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CSR in the Extractive Sector: the Canadian Stamp

July 2012

Evans, M. 2012. CSR in the Extractive Sector: the Canadian Stamp. GREAT Insights, Volume 1, Issue 5. July 2012. Maastricht: ECDPM.

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Research conducted by Natural Resources Canada tells a fascinating story: cumulative investment by the Canadian mining industry overseas mushroomed from $30 billion in 2002 to over $110 billion today. Interestingly, investment in traditional destinations such as Australia and the US was flat over that period – but in Latin America and Africa, investment increased seven-fold.

The potential benefits of extractive industries to economic development are increasingly acknowledged. Looking at Africa, $40 billion in annual official development assistance is overshadowed by the roughly $400 billion in export revenue generated by mining, oil and gas industries. Globally, the number of mining dependent countries, defined by the United Nations (UNCTAD) as states where mining represents more than 25% of total exports, is on the rise, increasing from 33 mining
dependent countries to 41 in recent years. These changes bring significant and complex risks as well as opportunities.

Many of the countries where investment has flowed in recent years have limited experience with modern resource extraction. Some are very poor, or emerging from conflict, with attendant complex social problems. Faced with these social and environmental challenges, Canadian companies are increasingly engaging in corporate social responsibility initiatives, generally defined as voluntary activities undertaken by a company to operate in an economically, socially, and environmentally
sustainable manner. CSR is important for Canadian business abroad because it helps manage risks, improve access to capital, enhance employee relations, build social license to operate, and improve reputation. The global consultancy Deloitte recently identified “the demand for heightened corporate social responsibility” as one of the top 10 trends facing the mining industry (1). With greater global visibility, the report notes, comes industry’s “greater responsibility.”

A Canadian Strategy

As Canadian Prime Minister Harper noted in Tanzania in November 2007, the government encourages and expects Canadian companies to meet high standards of corporate social responsibility. Canadian industry associations and extractive companies have been recognized for their leadership on these issues. However, more can be done. Many companies look to the Canadian government for guidance and support in managing the risks of operating in complex environments abroad.

The Office of the Extractive Sector CSR Counsellor is a new entity, part of a larger Government of Canada CSR Strategy for Canadian mining, oil and gas companies operating abroad, called “Building the Canadian Advantage.” This relatively new CSR Strategy aims, through a variety of integrated initiatives, to boost the competitiveness of Canadian extractive companies by enhancing their ability to manage dynamic social and environmental risks. The Strategy, announced by the Minister of International Trade in March 2009, is based on four complementary pillars, with the participation of three Government of Canada departments: the Department of Foreign Affairs and International Trade, the Canadian International Development Agency and Natural Resources Canada. The pillars of the Strategy are to:

1. Support host-country initiatives to enhance resource management capacity, and to benefit from these resources to reduce poverty. To that end, the Minister of International Cooperation, Bev Oda, recently announced initiatives in the extractives sector for Africa and South America, and the Prime Minister announced the creation of the Canadian International Institute for Extractive Industries and Development. These undertakings reinforce Canada’s commitment to support initiatives in developing countries that promote sustainable economic growth, create jobs and reduce long-term poverty.

2. Promote widely-recognized international CSR performance guidelines, which include the OECD Guidelines for Multinational Enterprises, the International Finance Corporation Performance Standards, the Voluntary Principles on Security and Human Rights, and the Global Reporting Initiative. These are the voluntary standards which underpin the mandate of my Office.

3. Support the development of a CSR Centre for Excellence, which was launched in January 2010 and is supported by a Secretariat housed at the Canadian Institute of Mining, Metallurgy and Petroleum.

4. Set up the Office of the Extractive Sector CSR Counsellor.

The CSR Strategy recognizes the good work that Canadian companies have done in meeting the challenges of new operating environments, while noting that stakeholder expectations about social and environmental issues are dynamic and intensifying. The Strategy also appreciates that good CSR outcomes are a shared responsibility – governments, civil society, and companies all have important roles to play.

The Office of the Extractive Sector CSR Counsellor

Large investments in extractive projects can raise the risk of community conflict; communities can feel left out of the big decisions, and consultations may not be adequate. People fear losses to their livelihoods or have concerns about their health. The Office I head up was put in place to put new problem-solving tools in the hands of both communities and companies, in order to address these kinds of issues. We act as a resource to project-affected communities and Canadian mining, oil and gas companies who wish to reduce and constructively resolve conflicts around projects outside of Canada. We proactively put information into the public domain, in the belief that many risks can be avoided and many impacts can be mitigated with the effective and systematic use of performance standards. And, existing, often free, tools are available – we try to raise awareness of those tools, and of good practice. We convene multistakeholder groups to build better understanding of the issues and challenges, and to build bridges between constituencies. We have a Learning Partnership with the Centre for the Study of CSR at Ryerson University for example; I write a monthly opinion piece for the Canadian Mining Journal; we interact continuously with a wide cross section of stakeholders, both to let them know about our work, but also to ensure we deepen our understanding of on-the-ground complexities.

As a recent Harvard University/University of Queensland study points out, the costs of corporate/community conflict are extremely high (2). Aside from reputational, legal and investor relations issues, in a third of the cases studied, the conflict resulted in loss of life. How do people typically try to resolve such issues? Companies might try to petition the host government, or go to the courts. Communities might try to launch a lawsuit, a media campaign or some kind of social activism at the site. But such processes can be long and costly, and not always satisfactory. Sometimes the issue at hand is not really amenable to resolution through these typical means.

Another potential avenue for tackling some of these types of disputes is through third party honest brokers, such as this Office. In addition to our proactive advisory role, we provide a neutral convening and facilitation space for problem-solving between Canadian mining, oil and gas companies and their local communities.

Problem-solving approach

Impressive results have been achieved by similar processes globally. The Compliance Advisor Ombudsman (CAO) office at the World Bank Group, with over a decade of experience, spent some time recently in Canada demonstrating the value such a problem-solving approach might provide. The CAO works with private sector companies, across all industries, and host communities, resolving complex conflicts in emerging markets. They now have 100 cases to draw lessons from. From their case history, we learned a couple of key things: most of the disputes they deal with involve socio-economic issues. In fact, for mining, about 90% of the cases deal with water issues in some fashion. The cases are getting increasingly complex, with more stakeholders involved, and the number of cases is increasing. A webcast, hosted with the Ryerson CSR Institute, is available at https://ryecast.ryerson.ca/12/watch/1680.aspx.

Community concerns sometimes arise due to lack of useful information, so one benefit of the type of approach used by my Office is the ability to provide information and to understand what else the community needs in terms of information. Can we build a richer, multi-perspective understanding of the problem, and can we, using that information, find opportunities to resolve conflicts in a way that might generate new win/win options? For communities, it is an opportunity to have their voices and concerns heard. And it is critical for companies to listen.

We invite you to contact us and learn more, or join our listserv to stay up to date on news from the Office. You can join by going to our website at http://www.international.gc.ca/csr_counsellor-conseiller_rse

Marketa Evans is the Government of Canada’s Extractive Sector CSR Counsellor.

Disclaimer: The CSR Counsellor is a special advisor to the Minister of International Trade. The Counsellor has no policy-making role and does not represent Government of Canada policy positions.
Email: [email protected]

Footnotes

  1. Deloitte (2012), Tracking the trends 2012.
  2. Davis, R and D.M. Franks (2011) The cost of conflict with local communities in the extractive industries. Paper presented at the First International Seminar on Social Responsibility in Mining, 19-21 October, Santiago, Chile.

This article was published in GREAT Insights Volume 1, Issue 5 (July 2012).

Extractive SectorsCorporate Social Responsibility (CSR)Natural resourcesRaw materialsAfricaCanada

External authors

Marketa Evans