On November 14, 2014, the Minister of International Trade announced Canada’s enhanced Corporate Social Responsibility (CSR) Strategy, “Doing Business the Canadian Way: A Strategy to Advance CSR in Canada’s Extractive Sector Abroad”. Like its predecessor, the CSR Strategy applies to all resource companies headquartered in Canada with extractive operations abroad.
The CSR Strategy launched in 2009, “Building a Canadian Advantage”, promoted compliance with international CSR guidelines but contained no enforcement mechanism. While it established the Office of the Extractive Sector CSR Counsellor, this role found little support in the industry, with companies tending to opt out of the dispute resolution process and the CSR Counsellor quietly resigning last year. The 2009 CSR Strategy included a commitment that its success would be reviewed after five years, and the updated CSR Strategy is intended to remedy some of the challenges experienced under the earlier policy.
The enhanced CSR Strategy notes that Canada will continue to be involved in the development and promotion of six international CSR performance and reporting standards and that Canadian companies are expected to align their practices accordingly. New to the list are two CSR guidelines that were released after the 2009 launch of the Strategy – the United Nations’ Guiding Principles on Business and Human Rights and the OECD’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The CSR Strategy also highlights CSR guidelines developed within Canada, including PDAC’s e3Plus and the Mining Association of Canada’s Towards Sustainable Mining.
Two additions to the updated CSR Strategy seem most pertinent to Canadian resource companies operating abroad: first, the strategy purports to enhance the mandate of the CSR Counsellor to work with Canadian resource companies to ensure CSR guidelines and best practices are incorporated into such companies’ operations. While this will continue to be a voluntary engagement process, the CSR Strategy will enhance the interaction between the CSR Counsellor and the Canadian National Contact Point (NCP) to the OECD. Where formal mediation is required, the CSR Counsellor will have the power to refer the parties to the NCP to engage in the OECD dispute resolution process. While the CSR Strategy references the NCP’s proven track record of success, the NCP does not have any more investigative authority than the CSR Counsellor and participation on the part of resource companies cannot be compelled. While the CSR Counsellor may not practically have any more substantive powers than under the previous policy, compliance with the non-judicial dispute resolution process may be attractive to companies wishing to avoid the expense and potential delay of formal court proceedings.
Second, the policy implements what the Canadian government hopes will amount to tangible consequences for resource companies who do not follow the the CSR-related guidance covered by the enhanced CSR Strategy or refuse to participate in the dispute resolution process through the CSR Counsellor or the NCP. Where companies do not comply, the federal government will withdraw its economic diplomacy in favour of that company in the country in which it operates. Examples of such diplomacy include issuing letters of support, advocating in support of the company in foreign markets, and allowing the company to participate in government trade missions. Failure to align with CSR best practices or participate in the CSR Strategy dispute resolution process will also be taken into account by Export Development Canada when considering for the availability of financing or other support. In addition, such failure to participate will be made public, which could lead to reputational concerns if nothing else.
Depending on the relationship between a mining company and the Canadian government, these tangible consequences may not be as serious as intended. If a company operates in a jurisdiction where other Canadian mining companies also operate, it may be impractical, and in some instances impossible, for the Canadian government to withdraw economic diplomacy in favour of a single mining company while continuing that diplomacy for others. Furthermore, the withdrawal of trade-related diplomacy for a company is unlikely to affect the government’s diplomatic efforts where adverse events such as kidnappings and terrorist incidents occur. Finally, withdrawal of financing from Export Development Canada will be inconsequential to companies already operating without such support.
The government intends to review the CSR Strategy again in 2019 to evaluate whether it has enhanced the CSR performance of Canadian extractive sector companies and secured the intended benefits for host countries and local communities.