Governance is a term commonly used to refer to how public institutions and private companies conduct their affairs and manage resources. It covers the process of decision-making as well as the processes by which decisions are implemented. ICMM believes that mining companies can enhance the mainstreaming of sustainable development by supporting national polices and government regulations that address the issues of corruption, human rights abuses, bribery, tax evasion and conflict. Mining companies can also contribute to institution building and the strengthening of existing institutions through government and community engagement processes.
BHP Billiton Foundation is supporting four global projects to increase transparency and reduce corruption across the mining value chain under its Natural Resource Governance Global Signature Program. Transparency International (TI) Australia is leading the first project, completing a series of country assessments for corruption risks in mining approvals in 2017. Two other projects, led by members of the World Bank group and the Brookings Institution, launched in September 2017 in Washington DC. A further project led by Open Contracting Partnership was launched in December 2017.
Corruption undermines sustainable development
The contribution of mining to sustainable development may be undermined by corruption at any stage of the natural resource governance value chain. The issue ranges from bribery and conflicts of interest involving project approvals, to the loss of resource revenues meant for public goods, such as healthcare, education and infrastructure. Transparency ranked within the EY top 10 business risks for mining and metals in 2015/16.
BHP Billiton Foundation Chairman, Karen Wood, recognises that ‘Corruption can be a significant risk for resource-rich countries. Improving the governance of natural resources reduces opportunities for corruption and enables countries to use the benefits of natural resource wealth to improve the lives of their citizens.’
Objectives of the BHP Billiton Foundation
As a charity funded by BHP, the BHP Billiton Foundation focuses it work on three Global Signature Programs (GSP): Natural Resource Governance, Environmental Resilience and Education Equity. Commencing in 2015, specific strategies for each GSP have been developed over an 18 month period through workshops with leading institutions and thought leaders in each program area.
The Natural Resource Governance Global Signature Program aims to harness the transformative power of natural resource wealth for sustainable and inclusive human development. The Program does this through project investments, which help catalyse system-wide change across the natural resources value chain to enhance transparency, reduce corruption and empower citizens with access to information. The projects fit together by addressing different aspects of transparency across the entire value chain – from the award of licenses and contracts through to how the taxes and royalties that are generated are spent. Each Natural Resource Governance Project contributes to one or more of the following Program objectives:
- Improve mechanisms to support disclosure, transparency and accountability, which reduce corruption and bribery related to natural resources;
- Make it easier for citizens and other stakeholders to access and interpret public data on natural resources;
- Build governance capacity and increase the effectiveness and accountability of civic and public institutions.
The Foundation’s focus on transparency is consistent with BHP’s corporate policy on transparency and founding membership of the Extractive Industries Transparency Initiative (EITI). Each of the gaps identified by the BHP Billiton Foundation for project support has relevance to SDG 16 (Building peace, justice and strong institutions) and SDG 17 (Partnerships for sustainable development). SDG 16 aims ‘to substantially reduce corruption and bribery in all their forms’. SDG 17 encourages ‘partnerships between governments, the private sector and civil society’.
Natural Resource Governance Global Signature Program
Established in 2014, the BHP Billiton Foundation has announced financial support for four global projects under its Natural Resource Governance Global Signature Program:
Assessing corruption risks in mining approvals
The first project, Mining for Sustainable Development, focuses on corruption in the mining approvals process. This five-year project is led by Transparency International (TI) Australia and co-funded by the Australian Department of Foreign Affairs and Trade (DFAT). The project has been working since 2016 through TI national chapters in 20 resource-rich countries to expand knowledge of the risks and impacts of corruption linked to awarding mining licences and contracts.
In each country, the TI national chapters are engaging with stakeholders from government, industry, local communities and civil society to minimise corruption risk by:
- building an evidence base to inform relevant policies and practices;
- encouraging changes in policy and behaviour; and
- developing practical solutions to change practices.
TI Australia’s Mining for Sustainable Development project began by developing a unique tool for assessing corruption risks in the mining approvals process. The Mining Awards Corruption Risk Assessment (MACRA) Tool was used by participating TI country chapters to assess vulnerabilities to corruption across a diverse range of mining jurisdictions. A global report based on research in 18 resource-rich countries, from Australia to Zimbabwe, was published in December 2017. TI national chapters have also published assessment reports, and other support material.
Evaluating transparency initiatives and capacity building
The second project, Leveraging Transparency to Reduce Corruption, is led by the Brookings Institution and supported by Results for Development (R4D) and the Natural Resource Governance Institute (NRGI). It will closely study a range of transparency initiatives introduced over the last 20 years by governments, the private sector, civil society and international organisations. The five-year project aims to understand which of these initiatives have been effective in improving peoples’ quality of life in resource-rich countries, and why. The project will share these learning with the many organisations and initiatives promoting transparency in governance to enhance the impact of their work around the world.
The Brookings-led project aims to build a rigorous and extensive evidence base identifying natural resource sector-focused open governance interventions that are effective in contributing to reducing corruption and achieving other sustainable development outcomes. The project has begun with a review of existing evidence for transparency and governance interventions via a multi-stakeholder group.
The researchers aim to enhance the ability of stakeholders and citizens alike to access, analyze, and interpret natural resource-related data in the public domain. Research to date, including Brookings’ own, has indicated that open governance works best if useful and relevant public data is at least available on demand for stakeholders, and preferably more proactively disseminated.
Accessible data management
The third project, From Disclosure to Development, is led by the International Finance Corporation (IFC) for the World Bank group. It aims to enable citizens to access and use financial information disclosed by the mining industry more easily to reduce corruption risks, improve transparency and enhance how natural resource wealth contributes to poverty reduction. The five-year project will further establish a global platform to promote use of extractives industry data and greater consistency and meaningfulness of disclosed information, matching the needs of data providers and users.
The first phase of the IFC-led project will provide an in-depth analysis of current financial data availability and use, and build an understanding of how to better match supply and demand for information. The project will generate recommendations to improve the effectiveness of existing disclosures. Consultations will be undertaken in three pilot countries: Colombia, Ghana and Indonesia.
Transparent public procurement
The fourth project by Open Contracting Partnership focuses on the final two stages of the natural resource value chain: working to enhance transparency of government tender and contracting processes. The aim is to reduce corruption risk, creating a level playing field for businesses to compete and delivering greater efficiency in the expenditure of government revenues for citizen services. The project will support the adoption of open contracting to promote accessible, user-friendly open data along the entire ‘deal flow’ of public contracts in 15 resource rich countries.
Monitoring and evaluation
The BHP Billiton Foundation will ensure rigorous monitoring, reporting and evaluation of the global signature program. The Foundation will also request regular financial statements from its partner organisations to maintain their own standards of governance.
The projects begun in 2016 and 2017 will each have a second phase as follows:
- TI’s Mining for Sustainable Development project will support TI national chapters to work with key stakeholders to develop and implement plans to address the corruption risks identified in phase one. TI Australia will continue to act as a global centre of expertise for the project.
- The Disclosure to Development project will expand the project’s focus beyond the pilot countries to a further 8-10 countries across Latin America, Africa and Asia. The project team will work with other Foundation partners supporting the Natural Resource Governance program as well as leading NGOs, think tanks and international initiatives with expertise in extractive industries transparency.
- The Brookings-led project will select a set of natural resource governance interventions for rapid testing on a smaller scale. The project will identify which of these interventions have shown strong potential for further evaluation at scale or to be replicated in different contexts.
Reflecting on the overall importance of the Natural Resource Governance program, BHP Billiton Foundation CEO James Ensor said,
‘Transparency is a critical issue for the global resources sector. The link between open governance and accountability, and the link between unaccountable governance, corruption and the loss of license to operate is clear. Transparency is the most powerful weapon we have at our disposal to build trust. It is the glue binding the Social Contract - Citizens must trust that governments and corporations are acting in their best interests.’