Social ImpactEmployment §3.4(d)Social Expenditures §4.1(e)
Along with paying revenues, extractive companies provide employment, execute corporate social responsibility programs, and often seek to address social concerns such as education, community infrastructure or environmental remediation. Key governance challenges associated with social impacts include the enforcement of effective local content policies and community discontent with companies resulting from unmet expectations surrounding industry obligations.
Employment is an important mechanism for ensuring that producing communities receive economic benefits from extraction, though local expectations often surpass the supply of jobs. Social expenditures can help companies improve their social license to operate. The disclosures related to social impacts that are required and/or encouraged under the EITI Standard should be implemented in ways that address national governance challenges and lead to meaningful policy reform.
Potential policy reforms in this area include developing and enforcing local content requirements, expanding local consultations and community monitoring around social projects, and enhancing environmental and social impact assessment systems.
3.4. The EITI Report must disclose, when available, information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI Report. This information is expected to nclude…
[d] Employment in the extractive industries in absolute terms and as a percentage of the total employment.
EITI Report Data
Characteristics of employement in the sectors of economy
In 2014 the economically active population was 4,840.7 thousand people, and among them 4,602.9 thousand people were employed. The rate of mining industry to employement was 0.9%, which is 41.5 thousand people.
In November 2013, BP signed three cooperation agreements with SOCAR in increasing the number of Azerbaijani nationals involved in its activities as the operator of the Azeri-Chirag-Gunashli (“ACG”), Shah Deniz, Baku-Tbilisi-Ceyhan (“BTC”) and South Caucasus Pipeline (“SCP”) projects. The agreements re-benefit the two organisations’ commitment to cooperate closely in the areas of nationalisation of BP’s staff, development and training of professionals specialising in petroleum disciplines, and workforce involved in oil and gas development projects in Azerbaijan.
In September 2014, BP signed a Memorandum of Understanding with SOCAR in order to agree their engagement in BP’s recruitment processes. By the end of 2014, the percentage of national citizens among regular professional staff of BP in Azerbaijan was 86%.
BP in Azerbaijan developed a five-year nationalisation plan for increasing the share of national staff with an ultimate target of reaching 90% by the end of 2018.
Review of the NGO Coalition
In our Coalition opinion on 2013 Report we mentioned that “stating investment and employment information on companies in this section, as well as distribution of employments in extractive companies based on local and expatriate staff would increase the quality of the report”. 2014 Report includes the dynamics and structure of BP employees only. We think that MSG should be focused on this issue, take necessary measures for collecting this type of information from other extractive companies and ensure the inclusion of such information into the reports of the following years.
§4.1.e. Where material social expenditures by companies are mandated by law or the contract with the government that governs the extractive investment, the EITI Report must disclose and, where possible, reconcile these transactions.
i. Where such benefits are provided in-kind, it is required that the EITI Report discloses the nature and the deemed value of the in-kind transaction. Where the beneficiary of the mandated social expenditure is a third party, i.e. not a government agency, it is required that the name and function of the beneficiary is disclosed.
ii. Where reconciliation is not feasible, the EITI Report should include unilateral company and/or government disclosures of these transactions.
iii. Where the multi-stakeholder group agrees that discretionary social expenditures and transfers are material, the multi-stakeholder group is encouraged to develop a reporting process with a view to achieving transparency commensurate with the disclosure of other payments and revenue streams to government entities. Where reconciliation of key transactions is not possible, e.g. where company payments are in-kind or to a non-governmental third party, the multi-stakeholder group may wish to agree an approach for voluntary unilateral company and/or government disclosures to be included in the EITI Report.
EITI Report Data
Information regarding social expenditures was not included in EITI Report for the year ended 2014 due to the fact that on 34th meeting of EITI Multi Stakeholder Group which took place on 10th of December 2014 was decided to eliminate this information from the EITI report as it was not applicable in the Republic of Azerbaijan
Review of the NGO Coalition
Section 4 of the EITI Report on “Reconciliation Process” states that following the discussions at the 34th meeting of the SMG dated December 10, 2014 infrastructure clauses and information on barters, subnational payments and transfers, as well as social expenses had not been included into 2014 EITI Report since they were not applicable to Azerbaijan. We think that the list of revenue types to be reflected in the following report shall be reviewed and approved by MSG upon start of preparatory activities for the report. This list shall be later stated in the agreement to be signed with the Independent Administrator and in the Report.
The Coalition thinks that the MSG shall discuss the inclusion of information on social expenses into the future report and make decisions in accordance with subparagraph 4.1e of the Standard. Though information on the social expenses of the companies cannot be reconciled, it can be unilaterally revealed by the company, as mentioned in part ii of subparagraph 4.1e. For instance, though concisely, SOCAR has revealed general information on its 2014 social expenses in “State Participation in Extractive Industry” section of this Report. Despite the fact that information on social expenses of the companies can be found in the reports of BP, SOCAR and other companies (Corporate Social Responsibility reports) and it is possible to refer to open sources in this regard, stating that this type of information is not applicable for Azerbaijan and not including it into the Report, damages the transparency image of the country.