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SDC Quarterly Update

March 30, 2017

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Transparency in Social Investments via ESTMA: What have we learned?

 

The Extractive Sector Transparency Measures Act (ESTMA) came into force June 1st, 2015 with a clear objective to make the social investment process more transparent. This means a better understanding of how communities are benefiting from hosting Canadian companies and operations, and ultimately dissuade corrupt practices in the extractives sector around the world.

 

Natural Resources Canada (NRCan) is administering and enforcing ESTMA. Their website – www.nrcan.gc.ca/estma – has clear information and guidelines that answer questions a company may have: the ‘who, what, where, when, how and why’ a must company report. NRCan even provides simple spreadsheets in formats easy to complete.

 

So, after the first year that ESTMA has been in force, what have we learned? How can we make next year’s reporting process easier? We shared these questions to our network of industry colleagues and this is what we found:

 

1. Be as thorough as possible. Go through all social investments during the year and then decide which ones meet ESTMA criteria and need to be included in the report.

 

2. Be defensible with your data. Ensure that each investment included in your ESTMA report can be clarified and justified.

 

3. Assemble a multidisciplinary team. It should include finance, corporate social responsibility, governance, legal, and other departments involved in the social investment process. ESTMA is not only a financial exercise or the task of an individual site. Rather, it is an opportunity for the company to see exactly what they are doing for the communities wherever they operate and how much is being investing in them.

 

4. Ensure consistency in your data by collecting and analyzing information at head office rather than at the site level. This will help to avoid variances.

Who should file an ESTMA report: 

Canadian companies that meet the criteria [http://www.nrcan.gc.ca/node/18802/] are required to publicly report payments or contributions made to any level of government or indigenous organization in the jurisdictions they operate when these exceed the amount of $100,000 CND [http://laws-lois.justice.gc.ca/eng/acts/E-22.7/page-1.html]. 

What does NRCan say?

We also wanted to understand the first year ESTMA experience from NRCan’s perspective. So we put a few questions to our colleagues there, and here is their feedback:

 

  1. Social reporting depends greatly on the circumstance in which a social payment was made. NRCan advises that companies be transparent, forthcoming and document the justification to include or not include any payment. There is a notes section on the form that can be used to provide additional information on qualifying payments.

  2. NRCan is actively engaged with extractives companies and understands that this is an ongoing process. They have fielded questions about the ESTMA process and have identified outstanding challenges in reporting on  joint ventures and social payments. NRCan conducted a survey and is updating the technical guidance for companies based on the results and feedback.

  3. NRCan is using a validation checklist to review reports and determines if all mandatory fields have beencompleted, before publishing links to reports on the NRCan website. This can help identify accidental omissions in mandatory fields.

  4. Companies publish their ESTMA reports online, and they need an active link that is publicly available for five years after the release of the report, while NRCan is responsible for maintaining the web page that provides a common place to find the links to those ESTMA reports.

  5. Verification of an ESTMA report is required and there are two options for verification. One option is third party verification, the other requires an officer within the company to certify the report is true, accurate, and complete.

  6. As of June 1, 2017, companies are required to include payments made to Indigenous governments in Canada. NRCan has conducted engagement sessions with First Nations communities, Indigenous organisations, and industry with these considerations in mind. Payments made to governments through Impacts and Benefits Agreements (IBAs) may be reportable through ESTMA at the time of payment regardless of non-disclosure agreements. Although, ESTMA does not require that the agreements per se be disclosed.

 

The requirement to report payments to Indigenous governments raises some questions with respect to stakeholder engagement. As IBAs are signed between companies and indigenous organisations are confidential, how will ESTMA affect the IBA process and the approach to dialogue and negotiations between companies and indigenous groups? Would ESTMA’S new requirement have an impact on relations amongst indigenous groups as each IBA has specific conditions, and now some of these agreements will become public? These are a few, important questions to explore as we move forward with ESTMA.

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