Executive Summary

This report provides an overview of possible options for operationalising enhanced transparency and reporting requirements by companies that purchase oil, gas and minerals (hereafter: buying companies) from state-owned enterprises (SOEs) and other public entities that can be undertaken by home governments, host governments and their SOEs, trading hubs, free zones, commodity exchanges and industry associations. In particular, as a significant share of global commodity trading transactions take place in a small number of global trading hubs, those hubs should take active steps to avoid the reputational risk of harbouring corrupt transactions and suspicious deals, including by introducing requirements for companies active in commodity trading to disclose their payments to governments. The options for operationalising enhanced transparency set out in this report can act to reinforce each other and should not be seen as mutually exclusive.

At the international level, the development of a global standard on payment disclosure by buying companies could lead to the creation of a level playing field across jurisdictions. This option would allow trading hubs to compete on an equal footing while maintaining high standards of integrity and would reduce the burden on buying companies by harmonising their reporting requirements globally. Furthermore, the public disclosure of comparable and readily accessible data can enable governments, civil society organisations, and other interested stakeholders to have a fuller picture of the revenues that resource-rich countries receive for the sale of their commodities.

The 2019 EITI Standard encourages buying companies to disclose payments for the purchase of publicly-owned commodities, and notably Equinor, Glencore, Gunvor, TotalEnergies and Trafigura now disclose information in respect of their payments to governments using the EITI framework. However, on a global basis, such disclosures represent only a tiny fraction of the payments to governments for the purchase of publicly-owned commodities.

A global standard on payment disclosure should include the participation of trading hubs and jurisdictions where buying companies are registered in order to enjoy broad multi-stakeholder ownership and legitimacy, and to capture the majority of global commodity sales transactions. Disclosures should be mandatory rather than encouraged in order to increase their uptake by buying companies, and in order to ensure consistency across commodity sales transactions, reporting requirements should apply to both listed and private companies.

In the absence of a coherent global standard, home governments, including trading hubs may choose to introduce requirements for companies to disclose information in respect of payments to governments on a unilateral basis – either through the adoption of general regulations or, in jurisdictions where commodity exchanges operate, through specific regulations applicable to companies operating on that exchange. This option would increase public disclosure of the details of commodity sales transactions, but unless aligned with a common reporting framework, such as the one provided by the EITI Reporting Guidelines for companies buying oil, gas and minerals from governments, may increase the reporting burden and compliance costs for companies operating in multiple jurisdictions, and would likely lead to a fragmentation of reporting and challenges with comparability of data by end-users.

Beyond reporting requirements enacted by governments, there is an opportunity for free zones, commodity exchanges and industry associations to create strong incentives for the disclosure of payments to governments. The ability of industry associations and commodities exchanges to restrict market access for non-complaint industry players provides a powerful tool for companies to comply with any applicable transparency requirements. Experience with self-regulatory approaches by industry associations and commodities exchanges shows that they work best if aligned with international standards.

Host governments and SOEs have an important role to play to clarify expectations regarding the disclosure of payments to governments from buying companies. This could be done through the adoption of a disclosure policy by host governments or the inclusion of specific disclosure obligations in commodity sales contracts. Such measures can contribute to the creation of an environment where expectations about transparency of payments are clarified at the outset and where commodity sales contracts are entered into with the understanding that payments made to governments for the purchase of oil, gas and minerals will be made public. Furthermore, these measures can also support the implementation of a global standard on payment disclosure or the operation of self-regulatory approaches, thus levelling the playing field for companies operating across different jurisdictions.

The implementation of the options set out in this report for operationalising enhanced transparency for the payments to governments for the purchase of publicly-owned commodities need to be carefully considered. A lack of implementing guidelines or a flexibility in respect of implementation can cause challenges with ensuring consistency and comparability. For example, governments may set out inconsistent reporting requirements, and companies may adopt different interpretations or approaches in respect of their reporting. A misalignment between the international standard and the implementing guidelines can have the effect of watering down the international standard and creating potential loopholes, and may increase the compliance burden if companies were subject to different reporting requirements across jurisdictions.

Early consideration should be given to the practicalities of disclosure requirements (scope, frequency, format, availability), the extent to which the data disclosed is publicly available, and the potential for new technologies (such as blockchain), to aid disclosures. The disclosure of payments to governments for the purchase of publicly-owned commodities would generate a significant amount of information that would need to be aggregated, and consequently, the creation of a common repository for disclosing, aggregating and publishing this information would be recommended in order for these disclosures to contribute meaningfully to effective accountability in commodity trading.