Renewed CSR strategy brings new consequences

A renewed Corporate Social Responsibility (CSR) strategy for the Canadian mining sector was announced by the Government of Canada on November 14, 2014 that will create consequences for companies who refuse to adhere to endorsed CSR best practices and dispute resolution processes.

This development coincides with sev­eral other related developments in the area of CSR that show a clear direction towards enforcement of CSR performance that is of note to Canada’s international mining sector.

The announcement followed a review of the Government of Canada’s original Corporate Social Responsibility (CSR) strategy for the Extractive Sector, original­ly released in 2009. That strategy included the creation of the Office of the Extractive Sector CSR Counsellor (“CSR Counsellor”), a non-judicial grievance mechanism with a primary mandate to intermediate inter­national disputes between local communi­ties and Canadian extractives companies. The CSR Counsellor’s Office received much criticism for not being effective. The new CSR Strategy builds on the old strate­gy, with the CSR Counsellor role remain­ing in place.

As part of the renewed CSR strategy, Canadian mining companies will face withdrawal of Trade Commissioner Services and other Government of Canada advocacy support abroad if they do not meet the endorsed CSR standards and par­ticipate in dialogue facilitation processes of Canada’s CSR Counsellor and OECD National Contact Point. This includes withdrawal of Government of Canada ser­vices, including the issuance of letters of support, advocacy efforts in foreign mar­kets, and participation in Government of Canada trade missions. Such matters will also be taken into account in the CSR-related evaluation and due diligence con­ducted by the Government of Canada’s export financing body, Export Development Canada (EDC), in its consid­ering financing or other support.

The primary goal of the CSR Strategy remains the promotion and adoption of CSR “best practice” standards throughout the mining sector. In particular, the inter­national best practice standards that have been endorsed by the Canadian government:

• the 2012 International Finance Cor­poration Performance Standards on Environmental & Social Sustainability (“IFC Performance Standards”)
• the United Nations Guiding Principles on Business and Human Rights (the “UNGP”)
• the OECD Guidelines for Multination­al Enterprises (“OECD Guidelines”) OECD Due Diligence Guidance on Responsible Supply Chains of Miner­als from Conflict-Affected and High- Risk Areas
• Voluntary Principles on Security and Human Rights (the “VP”) and; Global Reporting Initiative (the “GRI”).

Adoption of the 2012 IFC Performance Standards is noteworthy because of the Free Prior and Informed Consent (FPIC) principle that it includes. The CSR strategy is also the first formal endorsement of the UNGP by the Canadian Government since its adoption by the United Nations Commission on Human Rights in 2012. The UNGP is now widely recognized globally as a leading international stan­dard for business and human rights, with action plans being developed by the U.K. and U.S. governments.

The release of the CSR strategy is part of a broader trend towards “enforced self-regulation” of the environmental and social performance of the Canadian min­ing industry. “Enforcement” has often been through the marketplace rather than by government. For some time, dozens of global financial institutions including Canada’s five big banks (and EDC) have required mining companies they finance to adhere to the IFC Performance Standards and the UNGP in their interna­tional operations. This process has created a financial impetus encouraging adoption of some of the very same standards recently endorsed by the Government of Canada in the CSR strategy.

Courts have also begun to test the waters. In a recent ruling considering potential liability of a Canadian parent company for human rights violations of foreign subsidiaries occurring outside of Canada, international standards like those endorsed in the CSR Strategy were viewed as a possible policy basis for cor­porate liability.

In legal argument, these standards were referred to as evidence that Canadian mining companies are aware of interna­tional human rights risks and thus should be held liable when such standards are not met and human rights harms occur. While these cases are pending, such avenues for legal argument highlight the legal risks tied up with CSR best practices and emphasizes the need to treat such issues as part of legal due diligence, rather than simply as a public relations exercise.