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Return to Our Perspectives home page. With the global population predicted to reach nine billion bywe face a dual challenge: Agricultural commodities are the bedrock of a number of rural developing economies, contributing to vital economic growth and the ongoing fight against poverty. As such, they play a critical role in contributing to the Sustainable Development Goals. But deforestation and land degradation, a direct result of the growth of the agriculture sector, is irreversibly damaging our planet, its biodiversity, and the important ecosystem services it provides.

In fact, the largest driver of deforestation today is the production of agricultural commodities. This is why UNDP set up the Green Commodities Programme GCP in to spearhead dialogue, decision-making and action in the agro-commodity sector between governments, the private sector and civil society.

The goal is to improve the economic, social and environmental impact of agricultural commodities, with a specific focus on improving the lot of smallholders, most of whom live in poverty with no access to training, financing or land security. They struggle to eke out a living from agriculture. As a result, many of the younger generation are fleeing rural areas that seemingly offer no prospects in search of urban opportunities, leaving a void in the farming communities.

GCP is working in several countries in key commodity sectors including Indonesia palm oilCosta Rica pineappleGhana cocoaParaguay cattle and soyPeru palm oil and coffeeDominican Republic cocoaand Ethiopia coffee to support multi-stakeholder dialogue with the national governments. As head of GCP, I frequently travel to these countries and am encouraged by the progress that is being made towards true multi-stakeholder dialogue.

Working together is good for business Commodity traders connect producers and users by sourcing, processing, transporting, and distributing agricultural commodities. They can have a substantial impact on shifting entire sectors from negative practices to positive initiatives that actually promote sustainability, improve farmer income, and give the smallholders a competitive advantage. UNDP has been working with traders to encourage closer relationships with farmers.

If dealings between farmers and traders develop, traders will better understand farmer risks and work to mitigate them. As a result, the sustainability of the supply chain improves, which makes great business sense on both ends.

In this way, direct sourcing and assistance to farmers becomes a risk management strategy, not just corporate social responsibility. For example, UNDP works with Mondelez the largest chocolate company and second largest coffee company in the world and its Cocoa Life and Coffee Made Happy programmes to mainstream sound cocoa production practices in Ghana.

A central approach of this grassroots work is to require suppliers and traders, such as Cargill and Archers Daniel Midland, to increase their support to farmers so that Mondelez is assured of sustainable cocoa.

Another aspect of the work is for traders to train farmers and communities. Traders have in-country presence and local expertise, and building more constructive relationships is good for business. Some traders are increasing support to farmers, but sometimes in isolation.

This means that innovations in farmer training, for example, are not being captured and scaled up by governments. We also need public-private partnerships, like the national commodity platforms, to enable communication between all stakeholders in the supply chain. With the active and direct participation of commodity traders in the supply chain, we can make a serious contribution to the SDGs and help millions of farmers globally reduce poverty and improve their lives.

Our Perspectives Return to Our Perspectives home page. Democratic governance and peacebuilding. Climate and disaster resilience. Gender equality Crisis response Development impact. About us News Centre Funding Partners.

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This sector has conventionally been considered highly opaque and there have been accusations that government coffers have not received the expected market value.

The EITI Standard includes a number of provisions to promote transparency and accountability in the management of these resources and revenues. Indonesia Iraq Norway Republic of the Congo.

Amidst growing calls for greater transparency and accountability in oil trading, the Extractive Industries Transparency Initiative EITI has emerged as a practical, flexible and cost-effective response.

A key feature is that the EITI is owned and implemented by producer countries, emphasising collaboration between government, industry and civil society organisations. Much is needed to improve governance of global commodity trading. EITI implementing countries are increasingly engaging trading companies in this process. Four examples - Indonesia, Iraq, Norway and the Republic of the Congo - illustrate differing levels of disclosure and highlight the important role trading firms can play — and the benefits they can derive — by supporting the EITI.

Oil traders can earn both reputational and commercial benefits. Despite concerns over divulging potentially sensitive commercial information, all four examples demonstrate that time delays in disclosures and the participation of industry has not disadvantaged participating companies.

By supporting the EITI at country level, oil traders have a seat at the table in developing clear and consistent reporting mechanisms, and in informing policy debate in partnership with government, oil producers and civil society. In many oil and gas producing countries, the NOCs trade this profit-oil on behalf of the government.

They often act simultaneously as commercial operators, holders of government equity stakes, regulators and providers of social goods like subsidised products. Public concern over the role and accountability of NOCs has grown in line with their expanding share of oil production globally and with rising oil prices over the decade to The EITI Standard, adopted in , ensures not only disclosure of taxes and other payments made by extractive industry companies to the government that implements it, but also in extractive industry licensing, production, revenue collection, revenue allocation and the role of NOCs.

The national MSGs in each of the 48 implementing countries constitute forums for the evolving international debate on enhanced transparency and accountability in extractive industries and serve to strengthen government and company systems, inform public debate and enhance trust.

While countries voluntarily commit to implement the EITI, once a country joins, all companies are required to disclose their material payments to the government, and all government agencies that receive these payments are required to disclose their revenues.

This section requirement 4. Once the MSG agrees on the material threshold above which payments are deemed significant enough to be included in the report, the government and its NOCs must disclose all volumes sold and the revenue received. Indeed they must disclose these figures in as much detail — or disaggregation — as all other payments published under the EITI in the country encouraged under 5. All government and NOC sales deemed material must be covered, from exports to sales to domestic buyers and refineries.

Oil sales are typically above the materiality threshold, which defines payments deemed significant enough to cover. The process can go beyond these minimum requirements.

The MSG can agree to require disclosures and publication of data by type and grade of product, price, market and sale volume. The data from buyers can be used to verify the disclosures from the government and NOCs, and ensures that all parties are transparent about their activities. This includes the rules and practices covering payments, retained earnings, reinvestment, third-party financing, loans and loan guarantees under 3. Finally, the NOCs must report all non-commercial quasi-fiscal spending covering social services, public infrastructure, fuel subsidies and national debt servicing under 3.

Such disclosures are set within the context of respect for contracts and relevant laws of course under principle 6. These four case studies of EITI reporting related to NOCs and initial oil trades reveal a broad range of scenarios and highlight the contribution oil traders can make both in strengthening reporting and in deriving benefit from these emerging transparency trends.

Participation in the EITI also yields important reputational benefits for traders. Indeed they are supporting citizens in EITI implementing countries to ensure high standards of transparency and accountability in the trading of natural resources. Yet there is an equally strong business case for traders to support the EITI. Unlike those, compliance with the EITI Standard is a requirement for companies in their country of operation, not origin.

There is a growing body of trading data in the public domain — through direct and indirect disclosures through the EITI as well as unilaterally by reporting agencies as in the case of the Republic of the Congo.

It minimises the risk of the data — and the deals supporting them - being taken out of context and potentially being unduly questioned. Working with the EITI gives oil traders a permanent means of shaping the development of disclosure standards and informing the policy debate in partnership with government, oil producers and civil society. Trafigura was the first dedicated commodities trader to officially declare support to the EITI, joining oil-producing members like BP, Chevron, Shell and Total that operate significant in-house trading arms of their own.

Having become an EITI supporting company in , Trafigura published its policy on payments to governments in consultation with the Oslo-based EITI International Secretariat and will publish these figures in its next annual report in December This is an opportune time for commodity traders to join the debate by actively supporting the EITI.

In parallel, as global commodity traders including Trafigura, Gunvor and Louis Dreyfus Commodities expand their access to global capital markets through equity and fixed-income debt issuance, formulating transparency policies increasingly yields direct financial rewards in terms of cost of financing.

The following four case studies reveal that best practice may not always come from countries one would suspect, like Norway, and that the breadth of EITI experiences could benefit from more consistent implementation. To date Chad, Indonesia, Iraq, Nigeria, Norway and the Republic of the Congo feature among the EITI members that disclose some information on the revenues derived from state oil and gas sales, with others set to follow.

In countries like Chad, the NOC sells to only a handful of buyers, while in others like Iraq, sales data is collected and reconciled from close to 40 buyers. The diversity of ownership, regulation and market structures means that the reporting burden on implementing countries is uneven, depending on the level of state participation in the oil sector and the relevant institutional arrangements.

The following four examples reveal the width and breadth of market structures and differing approaches to EITI reporting on oil sales. Indonesia is a pertinent first example of limited disclosures of oil sales figures. Although the EITI Report does not explain the rules and practices covering the financial relations between the government and NOCs this will be included in the forthcoming EITI report , Pertamina publishes annual reports with information about its operations and subsidiaries, including cash-flow statements, which are audited by the State Audit Board BPK-RI.

Petral , incorporated in Hong Kong but operating out of Singapore, or through other private marketing companies appointed by SKK Migas. Once such obligations are deducted, the balance is then remitted onshore to the Treasury account at Bank Indonesia. The EITI Report includes some information on these transactions, on which future reports under the Standard are expected to expand. Upcoming reports covering and , under the EITI Standard, will go further in disclosing oil sales figures.

Beyond these mandatory requirements, the MSG could also choose to have SKK Migas publish the names of companies buying oil and could require buyers to disclose transaction figures to reconcile oil sales figures. It could also require figures to be disaggregated by product type, price, date of sale and more granularity in identifying export markets.

Iraq has gone beyond basic EITI reporting requirements by including reconciled oil sales figures in its reports. The reports contain detailed descriptions of the domestic sales process. Oil for domestic consumption is transported through state-owned Oil Pipelines Co.

Proceeds from domestic sales are then remitted by the state-owned Oil Products Distribution Co. Although the EITI Report does not include net revenue from oil products sales to the domestic market or total extractive industries revenue, reports do include reconciliation of:. The report also disaggregated oil exports by buyers, of which there were 43 in , by month, by producing company and by field. While the report clearly defines the price-setting mechanism for exported crude, future reports could go further in disclosing information on factors linked to domestic oil sales revenues.

They could also build on existing reconciled sales figures by buyer by further disaggregating figures shipment-by-shipment with information relating to crude grades, sales prices and dates of sales, as well as specific export markets. Oil and gas production from the Norwegian continental shelf accounts for the single largest sector of the Norwegian economy, Of the 56 companies with operating licenses, 37 of which operate one or more licenses, the state holds a direct stake in a third of the licenses.

The state-owned Petoro has managed the portfolio of state equity stakes since Dividends paid by Statoil to the state form only a small component of government revenues from the sector, at only 3. These cash flows are then reported annually under the EITI process. However there is no reconciliation of volumes and revenues for state oil sold with figures from buyers, who are not covered by the reporting process. While figures on volumes and value are comprehensively verified, the information is only disclosed in aggregate with only very limited details on oil trading.

Although the Independent Administrator, Deloitte, certifies its own work according to International Auditing Standards under ISRS , it does not provide quality assurances for the underlying data given that the EITI Report is not an audit under international standards.

Beyond aggregate disclosures of oil sales figures, the EITI Report provides details on ownership of petroleum assets, including those concerning NOCs.

It describes the Petroleum Register requirement 2. The register includes all blocks in which the state holds a stake, covers work-plans and investment obligations and is updated for transactions in real-time. A pioneer of more timely disclosures on NOC oil sales is the Republic of the Congo, which provides quarterly figures within a year of sales.

While the Republic of the Congo has published EITI Reports covering ten fiscal years, those reports covering , and provide information on the legal and regulatory frameworks governing the mining, oil and gas sectors.

Created in with the mandate of managing the state interests both direct and indirect in the oil and gas industry, SNPC is wholly state-owned and operates under the Ministry of Hydrocarbons. The NOC receives oil through PSAs, direct state equity stakes and royalties from concessions granted to international oil companies. It also discloses the total volumes of oil produced and transferred to SNPC as well as the allocations between domestic refining and international exports, including revenues earmarked for the repayment of loans used for infrastructure development.

In total, SNPC received 49 million barrels of oil from operating oil companies. The quarterly figures are disaggregated by crude oil grades with Congo producing four blends — Azurite, Djeno, Nkossa and Yombo and by sales price determined shipment-by-shipment. While the Republic of the Congo has led in disclosure of oil sales, there is less clarity on the financial relationship between the government and SNPC, particularly on the practices covering the use of retained earnings, reinvestment, third-party financing, loan repayments and transactions between SNPC and its subsidiaries refining and selling oil domestically.

Although EITI Reports include some information on the provisions for repaying loans used for infrastructure development, they do not cover information clarifying the terms of the loans, their tenure or the counterparties involved.

Our procedures are not designed to identify fraud or misstatements made by licensees and government bodies. The report includes only those items specified and do not include financial statements of the entities that have been reported as a whole.

Fair Links made a similar statement for data. Skip to main content. Please enable JavaScript for full use of this site. Indonesia Indonesia is a pertinent first example of limited disclosures of oil sales figures. Operating oil companies reported on total production volumes, disaggregated by PSA, which were then reconciled with production figures from the Ministry of Energy and Mineral Resources.

Total production was reported as million barrels in There was only one discrepancy of barrels in one PSA. The regulator SKK Migas disclosed revenues received from selling this oil both domestically and in export markets, which were then reconciled with Ministry of Finance figures after relevant deductions noted above. While these are essentially government-to-government transfers, all figures are disaggregated by market export and domestic and by PSA. Iraq Iraq has gone beyond basic EITI reporting requirements by including reconciled oil sales figures in its reports.

Although the EITI Report does not include net revenue from oil products sales to the domestic market or total extractive industries revenue, reports do include reconciliation of: Crude oil and natural gas quantities supplied to Electricity Generation Directorates, for , Net revenue from sale of oil products to the local market, for , Natural gas quantities supplied to state-owned companies that consumed natural gas, for Annual production disaggregated by field.

Transfer of State Direct Financial Investment from operators to Statoil Not disclosed, but can easily be calculated from production volume data disclosed by Petoro and in the Petroleum Registry. Revenues transferred from Oil Products Distribution Company for domestic sales to the state treasury.

Not disclosed, but can easily be calculated from production volume data disclosed by Petoro and in the Petroleum Registry.