings including first the G8 and then G20 countries to secure state participation. In the case of EITI, the process has also included the participation of extractive industries themselves as well as civil society.

The EITI has two basic thrusts. The first is to establish a financial reporting system that makes it clear exactly how much money has been received by a developing country from oil and mining companies operating in their state in order to discourage corruption. Without a reporting system, states are free to say that they received much lower sums and then government officials are quite free to spend money on private projects.

While this reporting system has a variety of challenges, according to Short and Pearson, countries that have agreed to become candidate countries are continually improving their ability to report and do receive help from the EITI multi-donor fund to strengthen in-country reporting systems.

The second pillar of EITI is to create in-country multi-stakeholder groups — government, industry, and civil society — that participate in discussions about how to manage the wealth being generated from the extractive industry. As Short reminded us throughout her talk, it is a crime that people who live in countries that have so much wealth through their natural resources are so poor. The multi-stakeholder approach allows all sectors of society to participate in the managing of the national wealth.

According to Dème, a fringe benefit of this approach is that it allows civil society groups that never had contact with the government to sit side-by-side with them, thus promoting improved communication between governments and the people.

One might wonder what would encourage a country to become an EITI candidate rather than just continue business as usual. The answer is money and stability. Development banks sometimes link development funding to participation in the EITI process. Sometimes countries join on their own once they are convinced it will be beneficial for their people. The process improves both national governance and management of the natural resources.

And what about Canada? Canada is a supporter of EITI but has resisted complying with EITI standards. According to the Canadian International Development Agency web site, the government of Canada understands that EITI is a tool for development and because we are not a developing country there is no reason to comply.

Short disagrees. She believes participation by wealthy nations sets a good example and removes the argument, “Why should we comply when even the wealthy countries don’t?” Unlike Canada, Norway is a leader in development policy, and is EITI-compliant, the only wealthy nation to do so.

A major challenge for Canadian companies regarding transparency in Canada is that while we do have clear reporting mechanisms, industry is reluctant to provide current reports for competitive reasons. At the Ottawa event, it was generally agreed this hurdle could be easily overcome through delayed reporting. The more difficult problem was considered to be the federal and provincial tax systems, which would require a co-ordinated approach in order to implement the EITI standards.

Interestingly though, the Dodd-Frank legislation in the United States may force some Canadian companies to undertake some EITI-like reporting. In addition, some First Nations communities and mining companies have already entered into transparency agreements following the EITI multi-stakeholder model.

Only time and good data will tell how effective the EITI will be in reducing corruption.

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