From Mark Robinson, Executive Director of the Extractive Industries Transparency Initiative (EITI), and Maja de Vibe, Senior Vice President at Statkraft, Europe’s largest producer of renewable energy. They write in a personal capacity, building on a joint research paper published by the Basel Institute on Governance.
In response to the global climate crisis, countries around the world are seeking to shift to clean energy. The result is massive pressure to invest in solar, wind, hydropower, and green hydrogen projects. As this critical investment moves forward, it is more important than ever to address the corruption and governance risks around issues like supply chains, licensing, land leases, community consultation, tax and royalties. After all, as investment in the renewables sector grows, so does its attractiveness to those seeking to exploit opportunities for bribery and fraud. Making good governance and anticorruption a priority can help the green energy sector mitigate the risks to communities and the environment, and ensure more equitable sharing of the benefits and burdens of renewable energy development
Yet while companies are increasingly aware of governance and corruption risks in the renewables sector, there has been insufficient action to address them so far. There are numerous reasons for this, including the fact that companies might prioritize more immediate needs, such as securing finance or community support, or they may lack the knowledge and capacity to analyze and address corruption risks.
The renewable energy sector has opportunities to develop shared norms, common standards, and guidance to promote transparency and galvanize multi-stakeholder action. Best practices from some industry associations and leading companies in the sector can serve as a foundation for these efforts. Additionally, governments and multilateral bodies, such as the European Commission, can play an influential role in setting expectations and creating incentives for companies to actively address governance and corruption risks.
The experience of the traditional extractive sector may also offer valuable lessons that can help renewable energy companies address shared governance and corruption risks. The EITI, which was established 20 years ago to tackle deep-seated corruption problems and improve governance in oil, gas, and mining, has succeeded in creating a shared transparency norm through a common set of principles, a multi-stakeholder governance structure that brings together governments, companies, and civil society, and a reporting framework for disclosures. While there are clear differences between the traditional extractive industries and the renewable energy sector, specific aspects of the EITI Standard could guide disclosures in the renewables sector concerning licenses and permits, beneficial ownership of suppliers, contractors and partners, tax payments and revenue sharing, and community engagement and benefit sharing. The Expectations for EITI supporting companies are also directly relevant for renewable energy companies, which could benefit from a similar mechanism to enhance corporate accountability. In short, lessons from the extractive sector can help avoid repeating past mistakes and prevent the emergence of a “green resource curse.”
