Local stakeholders are often unaware of the contributions that are made or that should be made in terms of extractive contracts. This can erode trust and, in some cases, may lead to conflict.

Publishing any legislation, contractual obligation or agreement surrounding payments, as well as the actual amounts paid or in-kind donations given, provides a more complete picture for all stakeholders involved and can help manage expectations.

Transparency can also be instrumental in ensuring that payments mandated by tax legislation or regulations reach the intended subnational government body, and that stakeholders are able to hold local authorities to account for the allocation and use of this revenue. 

Benefits for governments

• National governments seeking to use extractive operations to promote sustainable local development will have increased clarity and oversight over revenues allocated to local communities and their use. They will be able to track and manage revenues more efficiently.

• Developing an understanding of future tax revenue flows can facilitate improved planning, particularly during periods of commodity price volatility and through the energy transition, when revenues may increase, fluctuate or decline.

• Subnational governments benefit from understanding what revenues they should receive from extractive companies or from national governments and can ensure that these revenues are received. Timely disclosures can help them plan better to respond to demands from local communities and may support community representatives and local governments in negotiating benefit sharing agreements. .

• National and subnational governments benefit from extractive operations where there are good relations between operations and local communities. Conflict can occur when subnational revenues are not well managed or where expectations for local development impact are not met. Such conflict is costly and may deter investment into resource-rich regions.

Benefits for citizens

• Where there are payments due to local governments or directly to communities, being aware of these payments and their allocation will help citizens hold government to account for their use. Transparency can help deter corrupt activity relating to these payments.

• In several countries, EITI reporting has led to changes in the applicable regulatory framework and has helped ease bottlenecks, so that local communities receive the revenues to which they are entitled.

• Payments by companies are likely to be more effective in promoting social and economic development where they are transparent and where there are opportunities for citizens to participate in decisions on how they are used. For example, integrating gender considerations into decisions on the use of extractive revenues may help redress gender imbalances and promote more equal participation in the sector.

Benefits for companies

• Companies are increasingly held to account by investors for their social and economic impact. Companies with robust policies relating to social expenditures will benefit from increased transparency over the allocation of these payments.

• Clarity over the terms of agreements can help companies be more certain that their payments are contributing meaningfully to local development plans and support them in demonstrating the value of their contribution to both investors and local communities.

The 2019 EITI Standard includes provisions on subnational payments and transfers and social expenditures by companies.

Requirement 4.6 requires multi-stakeholder groups to establish whether payments from companies to subnational government entities are material, and to disclose them where this is the case.

Requirement 5.2 enables stakeholders to assess whether the transfer and management of subnational transfers of extractive revenues are in line with statutory entitlements. It requires the disclosure of material transfers of revenue generated by the extractive sector between national and subnational governments. It also requires disclosure of the revenue sharing formula and the actual amount transferred.

Requirement 6.1 requires implementing countries to disclose social expenditures where they are mandated by law or contracts, including benefits provided in kind. Multi-stakeholder groups are encouraged to publish discretionary social expenditures where these are material.

Requirement 6.3 requires implementing countries to disclose information about the contribution of the extractive sector to the economy and can provide important contextual information for data on subnational transfers and social expenditures.

Requirement 7.1 requires implementing countries to consider access challenges and information needs of different genders and subgroups of citizens.

• EITI guidance: Guidance Notes on EITI Requirements 4.6 and 5.2 and Requirement 6.1 provide step-by-step guidance on disclosing subnational payments, subnational transfers and social and environmental expenditures.

• NRGI: A primer developed by the Natural Resource Governance Institute explains the basics of subnational revenue distribution.

• World Bank: Programs led by the International Finance Corporation’s Sustainable Infrastructure Advisory facilitate access to and use of information to improve natural resources investment processes, promote social accountability and demonstrate how natural resource wealth contributes to reducing poverty and boosting shared prosperity. 

• Responsible Mining Foundation: The RMI Report 2020 provides an assessment of the economic, environmental, social and governance (EESG) policies and practices of 38 large-scale mining companies.

• IIED: The International Institute for Environment and Development has developed a catalogue and interactive map of community development laws related to the mining sector featuring legislative arrangements from 54 countries.

• Oxfam: Oxfam offers three recommendations for mining companies during the COVID-19 crisis.