Renewable energy promises to reshape our world’s climate and economy, but clean energy alone won’t make our future equitable. Corruption and governance in the renewable sector threaten the promise of a just transition.
Maja de Vibe and Mark Robinson see the energy industry from different perspectives, yet they’ve come to the same conclusion. Robinson strengthens accountability across the oil, gas, and mineral sectors as executive director of the Extractive Industries Transparency Initiative (EITI), while de Vibe serves as Senior Vice President, Sustainability, Governance and Compliance at Statkraft, Europe’s largest renewable energy producer. Both bring extensive experience in anti-corruption efforts around the globe.
In 2023, de Vibe and Robinson embarked on a Bellagio Center residency to explore the governance risks threatening a just transition. Their new paper provides concrete steps on how to fight potential corruption in the renewables sector through industry-led collective action.
What do governance and corruption have to do with the just transition to renewable energy?
Maja
For the transition to renewables to be just, it needs to benefit society at large, particularly the people who are directly affected by it. If those giving something up — such as people losing their livelihoods or communities losing access to land — aren’t treated fairly in terms of consultation and compensation, we won’t have the support to deploy the renewable energy the world needs. Corruption and governance issues threaten our ability to do that.
Mark
We honed in on three primary areas of risk related to governance and corruption. First, there is the need to secure buy-in and involvement from local communities at every stage of the process. The second is connected to licenses and permits and whether they are being given as favors to friends of politicians or people who are politically exposed. Last are tax and subsidy schemes, which create incentives to investors and are often used to reduce the cost of inputs. Even in relatively well-governed environments in the U.S. and Europe, we saw evidence of people gaining access to incentives in unethical ways.
Maja
Corruption in any of these areas causes damage. If you don’t have consent, it affects long-term sustainability and keeps communities from benefiting in a just way. Bribery and fraudulent misappropriation create greater incentive for corrupt practices and increase the cost of investment. When licensing and permitting processes are influenced by corruption, less experienced and more ruthless companies often engage, which can lead to lower quality and higher costs. And renewable energy policies associated with corruption can be undermined or ended, harming the entire sector.
What lessons can the renewable sector take from extractive industries like oil and gas?
Mark
In the 1980s and 1990s, concern in the extractive sector focused on grand corruption that permeated politics. Corruption in renewables today isn’t nearly that big and doesn’t have that intrinsic link to political regimes. But those same risk areas — community consultation and consent, licensing and permitting, and taxes and subsidies — are also found in extractive industries. There is increasing overlap between the two sectors, as well. For example, critical minerals like lithium, along with more common materials like steel and copper, play important roles in the production of green energy, and a huge increase in mining is going to be needed over the next couple of decades. Corruption and the failure to secure community consent for lithium mining has led to major scandals in multiple European countries. We outlined a number of ways in which lessons from the extractive sector can be harnessed. They aren’t exactly the same for renewables, but there are clear common threads, such as the need for buy-in from companies, governments, and civil society. Collective action is also key. The EITI requires systematic reporting by companies and governments on each of these areas of risk, which reduces the potential for hidden malfeasance.
In the extractive industries, it took a crisis point to stimulate action. We don’t have to wait for it to get that bad with renewables. We’re still ahead of the curve.
Mark RobinsonExecutive DirectorExtractive Industries Transparency Initiative
Are there any examples you can share of someone who’s doing governance well?
Mark
The leading renewable energy companies have strong due diligence and compliance teams, clear anti-corruption policies, whistleblower programs, and periodic training for staff. Yet most in the sector are small-to-medium-sized companies that would say they don’t have the capacity to invest in proper compliance. Investment doesn’t have to be large to be effective. Transparency International and the World Economic Forum recently released guidance on business integrity for small-and-medium-sized companies, saying, “You can invest in modest ways, but you must do it.”
Maja
Doing business ethically requires you to think carefully about how you structure critical activities. Who manages them and how do they do it? Can you understand contextual risk in all your locations? When considering an acquisition, it’s important to look at where the opportunity is coming from, what is involved, who did the licensing and permitting, and who the consultants are. If you don’t find the answers, walk away. Some companies contract with third parties, saying, “You sort out the community stuff, get us the licenses, and we’ll build the asset.” Our company has teams dealing with licensing and permitting and very strict standards. Anyone representing us is trained on our business ethics, and we monitor their work.
Where is collective action needed, and in what areas can it move things forward?
Maja
The value of a collective initiative is the competition it creates amongst companies towards better standards. If other entities publish data on who and how much they’re paying to run their licensing processes and my company doesn’t, we look exposed. That’s a highly valuable dynamic. Taking steps like developing a shared set of principles, creating a platform for multi-stakeholder action and instituting a common standard for disclosure requirements would provide a strong start in promoting greater accountability and oversight.
Mark
There is no voluntary compliance mechanism across the renewables sector. So what’s the best way to build it? Where should it be located so it has the buy-in of the sector and learns lessons from the extractive sector? While our paper focuses on companies, one of the biggest gaps is the lack of civil society engagement, oversight, and pressure. There are isolated examples here and there, but no equivalent of what the extractive sector had with Global Witness or Publish What You Pay, whose advocacy helped put these issues on the policy agenda, stimulating the launch of the EITI. It comes down to building more understanding and awareness of the significance of the risks followed by collective action to address them.
Maja
We’re looking for ways to engage the business associations and discuss what role they could play as an existing platform. The goal is to bring the right actors together in the same room. That way, they can work through these issues and collectively identify shared solutions.
The transition to green power is a “when,” not an “if.” It’s critical that the process happens in a way that is ethical, transparent, and just. To de Vibe and Robinson, the time to act is now. “In the extractive industries, it took a crisis point to stimulate action,” Robinson said. “We don’t have to wait for it to get that bad with renewables. We’re still a bit ahead of the curve.”
While The Rockefeller Foundation provided support to the authors to create this project, the Foundation is not responsible for and does not endorse its content. The opinions expressed in this article are those of the authors.
Learn More:
- Read Good governance and the just transition: Implications for renewable energy companies.
- Hear Maja de Vibe and Mark Robinson on the Global Anticorruption Podcast.
- Learn about EITI’s Call to Action for the Renewable Energy Sector.