PDAC: How payment transparency helps gain a social licence to operate (Canadian Mining Journal – February 26, 2015)


Corporate social responsibility is front-and-centre at this year’s Prospectors and Developers of Canada meeting. One not to be missed session about the ideas that will shape the future of CSR will be held Monday, March 2 from 3:30 to 5:00 pm in Room 717 of the Metro Toronto Convention Centre.

CMJ had an opportunity to talk with one of the presenters, O Trade founder Monica Ospina, about the importance of transparency in payment and its role in obtaining a social licence to operate.

CMJ: What does “transparency in payments” mean for the extractive industry?

MO: It means the open disclosure of all payments made to the government by the extractive industry on a project-by-project basis. The purpose is to inform people about payments of royalties and taxes by the industry and about the amounts received by their government.

A shift towards transparency in payments would also accompany legislative changes concerning the distribution of royalties. Specifically, governments would make clear how royalties and taxes could be distributed at the federal or national, regional and municipality levels. Such practices can be seen, for example, in Mexico, Colombia and Peru, where legislation has reshaped the way income is distributed and how democracy works at the grassroots level.

CMJ: How will payment transparency aid in eliminating corruption?

MO: For many years, secrecy around government revenue from royalties and taxes paid by the industry has allowed irresponsible leaders to take money to attend to their personal interests rather than plan and act to the benefit of their people. This is one of the reasons why many countries exploiting their natural resources remain in poverty.

In some cases, natural resources are known to factor strongly in a country’s exports and are held close to its people’s identity. Comments along the lines of, “Foreigners come and take our resources, leaving us empty handed and still impoverished,” are common. This portrays the industry as a taker and not a giver – an industry involved in backdoor deals, characterized by corruption. Of course, on the contrary, we can see today that the extractive industry is the one leading the initiative of transparency in payments, as well as, in many cases, is acting more as a giver and a reliable partner for social development.

CMJ: How can transparency of payment be made to work in war-torn countries or those ruled by dictators?

MO: With widespread corruption, it is very difficult for communities to put pressure on either their government or the private sector. To operate transparency of payments demands a state in which people are free to act in democracy, in order to be able to demand answers about payments done by foreign investors such as mining companies. For foreign investment as a path to development and operating in a political complicated environment, has the power to suggest to governments the disclosure of payments, and in a bigger scale the same private sector could advocate for support at the international level. The World Bank has led initiatives to support and promote transparency such as EITI (Extractive Industry Transparency Initiative), Equator Principles, and Stolen Assets Recovery among others.

All of the above is to say that transparency in payments is a call to professionalize community relations and be strategic in the approach to obtaining and maintaining the social license to operate.

For the rest of this interview, click here: http://www.canadianminingjournal.com/news/pdac-how-payment-transparency-helps-gain-a-social-licence-to-operate/1003498375/rq0wMrp3vyWrlxu0q82vM20/?ref=enews_CMJ&utm_source=CMJ&utm_medium=email&utm_campaign=CMJ-EN02272015