Measuring and Monitoring Use of Local Suppliers
At a Glance
- Systems that have the ability to collect information on local procurement include the Global Reporting Initiative (GRI) and the Mining Local Procurement Reporting Mechanism (LPRM).
- Internal benefits of reporting include better management,since measurement improves accountability and attention to key issues, internal evaluation and goal-setting, attentiveness to corporate responsibility, and a culture of transparency.
- External benefitsof reporting include reducing requests for information from outside actors, increasing trust of external stakeholders, and serving as a starting point for dialogue.
- Data on local procurement can be collected through annual or quarterly submissions to the relevant authority that oversees industry performance and local content performance in particular.
The development of systems to measure and monitor the use of local suppliers by extractive industry companies is an important step to understand policy results and correct for unwanted side effects. Examples of systems that have the ability to collect information on local procurement include: the Global Reporting Initiative (GRI) –used by many extractive industry companies to structure their annual sustainability reports, which has a specific section on local procurement, specifically local spend (GRI Disclosure 204-1); and the Mining Local Procurement Reporting Mechanism (LPRM), a set of disclosures on mining local procurement policies and results similar in nature to the GRI.
The Extractive Industries Transparency Initiative (EITI) does not yet have explicit disclosures on procurement as part of the reporting requirements but does cover areas where local procurement aspects could be covered such as general non-fiscal impact and community investment, which may include supplier support programs.
As discussed in the Defining local subtopic it is important to begin with a clear definition of ‘local’ crafted to suit policy goals, and to guide the measurement of policy outcomes and companies’ performance.
Beyond regulatory requirements, there are many reasons that companies have for reporting on sustainability measures, including local procurement. Internally, benefits of reporting include better management since measurement improves: i) accountability and attention to key issues, ii) internal evaluation and goal-setting; iii) attentiveness to corporate responsibility; and iv) a culture of transparency. External benefits of reporting include reducing requests for information from outside actors, increasing trust of external stakeholders, and serving as a starting point for dialogue
Data on local procurement can be collected through various channels, including:
Annual or quarterly submissions to the authority that oversees industry performance and local content performance in particular.
- As part of reporting towards performance of Community Development Agreements (CDAs), such as in Mongolia where CDAs are mandated to be re-negotiated each year and new targets for local procurement can be set on an annual basis.
- Integrated into annual EITI reporting, to cover aspects related to local procurement. The EITI and Opportunities for Increasing Local Content Transparency demonstrates how current EITI member countries have collected information on local content as part of reporting.
- Statistical reporting to the chamber of commerce or industry associations. For example, the Mining Association of Canada’s (MAC) Towards Sustainable Mining Framework which requires annual reporting by its members on performance towards managing material sustainable development aspects related to mining such as community relations and human rights. Other Chambers of Mines that are using this framework include Botswana, Argentina, Philippines, and Finland.
- GRI 204: Procurement Practices 2016 (Global Reporting Initiative)
- Mining Local Procurement Reporting Mechanism (Mining Shared Value, Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH)
- EITI and Opportunities for Increasing Local Content Transparency (Extractives Industry Transparency Initiative)
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