|
TCBCO believes that the Advisory
Group Report presents two possible courses for the future of CSR and
Extractive industries: a high road of responsibility or a low road of
the status quo, which will lead to disaster. If
the reports recommendations are accepted, and implemented by
Parliament, then
there will be better oversight, more monitoring, changes in enforcement
of Canada's domestic laws overseas, and changes in how the government
values CSR. All of these changes have the potential to improve the reputations
and practices of Canadian companies abroad.
This is a big "if".
The Report was commissioned by the previous Liberal government (2005) and the
Conservative government may be less enthusiastic about adopting the
recommendations. There are also questions about Canadian businesses competitiveness
with less regulated corporations from other countries. We would argue that Canada cannot compete with countries like China or Sudan
by lowering our human rights or environmental standards. A decision to not adopt
the recommendations will be a significant and damaging policy choice because we
will continue to fall behind the practices of the UK,
EU and USA and the
government will be turning away from the recommendations of not only civil
society but the leaders of Canada’s
extractive industry.
National Roundtables on Corporate Social Responsibility (CSR) and
the Canadian Extractive Industry in Developing Countries - Advisory
Group Report.
Click for our Recommendation Summary - or To see the Full Report ...
So
what is the big deal about the Advisory Report?. 1
CSR Defined. 1
Recommendations for Monitoring and Regulatory Change. 2
What happens if the recommendations are shelved or
rejected?. 3
Conclusion. 4
So what is the big deal about the Report?
First, it includes a wide range of perspectives and therefore
has credibility. ("61 [submissions] were from civil society, 33 from
industry, 15 from labour organisations, 31 from academics and research
institutes, and 16 from members of the public without a stated affiliation').
The final report is signed by some big players in the mining industry who would
traditionally be seen as enemies of CSR reform. Now they are recognizing the
challenges in their extractive industries (Reg Manhas, Talisman (oil) and Tony
Andrews, Prospectors and Developers Association). These players strengthen the
call to create more oversight bodies, including an ombudsperson for CSR gain
strength through these players support.
Second, many of the recommendations are conservative and pragmatic.
For example, that Canada
comply with OECD (Organization for Economic Cooperation and Development) on
criminal legislation changes to prevent corruption and to prosecute
international crimes, or that Canada
meet CSR and reporting standards of the International Finance Corporation (IFC
- an affiliate of the World Bank)). These standards are so limited and
conservative in their requirements that major banks as well as the World Bank
and the IFC have made them mandatory for project funding (Equator Principles –
members include the Royal Bank and Scotiabank).
Third, the Roundtable process has led to dialogue and coalition
building around CSR challenges. The parties who participated almost universally
have an interest in some sort of CSR standards being implemented (there may
still be disagreements about timing and how mandatory the standards should be).
This will make it difficult for the government to ignore the issues of CSR.
CSR Defined
The Advisory Group defined CSR as “the way firms integrate social,
environmental and economic concerns into their values, culture,
decision-making, strategy and operations in a transparent and accountable
manner and thereby establish better practices within the firm, create wealth
and improve society.” [From the Reports footnote 5: See Corporate Social
Responsibility: An Implementation Guide for Canadian Business, (Government
of Canada: 2006), 5. This definition notes that CSR “builds on a base of
compliance with legislation and regulation, and typically includes “beyond law”
commitments pertaining to a wide range of topics,
including corporate governance and ethics; health and safety; environmental
stewardship; human rights (including core labour rights); human resource
management; community involvement development and investment; involvement of
and respect for Aboriginal peoples; corporate philanthropy and employee
volunteering; customer satisfaction and adherence to principles of fair
competition; anti-bribery and anti-corruption measures; accountability,
transparency and performance reporting, and supplier relations, for both
domestic and international supply chains.” And see Department of Foreign
Affairs and International Trade, National Roundtables on Corporate Social
Responsibility and the Canadian Extractive Sector in Developing
Countries: Discussion Paper (Government of Canada:
2006). http://geo.international.gc.ca/cip-pic/library/CSR%20Roundtables%20Discussion%20Paper%20(English).pdf]
Recommendations for Monitoring and Regulatory
Change
The Report recommends the creation of an Independent Ombudsman and
Tripartite Compliance Review Committee, improvements to non-financial
disclosure of overseas activities, modifications of the criminal law, and the
income tax act, and conditioning government support for industry on compliance
with CSR standards.
The creation of a well-funded independent Ombudsman and Tripartite
Compliance Review Committee, with powers to investigate and make determinations
and recommendations about corporate compliance with the Canadian CSR Standards
presents an opportunity to boost the extractive industries’ reputation and the
CSR industry’s monitoring efficiency. By being independent and mandated to
examine non-compliance, these bodies have the potential to transform companies’
behavior overseas through naming and shaming the “bad apples”. Even if this
does not lead to a formal legal penalty or remedy, fear of reputation damage
may change corporate behavior and give corporate directors and managers the
courage and incentives to look outside the financial bottom line.
For those that still fail to comply with CSR standards, the Advisory
Group recommends changes in the criminal law to “remedy legal and other
barriers to the extraterritorial application of Canadian criminal law to ensure
this law is being used as effectively as it can be” (3.3.2.1). The built in
limitation of “as it can be” leaves all sorts of wiggle room for the
politicians. However, there are at least four benefits to increasing the risk
of prosecution. First it helps the law abiding companies compete with the “bad
guys” who do not meet Canadian standards. Second, companies (and their lenders)
contemplating substantial capital outlays will be very concerned about risk and
they will likely respond to potential prosecution by at least making an attempt
to meet standards. Third, “bad companies” will not be able to hide behind
claims that they comply with the host (developing) countries “laws”. This is an
especially strong effect when combined with civil society and competitors
combined monitoring. Fourth, amending the Corruption of Foreign Public
Officials Act to clarify that it applies to extraterritorially to Canadian
nationals (3.3.2.2), the practices of corruption that lead to so many other CSR
abuses, will reduce these abuses and improve Canadian corporations abilities to
stand up to corrupt governments.
Changes in the Income Tax Act strike
directly at the bottom line of the “wrongdoers” by “eliminat[ing] double tax
relief in Canada
for tax paid by a company to a foreign government where there is serious
non-compliance with the Canadian CSR Standards in that country (where
permissible under tax treaties)” (3.3.2.3). It seems bizarre to comply with tax
treaties with countries that are failing to meet their obligations under
international law because they are in conflict zones or have weak governance.
Here, the Canadian Government’s commitment to CSR will be tested, and will
hopefully lead to modification of treaties or temporary suspension in certain
cases. This is not without precedent in international law as seen through the United States of America’s
passage of the Helms-Burton Act to discourage investment in Cuba or Israel’s
and its neighbors’ laws related to trade between these conflicting Middle
Eastern States. There is also an apt analogy with sanctions against human
rights abusing states like South Africa
in the 1980s. By removing the tax incentives, Canadian corporations will be
less likely to invest in these troubled areas. And at the least Canadians will
not be implicated in subsidizing their harmful investments through tax
incentives.
The Report makes a strong recommendation that “EDC’ contracts should
provide that serious failure by extractive-sector companies to meet the
Canadian CSR Standards should lead to the withdrawal of financial and insurance
support when reasonable efforts by EDC and the Government of Canada to bring
the company back into compliance have failed” (3.4.2.1). Government support in
other forms should also be withdrawn in the case of a “serious failure”
(3.4.2.2). Note: “serious failure” is not explicitly defined. It will be
determined based on the Compliance Review Committee’s recommendations and the
EDC’s policies. For this stick to be effective against CSR abusers, the
“serious failure” bar must not be set too high. Otherwise, the EDC and the
extractive industry in general will take a reputational hit and Canadian
citizens will be implicated in international CSR abuses. (While the EDC is a
Crown Corporation and theoretically independent from the Government, its loans
on the international market are backed by the Government of Canada (taxpayers).
The EDC and the Government have a strong role to play in the development of
best practices in the CSR field.
The bottom line is that the practices of all participants in the
extractive industry will be improved by these combinations of incentives and
penalties as participants seek out the carrots and try to avoid the sticks.
What happens if the
recommendations are shelved or rejected?
Governments and businesses are concerned about competitiveness
and uncertain liability arising from stronger CSR standards. This could
lead to a rejection of the recommendations or worse a call for more study.
There is no need for more study. There have been plenty of submissions and time
for discussion. The time for action is now. Both of these concerns
have been dealt with through the roundtable process
We would argue that the best way to clarify corporate obligations
and liability is through legislation that adopts the recommendations and this will
make Canada
a leader in the CSR field. Already, Europe and especially Britain
have made great strides in CSR standard setting and enforcement. These
countries and their markets (with accompanying conscious consumers) will be
supportive and open to Canadian producers with strong reputations for CSR. The
business case for corporate responsibility is solid (Just ask Reg Hanson).
There is also a fundamental argument that corporations, as
participants in the Canadian economy, have a duty to respect fundamental human
rights and environmental standards, even if they are not in the direct
short-term benefit of the corporation. Amnesty International is involved in
strong campaign to remind individuals, governments, and corporations that “human
rights matter because human rights matter”. At some point Canada, has to
put its “legal pen” where its mouth is and step up to the plate with
regulations on the extractive industry abroad.
Conclusion
If the recommendations are left on a dusty shelf in Ottawa,
the Government and Canadian citizens will their collective backs upon a future
of responsibility. TCBCO encourages the adoption and strengthening of the
Advisory Group’s recommendations. We will continue to provide solutions and
insights that meet our standards of common sense and responsibility and that
strive for not only industry “best practices” but good practices that go beyond
industry norms.
Discuss this article on the forums. (0 posts)
|
