Review of country-by-country reporting requirements for extractive and logging industries : executive summary.
Date: 2019-05-23
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union
Subjects: commodity price, competitiveness, energy supply, exploitation of resources, extraction of oil, financial transparency, forestry holding, international trade, mining extraction, multinational enterprise, pulp and paper industry, revenue, sample survey, security of supply

Review of country-by-country reporting 
requirements for extractive and 
logging industries 

Executive summary 

DG FISMA 

Valdani, Vicari & Associati 
October - 2018 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

The information and views set out in this study are those of the authors and do not 
necessarily reflect the official opinion of the Commission. The Commission does not 
guarantee the accuracy of the data included in this study. Neither the Commission 
nor any person acting on the Commission’s behalf may be held responsible for the 
use which may be made of the information contained therein. 

DOI: 10.2874/329509 

ISBN: 978-92-79-97013-9 

© European Union, 2018. 

Reproduction is authorised provided the source is acknowledged

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

Executive summary 

The  study  ‘Review  of  country-by-country  reporting  requirements  for 
extractive and logging industries’ provides an assessment of the implementation 
of the country-by-country reporting (CBCR) requirements for companies from logging 
and  extractive  industries  stemming  from  Directive  2013/34/EU1  and  Directive 
2013/50/EU. 

The study aims to: 

▪  Review  the  implementation  and  assess  the  effectiveness  of  the  European 

reporting requirements; 

▪  Assess  the  impacts  of  other  international  regimes  on  the  EU  reporting 

requirements and on the activity of European companies; 

▪  Assess the effects of the EU reporting requirements on the competitiveness of 

European companies and the security of energy supply for the EU; and 

▪  Discuss  potential  amendments/policy  recommendations  to  improve  the 

compliance, effectiveness and efficiency of the reporting requirements. 

The findings of the study are based on: 

▪  An extensive desk research and a review of more than 248 sources both at 

EU/international and national level; 

▪  A focus on a sample of nine countries of origin and 12 countries of operation; 
▪  An in-depth analysis of 83 reports (81 reports from extractive companies and 
2 from logging companies) with payments to governments from EU companies 
in  12  Member  States37  semi-structured  interviews  with  NGOs,  sector 
associations, companies, national authorities and academia completed with a 
company survey; 

▪  Two case studies that assess the potential of introducing a compulsory audit 

of the report and adding further reporting requirements; and 

▪  A workshop with representatives of the industry and reports’ users to discuss 

the preliminary findings of the study. 

Implementation of the reporting requirements 

The study found that in the extraction sector a considerable amount of reporting is 
conducted. Although the study could not verify whether all companies in the scope 
of  the  Directives  report  their  payment  to  governments,  there  is  no  evidence  of 
widespread non- compliance either.  

On the other hand, even though an extensive search for reports of logging companies 
was  conducted  only  two  reports  could  be  identified.  According  to  experts  and 
stakeholders  interviewed,  the  low  rate  of  reporting  in  the  logging  sector  could  be 
explained by the following factors: 

▪  The scope of the Directive is restrictive as it specifically targets primary forests 
and an important share of logging companies operate outside primary forests; 
▪  Very few companies in the European logging industry fall in the scope of the 
Directive due to their small size and thus the payments to governments in this 
sector are frequently under the required threshold; and 
If logging companies sub-contract their operations to local entities, which is 
often the case in the sector, the reporting requirements are not applicable to 
the latter. 

▪ 

 
 
 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

In  the  sample  of  reports  examined,  most  companies  have  provided  the  required 
information,  namely  the  payments  to  each  government  by  project  and  by  type  of 
payment. The main errors and inconsistencies identified in the reporting related to 
unclear definitions of specific requirements such as the definition of projects, types 
of payments and the approach on joint-ventures. Due to the lack of implementation 
guidelines,  companies  have  adopted  different  interpretations.  For  example, 
companies  have  adopted  different  approaches  regarding  the  reporting  of  the 
payments of joint ventures: some report only payments when they are the controlling 
party  while  others  report  the  payments  even  if  they  are  not  the  controlling  party; 
some  companies  report  payments  to  governments  in  full,  proportionally  or  do  not 
report such payments. With these different interpretations, important sums may be 
completely  excluded  from  the  reporting  or  be  reported  several  times  in  different 
companies’ reports. 

The study established that there is limited monitoring and oversight of the different 
national authorities on  the compliance with the  reporting requirements.  Therefore, 
issues with the reporting requirements were identified mostly through the efforts of 
civil  society  organisations,  focused  on  transparency  and  accountability,  and  of 
academics. 

Our findings show that companies’ reporting processes are deeply embedded in the 
data collection process  of  other financial reports. Accounting teams at  a central or 
local  level  collect  the  necessary  data  and  consolidate  it  for  reporting,  using 
corporate/governmental/sectorial guidelines and templates. While audit or assurance 
is  not  mandatory  in  the  reporting  requirements  and  their  national  transpositions, 
certain  large  multinational  companies  already  use  the  services  of  independent 
auditors or provide additional assurance on a voluntary basis.  

Effectiveness and efficiency of the reporting requirements 

Public awareness of the reports from civil society is still low in most countries. Civil 
society organisations are optimistic that the influence of the reports will increase over 
the next three to five years, once more reports are available. Due to different national 
rules for the publication of the reports (national registry, company website), access 
to  the  reports  can  be  challenging.  The  UK  centralised  repository  for  disclosures 
established by Companies House is a best practice example as it provides central free 
access to all the CBCR reports of UK-registered companies within the scope of the 
legislation, and the payments data are provided in XML format that outputs as a CSV 
spreadsheet, allowing the extraction and use of data. Some companies also provide 
additional methodological and contextual information in a separate PDF file.  

Civil  society  from  both  countries  of  origin  and  countries  of  operations  is  using  the 
information provided by the reports, mainly to compare figures with other sources, 
and to request clarifications from governments or companies. The extent of their use 
is dependent on the openness of the political system in the country of operation. The 
use of the reports can also be hampered by the lack of contextual information or the 
lack  of  comparability  across  reports,  due  to  different  interpretations  of  the 
requirements.  
There are several examples of civil society using the reports to raise awareness with 
reports and infographics or to request clarifications to governments and companies, 
thus holding both governments and companies to account, which is an unintended 
impact of the Directive. However, it is still too early to notice significant changes in 
government  accountability  and  resource  governance  in  resource-rich  countries.  In 
addition, the impacts depend on the freedom of the civil society to use the reports to 
hold their governments accountable. Indeed, unless civil society and media can use 

 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

the information disclosed for public debate and to query governments, transparency 
cannot automatically translate into accountability and in equitable revenue sharing. 
In comparison with other existing reporting schemes, the CBCR is found to be more 
reliable and thus effective than data published by some governments and more up 
to  date  than  EITI  in  the  extractive  sector.  However,  in  the  logging  sector, 
stakeholders  consider  that  the  EU  Timber  Regulation  and  Voluntary  Partnership 
Agreements are more relevant and with that effective in increasing transparency. 

Overall,  in  line  with  their  main  objective,  the  reporting  requirements  have  been 
deemed effective in increasing the transparency of payments made by companies to 
governments for the exploitation of natural resources. The EU CBCR, which provides 
data that were not available before, offers a new source of information that enables 
the civil society to compare data on payments to governments across several sources 
and  therefore  make  it  better  equipped  to  hold  government  representatives  to 
account.   
The long-term impacts of the reporting requirements on reducing illegal logging and 
extractive operations also remain limited since the disclosure is still recent. As very 
few logging reports have been identified, the impact on illegal logging is even more 
limited.  Where  progress  was  noted,  it  was  also  due  to  the  EITI,  the  EU  Timber 
Regulation or national initiatives. 

The reporting requirements entail additional compliance costs, but the companies did 
not consider that they represent a disproportionate burden. 

Impacts of other international regimes 

The  EU  reporting  requirements  present  similarities  with  the  following  other 
international reporting schemes: 

The Extractive Industries Transparency Initiative (EITI): 
The EITI is a voluntary regime while the EU CBCR is compulsory. The EITI reports 
the payments received by governments, as reported by each government whereas 
the EU reports are prepared by companies and cover their payments to governments. 
The EITI reports provide more contextual information but are usually published two 
years after the payments occurred, while the EU reports are published annually. The 
EITI only targets the extractive sector. EITI was there before the EU requirements 
and has thus eased the adoption of the latter, however there is no concrete example 
of  countries  joining  the  EITI  due  to  the  EU  CBCR.  The  EU  requirements  have  also 
influenced  the  EITI  with  the  adoption  of  project-by-project  reporting.  There  is 
potential  for  mainstreaming  extractive  industry  transparency  with  more  synergies 
between the two regimes. 

The Canadian Extractive Sector Transparency Measures Act (ESTMA): 
The  EU  and  the  Canadian  reporting  requirements  are  equivalent  and  fully 
substitutable  with  each  other.  The  extractive  industry  welcomed  this  equivalence 
because it will avoid double reporting for companies operating in Canada and the EU. 
The ESTMA does not cover the logging sector. 

The US Dodd-Frank Wall Street Reform and Consumer Protection Act: 
The Dodd-Frank Act has many similarities with the EU CBCR, although it is focused 
solely  on  the  extractive  sector.  Since  the  implementation  rule  of  Section  1504  of 
Dodd-Frank Act has been invalided by the current US administration American, US 
companies no longer have reporting obligations, until a new rule is adopted by the 
Securities and Exchange Commission (SEC). 

 
 
 
 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

Overall,  extractive  companies  would  favour  the  adoption  of  a  unique  reporting 
standard applicable to all stakeholders in the sector, for instance one designed by an 
international  organisation.  However,  companies  deem  unified  standards  to  be 
unrealistic and favour equivalence between the reporting standards. 

Impacts of EU reporting requirements on competitiveness and energy 
supply 

EU Member States are heavily dependant on a few supplying countries  for both crude 
oil and gas. Therefore, any limitations of the operations of EU companies in strategic 
resource-rich  partner  countries  due  to  the  reporting  requirements  would    have  an 
impact on energy security.  

There is no evidence that competitors from third countries benefit from substantial 
competitive  advantages  by  not  being  required  to  report  on  payments  to 
governments.  In addition, so  far  European companies have not reported that they 
suffered  material  damages  or  losses  of  opportunity  due  to  the  introduction  of  the 
reporting requirements. The requirements entail compliance costs, but they are not 
seen as highly disproportionate by the industry. Similarly, companies did not find it 
harder to operate in third countries. An analysis of recent contracts in the extractive 
sector in some country of  operation shows that  EU companies  have  maintained or 
increased their presence in countries where they were operating. 

Despite  the  shared  opinion  that  EU  reporting  requirements  do  not  represent  a 
competitive  disadvantage,  some  European  companies  nevertheless  expressed 
concern about the absence of similar reporting requirements for US companies. It is 
too  early  to  tell  whether  this  has  created  an  unlevel  playing  field,  but  some  EU 
stakeholders suggested that this risk could materialise if EU companies remain the 
only ones complying with such reporting requirements. 

On  the  other  hand,  a  number  of  stakeholders  interviewed  believe  EU  reporting 
requirements may even present a competitive advantage. These requirements may 
enhance the reputation of the company, making them attractive to civil society and 
investors. 

Overall, stakeholders have not noted cases of third countries limiting the operation 
of EU companies due to reporting requirements. Thus no impact can be reported on 
the energy security of Member States. 

Recommendations 

The findings of the study led to a set of recommendations and an assessment of their 
added value.   

Improve  the  unclear  aspects  of  the  requirements  and  additional  steps  to  improve 
compliance 
The  industry  and  NGOs  agree  that  the  lack  of  clarity  of  some  definitions  in  the 
reporting requirements can lead to different interpretations. The main issues in terms 
of interpretation are the definitions of project and of payment types, as well as the 
approach  on  joint-ventures.  Thus,  there  are  discrepancies  in  the  way  companies 
report their payments for similar operations. On a similar note, in the logging sector, 
the  definition  of  primary  forest  is  often  interpreted  in  a  restrictive  way.  One 

 
 
 
 
 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

consequence  is  that  very  few  logging  companies  consider  themselves  to  be  in  the 
scope of the Directives. 

In the absence of EU guidelines, extractive companies have used several strategies: 
while  some  have  defined  their  own  interpretation,  others  have  discussed  their 
interpretation with other companies in informal working groups. Given this room for 
interpretation, most stakeholders would welcome the following measures: 

▪  Guidelines  at  EU  or  national  level  to  clarify,  in  particular,  the  definitions  of 
projects, types of payments, the approach on joint-ventures and the scope of 
logging activities; 

▪  Obligation for companies to include a “basis of preparation” section, to explain 

their interpretation of the reporting requirements; 

▪  Better national authority oversight and more  effective sanctions to improve 

compliance; and 

▪  Awareness raising in the logging sector of the reporting requirements among 

forestry associations and companies in the scope. 

Extension of reporting requirements to other sectors 
While  government  representatives  remain  cautious  about  extending  the  CBCR 
reporting requirements of the extractive and logging sectors to other sectors, NGOs 
are  generally  in  favour  of  adopting  similar  requirements  in  other  sectors  involving 
national  resources  or  substantial  payments  to  governments  (e.g.  agriculture, 
fisheries, telecoms, construction). Some logging stakeholders are also in favour  of 
having  all  logging  operations  in  the  scope  instead  of  only  logging  operations  in 
primary  forests,  or  at  least  extending  the  scope  to  forests  that  have  been 
commercially logged once or twice since their official natural state. It is worth noting 
though that the lack of reporting in forestry is also linked with the industry structure 
as EU companies are very often not the holder of the logging concession. If reporting 
requirements were to be extended to other sectors, they need to be tailored to the 
sectors in question as both the effectiveness and the costs of the measure depend 
heavily on the size of operating firms and the extent to which the sector has direct 
financial interactions of large firms in the EU with governments.  

Benefits and costs of a compulsory audit of the reports 
A full audit of the reports could increase the confidence of users in the accuracy of 
the  figures  and  the  compliance  of  the  reports  with  the  reporting  requirements. 
However,  an  independent  audit  would  also  increase  significantly  the  compliance 
costs. National authorities advise that costs and benefits should be carefully assessed 
before introducing any compulsory auditing. To strike a balance between the current 
absence of formal verification and a full audit, introducing limited assurance is more 
likely to be found acceptable by the industry, and could also improve the reliability 
of reports as advocated by NGOs. The framework regarding limited assurance would 
however  need  to  be  tailored  to  the  specific  reporting  regime  to  define  the  scope. 
Another  option  would  be  to  include  the  payment  reports  in  annual  reports  or 
corporate  social  responsibility  reports,  which  would  carry  more  weight  and  imply 
some consistency checks with the financial statements by the auditors.  

Relevance of additional payment information 
The potential addition of new payment information to the requirements, namely the 
average  number  of  employees,  the  use  of  subcontractors,  the  pecuniary  penalties 
administered by a country, the effective tax rates and the recipient’s details such as 
bank account information received mixed support. While NGOs  would welcome the 
introduction of all above items to increase accountability and contextual information, 
companies  are  reluctant  to  add  any  more  information,  arguing  that  it  would  incur 
additional  compliance  costs  and  is  not  necessary  to  achieve  the  objectives  of  the 
Directives.  National  authorities  also  do  not  see  added  value  in  adding  these  extra 

 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

items. Overall, adding information requirements which help users to assess the total 
size of the operations in a country (e.g. subcontractors or effective tax rate) would 
provide  some added  value to users as they would get a better  comparator for the 
payments  that  the  government  receives.  However,  civil  society  representatives  do 
not  deem  the  above  items  to  be  the  most  important  ones  and  noted  that  each 
additional requirement on its own would not be sufficient to provide a comprehensive 
picture of the company’s activities. On the other hand, the compliance costs are likely 
to  be  highest  for  the  disclosure  of  the  number  of  employees  and  the  use  of 
subcontractors,  since  information  systems  vary  greatly  across  countries  and 
company  accounting  systems  are  not  consistently  set  up  to  gather  information 
centrally.   

Other relevant information or recommendations 
To  facilitate  access  and  use  of  the  reports,  NGOs  call  for  a  central  repository  of 
reports,  either  at  Member  State  or  EU  level,  with  machine-readable  data.  
There could be further synergies between the EU reporting requirements and other 
initiatives  to  enhance  consistency  and  increase  transparency  on  payments  to 
governments such as EITI, the EU Timber Regulation and the EU FLEGT, and more 
awareness raising in countries of operation.   
NGOs propose to include information on trading activities of commodities, the clear 
identification by name of the government entity that received payment, the exchange 
rate used by currency, the name of all projects (even below EUR 100,000 payments) 
and  contextual  information  on  the  projects.  In  the  logging  sector,  payment 
information for connected operations could be included. This extra information would 
improve understanding of the reports and facilitate their use in holding governments 
accountable.  

 
 
 
 
 
 
 
 
 
 Review of country-by-country reporting requirements for extractive and logging industries 

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DOI: 10.2874/329509 

ISBN : 978-92-79-97013-9