Measuring and Monitoring the Use of Local Suppliers
At a glance
Systems that measure and monitor extractive companies’ use of local suppliers not only inform enforcement measures but also help policy makers address realities on the ground.
For companies, the 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 benefits of reporting include increased stakeholder trust, fewer requests for information, and the creation of a starting point for dialogue.
- Data on local procurement can be collected on a quarterly or annual basis and submitted to the authorities overseeing industry performance in general and local content in particular.
- New Diavik Diamond Mine 2018 Sustainable Development Report (Rio Tinto)
- New Lundin Gold 2018 Sustainability Report (Lundin Gold)
- 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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The development of systems to measure and monitor how extractive companies use local suppliers is an important step toward understanding policy results and correcting for unwanted side effects.
Beyond regulatory requirements, there are many reasons for companies to report on local procurement. Internally, the benefits of reporting include better management, since measurement improves (i) accountability and attention to key priorities, (ii) internal evaluation and goal-setting, (iii) attentiveness to corporate responsibility, and (iv) a culture of transparency. External benefits of reporting include reduced requests for information from outside actors, increased stakeholder trust, and the creation of a starting point for dialogue.
As discussed in the Defining local subtopic, it is important that policy makers begin with a clear definition of “local content,” crafted to suit policy goals and to guide the measurement of policy outcomes and companies’ performance.
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, and which has a specific section on local procurement, specifically local spending (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 include explicit disclosure on local procurement in its reporting requirements. But its focus on general nonfiscal impacts and community investment might be understood to include supplier support programs.
Data on local procurement can be collected through various channels, including through:
- Annual or quarterly company submissions to the authority that oversees industry performance in general and local content performance in particular.
- Reporting on the performance of community development agreements, such as in Mongolia.
- Annual EITI reporting.
- Statistical reporting to chambers of commerce or industry associations, and through frameworks such as the Mining Association of Canada’s Towards Sustainable Mining Framework, which is being used in countries that include Botswana, Argentina, the Philippines, and Finland.