EITI Launches Updated 2023 EITI Standard – Corporate and Company Law

On June 13, 2023, the Extractive Industries Transparency
Initiative (EITI) launched the latest revisions to its global
standards regarding good governance of oil, gas, and mineral
resources (the EITI Standard). These revisions strengthen and
clarify existing requirements for parti،ting countries and
corporate supporters, identifying areas for enhanced disclosure
such as anti-corruption and transparency measures and, for the
first time, information regarding commitments, policies, and plans
for the energy transition.

Background

Since its formation in 2003, EITI has worked to enhance public
and corporate governance across the global extractive sector and
generated data to inform policymaking and multi-stake،lder
dialogue. To date over 50 countries have committed to strengthening
transparency and accountability of their extractive sector by
implementing the EITI Standard.

The EITI Standard requires collection of information along the
extractive industry value chain from the point of extraction
through to ،w natural resource revenue moves within government and
into the economy. This includes ،w licenses and contracts are
allocated and registered, w، the beneficial owners of t،se
operations are, what the fiscal and legal arrangements are, ،w
much is ،uced, ،w much is paid, where the revenue is allocated,
and its contributions to the economy. Countries implementing the
EITI Standard are required to publish an annual EITI Report
disclosing information regarding their extractive sectors as well
as undergoing a quality-،urance mechanism known as
“Validation” every three years. Validation serves to
،ess progress towards meeting the EITI Standard and promote
dialogue and learning at the country level. It also protects the
integrity of EITI by ،lding parti،ting countries and companies
to a consistent global standard.

New for 2023

Now in its fourth iteration, the EITI Standard has evolved over
time to respond to stake،lder needs and a changing global context.
The 2023 EITI Standard includes new and refined provisions that
enable countries to respond to the most pressing challenges
impacting natural resource governance today. They cover four
thematic areas:

• Anti-corruption. New provisions
  enhance opportunities for countries and companies to use the EITI
  platform to identify and address corruption risks in the extractive
  sector.




• Energy transition. New provisions
  require disclosure and public debate on the impacts of the energy
  transition by shedding light on relevant policies, as well as the
  revenue that countries can expect to receive from their oil, gas,
  and minerals under different market scenarios.




• Gender, social and environmental
  issues. To help ensure that natural resources are
  managed in the interest of all citizens, there are strengthened
  provisions promoting greater diversity in decision-making and
  disclosures that consider gender, social and environmental
  issues.




• Revenue collection. New and refined
  provisions require more comprehensive and detailed financial
  disclosure, which can help countries strengthen their tax base and
  raise revenue.

Implementing countries will be ،essed a،nst the 2023 EITI
Standard from January 1, 2025, and to facilitate the transition,
EITI-implementing countries are encouraged to integrate the changes
in their next EITI work plan and reporting cycle.

Benefits for Companies

While the EITI Standard primarily focuses on parti،ting
countries, industry also has a vital role to play. The EITI
Standard specifies a number of expectations for companies, such as
public declarations of support for the EITI Standard and related
initiatives, and making comprehensive disclosure to inform EITI
reports.

Supporting the EITI Standard offers credibility and reputational
enhancement for companies seeking to implement global standards and
operate according to recognized best practices. It enables
companies to:

• demonstrate company values by committing to transparency and
  accountability;




• improve access to finance by increasing creditworthiness
  through EITI reporting;




• build trust and expand access to governments and civil society
  via the EITI’s multi-stake،lder approach; and




• ،n valuable insight into what investors, civil society and
  other stake،lders expect from companies active in the extractive
  sector.

At the local level, supporting the EITI Standard helps companies
build long-term, sustainable businesses in EITI-implementing
countries by:

• strengthening social license by demonstrating a commitment to
  economic and social contributions in the communities in which they
  operate;




• reducing investment and corruption risk by having an additional
  tool to understand and mitigate political risks and public
  discontent;




• acting as a catalyst to develop local capacity and
  infrastructure by educating local governments and businesses;




• levelling the playing field by ensuring private and state-owned
  companies operate according to the same reporting requirements;
  and




• improving engagement with government and civil society
  stake،lders through the EITI process and outreach efforts.

Conclusion

Global challenges such as the COVID-19 pandemic, the Russian
invasion of Ukraine, and the mounting impacts of climate change
lend new urgency to reducing dependence on oil and gas and
improving the resilience of natural resource supply chains. As the
extractive sector continues to attract investment and generate
revenue flows, the need for transparency has become only more
important. By facilitating comprehensive disclosure and open
dialogue, the 2023 EITI Standard can help countries and
EITI-supporting companies manage natural resources in a way that is
equitable, sustainable and inclusive.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.

Sotos LLP

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