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New reporting requirements set for UK extractive companies

01 September 2014

New reporting requirements for extractive industry - Read more

The UK government has set new reporting requirements for extractive companies to increase transparency in the extractive industries.

Mining, gas and oil companies registered in the UK will be required to report on the payments they make to governments in all the countries they operate in as of 1 January 2015.

The threshold for reporting payments is €100,000 or more. Extractives companies will have a maximum of 11 months after the end of their financial year to file a report at Companies House detailing their extractives payments.

Speaking to Governance + Compliance, Head of Department for Gas and Oil at Greenwich School of Management, Babawande Sheba called the initiative an important and brave step taken by the UK government, which he said ‘should lead to improved corporate governance practices and foster better corporate social responsibility and improved ethical behaviour amongst UK companies’.

CEO of 8over8, a contractual risk management firm in the oil and energy industry, Clare Colhoun said: [It is] a positive and timely reporting requirement … that will both benefit the citizens in the countries that receive such payments and reduce reputational risk of the companies that make the payments to these governments. Many of the most resource–rich places in the world are home to the poorest people and initiatives to combat corruption in these countries are overdue and essential.’

However, Sheba said that only ‘time will tell whether this requirement will lead to reduced corruption in international trade, especially considering that the threshold for reporting a payment is €100,000 – there is a potential for smaller payments to change hands without being reported.’

Senior Vice President at MetricStream, a governance, risk and compliance consultancy, Brenda Boultwood emphasised the impact of this requirement on smaller companies: ‘there will be an impact on the cost and possibly on the competitive front and smaller companies will feel it more than their larger counterparts. But as more countries enact such laws, the impact should diminish in the long run and a level playing field should emerge for all global players.’

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