More transparency for extractive and logging industries
By Sophie Mosca | Tuesday 21 February 2012
The Competitiveness Council aims to work out a compromise by the end of June on the transparency of payments made to governments by the extractive industry and loggers of primary forest. It held a policy debate at its 20 February meeting on this element of the Commission’s proposal of 27 October 2011 on a general reform of the European Union’s accounting directives.
The reform of accounting legislation is meant to reduce the administrative burden, especially for small businesses, improve the clarity and comparability of financial statements and increase transparency on exploitation by the extractive and logging industries by requiring disclosure of payments to governments in accounting reports on a country-by-country and project-by-project basis.
These new requirements form part of plans for the adoption of an international accounting standard for the disclosure of better information to citizens on earnings generated by the exploitation of natural resources on their territory and improved governance in countries dependent on such resources. Such a standard would establish a level playing field for companies, protecting those with an ethical approach from more unscrupulous firms, and help reduce disruptions to energy security. The European Parliament adopted a resolution along these lines on 14 November 2007.
More broadly, the proposal is related to the international Extractive Industries Transparency Initiative (EITI) and to the Dodd-Frank Act, adopted in July 2010 in the United States. The latter requires all extractive companies listed on US stock exchanges to publish payments made to governments on a country-by-country and project-by-project basis, although the implementing measures still have to be put in place.
The European Commission intends to go further by including forest exploitation and by applying this obligation to general interest entities (i.e. national public enterprises) active in these sectors and to all extractive and logging firms, whether or not listed on European stock exchanges, including those whose registered office is not in the EU, and to payments of amounts to third-country or EU member state governments.
The majority of the 27 defend the inclusion of forest exploitation in the scope of the new rules. Together with environmental and anti-poverty non-governmental organisations (NGOs), some member states were behind the drive to include this sector in the draft directive. However, others – Germany, Finland and Poland – still have reservations or are categorically opposed.
On the question of reporting by country and by project with the aim of ensuring greater transparency, many states are opposed, in particular Germany, Austria, Belgium, Bulgaria, Finland, Ireland and the Netherlands. They claim that this would create an excessive administrative burden on companies and some note that it would be best to wait until the United States has adopted implementing measures before taking action.
On the matter of reporting amounts paid to member state governments, Belgium, Bulgaria, Cyprus, France and Sweden, among others, support the executive’s proposal for reasons of fairness to non-EU countries. This position contrasts with that of Germany, Austria and Poland, which consider that such transparency is provided for by other EU policies.
The majority of capitals find that the threshold for the reporting obligation should be set on the basis of an absolute value (an amount in euros) written into the directive, rather than through delegated acts, as supported by the Commission.
Internal Market Commissioner Michel Barnier does not consider this point crucial. He wishes above all to maintain the proposal’s coherence and credibility. «The EU must take the lead in this effort to build corporate social and environmental responsibility.»