This guest post is the second in a two part series from Nikki Reisch, a second year law student at New York University School of Law, who recently completed a legal internship in ERI’s Washington DC office. The first part, published on Tuesday, was Extractive Industries Transparency and Human Rights: Why Opening the Books is Just the Beginning of the Story.”

In the last twelve months, we’ve seen a spate of new initiatives aimed at mandating revenue and contract transparency in the extractive industries. The trend is encouraging, and reflects the culmination of years of campaigning on the part of coalitions like Publish What You Pay (PWYP), of which ERI is an active member. PWYP has long argued that voluntary reporting of payments, through industry-backed programs like the Extractive Industries Transparency Initiative, is not enough; many of the countries with the worst resource-related problems like Burma and Sudan simply refuse to participate. In order to capture all companies, in all countries, reporting requirements must be compulsory and widespread. In July of this year, the U.S. Congress took a step in that direction by passing the Dodd-Frank Wall Street Reform and Consumer Protection Act which includes an Energy Security Through Transparency (ESTT) provision requiring oil, gas and mining companies listed with the U.S. Securities Exchange Commission to disclose information about payments they make to foreign governments for the extraction of resources.

Taking their cue from this landmark legislation, other countries are considering the adoption of similar measures. Parliamentarians in the U.K. have proposed parallel legislation. The move is being encouraged by transparency activists as a way to ensure that any companies not caught in the ESTT net would be covered by transparency reporting requirements in the other jurisdictions. Industry should support additional national legislation outside of the U.S. as universal adoption of mandatory disclosure regulations would address any supposed competitive disadvantage that U.S.-listed companies may face as a result of Dodd-Frank.

It’s still not clear, however, just how the ESTT provision in the U.S. will be implemented. The SEC has just launched a call for public comment on the rules that will govern how companies comply with the new law. Those rules will need to clarify a lot of murky issues regarding the scope of the new law’s coverage: Will foreign companies and foreign-based subsidiaries of US companies be covered? Will individual payments be reported separately or lumped together in aggregate form, making them more difficult to track? Which types of payments and benefits will be included? Anyone who has followed the numerous accounting scandals over the past decade (hello Enron) knows that where there are loopholes, they will be found and exploited.

The U.S. legislation is not the only sign that mandatory transparency requirements are catching on. Earlier this year, the Hong Kong stock exchange revised its listing requirements for mineral extraction companies. Companies with assets, revenues or operating costs of 25% or more in the mineral sector must now report their reserves and available resources, including future production and scoping plans.

The pressure to open the books is being felt by bookkeepers, too. The private International Accounting Standards Board (IASB), the body which sets the standards for financial reporting used by many of the world’s largest corporations, has also jumped on the transparency bandwagon. The IASB has sought public comments on the idea of adopting new reporting standards for extractive industry companies. Although their initial findings suggested that disclosure of oil, gas and mineral payments made to governments might actually be good for investors, the Board is proceeding cautiously; it won’t decide whether to pursue development of extractive industry-specific standards until 2011.

Other institutions, like the World Bank, continue to lag behind, seemingly unswayed by this growing momentum. The Bank’s private sector arm, the International Finance Corporation (IFC), is missing an opportunity to advance transparency and anti-corruption efforts by not addressing this issue in its revised policies. Although the IFC is in the process of updating its social, environmental and disclosure standards, it has not proposed any meaningful changes to its policy regarding extractive industry reporting requirements. Since 2006, following the Extractive Industries Review, the IFC has required disclosure of payments to governments and “relevant terms of key agreements that are of public concern,” but only in extractive industry projects representing more than 10% of a country’s total revenue. In other words – the requirements apply to hardly any projects at all. This overly narrow rule is not helping to spread the sunshine.

All of the attention to transparency, however, can distract from a focus on longer-term goals. For example, if, as IASB’s initial research has suggested, transparency is ‘good for business,’ what does that mean for communities seeking to put an end to destructive oil, gas and mining projects altogether? Transparency advocates are left with a question that has plagued these campaigns for years: how can we ensure that our efforts to combat endemic corruption in the extractive industries through mandatory disclosure requirements do not end up legitimating, sanctioning or perpetuating industries that continue to be associated with conflict, environmental destruction, climate change, and human rights violations? How do we ensure that companies do not see their compliance with disclosure provisions as a seal of approval of their operations? Acknowledging a company’s transparency does not mean endorsing its activities.

Disclosure of how much is being mined and pumped, and what is being paid for it, may help communities in the countries where the extraction is occurring keep tabs on their own authorities and help ensure that so long as these dirty industries continue, the proceeds are going to fight poverty, not fill pockets. Similarly, it will help citizens in the countries where the extractive companies are based exercise some check on the sources of their goods and the role their companies are playing abroad. But while disclosure may clear up cash flows, it alone cannot clean up the industry. Once the books are opened, we have to be poised to turn the page and write the next chapter, by using the information to hold governments and corporations accountable, focusing attention on the social and environmental costs of resource extraction that are not reflected on balance sheets, and ultimately, demanding sustainable use of natural resources in ways that benefit people and planet.